Question 1

At a low wage rate,

Accepted Answer

A) there is no substitution effect. 
B) there is no income effect. 
C) the substitution effect usually outweighs the income effect. 
D) the income effect usually outweighs the substitution effect. 
E) the disutility of market work is usually high. 
A) there is no substitution effect. 
B) there is no income effect. 
C) the substitution effect usually outweighs the income effect. 
D) the income effect usually outweighs the substitution effect. 
E) the disutility of market work is usually high.

Question 2

There is an Italian soccer player who makes more than $10 million a year. Why?

Accepted Answer

The owners of the team must believe he a

Question 3

When a resource price is below equilibrium,

Accepted Answer

A) excess supply will be present. 
B) excess demand will be present. 
C) the supply of the resource will be inelastic. 
D) the demand for the resource will be inelastic. 
A) excess supply will be present. 
B) excess demand will be present. 
C) the supply of the resource will be inelastic. 
D) the demand for the resource will be inelastic.

Question 4

When the price of a resource goes up and firms seek other suitable resources, this is called the

Accepted Answer

A) substitution in production effect. 
B) substitution in demand effect. 
C) elasticity effect. 
D) inelasticity effect. 
A) substitution in production effect. 
B) substitution in demand effect. 
C) elasticity effect. 
D) inelasticity effect.

Question 5

Which of the following would be the most likely result from a new government program that provided significant financial aid for children of low- and middle-income families to attend college?

Accepted Answer

A) Starting salaries for new college graduates would rise because of an increase in the number of high-quality graduates. 
B) Starting salaries for college graduates would be unaffected. 
C) The productivity of the labor force would be permanently lower because more young people would choose to be students instead of workers. 
D) Starting salaries of new college graduates would fall as the supply of graduates increased. 
A) Starting salaries for new college graduates would rise because of an increase in the number of high-quality graduates. 
B) Starting salaries for college graduates would be unaffected. 
C) The productivity of the labor force would be permanently lower because more young people would choose to be students instead of workers. 
D) Starting salaries of new college graduates would fall as the supply of graduates increased.

Question 6

If unskilled labor is relatively plentiful and cheap in many foreign countries, then as the United States expands its trade with these foreign countries, the domestic demand for

Accepted Answer

A) unskilled labor will rise and skilled labor will fall. 
B) skilled labor will rise and unskilled labor will fall. 
C) both skilled and unskilled labor will rise proportionately. 
D) both skilled and unskilled labor will be unaffected, assuming no barriers to free trade. 
A) unskilled labor will rise and skilled labor will fall. 
B) skilled labor will rise and unskilled labor will fall. 
C) both skilled and unskilled labor will rise proportionately. 
D) both skilled and unskilled labor will be unaffected, assuming no barriers to free trade.

Question 7

Troll Corporation sells dolls for $10.00 each in a market that is perfectly competitive. Increasing the number of workers from 100 to 101 would cause output to rise from 500 to 550 dolls per day. The marginal revenue product for the 101st worker is

Accepted Answer

A) $10.00. 
B) $500. 
C) $5,000. 
D) $1,010. 
A) $10.00. 
B) $500. 
C) $5,000. 
D) $1,010.

Question 8

The marginal productivity principle says that a profit-maximizing firm should

Accepted Answer

A) hire capital until its marginal product is zero. 
B) hire labor until another worker costs more to hire than he can earn for the firm. 
C) hire the quantities of capital and of labor at which their marginal products are equal. 
D) hire capital until its marginal product is negative. 
A) hire capital until its marginal product is zero. 
B) hire labor until another worker costs more to hire than he can earn for the firm. 
C) hire the quantities of capital and of labor at which their marginal products are equal. 
D) hire capital until its marginal product is negative.

Question 9

Table 12-3
  
-Refer to Table 12-3. Suppose that the firm pays its workers $55 per day. Each unit of output sells for $12. How many days of labor should the firm hire?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 6 
A) 3 
B) 4 
C) 5 
D) 6

Question 10

As the price paid to a resource increases,

Accepted Answer

A) the supply of that resource will increase in the resource market. 
B) the supply of that resource will decrease in the resource market. 
C) resources will shift from other resource markets to this one. 
D) resources will shift from this resource market to others. 
E) resource usage will be unaffected. 
A) the supply of that resource will increase in the resource market. 
B) the supply of that resource will decrease in the resource market. 
C) resources will shift from other resource markets to this one. 
D) resources will shift from this resource market to others. 
E) resource usage will be unaffected.

Question 11

The supply curve of truck drivers is upward sloping and demand curve is downward sloping. A reduction in the price of hauling freight by truck relative to the price of hauling freight by rail will ____ the equilibrium wage of truck drivers and ____ the number of drivers employed.

Accepted Answer

A) decrease; decrease 
B) decrease; increase 
C) increase; decrease 
D) increase; increase 
A) decrease; decrease 
B) decrease; increase 
C) increase; decrease 
D) increase; increase

Question 12

Table 12-5
  
-Refer to Table 12-5. What is the marginal product of the fourth worker?

Accepted Answer

A) 65 
B) 70 
C) 75 
D) 80 
A) 65 
B) 70 
C) 75 
D) 80

Question 13

The derived demand curve for a resource is downward sloping because

Accepted Answer

A) the demand for products that utilize the resource is directly related to the price of the resource. 
B) the marginal productivity of resources will decline as their price increases. 
C) as the price of a resource rises, other resources will be less desirable than the higher priced resource. 
D) other resources will be substituted for a resource that increases in price. 
A) the demand for products that utilize the resource is directly related to the price of the resource. 
B) the marginal productivity of resources will decline as their price increases. 
C) as the price of a resource rises, other resources will be less desirable than the higher priced resource. 
D) other resources will be substituted for a resource that increases in price.

Question 14

The demand for most products is likely to be

Accepted Answer

A) more elastic in the long run than in the short run. 
B) less elastic in the long run than in the short run. 
C) equally elastic in the short and long run. 
D) equally inelastic in the short and long run. 
A) more elastic in the long run than in the short run. 
B) less elastic in the long run than in the short run. 
C) equally elastic in the short and long run. 
D) equally inelastic in the short and long run.

Question 15

Suppose a U.S. automotive manufacturer was considering moving to Mexico to take advantage of the lower wage rates for unskilled Mexican labor. The typical Mexican worker could produce 20 cars per day, while the firm's typical U.S. worker can produce 50 cars per day. If the firm currently pays its U.S. workers an hourly wage of $25, economic theory suggests that the firm should

Accepted Answer

A) move to Mexico if the Mexican hourly wage is less than $25. 
B) move to Mexico if the Mexican hourly wage is $15. 
C) move to Mexico if the Mexican hourly wage is $12. 
D) only move to Mexico if the Mexican hourly wage is less than $10. 
A) move to Mexico if the Mexican hourly wage is less than $25. 
B) move to Mexico if the Mexican hourly wage is $15. 
C) move to Mexico if the Mexican hourly wage is $12. 
D) only move to Mexico if the Mexican hourly wage is less than $10.

Question 16

An unexpected increase in the demand for accountants will lead to

Accepted Answer

A) an increase in their earnings and an expansion in the future supply of accountants. 
B) a decrease in the incentive of students to prepare for a career in accounting. 
C) a reduction in the current earnings of accountants, followed by a reduction in the future supply of accountants. 
D) a reduction in the employment of accountants but not their wage rates. 
A) an increase in their earnings and an expansion in the future supply of accountants. 
B) a decrease in the incentive of students to prepare for a career in accounting. 
C) a reduction in the current earnings of accountants, followed by a reduction in the future supply of accountants. 
D) a reduction in the employment of accountants but not their wage rates.

Question 17

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil

Accepted Answer

A) will increase the demand for coal. 
B) will reduce the demand for coal. 
C) will increase the supply of coal. 
D) will reduce the supply of coal. 
E) will not affect the demand for coal. 
A) will increase the demand for coal. 
B) will reduce the demand for coal. 
C) will increase the supply of coal. 
D) will reduce the supply of coal. 
E) will not affect the demand for coal.

Question 18

Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as

Accepted Answer

A) overhead expenditures. 
B) investments in human capital. 
C) sunk expenditures. 
D) social capital. 
A) overhead expenditures. 
B) investments in human capital. 
C) sunk expenditures. 
D) social capital.

Question 19

Which of the following is the best definition of "physical capital"?

Accepted Answer

A) the labor utilized in the production process 
B) man-made resources used to produce other goods 
C) natural resources in their original state 
D) the ownership of stock shares issued by a corporation 
A) the labor utilized in the production process 
B) man-made resources used to produce other goods 
C) natural resources in their original state 
D) the ownership of stock shares issued by a corporation

Question 20

The supply of a resource, such as oil, is likely to be

Accepted Answer

A) equally elastic in both the short and long run. 
B) more elastic in the long run than in the short run. 
C) more elastic in the short run than in the long run. 
D) determined by the demand for the resource. 
A) equally elastic in both the short and long run. 
B) more elastic in the long run than in the short run. 
C) more elastic in the short run than in the long run. 
D) determined by the demand for the resource.

Exam 12: The Supply of and Demand for Productive Resources

At a low wage rate,

There is an Italian soccer player who makes more than $10 million a year. Why?

When a resource price is below equilibrium,

When the price of a resource goes up and firms seek other suitable resources, this is called the

Which of the following would be the most likely result from a new government program that provided significant financial aid for children of low- and middle-income families to attend college?

If unskilled labor is relatively plentiful and cheap in many foreign countries, then as the United States expands its trade with these foreign countries, the domestic demand for

Troll Corporation sells dolls for $10.00 each in a market that is perfectly competitive. Increasing the number of workers from 100 to 101 would cause output to rise from 500 to 550 dolls per day. The marginal revenue product for the 101st worker is

The marginal productivity principle says that a profit-maximizing firm should

Table 12-3 -Refer to Table 12-3. Suppose that the firm pays its workers $55 per day. Each unit of output sells for $12. How many days of labor should the firm hire?

As the price paid to a resource increases,

The supply curve of truck drivers is upward sloping and demand curve is downward sloping. A reduction in the price of hauling freight by truck relative to the price of hauling freight by rail will ____ the equilibrium wage of truck drivers and ____ the number of drivers employed.

Table 12-5 -Refer to Table 12-5. What is the marginal product of the fourth worker?

The derived demand curve for a resource is downward sloping because

The demand for most products is likely to be

An unexpected increase in the demand for accountants will lead to

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil

Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as

Which of the following is the best definition of "physical capital"?

The supply of a resource, such as oil, is likely to be

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

Filters

The supply curve of truck drivers is upward sloping and demand curve is downward sloping. A reduction in the price of hauling freight by truck relative to the price of hauling freight by rail will the equilibrium wage of truck drivers and the number of drivers employed.