Question 1

Explain the concept of 'creative destruction' by innovation.Does it ensure positive economic profits in the long run?

Accepted Answer

Creative destruction begins when the alert innovative entrepreneur creates or recognizes a new and better product, acquires it, and brings it to market, where it makes older substitutes obsolete.As the first provider of the improved product, the entrepreneur initially faces little or no competition, and the resulting monopoly power enables the entrepreneur to sell the new product at a price that is high relative to its costs and yields abundant profit.This generous profit gets the attention of other individuals with entrepreneurial ambitions, who seek to enter the market with competitive and imitative products.This competitive entry first reduces and finally brings to an end the temporary excess of price over the competitive level that was initially enjoyed by the entrepreneur.

Question 2

The American Bar Association administers the bar examinations that prospective lawyers must pass before being allowed to practice law.The exam system thus allows the ABA to act like a

Accepted Answer

A)  monopsony. 
B)  union that can restrict the supply of lawyers. 
C)  union that can increase the number of lawyers. 
D)  None of the above is correct. 
A)  monopsony. 
B)  union that can restrict the supply of lawyers. 
C)  union that can increase the number of lawyers. 
D)  None of the above is correct. B

Question 3

Income effect of lower wages implies

Accepted Answer

A)  workers prefer leisure to work. 
B)  an increase in the productivity of labor. 
C)  a fall in the demand for labor. 
D)  workers would want to work more. 
A)  workers prefer leisure to work. 
B)  an increase in the productivity of labor. 
C)  a fall in the demand for labor. 
D)  workers would want to work more. D

Question 4

Over the last 30 years, the income gap between the rich and the poor has declined.

Accepted Answer

A) True 
 B)False

Question 5

Statistical studies in the United States have reached the conclusion that for low-income workers

Accepted Answer

A)  the substitution effect is greater than the income effect. 
B)  the income effect is greater than the substitution effect. 
C)  the income effect is about equal to the substitution effect. 
D)  the substitution effect is of the "wrong" sign. 
A)  the substitution effect is greater than the income effect. 
B)  the income effect is greater than the substitution effect. 
C)  the income effect is about equal to the substitution effect. 
D)  the substitution effect is of the "wrong" sign.

Question 6

The more specialized and highly valued a worker's skills are,

Accepted Answer

A)  the lower is her stock of human capital. 
B)  the more likely she is to earn economic rent. 
C)  the less likely she is to sell her skills on the primary labor market. 
D)  the more likely she is to be directly affected by minimum wage legislation. 
A)  the lower is her stock of human capital. 
B)  the more likely she is to earn economic rent. 
C)  the less likely she is to sell her skills on the primary labor market. 
D)  the more likely she is to be directly affected by minimum wage legislation.

Question 7

Studies have shown that in the 1980s the wage gap between college-educated workers and those with high school education or less

Accepted Answer

A)  decreased dramatically. 
B)  decreased slightly. 
C)  remained unchanged. 
D)  widened dramatically. 
A)  decreased dramatically. 
B)  decreased slightly. 
C)  remained unchanged. 
D)  widened dramatically.

Question 8

The real minimum wage has increased significantly over the last 40 years.

Accepted Answer

A) True 
 B)False

Question 9

Unions have the power to

Accepted Answer

A)  set all working rules. 
B)  increase the firm's total taxes. 
C)  push wages above competitive levels at times. 
D)  make a firm nationalized. 
A)  set all working rules. 
B)  increase the firm's total taxes. 
C)  push wages above competitive levels at times. 
D)  make a firm nationalized.

Question 10

The increasing share of women in the labor force may have contributed to the decrease in unionization.

Accepted Answer

A) True 
 B)False

Question 11

The consensus among researchers is that union workers earn 15 percent more than otherwise identical nonunion workers.This means unions have probably raised wages

Accepted Answer

A)  exactly 15 percent. 
B)  less than 15 percent. 
C)  at least 15 percent. 
D)  more or less than 15 percent, but one cannot tell exactly. 
A)  exactly 15 percent. 
B)  less than 15 percent. 
C)  at least 15 percent. 
D)  more or less than 15 percent, but one cannot tell exactly.

Question 12

Explain what is meant when it is said that the demand for labor is a derived demand.

Accepted Answer

The demand for labor is derived from the

Question 13

Increased productivity of workers in manufacturing has

Accepted Answer

A)  increased employment in manufacturing. 
B)  increased employment in agriculture. 
C)  decreased employment in agriculture. 
D)  decreased employment in services. 
E)  increased employment in services. 
A)  increased employment in manufacturing. 
B)  increased employment in agriculture. 
C)  decreased employment in agriculture. 
D)  decreased employment in services. 
E)  increased employment in services.

Question 14

Teenagers generally have high marginal revenue products because they have not completed their educations and have little job experience.

Accepted Answer

A) True 
 B)False

Question 15

Explain the circumstances under which some component of labor income is economic rent.

Accepted Answer

Economic rent is a payment to a factor a

Question 16

The demand for labor is derived from the

Accepted Answer

A)  demand for leisure. 
B)  supply of labor. 
C)  demand for final-output goods. 
D)  supply of final-output goods. 
A)  demand for leisure. 
B)  supply of labor. 
C)  demand for final-output goods. 
D)  supply of final-output goods.

Question 17

Which of the following affects the marginal physical product of labor?

Accepted Answer

A)  a worker's abilities and degree of work effort 
B)  the amount of capital available per worker 
C)  the technical know-how of the management of the firm 
D)  all of the above 
A)  a worker's abilities and degree of work effort 
B)  the amount of capital available per worker 
C)  the technical know-how of the management of the firm 
D)  all of the above

Question 18

Which of the following might be a goal of a union?

Accepted Answer

A)  increasing the size of the union 
B)  increasing the income while holding the size of the union constant 
C)  increasing both the size and income of the union 
D)  all of the above 
A)  increasing the size of the union 
B)  increasing the income while holding the size of the union constant 
C)  increasing both the size and income of the union 
D)  all of the above

Question 19

Minimum wage laws usually

Accepted Answer

A)  increase the number of unskilled workers who are employed. 
B)  benefit all unskilled workers. 
C)  raise the wages paid to unskilled workers who are employed. 
D)  All of the above are correct. 
A)  increase the number of unskilled workers who are employed. 
B)  benefit all unskilled workers. 
C)  raise the wages paid to unskilled workers who are employed. 
D)  All of the above are correct.

Question 20

One implication of human capital theory is that college graduates should earn substantially less than high school graduates.

Accepted Answer

A) True 
 B)False

Exam 20: Labor and Entrepreneurship: The Human Inputs

Explain the concept of 'creative destruction' by innovation.Does it ensure positive economic profits in the long run?

The American Bar Association administers the bar examinations that prospective lawyers must pass before being allowed to practice law.The exam system thus allows the ABA to act like a

Income effect of lower wages implies

Over the last 30 years, the income gap between the rich and the poor has declined.

Statistical studies in the United States have reached the conclusion that for low-income workers

The more specialized and highly valued a worker's skills are,

Studies have shown that in the 1980s the wage gap between college-educated workers and those with high school education or less

The real minimum wage has increased significantly over the last 40 years.

Unions have the power to

The increasing share of women in the labor force may have contributed to the decrease in unionization.

The consensus among researchers is that union workers earn 15 percent more than otherwise identical nonunion workers.This means unions have probably raised wages

Explain what is meant when it is said that the demand for labor is a derived demand.

Increased productivity of workers in manufacturing has

Teenagers generally have high marginal revenue products because they have not completed their educations and have little job experience.

Explain the circumstances under which some component of labor income is economic rent.

The demand for labor is derived from the

Which of the following affects the marginal physical product of labor?

Which of the following might be a goal of a union?

Minimum wage laws usually

One implication of human capital theory is that college graduates should earn substantially less than high school graduates.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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