Question 1

If steel workers obtain a substantial wage increase, employment in the steel industry will be likely to fall the most if

Accepted Answer

A)  the demand curve for steel is highly inelastic. 
B)  the demand curve for steel is highly elastic. 
C)  the demand curve for steel workers is highly inelastic. 
D)  there are no good substitutes for steel. 
A)  the demand curve for steel is highly inelastic. 
B)  the demand curve for steel is highly elastic. 
C)  the demand curve for steel workers is highly inelastic. 
D)  there are no good substitutes for steel.

Question 2

Firms should hire additional units of a resource as long as the

Accepted Answer

A)  marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. 
B)  marginal product of the resource is less than the price of the resource. 
C)  price of the output produced is positive. 
D)  marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource. 
A)  marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. 
B)  marginal product of the resource is less than the price of the resource. 
C)  price of the output produced is positive. 
D)  marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource.

Question 3

The demand curve for a human resource will be more elastic the

Accepted Answer

A)  more and better substitutes are available for it. 
B)  more difficult it is to substitute other resources for it. 
C)  more inelastic the demand for the product the resource is used to produce. 
D)  shorter the time period under consideration. 
A)  more and better substitutes are available for it. 
B)  more difficult it is to substitute other resources for it. 
C)  more inelastic the demand for the product the resource is used to produce. 
D)  shorter the time period under consideration.

Question 4

If the demand for computer scientists increases relative to their supply,

Accepted Answer

A)  the wages of computer scientists will decline. 
B)  a computer science major will be more attractive to college students. 
C)  the employment of computer scientists will fall. 
D)  there will be a surplus of computer scientists. 
A)  the wages of computer scientists will decline. 
B)  a computer science major will be more attractive to college students. 
C)  the employment of computer scientists will fall. 
D)  there will be a surplus of computer scientists.

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

The demand for a factor of production will be more inelastic

Accepted Answer

A)  when the cost of the factor is small relative to the total cost of the product. 
B)  the more elastic the demand for the final product. 
C)  the easier it is to substitute other resources for the factor. 
D)  the more elastic the supply of products produced with the resource. 
A)  when the cost of the factor is small relative to the total cost of the product. 
B)  the more elastic the demand for the final product. 
C)  the easier it is to substitute other resources for the factor. 
D)  the more elastic the supply of products produced with the resource.

Question 7

If a firm is using a resource hired in a perfectly competitive market, and if the price of the resource exceeds the marginal revenue product of the resource,

Accepted Answer

A)  more of the resource should be used. 
B)  less of the resource should be used. 
C)  the firm should pay a lower price for the resource. 
D)  the firm should pay a higher price for the resource. 
E)  the firm is using the optimal amount of the resource 
A)  more of the resource should be used. 
B)  less of the resource should be used. 
C)  the firm should pay a lower price for the resource. 
D)  the firm should pay a higher price for the resource. 
E)  the firm is using the optimal amount of the resource

Question 8

When the marginal revenue product of an input is less than its price, the

Accepted Answer

A)  producer should expand the use of that input. 
B)  price of the input will automatically rise in a free market. 
C)  producer should reduce the use of that input. 
D)  marginal physical product of that input must be below its average physical product. 
A)  producer should expand the use of that input. 
B)  price of the input will automatically rise in a free market. 
C)  producer should reduce the use of that input. 
D)  marginal physical product of that input must be below its average physical product.

Question 9

If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect

Accepted Answer

A)  economics majors to receive a greater return on their human capital investment. 
B)  a decrease in the employment opportunities for economics majors. 
C)  lower wages for economics majors. 
D)  fewer students to major in economics. 
A)  economics majors to receive a greater return on their human capital investment. 
B)  a decrease in the employment opportunities for economics majors. 
C)  lower wages for economics majors. 
D)  fewer students to major in economics.

Question 10

Why is a college graduate more likely to get a job in management than is someone with only a high school diploma, even when the job has nothing to do with a specific type of education?

Accepted Answer

Increasingly, a college education is use

Question 11

A decrease in the demand for a product will cause output of that product to

Accepted Answer

A)  increase and the demand for and prices of the resources used to produce the product to rise. 
B)  decrease and both the demand for and prices of the resources used to produce the product to fall. 
C)  decline; the demand for the resources used to produce the product will remain constant. 
D)  increase; the price of resources used to produce the product will rise if their supply is elastic but fall if supply is inelastic. 
A)  increase and the demand for and prices of the resources used to produce the product to rise. 
B)  decrease and both the demand for and prices of the resources used to produce the product to fall. 
C)  decline; the demand for the resources used to produce the product will remain constant. 
D)  increase; the price of resources used to produce the product will rise if their supply is elastic but fall if supply is inelastic.

Question 12

Assume that the demand for paper products increases. Then, we expect that the

Accepted Answer

A)  demand for trees will also increase. 
B)  demand for trees will stay the same. 
C)  demand for trees will decrease. 
D)  effect on the demand for trees is uncertain; it depends on the elasticity of the demand for paper. 
A)  demand for trees will also increase. 
B)  demand for trees will stay the same. 
C)  demand for trees will decrease. 
D)  effect on the demand for trees is uncertain; it depends on the elasticity of the demand for paper.

Question 13

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired (holding other inputs fixed). Then the marginal product of the 16th worker is

Accepted Answer

A)  10 units of output. 
B)  11 units of output. 
C)  16 units of output. 
D)  176 units of output. 
A)  10 units of output. 
B)  11 units of output. 
C)  16 units of output. 
D)  176 units of output.

Question 14

The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and output increased by twelve units. Since the hammer increased the marginal product more than Bob did, and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why or why not?

Accepted Answer

This example illustrates a minor flaw wi

Question 15

The more elastic the demand for a final product,

Accepted Answer

A)  the more elastic will be the demand for the productive resources used. 
B)  the less elastic the supply of resources used in producing the product. 
C)  the less firms will reduce their usage of resources when the price of the resources increases. 
D)  the higher the MRP of the resources used to produce the product. 
A)  the more elastic will be the demand for the productive resources used. 
B)  the less elastic the supply of resources used in producing the product. 
C)  the less firms will reduce their usage of resources when the price of the resources increases. 
D)  the higher the MRP of the resources used to produce the product.

Question 16

When an employer pays the cost of educating a worker, it is likely that the employer

Accepted Answer

A)  is demonstrating altruistic motives. 
B)  is pursuing some objective other than profit-maximization. 
C)  hopes to recapture its investment in the form of increased labor productivity. 
D)  receives reimbursement from the government for the cost of the education. 
A)  is demonstrating altruistic motives. 
B)  is pursuing some objective other than profit-maximization. 
C)  hopes to recapture its investment in the form of increased labor productivity. 
D)  receives reimbursement from the government for the cost of the education.

Question 17

Assume the average salary for a college philosophy professor is $50,000. Suppose businesses decide they need in-house instructors to teach ethics to employees, and they begin hiring philosophy professors at a salary of $75,000. What are the short-term and long-term effects of this supposition?

Accepted Answer

As philosophy professors move into the c

Question 18

A convenience store is considering renting a surveillance camera from a security company that would prevent $100 in shoplifting per year. The yearly rental rate for the camera is $150. To maximize profits, the firm should

Accepted Answer

A)  rent the camera because the firm wants to completely eliminate shoplifting. 
B)  not rent the camera because the rental rate exceeds the value of shoplifting prevented. 
C)  rent the camera if VMP exceeds MRP, but not rent the camera if VMP is less than MRP. 
D)  Without knowing the rate of diminishing marginal returns, there is not enough information to answer the question. 
A)  rent the camera because the firm wants to completely eliminate shoplifting. 
B)  not rent the camera because the rental rate exceeds the value of shoplifting prevented. 
C)  rent the camera if VMP exceeds MRP, but not rent the camera if VMP is less than MRP. 
D)  Without knowing the rate of diminishing marginal returns, there is not enough information to answer the question.

Question 19

Which of the following is the best example of an investment in human capital?

Accepted Answer

A)  on-the-job training received by an apprentice electrician 
B)  an increase in the number of hours worked per week by a worker in an unskilled laboring job 
C)  the purchase of company stock by a worker 
D)  payments into a retirement pension plan by a skilled laborer 
A)  on-the-job training received by an apprentice electrician 
B)  an increase in the number of hours worked per week by a worker in an unskilled laboring job 
C)  the purchase of company stock by a worker 
D)  payments into a retirement pension plan by a skilled laborer

Question 20

Suppose the price of aluminum rises, and as a result, a manufacturing company purchases tin to use in place of the now higher-priced aluminum. This is referred to as

Accepted Answer

A)  substitution in consumption. 
B)  substitution in production. 
C)  reverse substitution. 
D)  factor reversal. 
A)  substitution in consumption. 
B)  substitution in production. 
C)  reverse substitution. 
D)  factor reversal.

Exam 25: The Supply of and Demand for Productive Resources

If steel workers obtain a substantial wage increase, employment in the steel industry will be likely to fall the most if

Firms should hire additional units of a resource as long as the

The demand curve for a human resource will be more elastic the

If the demand for computer scientists increases relative to their supply,

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?

The demand for a factor of production will be more inelastic

If a firm is using a resource hired in a perfectly competitive market, and if the price of the resource exceeds the marginal revenue product of the resource,

When the marginal revenue product of an input is less than its price, the

If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect

Why is a college graduate more likely to get a job in management than is someone with only a high school diploma, even when the job has nothing to do with a specific type of education?

A decrease in the demand for a product will cause output of that product to

Assume that the demand for paper products increases. Then, we expect that the

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired (holding other inputs fixed). Then the marginal product of the 16th worker is

The more elastic the demand for a final product,

When an employer pays the cost of educating a worker, it is likely that the employer

Assume the average salary for a college philosophy professor is $50,000. Suppose businesses decide they need in-house instructors to teach ethics to employees, and they begin hiring philosophy professors at a salary of $75,000. What are the short-term and long-term effects of this supposition?

A convenience store is considering renting a surveillance camera from a security company that would prevent $100 in shoplifting per year. The yearly rental rate for the camera is $150. To maximize profits, the firm should

Which of the following is the best example of an investment in human capital?

Suppose the price of aluminum rises, and as a result, a manufacturing company purchases tin to use in place of the now higher-priced aluminum. This is referred to as

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

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, Incentives, and Secondary Effects

A : Money and the Banking System

B : Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

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

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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