Question 1

The opportunity cost of an extra hour of leisure is:

Accepted Answer

A)  $1. 
B)  the hourly wage rate. 
C)  the same as the price of money. 
D)  always less than the value of the marginal product of labor. 
A)  $1. 
B)  the hourly wage rate. 
C)  the same as the price of money. 
D)  always less than the value of the marginal product of labor.

Question 2

If a union is able to bargain for a wage that is higher than the equilibrium:

Accepted Answer

A)  all workers will earn a wage equal to their value of marginal product. 
B)  some excess supply of labor or unemployment will result. 
C)  compensating differentials will be erased. 
D)  diminishing returns will not exist. 
A)  all workers will earn a wage equal to their value of marginal product. 
B)  some excess supply of labor or unemployment will result. 
C)  compensating differentials will be erased. 
D)  diminishing returns will not exist.

Question 3

A person's optimal labor supply choice:

Accepted Answer

A)  is similar to a person's optimal consumption rule. 
B)  is not useful in determining how many hours a person should work. 
C)  reveals little about a person's labor-leisure choices. 
D)  results in people working too much for too little pay. 
A)  is similar to a person's optimal consumption rule. 
B)  is not useful in determining how many hours a person should work. 
C)  reveals little about a person's labor-leisure choices. 
D)  results in people working too much for too little pay.

Question 4

Use the following to answer questions:
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive. The price of this firm's product is $5. The firm's total product with respect to labor is given in the table that follows.  
-(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. How many workers will this perfectly competitive, profit-maximizing firm choose to hire if the equilibrium wage is $30?

Accepted Answer

A)  one 
B)  two 
C)  three 
D)  four 
A)  one 
B)  two 
C)  three 
D)  four

Question 5

Use the following to answer questions:  
-(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords. Assume that the market for power cords is perfectly competitive. The price of a power cord is $2, the market wage rate is $40 per hour, and eight workers are hired. Profit can be maximized by hiring _____ worker(s).

Accepted Answer

A)  one more 
B)  two more 
C)  one fewer 
D)  three fewer 
A)  one more 
B)  two more 
C)  one fewer 
D)  three fewer

Question 6

In the labor market, households demand labor and firms supply goods and services.

Accepted Answer

A) True 
 B)False

Question 7

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 most likely caused by differences in ability and talent.

Accepted Answer

A) True 
 B)False

Question 8

Now that Naila has her bachelor's degree, she has decided to pursue her master's degree. Naila's choice of additional education is called an investment in:

Accepted Answer

A)  natural resources. 
B)  human capital. 
C)  physical capital. 
D)  labor. 
A)  natural resources. 
B)  human capital. 
C)  physical capital. 
D)  labor.

Question 9

The demand for a factor of production is a(n) _____ demand.

Accepted Answer

A)  derived 
B)  implicit 
C)  direct 
D)  distributional 
A)  derived 
B)  implicit 
C)  direct 
D)  distributional

Question 10

Your boss is trying to decide whether to buy out a rival company and asks for your advice. The boss says that she will buy the rival if there is evidence that the rival is operating inefficiently. (Your company will then improve its efficiency and increase profits.) She will not buy the rival if there is evidence that the rival is already operating efficiently. Your boss gives you the following data on the rival's operations: The average product of labor is 4, the marginal product of the last worker hired is 10, the wage is $20, and the price of output is $5. Based on this information, you should tell your boss to buy the rival.

Accepted Answer

A) True 
 B)False

Question 11

G. Reecy's Hamburger Joint is a fast-food restaurant. Which of the following is a factor of production?

Accepted Answer

A)  the raw meat used for the hamburgers 
B)  the hamburger buns 
C)  the cook 
D)  the concentrate that is diluted to make the soft drinks 
A)  the raw meat used for the hamburgers 
B)  the hamburger buns 
C)  the cook 
D)  the concentrate that is diluted to make the soft drinks

Question 12

Kaile earns $10 as a lab technician. She can work up to 60 hours per week but usually works 35 hours. She spends several hours every week reading in the park. She says she likes this because it is free. Kaile is right: sitting in the park with a book is costless.

Accepted Answer

A) True 
 B)False

Question 13

One reason that wage discrimination based on gender or ethnicity can continue is:

Accepted Answer

A)  market interference or market failure associated with above-equilibrium wages. 
B)  market competition making it profitable to engage in discrimination. 
C)  it is justified by the marginal productivity theory of income distribution. 
D)  the South African experience with apartheid showed that discrimination led to more rapid economic growth. 
A)  market interference or market failure associated with above-equilibrium wages. 
B)  market competition making it profitable to engage in discrimination. 
C)  it is justified by the marginal productivity theory of income distribution. 
D)  the South African experience with apartheid showed that discrimination led to more rapid economic growth.

Question 14

According to the _____, workers may earn a wage rate higher than the value of their marginal product because it provides an incentive to perform efficiently.

Accepted Answer

A)  marginal productivity of income distribution theory 
B)  efficiency-wage model 
C)  diminishing-returns theory 
D)  increasing-returns model 
A)  marginal productivity of income distribution theory 
B)  efficiency-wage model 
C)  diminishing-returns theory 
D)  increasing-returns model

Question 15

Use the following to answer questions:
Figure: The Time Allocation Budget Line  
-(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate decreases, then the time allocation budget line will rotate _____ along the _____ axis.

Accepted Answer

A)  left; leisure 
B)  up; income 
C)  right; leisure 
D)  down; income 
A)  left; leisure 
B)  up; income 
C)  right; leisure 
D)  down; income

Question 16

An individual will allocate time between labor and leisure by finding the point at which:

Accepted Answer

A)  he or she maximizes utility while remaining beneath the time allocation budget line. 
B)  the time allocation budget line is just tangent to an indifference curve. 
C)  he or she reaches the lowest possible indifference curve while still on the time allocation budget line. 
D)  he or she is indifferent between work and leisure. 
A)  he or she maximizes utility while remaining beneath the time allocation budget line. 
B)  the time allocation budget line is just tangent to an indifference curve. 
C)  he or she reaches the lowest possible indifference curve while still on the time allocation budget line. 
D)  he or she is indifferent between work and leisure.

Question 17

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, an increase in the productivity of labor, 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)  decrease; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  increase; increase 
A)  decrease; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  increase; increase

Question 18

The category compensation of employees:

Accepted Answer

A)  includes the earnings of proprietors. 
B)  doesn't include benefits such as health insurance. 
C)  can be attributed in a large part to the return on human capital. 
D)  includes payments in kind that are common in rural areas. 
A)  includes the earnings of proprietors. 
B)  doesn't include benefits such as health insurance. 
C)  can be attributed in a large part to the return on human capital. 
D)  includes payments in kind that are common in rural areas.

Question 19

If the wage rate rises, firms will find that:

Accepted Answer

A)  their labor demand curve shifts leftward. 
B)  their labor demand curve shifts rightward. 
C)  they move upward and to the left along the labor demand curve. 
D)  they move downward and to the right along the labor demand curve. 
A)  their labor demand curve shifts leftward. 
B)  their labor demand curve shifts rightward. 
C)  they move upward and to the left along the labor demand curve. 
D)  they move downward and to the right along the labor demand curve.

Question 20

Use the following to answer questions:  
-(Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $130 and the price per bushel of corn is $10. Suppose Laura is employing two workers. If she adds the third worker, her profits will:

Accepted Answer

A)  increase by $79. 
B)  decrease by $51. 
C)  decrease by $109. 
D)  increase by $80. 
A)  increase by $79. 
B)  decrease by $51. 
C)  decrease by $109. 
D)  increase by $80.

The opportunity cost of an extra hour of leisure is:

If a union is able to bargain for a wage that is higher than the equilibrium:

A person's optimal labor supply choice:

In the labor market, households demand labor and firms supply goods and services.

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 most likely caused by differences in ability and talent.

Now that Naila has her bachelor's degree, she has decided to pursue her master's degree. Naila's choice of additional education is called an investment in:

The demand for a factor of production is a(n) _____ demand.

G. Reecy's Hamburger Joint is a fast-food restaurant. Which of the following is a factor of production?

Kaile earns $10 as a lab technician. She can work up to 60 hours per week but usually works 35 hours. She spends several hours every week reading in the park. She says she likes this because it is free. Kaile is right: sitting in the park with a book is costless.

One reason that wage discrimination based on gender or ethnicity can continue is:

According to the _____, workers may earn a wage rate higher than the value of their marginal product because it provides an incentive to perform efficiently.

Use the following to answer questions: Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate decreases, then the time allocation budget line will rotate _ along the _ axis.

An individual will allocate time between labor and leisure by finding the point at which:

The category compensation of employees:

If the wage rate rises, firms will find that:

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

The opportunity cost of an extra hour of leisure is:

If a union is able to bargain for a wage that is higher than the equilibrium:

A person's optimal labor supply choice:

In the labor market, households demand labor and firms supply goods and services.

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 most likely caused by differences in ability and talent.

Now that Naila has her bachelor's degree, she has decided to pursue her master's degree. Naila's choice of additional education is called an investment in:

The demand for a factor of production is a(n) _____ demand.

G. Reecy's Hamburger Joint is a fast-food restaurant. Which of the following is a factor of production?

Kaile earns $10 as a lab technician. She can work up to 60 hours per week but usually works 35 hours. She spends several hours every week reading in the park. She says she likes this because it is free. Kaile is right: sitting in the park with a book is costless.

One reason that wage discrimination based on gender or ethnicity can continue is:

According to the _____, workers may earn a wage rate higher than the value of their marginal product because it provides an incentive to perform efficiently.

Use the following to answer questions: Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate decreases, then the time allocation budget line will rotate _____ along the _____ axis.

An individual will allocate time between labor and leisure by finding the point at which:

The category compensation of employees:

If the wage rate rises, firms will find that:

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

Use the following to answer questions: Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate decreases, then the time allocation budget line will rotate _ along the _ axis.