Question 1

Which of the following does not explain wage differentials in long-run equilibrium?

Accepted Answer

A) The relative attractiveness of jobs 
B) The level of investment in human capital 
C) The size of the work force in the economy 
D) The variation in the abilities of workers 
A) The relative attractiveness of jobs 
B) The level of investment in human capital 
C) The size of the work force in the economy 
D) The variation in the abilities of workers C

Question 2

Use the following figure to answer the question : Figure 17-1 : shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line.
 
-Refer to Figure 17-1.If the number of leisure hours is OL3 after a change in the wage rate,the individual's supply curve of labor will be _____.

Accepted Answer

A) backward bending 
B) vertical 
C) upward-sloping 
D) relatively elastic 
A) backward bending 
B) vertical 
C) upward-sloping 
D) relatively elastic A

Question 3

How can the presence of a union in a labor market be beneficial?

Accepted Answer

In some industries,unions actually counteract the monopsony power of big firms that have market power in the labor market.Another argument for the presence of unions is that unions can make workers more productive by representing workers' problems with employers.There are also some empirical studies that show that workers who are members of a union are more productive than non-union workers.

Question 4

A firm has $2 million in retained earnings.It can lend out the money at the rate of 11 percent per year,keep the money as idle cash,or earn invest in government bonds and earn 10 percent per year.Suppose the firm also needs $2 million for a new project which will give an 8 percent return per year.What should the firm do to maximize its return?

Accepted Answer

A) It should lend out the money at an interest of 11 percent per annum. 
B) It should purchase government bonds promising a 10 percent return per annum. 
C) It should invest the money in its new project. 
D) It should keep the money as idle cash. 
A) It should lend out the money at an interest of 11 percent per annum. 
B) It should purchase government bonds promising a 10 percent return per annum. 
C) It should invest the money in its new project. 
D) It should keep the money as idle cash.

Question 5

Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

Accepted Answer

A) the worker will work more if the income effect of the wage increase is greater than the substitution effect. 
B) the worker will work less if the income effect of the wage increase is greater than the substitution effect. 
C) the supply curve of labor will be backward bending if the substitution effect of the wage increase is greater than the income effect. 
D) the supply curve of labor will be upward sloping throughout if the income effect of the wage increase is greater than the substitution effect. 
A) the worker will work more if the income effect of the wage increase is greater than the substitution effect. 
B) the worker will work less if the income effect of the wage increase is greater than the substitution effect. 
C) the supply curve of labor will be backward bending if the substitution effect of the wage increase is greater than the income effect. 
D) the supply curve of labor will be upward sloping throughout if the income effect of the wage increase is greater than the substitution effect.

Question 6

When investment is financed through borrowing,an increase in the interest rate will lead to:

Accepted Answer

A) a fall in investment as the supply of funds declines at higher interest rates. 
B) a fall in investment as the rate of return on certain projects will be below the interest rate. 
C) an increase in investment as the value of present spending will be higher. 
D) an increase in investment as the net marginal productivity will increase. 
A) a fall in investment as the supply of funds declines at higher interest rates. 
B) a fall in investment as the rate of return on certain projects will be below the interest rate. 
C) an increase in investment as the value of present spending will be higher. 
D) an increase in investment as the net marginal productivity will increase.

Question 7

Which of the following correctly supports the argument for the presence of unions in an industry?

Accepted Answer

A) Unions counteract the monopsony power of big firms in the labor market. 
B) As a result of negotiations by unions,employment in the industry is higher than it would have been without a union. 
C) Any inefficiency arising from the presence of a union is outweighed by the benefits of unions. 
D) The presence of unions does not lead to a deadweight loss in the labor market. 
A) Unions counteract the monopsony power of big firms in the labor market. 
B) As a result of negotiations by unions,employment in the industry is higher than it would have been without a union. 
C) Any inefficiency arising from the presence of a union is outweighed by the benefits of unions. 
D) The presence of unions does not lead to a deadweight loss in the labor market.

Question 8

Which of the following factors will contribute to an increase in the marginal productivity of labor?

Accepted Answer

A) An increase in the cost of living 
B) Technological progress 
C) An increase in the demand for labor 
D) A high nominal wage 
A) An increase in the cost of living 
B) Technological progress 
C) An increase in the demand for labor 
D) A high nominal wage

Question 9

Which of the following correctly explains the reason for the decline in union membership in the U.S.post 1970s?

Accepted Answer

A) The implementation of minimum wage laws that force employers to compensate low-skilled workers more. 
B) The fall in elasticity of demand for the products of certain industries,leading to an increase in the elasticity of the labor input. 
C) The irrelevance of union membership in technology sectors where demand for workers outstrips supply. 
D) The increase in labor supply due to a large number of baby boomers entering the workforce. 
A) The implementation of minimum wage laws that force employers to compensate low-skilled workers more. 
B) The fall in elasticity of demand for the products of certain industries,leading to an increase in the elasticity of the labor input. 
C) The irrelevance of union membership in technology sectors where demand for workers outstrips supply. 
D) The increase in labor supply due to a large number of baby boomers entering the workforce.

Question 10

What are the sources of variation in wages across individuals?

Accepted Answer

Wages differ across individuals in equil

Question 11

The purpose of unions formed by workers is to:

Accepted Answer

A) increase mobility of labor across industries. 
B) increase the productivity of the workers. 
C) maximize the economic rent accruing to their members. 
D) secure different wages for different members. 
A) increase mobility of labor across industries. 
B) increase the productivity of the workers. 
C) maximize the economic rent accruing to their members. 
D) secure different wages for different members.

Question 12

When a firm earns a rate of return on an investment that _____,it makes a pure economic profit.

Accepted Answer

A) is above its accounting costs 
B) is equal to its average variable cost 
C) is above the cost of borrowed funds 
D) just covers the firm's fixed costs 
A) is above its accounting costs 
B) is equal to its average variable cost 
C) is above the cost of borrowed funds 
D) just covers the firm's fixed costs

Question 13

Which of the following is not a source of equilibrium differences in wage rates?

Accepted Answer

A) The level of risk associated with an occupation 
B) The level of skills that workers possess 
C) The economic rent associated with the labor input 
D) The aptitude that workers have for an occupation 
A) The level of risk associated with an occupation 
B) The level of skills that workers possess 
C) The economic rent associated with the labor input 
D) The aptitude that workers have for an occupation

Question 14

When might a compensating wage differential go the "wrong way"? Explain with a graph.

Accepted Answer

It is typically assumed that all workers

Question 15

A compensating wage differential is the extra wage that is paid _____.

Accepted Answer

A) in occupations where there is excess supply of labor 
B) for working overtime 
C) in intrinsically less attractive jobs 
D) to compensate the worker for the effects of inflation 
A) in occupations where there is excess supply of labor 
B) for working overtime 
C) in intrinsically less attractive jobs 
D) to compensate the worker for the effects of inflation

Question 16

Using a graph,explain the welfare effects of an effectively organized union in the labor market.

Accepted Answer

The graph shows the demand and supply cu

Question 17

As a result of the substitution effect of a wage increase,a worker will:

Accepted Answer

A) increase his work effort. 
B) increase his leisure time. 
C) reduce his work effort. 
D) keep leisure time unchanged. 
A) increase his work effort. 
B) increase his leisure time. 
C) reduce his work effort. 
D) keep leisure time unchanged.

Question 18

The income-leisure model of work is based on the assumption that:

Accepted Answer

A) the worker is able to choose the desired level of income. 
B) the worker works for a fixed number of hours a week. 
C) the worker is able to choose how many hours to work. 
D) the worker considers work an economic bad. 
A) the worker is able to choose the desired level of income. 
B) the worker works for a fixed number of hours a week. 
C) the worker is able to choose how many hours to work. 
D) the worker considers work an economic bad.

Question 19

Management consultants work in pleasant surroundings at low risk of injury,but they generally receive higher pay than sanitation workers who face a health risk by working in unpleasant conditions.Based on this information,which of the following must be true?

Accepted Answer

A) Management workers receive a higher pay because their wages include a compensating wage differential. 
B) Since there is free mobility of labor,sanitation workers must have chosen not to move to a higher-paying job. 
C) Wages of management consultants and sanitation workers are not comparable due to differences in the level of human capital investment. 
D) Management consultants are paid a higher wage to compensate for the intrinsic attractiveness of their jobs. 
A) Management workers receive a higher pay because their wages include a compensating wage differential. 
B) Since there is free mobility of labor,sanitation workers must have chosen not to move to a higher-paying job. 
C) Wages of management consultants and sanitation workers are not comparable due to differences in the level of human capital investment. 
D) Management consultants are paid a higher wage to compensate for the intrinsic attractiveness of their jobs.

Question 20

Anna and James decide to apply for individual personal loans at a bank.Anna will have to pay a higher interest rate than James if:

Accepted Answer

A) the inflation rate in the economy increases. 
B) the duration of James' loan is longer. 
C) James opts for a loan that is paid in installments. 
D) James has a lower credit score than Anna. 
A) the inflation rate in the economy increases. 
B) the duration of James' loan is longer. 
C) James opts for a loan that is paid in installments. 
D) James has a lower credit score than Anna.

Which of the following does not explain wage differentials in long-run equilibrium?

How can the presence of a union in a labor market be beneficial?

Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

When investment is financed through borrowing,an increase in the interest rate will lead to:

Which of the following correctly supports the argument for the presence of unions in an industry?

Which of the following factors will contribute to an increase in the marginal productivity of labor?

Which of the following correctly explains the reason for the decline in union membership in the U.S.post 1970s?

What are the sources of variation in wages across individuals?

The purpose of unions formed by workers is to:

When a firm earns a rate of return on an investment that _____,it makes a pure economic profit.

Which of the following is not a source of equilibrium differences in wage rates?

When might a compensating wage differential go the "wrong way"? Explain with a graph.

A compensating wage differential is the extra wage that is paid _____.

Using a graph,explain the welfare effects of an effectively organized union in the labor market.

As a result of the substitution effect of a wage increase,a worker will:

The income-leisure model of work is based on the assumption that:

Management consultants work in pleasant surroundings at low risk of injury,but they generally receive higher pay than sanitation workers who face a health risk by working in unpleasant conditions.Based on this information,which of the following must be true?

Anna and James decide to apply for individual personal loans at a bank.Anna will have to pay a higher interest rate than James if:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 17: Wages, Rent, Interest, and Profit

Which of the following does not explain wage differentials in long-run equilibrium?

How can the presence of a union in a labor market be beneficial?

Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

When investment is financed through borrowing,an increase in the interest rate will lead to:

Which of the following correctly supports the argument for the presence of unions in an industry?

Which of the following factors will contribute to an increase in the marginal productivity of labor?

Which of the following correctly explains the reason for the decline in union membership in the U.S.post 1970s?

What are the sources of variation in wages across individuals?

The purpose of unions formed by workers is to:

When a firm earns a rate of return on an investment that _____,it makes a pure economic profit.

Which of the following is not a source of equilibrium differences in wage rates?

When might a compensating wage differential go the "wrong way"? Explain with a graph.

A compensating wage differential is the extra wage that is paid _____.

Using a graph,explain the welfare effects of an effectively organized union in the labor market.

As a result of the substitution effect of a wage increase,a worker will:

The income-leisure model of work is based on the assumption that:

Management consultants work in pleasant surroundings at low risk of injury,but they generally receive higher pay than sanitation workers who face a health risk by working in unpleasant conditions.Based on this information,which of the following must be true?

Anna and James decide to apply for individual personal loans at a bank.Anna will have to pay a higher interest rate than James if:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters