Question 1

Alex's wage rate falls. Holding everything else constant, Alex's new time allocation budget line will:

Accepted Answer

A)  shift in toward the origin, parallel to the old one. 
B)  shift away from the origin, parallel to the old one. 
C)  rotate to the left on the x-axis. 
D)  rotate down on the y-axis. 
A)  shift in toward the origin, parallel to the old one. 
B)  shift away from the origin, parallel to the old one. 
C)  rotate to the left on the x-axis. 
D)  rotate down on the y-axis.

Question 2

A backward-bending supply curve of labor shows that at relatively high wages the _____ effect dominates the _____ effect, and the supply curve has a _____ slope.

Accepted Answer

A)  income; substitution; positive 
B)  income; substitution; negative 
C)  substitution; income; positive 
D)  substitution; income; negative 
A)  income; substitution; positive 
B)  income; substitution; negative 
C)  substitution; income; positive 
D)  substitution; income; negative

Question 3

When a person becomes better educated and is able to produce a better product, the person's education is an improvement in:

Accepted Answer

A)  human capital. 
B)  physical capital. 
C)  land. 
D)  labor. 
A)  human capital. 
B)  physical capital. 
C)  land. 
D)  labor.

Question 4

Which of the following statements about unions is TRUE?

Accepted Answer

A)  Laws allow unions to discriminate on the basis of gender and ethnicity. 
B)  Unions bargain for better working conditions at the cost of higher wages. 
C)  Unions cause a surplus of labor by bargaining for wages that are higher than the value of the marginal product of labor. 
D)  Unions cause compensating differentials. 
A)  Laws allow unions to discriminate on the basis of gender and ethnicity. 
B)  Unions bargain for better working conditions at the cost of higher wages. 
C)  Unions cause a surplus of labor by bargaining for wages that are higher than the value of the marginal product of labor. 
D)  Unions cause compensating differentials.

Question 5

Use the following to answer questions:
Figure: Equilibrium in the Labor Market  
-(Figure: Equilibrium in the Labor Market) In the figure Equilibrium in the Labor Market, a decrease in the price of the good produced, when everything else stays the same, will lead to a(n) _____ in the equilibrium quantity of labor and a(n) _____ in the equilibrium price of labor.

Accepted Answer

A)  increase; increase 
B)  decrease; increase 
C)  increase; decrease 
D)  decrease; decrease 
A)  increase; increase 
B)  decrease; increase 
C)  increase; decrease 
D)  decrease; decrease

Question 6

While reading the local newspaper, you notice an article about a man who won a sizable prize in the state lottery. This prize amounts to monthly payments for the rest of the man's life. The man is quoted as saying, "As soon as I receive that first lottery payment, I will only work when I want to, rather than because I have to." How would an economist explain what has happened to this man's labor supply curve?

Accepted Answer

It sounds as if the man's labor supply c

Question 7

Use the following to answer questions:
Figure: The Demand for Bricklayers  
-(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. The equilibrium market wage for bricklayers is $100 a day, but a minimum wage of $130 a day for bricklayers is set by the government. As a result:

Accepted Answer

A)  six workers will now be hired by the firm. 
B)  three workers who otherwise would have been employed are now unemployed. 
C)  all bricklayers are better off. 
D)  construction firms will shut down. 
A)  six workers will now be hired by the firm. 
B)  three workers who otherwise would have been employed are now unemployed. 
C)  all bricklayers are better off. 
D)  construction firms will shut down.

Question 8

The value of the marginal product is equal to:

Accepted Answer

A)  marginal product times the wage rate. 
B)  average product times the wage rate. 
C)  marginal product times the price per unit of output. 
D)  average product times the price per unit of output. 
A)  marginal product times the wage rate. 
B)  average product times the wage rate. 
C)  marginal product times the price per unit of output. 
D)  average product times the price per unit of output.

Question 9

Use the following to answer questions:
Figure: Joanna's Time Allocation Budget Line  
-(Figure: Joanna's Time Allocation Budget Line) Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. If Joanna's wage rate increases and she ends up working more hours, for her:

Accepted Answer

A)  the substitution effect dominates. 
B)  the income effect dominates. 
C)  the substitution and income effects cancel each other out. 
D)  the substitution effect becomes ineffective. 
A)  the substitution effect dominates. 
B)  the income effect dominates. 
C)  the substitution and income effects cancel each other out. 
D)  the substitution effect becomes ineffective.

Question 10

The fact that Tom Brady, the quarterback of the New England Patriots, is paid more than a high school football coach is an example of a wage disparity caused by compensating differentials.

Accepted Answer

A) True 
 B)False

Question 11

Kurt earns a wage of $100 per hour; Jim earns a wage of $10 per hour. To maximize utility, Kurt works 45 hours per week and Jim works 50 hours per week. The value of an additional hour of leisure is:

Accepted Answer

A)  higher for Jim than for Kurt. 
B)  higher for Kurt than for Jim. 
C)  less than $100 for Kurt. 
D)  greater than $10 for Jim. 
A)  higher for Jim than for Kurt. 
B)  higher for Kurt than for Jim. 
C)  less than $100 for Kurt. 
D)  greater than $10 for Jim.

Question 12

Which of the following will NOT shift the labor supply curve?

Accepted Answer

A)  a change in preferences and social norms 
B)  changes in wealth 
C)  changes in opportunities 
D)  a change in the wage rate 
A)  a change in preferences and social norms 
B)  changes in wealth 
C)  changes in opportunities 
D)  a change in the wage rate

Question 13

Use the following to answer questions:
Figure: The Demand for Bricklayers  
-(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the equilibrium market wage rate for bricklayers rises from $80 to $100, the _____ bricklayers will _____.

Accepted Answer

A)  demand for; rise 
B)  quantity demanded of; rise 
C)  demand for; fall 
D)  quantity demanded of; fall 
A)  demand for; rise 
B)  quantity demanded of; rise 
C)  demand for; fall 
D)  quantity demanded of; fall

Question 14

The amount by which the use of an additional unit of a factor of production increases a firm's total revenue during a period is called the:

Accepted Answer

A)  value of the marginal product. 
B)  average product. 
C)  marginal factor cost. 
D)  marginal physical product. 
A)  value of the marginal product. 
B)  average product. 
C)  marginal factor cost. 
D)  marginal physical product.

Question 15

Use the following to answer questions:  
-(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10, then the value of the marginal product of the fifth worker is:

Accepted Answer

A)  $11. 
B)  $110. 
C)  $90. 
D)  $750. 
A)  $11. 
B)  $110. 
C)  $90. 
D)  $750.

Question 16

According to the _____, in a perfectly competitive economy each factor of production is paid its equilibrium value of the marginal product.

Accepted Answer

A)  theory of labor supply 
B)  efficiency-wage model 
C)  theory of compensating differentials 
D)  marginal productivity theory of income distribution 
A)  theory of labor supply 
B)  efficiency-wage model 
C)  theory of compensating differentials 
D)  marginal productivity theory of income distribution

Question 17

In the factor market for land, equilibrium rental prices will be _____ the value of marginal product of land.

Accepted Answer

A)  less than 
B)  equal to 
C)  greater than 
D)  unrelated to 
A)  less than 
B)  equal to 
C)  greater than 
D)  unrelated to

Question 18

The invention of labor-saving appliances has decreased the supply of labor in the United States.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions:
Figure: Davina's Labor Supply Choice  
-(Figure: Davina's Labor Supply Choice) The figure Davina's Labor Supply Choice shows Davina's time allocation budget line when her hourly wage is $10 or $15 and she has 80 hours to allocate between labor and leisure; it also shows two of her indifference curves for income and leisure. When Davina earns $10 per hour, she works _____ hours and enjoys _____ hours of leisure.

Accepted Answer

A)  20; 60 
B)  30; 50 
C)  40; 40 
D)  50; 30 
A)  20; 60 
B)  30; 50 
C)  40; 40 
D)  50; 30

Question 20

Liyun owns a small flower shop, and the industry is perfectly competitive. She is considering whether to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units is $10 each. What should Liyun do?

Accepted Answer

A)  hire the additional worker 
B)  not hire the additional worker 
C)  raise the price of the flower arrangements that she sells 
D)  Not enough information is given to answer the question. 
A)  hire the additional worker 
B)  not hire the additional worker 
C)  raise the price of the flower arrangements that she sells 
D)  Not enough information is given to answer the question.

Alex's wage rate falls. Holding everything else constant, Alex's new time allocation budget line will:

A backward-bending supply curve of labor shows that at relatively high wages the ___ effect dominates the _ effect, and the supply curve has a ___ slope.

When a person becomes better educated and is able to produce a better product, the person's education is an improvement in:

Which of the following statements about unions is TRUE?

The value of the marginal product is equal to:

The fact that Tom Brady, the quarterback of the New England Patriots, is paid more than a high school football coach is an example of a wage disparity caused by compensating differentials.

Kurt earns a wage of $100 per hour; Jim earns a wage of $10 per hour. To maximize utility, Kurt works 45 hours per week and Jim works 50 hours per week. The value of an additional hour of leisure is:

Which of the following will NOT shift the labor supply curve?

Use the following to answer questions: Figure: The Demand for Bricklayers -(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the equilibrium market wage rate for bricklayers rises from $80 to $100, the _ bricklayers will _.

The amount by which the use of an additional unit of a factor of production increases a firm's total revenue during a period is called the:

Use the following to answer questions: -(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10, then the value of the marginal product of the fifth worker is:

According to the _____, in a perfectly competitive economy each factor of production is paid its equilibrium value of the marginal product.

In the factor market for land, equilibrium rental prices will be _____ the value of marginal product of land.

The invention of labor-saving appliances has decreased the supply of labor in the United States.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Uncertainty, Risk, and Private Information

Filters

Exam 19: Factor Markets and the Distribution of Income

Alex's wage rate falls. Holding everything else constant, Alex's new time allocation budget line will:

A backward-bending supply curve of labor shows that at relatively high wages the _____ effect dominates the _____ effect, and the supply curve has a _____ slope.

When a person becomes better educated and is able to produce a better product, the person's education is an improvement in:

Which of the following statements about unions is TRUE?

The value of the marginal product is equal to:

The fact that Tom Brady, the quarterback of the New England Patriots, is paid more than a high school football coach is an example of a wage disparity caused by compensating differentials.

Kurt earns a wage of $100 per hour; Jim earns a wage of $10 per hour. To maximize utility, Kurt works 45 hours per week and Jim works 50 hours per week. The value of an additional hour of leisure is:

Which of the following will NOT shift the labor supply curve?

Use the following to answer questions: Figure: The Demand for Bricklayers -(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the equilibrium market wage rate for bricklayers rises from $80 to $100, the _____ bricklayers will _____.

The amount by which the use of an additional unit of a factor of production increases a firm's total revenue during a period is called the:

Use the following to answer questions: -(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10, then the value of the marginal product of the fifth worker is:

According to the _____, in a perfectly competitive economy each factor of production is paid its equilibrium value of the marginal product.

In the factor market for land, equilibrium rental prices will be _____ the value of marginal product of land.

The invention of labor-saving appliances has decreased the supply of labor in the United States.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Uncertainty, Risk, and Private Information

Filters

A backward-bending supply curve of labor shows that at relatively high wages the ___ effect dominates the _ effect, and the supply curve has a ___ slope.

Use the following to answer questions: Figure: The Demand for Bricklayers -(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the equilibrium market wage rate for bricklayers rises from $80 to $100, the _ bricklayers will _.