Question 1

Which of the following is an example of a compensating wage differential?

Accepted Answer

A) Nurse anesthetists are paid less than anesthesiologists (who have medical degrees). 
B) Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills. 
C) In the market for lawyers,top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs. 
D) Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors. 
A) Nurse anesthetists are paid less than anesthesiologists (who have medical degrees). 
B) Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills. 
C) In the market for lawyers,top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs. 
D) Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors.

Question 2

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 3

If national laws protecting the health and safety of workers completely eliminate any and all risk,then

Accepted Answer

A) workers in risky occupations become better off. 
B) compensating wage differentials disappear and workers in risky occupations may be no better off. 
C) compensating differentials would grow because workers could not be compensated by being given lower risk jobs. 
D) more people would be employed. 
A) workers in risky occupations become better off. 
B) compensating wage differentials disappear and workers in risky occupations may be no better off. 
C) compensating differentials would grow because workers could not be compensated by being given lower risk jobs. 
D) more people would be employed.

Question 4

How much is a bond that pays $50 in coupon payments for 3 years and $1000 at the end of the third year worth if the interest rate is 10%?

Accepted Answer

A) $876 
B) $952 
C) $1045 
D) $1150 
A) $876 
B) $952 
C) $1045 
D) $1150

Question 5

The typical labour supply curve is upward sloping,but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Accepted Answer

A) This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. 
B) This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. 
C) This would occur if leisure is an inferior good. 
D) This would occur when a large number of workers choose leisure rather than employment at low wages;only a very large increase in the wage will lead these workers to prefer employment to leisure. 
A) This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. 
B) This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. 
C) This would occur if leisure is an inferior good. 
D) This would occur when a large number of workers choose leisure rather than employment at low wages;only a very large increase in the wage will lead these workers to prefer employment to leisure.

Question 6

Painters who paint water towers earn higher wages relative to painters who paint houses because

Accepted Answer

A) the demand for tower painters is greater than the demand for residential painters. 
B) painting water towers is more risky than painting houses. 
C) the tower painters' union is probably more powerful than the house painters' union. 
D) the supply of water tower painters exceeds the supply of house painters. 
A) the demand for tower painters is greater than the demand for residential painters. 
B) painting water towers is more risky than painting houses. 
C) the tower painters' union is probably more powerful than the house painters' union. 
D) the supply of water tower painters exceeds the supply of house painters.

Question 7

If you put $100 into a bank account that earns five per cent interest per year,what is the formula you should use to determine the account's future value in one year?

Accepted Answer

A) Future value equals the present value divided by the rate of interest. 
B) Future value equals the present value multiplied by the rate of interest. 
C) Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D) All of these yield the same answer. 
A) Future value equals the present value divided by the rate of interest. 
B) Future value equals the present value multiplied by the rate of interest. 
C) Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D) All of these yield the same answer.

Question 8

The application of economic analysis to human resources issues is called personnel economics.

Accepted Answer

A) True 
 B)False

Question 9

A decrease in the wage rate causes

Accepted Answer

A) an increase in the quantity of labour demanded. 
B) a rightward shift of the firm's labour demand curve. 
C) a leftward shift of the firm's labour demand curve. 
D) a decrease in labour's productivity. 
A) an increase in the quantity of labour demanded. 
B) a rightward shift of the firm's labour demand curve. 
C) a leftward shift of the firm's labour demand curve. 
D) a decrease in labour's productivity.

Question 10

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labour.

Accepted Answer

A) True 
 B)False

Question 11

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The labour supply for an industry would decrease if

Accepted Answer

A) the wage rate falls. 
B) the percentage of the population from age 16 to 65 decreases. 
C) the government welcomes foreign workers into the country. 
D) a greater percentage of women want to work outside the home. 
A) the wage rate falls. 
B) the percentage of the population from age 16 to 65 decreases. 
C) the government welcomes foreign workers into the country. 
D) a greater percentage of women want to work outside the home.

Question 14

An increase in the demand for orthodontic services leads to

Accepted Answer

A) an increase in the supply of orthodontists. 
B) lower prices for orthodontic care. 
C) an increase in the demand for orthodontists. 
D) a rise in the rates of dental insurance. 
A) an increase in the supply of orthodontists. 
B) lower prices for orthodontic care. 
C) an increase in the demand for orthodontists. 
D) a rise in the rates of dental insurance.

Question 15

Table 12-2
  
-Refer to Table 12-2.The firm represented in the table

Accepted Answer

A) has market power in the factor market. 
B) has market power in the output market. 
C) has market power in both the factor and product market. 
D) has no market power in the factor or product market. 
A) has market power in the factor market. 
B) has market power in the output market. 
C) has market power in both the factor and product market. 
D) has no market power in the factor or product market.

Question 16

A firm chooses its profit-maximising quantity of capital by

Accepted Answer

A) comparing the marginal revenue product of capital with the rental price of capital. 
B) comparing the price of capital with the price of labour. 
C) examining the total cost of capital equipment. 
D) determining the rate at which the firm can borrow funds to purchase plant and equipment. 
A) comparing the marginal revenue product of capital with the rental price of capital. 
B) comparing the price of capital with the price of labour. 
C) examining the total cost of capital equipment. 
D) determining the rate at which the firm can borrow funds to purchase plant and equipment.

Question 17

The market demand curve for labour

Accepted Answer

A) is determined by adding up the quantity of labour demanded by each firm at each wage,holding constant the other variables that affect the willingness of firms to hire workers. 
B) is the same as the market demand curve for the product labour produces because it is a derived demand. 
C) is determined by adding up the demand for labour by each firm at each wage,holding constant the other variables that affect the willingness of firms to hire workers. 
D) is perfectly inelastic because there is a finite number of workers in the market for labour. 
A) is determined by adding up the quantity of labour demanded by each firm at each wage,holding constant the other variables that affect the willingness of firms to hire workers. 
B) is the same as the market demand curve for the product labour produces because it is a derived demand. 
C) is determined by adding up the demand for labour by each firm at each wage,holding constant the other variables that affect the willingness of firms to hire workers. 
D) is perfectly inelastic because there is a finite number of workers in the market for labour.

Question 18

Suppose the following two events occur in the market for elementary school teachers:
A.Overcrowded schools and education budget cuts have discouraged young university students from pursuing careers in teaching.
B.With an increasing birth rate,the number of children entering the elementary school system is expected to increase significantly over the next ten years.
What is likely to happen to the equilibrium wage and quantity of teachers as a result of these two events?

Accepted Answer

A) The equilibrium quantity and the equilibrium wage of elementary school teachers fall. 
B) The equilibrium wage rises and the effect on the equilibrium quantity of elementary school teachers is indeterminate. 
C) The equilibrium quantity falls and the effect on the equilibrium wage of elementary school teachers is indeterminate. 
D) The equilibrium quantity falls and the equilibrium wage of elementary school teachers rises. 
A) The equilibrium quantity and the equilibrium wage of elementary school teachers fall. 
B) The equilibrium wage rises and the effect on the equilibrium quantity of elementary school teachers is indeterminate. 
C) The equilibrium quantity falls and the effect on the equilibrium wage of elementary school teachers is indeterminate. 
D) The equilibrium quantity falls and the equilibrium wage of elementary school teachers rises.

Question 19

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

Accepted Answer

A) True 
 B)False

Question 20

Because leisure is a normal good,an increase in the wage rate will result in

Accepted Answer

A) an increase in the quantity of labour supplied because of both the substitution effect and the income effect. 
B) a decrease in the quantity of labour supplied because of the substitution effect and an increase in the quantity of labour supplied because of the income effect. 
C) an increase in the quantity of labour supplied because of the substitution effect and a decrease in the quantity of labour supplied because of the income effect. 
D) an increase in the quantity of labour supplied because of the substitution effect.At low wages the income effect causes an increase in the quantity of labour supplied,but at high wages the income effect causes a decrease in the quantity of labour supplied as the wage rises. 
A) an increase in the quantity of labour supplied because of both the substitution effect and the income effect. 
B) a decrease in the quantity of labour supplied because of the substitution effect and an increase in the quantity of labour supplied because of the income effect. 
C) an increase in the quantity of labour supplied because of the substitution effect and a decrease in the quantity of labour supplied because of the income effect. 
D) an increase in the quantity of labour supplied because of the substitution effect.At low wages the income effect causes an increase in the quantity of labour supplied,but at high wages the income effect causes a decrease in the quantity of labour supplied as the wage rises.

Which of the following is an example of a compensating wage differential?

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

If national laws protecting the health and safety of workers completely eliminate any and all risk,then

How much is a bond that pays $50 in coupon payments for 3 years and $1000 at the end of the third year worth if the interest rate is 10%?

The typical labour supply curve is upward sloping,but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Painters who paint water towers earn higher wages relative to painters who paint houses because

If you put $100 into a bank account that earns five per cent interest per year,what is the formula you should use to determine the account's future value in one year?

The application of economic analysis to human resources issues is called personnel economics.

A decrease in the wage rate causes

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labour.

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

Economic rent is defined as

The labour supply for an industry would decrease if

An increase in the demand for orthodontic services leads to

Table 12-2 -Refer to Table 12-2.The firm represented in the table

A firm chooses its profit-maximising quantity of capital by

The market demand curve for labour

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

Because leisure is a normal good,an increase in the wage rate will result in

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 12: The Markets for Labour and Other Factors of Production

Which of the following is an example of a compensating wage differential?

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

If national laws protecting the health and safety of workers completely eliminate any and all risk,then

How much is a bond that pays $50 in coupon payments for 3 years and $1000 at the end of the third year worth if the interest rate is 10%?

The typical labour supply curve is upward sloping,but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Painters who paint water towers earn higher wages relative to painters who paint houses because

If you put $100 into a bank account that earns five per cent interest per year,what is the formula you should use to determine the account's future value in one year?

The application of economic analysis to human resources issues is called personnel economics.

A decrease in the wage rate causes

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labour.

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

Economic rent is defined as

The labour supply for an industry would decrease if

An increase in the demand for orthodontic services leads to

Table 12-2 -Refer to Table 12-2.The firm represented in the table

A firm chooses its profit-maximising quantity of capital by

The market demand curve for labour

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

Because leisure is a normal good,an increase in the wage rate will result in

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters