Question 1

A leftward shift in the labor supply curve will result if:

Accepted Answer

A)  people begin to value leisure more highly. 
B)  people have less nonlabor income. 
C)  transit costs to and from work decline. 
D)  the population increases. 
A)  people begin to value leisure more highly. 
B)  people have less nonlabor income. 
C)  transit costs to and from work decline. 
D)  the population increases.

Question 2

An important assumption underlying the marginal productivity theory of income distribution is that:

Accepted Answer

A)  product markets are monopolistically competitive. 
B)  factor markets are perfectly competitive. 
C)  the relevant value of the marginal product is not the equilibrium value. 
D)  the firm does not own any land or physical capital. 
A)  product markets are monopolistically competitive. 
B)  factor markets are perfectly competitive. 
C)  the relevant value of the marginal product is not the equilibrium value. 
D)  the firm does not own any land or physical capital.

Question 3

The more work people do, all other things unchanged, the:

Accepted Answer

A)  more their free time. 
B)  greater their nonmarket use of time. 
C)  less income they have. 
D)  less leisure they have. 
A)  more their free time. 
B)  greater their nonmarket use of time. 
C)  less income they have. 
D)  less leisure they have.

Question 4

To maximize utility, an individual should allocate time so that the marginal utility of the earnings from an hour spent working is equal to the marginal utility of an additional hour of leisure.

Accepted Answer

A) True 
 B)False

Question 5

The marginal productivity theory of income distribution is based on the assumption that factor markets are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 6

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 difference means that the marginal productivity theory of income distribution doesn't hold.

Accepted Answer

A) True 
 B)False

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. If the equilibrium market wage for bricklayers is $80 per day, then this masonry firm will hire _____ bricklayers.

Accepted Answer

A)  four 
B)  six 
C)  five 
D)  eight 
A)  four 
B)  six 
C)  five 
D)  eight

Question 8

Decisions about labor supply result from decisions about time allocation, which deals with determining how many hours to spend on different activities.

Accepted Answer

A) True 
 B)False

Question 9

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. Davina's labor supply curve is _____ as her hourly wage rises from $10 to $15.

Accepted Answer

A)  upward-sloping 
B)  downward-sloping 
C)  vertical 
D)  horizontal 
A)  upward-sloping 
B)  downward-sloping 
C)  vertical 
D)  horizontal

Question 10

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 $20 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)  two fewer 
A)  one more 
B)  two more 
C)  one fewer 
D)  two fewer

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Unions represent approximately _____% of employees of private businesses.

Accepted Answer

A)  less than 1 
B)  7 
C)  19 
D)  29 
A)  less than 1 
B)  7 
C)  19 
D)  29

Question 13

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. If it hires two workers, the value of marginal product for the second worker is:

Accepted Answer

A)  $5. 
B)  $45. 
C)  $20. 
D)  $10. 
A)  $5. 
B)  $45. 
C)  $20. 
D)  $10.

Question 14

A determinant of the demand for a factor of production is the:

Accepted Answer

A)  price of the factor. 
B)  productivity of the factor. 
C)  quantity of the factor supplied. 
D)  compensating differential. 
A)  price of the factor. 
B)  productivity of the factor. 
C)  quantity of the factor supplied. 
D)  compensating differential.

Question 15

Tim works 51 hours per week, and his wage is $35 per hour. If his wage increases to $70 per hour:

Accepted Answer

A)  the substitution effect implies that he will work less. 
B)  if leisure is a normal good, the income effect implies that he will work more. 
C)  if leisure is a normal good, the income effect will reinforce the substitution effect and he will work more. 
D)  the substitution effect implies that he will work more. 
A)  the substitution effect implies that he will work less. 
B)  if leisure is a normal good, the income effect implies that he will work more. 
C)  if leisure is a normal good, the income effect will reinforce the substitution effect and he will work more. 
D)  the substitution effect implies that he will work more.

Question 16

Gabriella often faces a trade-off between time at the beach and time working as a model. She earns $40 per hour as a model and values going to the beach at the same price. When explaining this to her parents, she says, "The marginal utility per hour working is the same as the marginal utility per hour of going to the beach." This is an illustration of:

Accepted Answer

A)  indifference curves. 
B)  the substitution effect. 
C)  the income effect. 
D)  optimal time allocation. 
A)  indifference curves. 
B)  the substitution effect. 
C)  the income effect. 
D)  optimal time allocation.

Question 17

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the _____ product of labor is _____ product of capital.

Accepted Answer

A)  marginal; greater than the marginal 
B)  marginal; less than the marginal 
C)  average; greater than the average 
D)  average; less than the average 
A)  marginal; greater than the marginal 
B)  marginal; less than the marginal 
C)  average; greater than the average 
D)  average; less than the average

Question 18

One objection to the marginal productivity theory of income distribution is the absence of large disparities in income between men and women and various ethnic groups.

Accepted Answer

A) True 
 B)False

Question 19

When wages increase, if the income effect dominates, the quantity of labor supplied will increase.

Accepted Answer

A) True 
 B)False

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 $125 and the price per bushel of corn is $10. To maximize profits Laura should employ _____ workers.

Accepted Answer

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

A leftward shift in the labor supply curve will result if:

An important assumption underlying the marginal productivity theory of income distribution is that:

The more work people do, all other things unchanged, the:

To maximize utility, an individual should allocate time so that the marginal utility of the earnings from an hour spent working is equal to the marginal utility of an additional hour of leisure.

The marginal productivity theory of income distribution is based on the assumption that factor markets are perfectly competitive.

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 difference means that the marginal productivity theory of income distribution doesn't hold.

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 for bricklayers is $80 per day, then this masonry firm will hire _____ bricklayers.

Decisions about labor supply result from decisions about time allocation, which deals with determining how many hours to spend on different activities.

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

Unions represent approximately _____% of employees of private businesses.

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. If it hires two workers, the value of marginal product for the second worker is:

A determinant of the demand for a factor of production is the:

Tim works 51 hours per week, and his wage is $35 per hour. If his wage increases to $70 per hour:

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the _ product of labor is _ product of capital.

One objection to the marginal productivity theory of income distribution is the absence of large disparities in income between men and women and various ethnic groups.

When wages increase, if the income effect dominates, the quantity of labor supplied will increase.

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

A leftward shift in the labor supply curve will result if:

An important assumption underlying the marginal productivity theory of income distribution is that:

The more work people do, all other things unchanged, the:

To maximize utility, an individual should allocate time so that the marginal utility of the earnings from an hour spent working is equal to the marginal utility of an additional hour of leisure.

The marginal productivity theory of income distribution is based on the assumption that factor markets are perfectly competitive.

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 difference means that the marginal productivity theory of income distribution doesn't hold.

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 for bricklayers is $80 per day, then this masonry firm will hire _____ bricklayers.

Decisions about labor supply result from decisions about time allocation, which deals with determining how many hours to spend on different activities.

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

Unions represent approximately _____% of employees of private businesses.

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. If it hires two workers, the value of marginal product for the second worker is:

A determinant of the demand for a factor of production is the:

Tim works 51 hours per week, and his wage is $35 per hour. If his wage increases to $70 per hour:

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the _____ product of labor is _____ product of capital.

One objection to the marginal productivity theory of income distribution is the absence of large disparities in income between men and women and various ethnic groups.

When wages increase, if the income effect dominates, the quantity of labor supplied will increase.

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

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the _ product of labor is _ product of capital.