Question 1

The marginal revenue product of labor is defined as

Accepted Answer

A) the change in the firm's revenue as a result of selling one more unit of output. 
B) the change in the firm's output as a result of hiring one more worker. 
C) the change in the firm's profit as a result of hiring one more worker. 
D) the change in the firm's revenue as a result of hiring one more worker. 
A) the change in the firm's revenue as a result of selling one more unit of output. 
B) the change in the firm's output as a result of hiring one more worker. 
C) the change in the firm's profit as a result of hiring one more worker. 
D) the change in the firm's revenue as a result of hiring one more worker. D

Question 2

Figure 17-6
   
Figure 17-6 shows two different compensation schemes for the Vortex Vacuum Cleaner Company.
Under Scheme I, the firm pays a consistent wage of $2,500 per month to all its salespeople for sales up to 20 vacuum cleaners.For sales of 21-30 vacuum cleaners, its salespeople earn $125 per vacuum cleaner, with wages capped at $3,750 per month for sales over 30 vacuum cleaners.If a salesperson has three consecutive months of sales below 20 vacuum cleaners, the person loses his or her job.
Scheme II represents a straight commission, with salespeople earning a commission of $125 per vacuum cleaner sold, with no wage cap.
-Refer to Figure 17-6.Salespeople would be indifferent to the two pay schemes if their monthly sales were

Accepted Answer

A) less than 20 vacuum cleaners. 
B) between 20 and 30 vacuum cleaners. 
C) between 30 and 45 vacuum cleaners. 
D) more than 45 vacuum cleaners. 
A) less than 20 vacuum cleaners. 
B) between 20 and 30 vacuum cleaners. 
C) between 30 and 45 vacuum cleaners. 
D) more than 45 vacuum cleaners. B

Question 3

What is a factor market?

Accepted Answer

A) It is a market where financial instruments are traded. 
B) It is a market where stocks and bonds are traded. 
C) It is a market where producers buy consumption and capital goods. 
D) It is a market where resources used to produce final goods are traded. 
A) It is a market where financial instruments are traded. 
B) It is a market where stocks and bonds are traded. 
C) It is a market where producers buy consumption and capital goods. 
D) It is a market where resources used to produce final goods are traded. D

Question 4

The marginal productivity theory of income states that a person's total income is determined by

Accepted Answer

A) the amount and productivity of factors of production the individual owns. 
B) how much the individual works. 
C) how profitable the firm the individual works for is. 
D) how much the individual has inherited. 
A) the amount and productivity of factors of production the individual owns. 
B) how much the individual works. 
C) how profitable the firm the individual works for is. 
D) how much the individual has inherited.

Question 5

a.What are the two effects of an increase in the wage rate on an individual's labor supply decision? Briefly explain each effect.
b.Explain how a labor supply curve could be backward bending.

Accepted Answer

a.There are two effects of a wage rate i

Question 6

Figure 17-4
  
-Refer to Figure 17-4.Which of the following is true at W₀?

Accepted Answer

A) The income effect is larger than the substitution effect. 
B) The substitution effect is larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is positively sloped. 
A) The income effect is larger than the substitution effect. 
B) The substitution effect is larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is positively sloped.

Question 7

Economic rent is defined as

Accepted Answer

A) what you pay to rent your apartment or house. 
B) the revenue received by a factor of production with an upward-sloping supply curve. 
C) the price of a factor of production that is fixed in supply. 
D) the surplus received by employing a factor of production in its highest-valued use. 
A) what you pay to rent your apartment or house. 
B) the revenue received by a factor of production with an upward-sloping supply curve. 
C) the price of a factor of production that is fixed in supply. 
D) the surplus received by employing a factor of production in its highest-valued use.

Question 8

Companies often find it to be more profitable to use a commission or piece-rate system of compensation rather than a salary system, yet many firms continue to pay their workers salaries.List three reasons why a firm would choose a salary system of compensation.

Accepted Answer

1)Firms may find it difficult to attribu

Question 9

Figure 17-3
  
-Refer to Figure 17-3.Assume Panel B represents the labor supply curve.Which of the following statements about Panel B is true?

Accepted Answer

A) Panel B describes a situation in which the income effect dominates the substitution effect at low wages (segment i)and again at very high wages (segment iii). 
B) Panel B describes a situation in which the income effect dominates the substitution effect at low wages (segment i)and a situation in which the substitution effect dominates the income effect at very high wages (segment iii). 
C) Panel B describes a situation in which the substitution effect dominates the income effect at low wages (segment i). 
D) Panel B describes a situation in which the income effect dominates the substitution effect at every level of wages (segments i, ii, and iii). 
A) Panel B describes a situation in which the income effect dominates the substitution effect at low wages (segment i)and again at very high wages (segment iii). 
B) Panel B describes a situation in which the income effect dominates the substitution effect at low wages (segment i)and a situation in which the substitution effect dominates the income effect at very high wages (segment iii). 
C) Panel B describes a situation in which the substitution effect dominates the income effect at low wages (segment i). 
D) Panel B describes a situation in which the income effect dominates the substitution effect at every level of wages (segments i, ii, and iii).

Question 10

A firm might prefer to choose a salary system rather than a commission or piece-rate system of compensation when there are concerns about output quality.

Accepted Answer

A) True 
 B)False

Question 11

Economic discrimination takes place when an employer

Accepted Answer

A) pays workers the lowest wage possible. 
B) pays workers different wages on the basis of some arbitrary characteristics of workers that are irrelevant to the job performed. 
C) pays lower wages to workers who are not as productive as other workers. 
D) pays workers compensating wage differentials. 
A) pays workers the lowest wage possible. 
B) pays workers different wages on the basis of some arbitrary characteristics of workers that are irrelevant to the job performed. 
C) pays lower wages to workers who are not as productive as other workers. 
D) pays workers compensating wage differentials.

Question 12

Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials.

Accepted Answer

A) True 
 B)False

Question 13

If the labor supply is unchanged, an increase in the demand for labor will

Accepted Answer

A) increase the equilibrium wage and decrease the number of workers employed. 
B) increase the equilibrium wage and increase the quantity of jobs demanded. 
C) decrease the equilibrium wage and increase the number of workers employed. 
D) increase the equilibrium wage and increase the number of workers employed. 
A) increase the equilibrium wage and decrease the number of workers employed. 
B) increase the equilibrium wage and increase the quantity of jobs demanded. 
C) decrease the equilibrium wage and increase the number of workers employed. 
D) increase the equilibrium wage and increase the number of workers employed.

Question 14

Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximize profits is

Accepted Answer

A) P × MP = W. B) P × MP > W. C) P × MP < W. D) MP × W = P. A) P × MP = W. B) P × MP > W. C) P × MP < W. D) MP × W = P.

Question 15

What is the difference between labor's marginal product and marginal revenue product?

Accepted Answer

A) The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker. 
B) The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. 
C) The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. 
D) Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products. 
A) The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker. 
B) The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. 
C) The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. 
D) Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

Question 16

The application of economic analysis to human resources issues is called

Accepted Answer

A) resource economics. 
B) personnel economics. 
C) human economics. 
D) labor economics. 
A) resource economics. 
B) personnel economics. 
C) human economics. 
D) labor economics.

Question 17

The wage rate is the opportunity cost of

Accepted Answer

A) working. 
B) working overtime. 
C) leisure. 
D) consumption. 
A) working. 
B) working overtime. 
C) leisure. 
D) consumption.

Question 18

Scenario 17-1
In academia, professors in some disciplines receive higher salaries than others.For example, professors teaching in business schools receive higher salaries than professors in the English department.Suppose at Unity College, assistant professors in the business school earn $80,000 while assistant professors in the English department earn $50,000.Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries.
-Refer to Scenario 17-1.Following the passage of comparable worth legislation, Unity College responds by placing salaries at $65,000.Which of the following is the result of the legislation?

Accepted Answer

A) The supply of English professors increases and the supply of business professors decreases. 
B) The demand for English professors decreases and the demand for business professors increases. 
C) There will be a surplus in the market for English professors and a shortage in the market for business professors. 
D) There will be a surplus in the market for English professors and the market for business professors will not be affected. 
A) The supply of English professors increases and the supply of business professors decreases. 
B) The demand for English professors decreases and the demand for business professors increases. 
C) There will be a surplus in the market for English professors and a shortage in the market for business professors. 
D) There will be a surplus in the market for English professors and the market for business professors will not be affected.

Question 19

Figure 17-6
   
Figure 17-6 shows two different compensation schemes for the Vortex Vacuum Cleaner Company.
Under Scheme I, the firm pays a consistent wage of $2,500 per month to all its salespeople for sales up to 20 vacuum cleaners.For sales of 21-30 vacuum cleaners, its salespeople earn $125 per vacuum cleaner, with wages capped at $3,750 per month for sales over 30 vacuum cleaners.If a salesperson has three consecutive months of sales below 20 vacuum cleaners, the person loses his or her job.
Scheme II represents a straight commission, with salespeople earning a commission of $125 per vacuum cleaner sold, with no wage cap.
-Refer to Figure 17-6.Which of the following statements about Scheme II is false?

Accepted Answer

A) It is likely to draw highly productive workers who see the opportunity to increase their wages. 
B) It could discourage less productive workers and induce them to leave the firm. 
C) It allows workers to increase their monthly wage without penalizing those who are content with their monthly wage. 
D) It is more risky for senior employees. 
A) It is likely to draw highly productive workers who see the opportunity to increase their wages. 
B) It could discourage less productive workers and induce them to leave the firm. 
C) It allows workers to increase their monthly wage without penalizing those who are content with their monthly wage. 
D) It is more risky for senior employees.

Question 20

The marginal productivity theory of income distribution states that

Accepted Answer

A) as more and more units of labor are added to a fixed quantity of capital, eventually labor's contribution to a firm's income will decrease. 
B) income distribution is determined by the marginal productivity of the factors of production that individuals own. 
C) factors of production in short supply command higher prices than those available in abundant quantities. 
D) capital owners receive the bulk of a nation's income because capital-intensive production generates productivity gains. 
A) as more and more units of labor are added to a fixed quantity of capital, eventually labor's contribution to a firm's income will decrease. 
B) income distribution is determined by the marginal productivity of the factors of production that individuals own. 
C) factors of production in short supply command higher prices than those available in abundant quantities. 
D) capital owners receive the bulk of a nation's income because capital-intensive production generates productivity gains.

The marginal revenue product of labor is defined as

What is a factor market?

The marginal productivity theory of income states that a person's total income is determined by

a.What are the two effects of an increase in the wage rate on an individual's labor supply decision? Briefly explain each effect. b.Explain how a labor supply curve could be backward bending.

Figure 17-4 -Refer to Figure 17-4.Which of the following is true at W₀?

Economic rent is defined as

Companies often find it to be more profitable to use a commission or piece-rate system of compensation rather than a salary system, yet many firms continue to pay their workers salaries.List three reasons why a firm would choose a salary system of compensation.

Figure 17-3 -Refer to Figure 17-3.Assume Panel B represents the labor supply curve.Which of the following statements about Panel B is true?

A firm might prefer to choose a salary system rather than a commission or piece-rate system of compensation when there are concerns about output quality.

Economic discrimination takes place when an employer

Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials.

If the labor supply is unchanged, an increase in the demand for labor will

Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximize profits is

What is the difference between labor's marginal product and marginal revenue product?

The application of economic analysis to human resources issues is called

The wage rate is the opportunity cost of

The marginal productivity theory of income distribution states that

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

Public Choice, Taxes, and the Distribution of Income

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Exam 17: The Markets for Labor and Other Factors of Production

The marginal revenue product of labor is defined as

What is a factor market?

The marginal productivity theory of income states that a person's total income is determined by

a.What are the two effects of an increase in the wage rate on an individual's labor supply decision? Briefly explain each effect. b.Explain how a labor supply curve could be backward bending.

Figure 17-4 -Refer to Figure 17-4.Which of the following is true at W₀?

Economic rent is defined as

Companies often find it to be more profitable to use a commission or piece-rate system of compensation rather than a salary system, yet many firms continue to pay their workers salaries.List three reasons why a firm would choose a salary system of compensation.

Figure 17-3 -Refer to Figure 17-3.Assume Panel B represents the labor supply curve.Which of the following statements about Panel B is true?

A firm might prefer to choose a salary system rather than a commission or piece-rate system of compensation when there are concerns about output quality.

Economic discrimination takes place when an employer

Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials.

If the labor supply is unchanged, an increase in the demand for labor will

Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximize profits is

What is the difference between labor's marginal product and marginal revenue product?

The application of economic analysis to human resources issues is called

The wage rate is the opportunity cost of

The marginal productivity theory of income distribution states that

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

Public Choice, Taxes, and the Distribution of Income

Filters