Question 1

The individual producer's labor demand curve is the:

Accepted Answer

A)  marginal product of labor curve. 
B)  value of the average product of labor curve. 
C)  average product curve. 
D)  value of the marginal product of labor curve. 
A)  marginal product of labor curve. 
B)  value of the average product of labor curve. 
C)  average product curve. 
D)  value of the marginal product of labor curve.

Question 2

An increase in the demand for autoworkers may come about because of:

Accepted Answer

A)  a decrease in the price of cars. 
B)  a decrease in the productivity of autoworkers. 
C)  a decrease in the supply of other factors that autoworkers use in production. 
D)  an increase in the price of cars. 
A)  a decrease in the price of cars. 
B)  a decrease in the productivity of autoworkers. 
C)  a decrease in the supply of other factors that autoworkers use in production. 
D)  an increase in the price of cars.

Question 3

Use the following to answer questions:
Figure: Joanna's Time Allocation Budget Line  
-(Figure: Joanna's Time Allocation Budget Line) The figure Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. What is Joanna's wage rate?

Accepted Answer

A)  $10.00 
B)  $12.50 
C)  $40.00 
D)  $15.00 
A)  $10.00 
B)  $12.50 
C)  $40.00 
D)  $15.00

Question 4

The demand for factors of production is called a derived demand because it is:

Accepted Answer

A)  derived from the demand for the outputs that are produced by the factors of production. 
B)  derived from the available supply of factors, such as land, that can be overexploited. 
C)  not easy to determine and must be derived by a technical (and often complicated) process. 
D)  derived on the basis of questions posed to residents during the census. 
A)  derived from the demand for the outputs that are produced by the factors of production. 
B)  derived from the available supply of factors, such as land, that can be overexploited. 
C)  not easy to determine and must be derived by a technical (and often complicated) process. 
D)  derived on the basis of questions posed to residents during the census.

Question 5

Beyond some point, a higher wage may induce an individual to work _____, and the labor supply curve may then _____.

Accepted Answer

A)  more; bend backward 
B)  less; bend backward 
C)  more; slope downward 
D)  harder; become vertical 
A)  more; bend backward 
B)  less; bend backward 
C)  more; slope downward 
D)  harder; become vertical

Question 6

A backward-bending supply curve of labor shows that at relatively low 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 7

Use the following to answer questions:
Figure: Rita's Time Allocation Budget Line  
-(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. If her hourly wage doubles, the vertical intercept will be:

Accepted Answer

A)  $1,120. 
B)  $1,400. 
C)  $1,600. 
D)  $2,000. 
A)  $1,120. 
B)  $1,400. 
C)  $1,600. 
D)  $2,000.

Question 8

The largest component of the factor distribution of income in the United States is:

Accepted Answer

A)  interest and rents. 
B)  taxes. 
C)  corporate profits. 
D)  compensation of employees. 
A)  interest and rents. 
B)  taxes. 
C)  corporate profits. 
D)  compensation of employees.

Question 9

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. If the price of a power cord is $2, the value of the marginal product for the third worker is:

Accepted Answer

A)  $2. 
B)  $10. 
C)  $60. 
D)  $80. 
A)  $2. 
B)  $10. 
C)  $60. 
D)  $80.

Question 10

You overhear an economist refer to the price of leisure. What does this mean? How can leisure have a price?

Accepted Answer

Economists see the decision to work as a

Question 11

Leisure is considered a normal good, since people:

Accepted Answer

A)  consume more of it all the time. 
B)  cannot consume more, it being limited. 
C)  consume more of it when their income rises. 
D)  find it to be a luxury to take time off from their job. 
A)  consume more of it all the time. 
B)  cannot consume more, it being limited. 
C)  consume more of it when their income rises. 
D)  find it to be a luxury to take time off from their job.

Question 12

The _____ effect of a _____ wage causes individuals to substitute _____.

Accepted Answer

A)  substitution, higher; labor for leisure 
B)  income; lower; leisure for labor 
C)  substitution; lower; labor for leisure 
D)  complementary; constant; leisure for labor 
A)  substitution, higher; labor for leisure 
B)  income; lower; leisure for labor 
C)  substitution; lower; labor for leisure 
D)  complementary; constant; leisure for labor

Question 13

At Hamill Manufacturing of Pennsylvania highly skilled senior machinists are paid $70,000, excluding benefits, but the average skilled machinist generates approximately $137,000 in value added. This is partially because diminishing returns to labor cause the value of the marginal product of the last machinist hired to be greater than the average of all of the machinists employed.

Accepted Answer

A) True 
 B)False

Question 14

Derived demand for a factor means that:

Accepted Answer

A)  people demand factors just as they do goods. 
B)  the demand for factors depends on what the factor can produce. 
C)  the market derives a demand for factors regardless of what they produce. 
D)  suppliers determine what will be produced. 
A)  people demand factors just as they do goods. 
B)  the demand for factors depends on what the factor can produce. 
C)  the market derives a demand for factors regardless of what they produce. 
D)  suppliers determine what will be produced.

Question 15

Use the following to answer questions:
Figure: The Value of the Marginal Product Curve  
-(Figure: The Value of the Marginal Product Curve) In the figure The Value of the Marginal Product Curve, if the price of the good increases and everything else stays the same, then the profit-maximizing quantity of labor:

Accepted Answer

A)  will increase. 
B)  will decrease. 
C)  will stay the same. 
D)  cannot be determined. 
A)  will increase. 
B)  will decrease. 
C)  will stay the same. 
D)  cannot be determined.

Question 16

Which of the following is a compensating differential?

Accepted Answer

A)  Tiger Woods gets paid more than a college professor. 
B)  A window washer working in a suburban residential subdivision gets paid less than one who is washing windows on the outside of a skyscraper. 
C)  A nuclear scientist gets paid more than a janitor working in the same building. 
D)  On average, White men get paid more than women of all ethnicities. 
A)  Tiger Woods gets paid more than a college professor. 
B)  A window washer working in a suburban residential subdivision gets paid less than one who is washing windows on the outside of a skyscraper. 
C)  A nuclear scientist gets paid more than a janitor working in the same building. 
D)  On average, White men get paid more than women of all ethnicities.

Question 17

Andy's individual labor supply curve is positively sloped, so for Andy, the substitution effect dominates the income effect.

Accepted Answer

A) True 
 B)False

Question 18

A firm's demand curve for labor is:

Accepted Answer

A)  its marginal cost curve. 
B)  its marginal product curve. 
C)  its value of the marginal product of labor curve. 
D)  horizontal if it is in perfect competition. 
A)  its marginal cost curve. 
B)  its marginal product curve. 
C)  its value of the marginal product of labor curve. 
D)  horizontal if it is in perfect competition.

Question 19

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. If the price of a power cord is $4 and the market wage rate is $120 per hour, the profit-maximizing quantity of labor is _____ workers.

Accepted Answer

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

Question 20

If John's wage increases from $10 to $12 per hour, his opportunity cost of leisure has increased.

Accepted Answer

A) True 
 B)False

The individual producer's labor demand curve is the:

An increase in the demand for autoworkers may come about because of:

Use the following to answer questions: Figure: Joanna's Time Allocation Budget Line -(Figure: Joanna's Time Allocation Budget Line) The figure Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. What is Joanna's wage rate?

The demand for factors of production is called a derived demand because it is:

Beyond some point, a higher wage may induce an individual to work _, and the labor supply curve may then _.

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

Use the following to answer questions: Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. If her hourly wage doubles, the vertical intercept will be:

The largest component of the factor distribution of income in the United States is:

You overhear an economist refer to the price of leisure. What does this mean? How can leisure have a price?

Leisure is considered a normal good, since people:

The ___ effect of a _ wage causes individuals to substitute ___.

Derived demand for a factor means that:

Which of the following is a compensating differential?

Andy's individual labor supply curve is positively sloped, so for Andy, the substitution effect dominates the income effect.

A firm's demand curve for labor is:

If John's wage increases from $10 to $12 per hour, his opportunity cost of leisure has increased.

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 individual producer's labor demand curve is the:

An increase in the demand for autoworkers may come about because of:

Use the following to answer questions: Figure: Joanna's Time Allocation Budget Line -(Figure: Joanna's Time Allocation Budget Line) The figure Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. What is Joanna's wage rate?

The demand for factors of production is called a derived demand because it is:

Beyond some point, a higher wage may induce an individual to work _____, and the labor supply curve may then _____.

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

Use the following to answer questions: Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. If her hourly wage doubles, the vertical intercept will be:

The largest component of the factor distribution of income in the United States is:

You overhear an economist refer to the price of leisure. What does this mean? How can leisure have a price?

Leisure is considered a normal good, since people:

The _____ effect of a _____ wage causes individuals to substitute _____.

Derived demand for a factor means that:

Which of the following is a compensating differential?

Andy's individual labor supply curve is positively sloped, so for Andy, the substitution effect dominates the income effect.

A firm's demand curve for labor is:

If John's wage increases from $10 to $12 per hour, his opportunity cost of leisure has increased.

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

Beyond some point, a higher wage may induce an individual to work _, and the labor supply curve may then _.

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

The ___ effect of a _ wage causes individuals to substitute ___.