Question 1

Compensating differentials are used to motivate employees and to reduce worker turnover.

Accepted Answer

A) True 
 B)False

Question 2

In a perfectly competitive labor market, the equilibrium wage:

Accepted Answer

A)  is the same for all firms. 
B)  is always greater than the value of marginal product. 
C)  results in diminishing marginal product. 
D)  causes some people to be unemployed. 
A)  is the same for all firms. 
B)  is always greater than the value of marginal product. 
C)  results in diminishing marginal product. 
D)  causes some people to be unemployed.

Question 3

When a person receives a wage increase, changes in his or her labor supply depend on:

Accepted Answer

A)  a substitution effect and an income effect. 
B)  a substitution effect only. 
C)  an income effect only. 
D)  diminishing marginal product. 
A)  a substitution effect and an income effect. 
B)  a substitution effect only. 
C)  an income effect only. 
D)  diminishing marginal product.

Question 4

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to differences in human capital.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a factor of production at a college?

Accepted Answer

A)  the faculty 
B)  lab concentrations to use in experiments 
C)  electricity 
D)  Scantron sheets 
A)  the faculty 
B)  lab concentrations to use in experiments 
C)  electricity 
D)  Scantron sheets

Question 6

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to compensating differentials.

Accepted Answer

A) True 
 B)False

Question 7

According to the marginal productivity theory of income distribution, every factor of production is paid a wage equal to the equilibrium value of its marginal product.

Accepted Answer

A) True 
 B)False

Question 8

In the United States, payments to labor account for:

Accepted Answer

A)  70% of total income, a share that has not fluctuated much in the past 30 years. 
B)  50% of total income, but the returns to land have been increasing. 
C)  only 30% of total income, and this number is falling. 
D)  90% of income and can be broken down into human capital and physical capital. 
A)  70% of total income, a share that has not fluctuated much in the past 30 years. 
B)  50% of total income, but the returns to land have been increasing. 
C)  only 30% of total income, and this number is falling. 
D)  90% of income and can be broken down into human capital and physical capital.

Question 9

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

Accepted Answer

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

Question 10

If an individual's wage rate decreases, the substitution effect will cause the individual to work fewer hours.

Accepted Answer

A) True 
 B)False

Question 11

Lisa works 46 hours a week at $10 an hour. If her wage increases to $16.50:

Accepted Answer

A)  the substitution effect implies that she will work less. 
B)  if leisure is a normal good, the income effect implies that she will work less. 
C)  if leisure is a normal good, the income effect will reinforce the substitution effect and she will work less. 
D)  Lisa's marginal product of labor has decreased. 
A)  the substitution effect implies that she will work less. 
B)  if leisure is a normal good, the income effect implies that she will work less. 
C)  if leisure is a normal good, the income effect will reinforce the substitution effect and she will work less. 
D)  Lisa's marginal product of labor has decreased.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Time allocation refers to:

Accepted Answer

A)  how many hours an employer should hire a worker for. 
B)  how many hours people choose to spend on different activities. 
C)  how many hours unions will choose for their members to work. 
D)  how different types of talents determine the wages people will earn. 
A)  how many hours an employer should hire a worker for. 
B)  how many hours people choose to spend on different activities. 
C)  how many hours unions will choose for their members to work. 
D)  how different types of talents determine the wages people will earn.

Question 14

The marginal productivity theory of income distribution assumes that factor markets are oligopolies.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions:
Figure: Income and Leisure Opportunities  
-(Figure: Income and Leisure Opportunities) The figure Income and Leisure Opportunities refers to Keisha when she has 100 hours per week for working or leisure. There are two time allocation lines, one for a $10 hourly wage rate and one for a $20 hourly wage rate. Keisha's optimal choice is point A when the wage is $10, and her optimal choice is point C when the wage is $20. As the amount she earns increases from $10 to $20 per hour, Keisha will work _____ hours because of the substitution effect.

Accepted Answer

A)  10 fewer 
B)  15 more 
C)  25 fewer 
D)  50 more 
A)  10 fewer 
B)  15 more 
C)  25 fewer 
D)  50 more

Question 16

A firm's demand curve for labor in a perfectly competitive market is the downward-sloping portion of its _____ curve.

Accepted Answer

A)  marginal revenue 
B)  average total cost 
C)  value of the marginal product of labor 
D)  total revenue 
A)  marginal revenue 
B)  average total cost 
C)  value of the marginal product of labor 
D)  total revenue

Question 17

An increase in the demand for autoworkers may come about because of all of the following EXCEPT a(n):

Accepted Answer

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

Question 18

As stock prices rise and workers' wealth increases, workers will increase the quantity supplied of labor because they will want to buy more stock.

Accepted Answer

A) True 
 B)False

Question 19

To maximize profits, a firm will employ workers until for the last worker employed:

Accepted Answer

A)  marginal product of labor is equal to the nominal wage rate. 
B)  the value of the marginal product of labor is equal to the wage rate. 
C)  the value of the marginal product of labor is equal to the price per unit of output. 
D)  the value of the marginal product of labor is as high as possible. 
A)  marginal product of labor is equal to the nominal wage rate. 
B)  the value of the marginal product of labor is equal to the wage rate. 
C)  the value of the marginal product of labor is equal to the price per unit of output. 
D)  the value of the marginal product of labor is as high as possible.

Question 20

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 there is a new minimum wage of $120. Therefore:

Accepted Answer

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

Compensating differentials are used to motivate employees and to reduce worker turnover.

In a perfectly competitive labor market, the equilibrium wage:

When a person receives a wage increase, changes in his or her labor supply depend on:

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to differences in human capital.

Which of the following is a factor of production at a college?

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to compensating differentials.

According to the marginal productivity theory of income distribution, every factor of production is paid a wage equal to the equilibrium value of its marginal product.

In the United States, payments to labor account for:

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

If an individual's wage rate decreases, the substitution effect will cause the individual to work fewer hours.

Lisa works 46 hours a week at $10 an hour. If her wage increases to $16.50:

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

Time allocation refers to:

The marginal productivity theory of income distribution assumes that factor markets are oligopolies.

A firm's demand curve for labor in a perfectly competitive market is the downward-sloping portion of its _____ curve.

An increase in the demand for autoworkers may come about because of all of the following EXCEPT a(n):

As stock prices rise and workers' wealth increases, workers will increase the quantity supplied of labor because they will want to buy more stock.

To maximize profits, a firm will employ workers until for the last worker employed:

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 there is a new minimum wage of $120. Therefore:

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

Compensating differentials are used to motivate employees and to reduce worker turnover.

In a perfectly competitive labor market, the equilibrium wage:

When a person receives a wage increase, changes in his or her labor supply depend on:

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to differences in human capital.

Which of the following is a factor of production at a college?

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to compensating differentials.

According to the marginal productivity theory of income distribution, every factor of production is paid a wage equal to the equilibrium value of its marginal product.

In the United States, payments to labor account for:

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

If an individual's wage rate decreases, the substitution effect will cause the individual to work fewer hours.

Lisa works 46 hours a week at $10 an hour. If her wage increases to $16.50:

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

Time allocation refers to:

The marginal productivity theory of income distribution assumes that factor markets are oligopolies.

A firm's demand curve for labor in a perfectly competitive market is the downward-sloping portion of its _____ curve.

An increase in the demand for autoworkers may come about because of all of the following EXCEPT a(n):

As stock prices rise and workers' wealth increases, workers will increase the quantity supplied of labor because they will want to buy more stock.

To maximize profits, a firm will employ workers until for the last worker employed:

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 there is a new minimum wage of $120. Therefore:

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

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