Question 1

The value of the marginal product is calculated as:

Accepted Answer

A)  MP / MR. 
B)  MP / P. 
C)  MP × P. 
D)  MR / MP. 
A)  MP / MR. 
B)  MP / P. 
C)  MP × P. 
D)  MR / MP.

Question 2

Wage differences across jobs reflecting the fact that some jobs are less pleasant than others are called efficiency wages.

Accepted Answer

A) True 
 B)False

Question 3

Since the Great Recession, which began in 2008, the U.S. labor supply curve has shifted to the left because many workers were disillusioned by bad job prospects and left the labor force.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is TRUE?

Accepted Answer

A)  The marginal product is the change in total revenue divided by a one-unit change in a factor. 
B)  The marginal revenue is the change in total output divided by the change in output. 
C)  The value of the marginal product is the marginal product times the price. 
D)  The marginal cost is equal to the average total cost. 
A)  The marginal product is the change in total revenue divided by a one-unit change in a factor. 
B)  The marginal revenue is the change in total output divided by the change in output. 
C)  The value of the marginal product is the marginal product times the price. 
D)  The marginal cost is equal to the average total cost.

Question 5

When wages increase, if the income effect dominates, the quantity of labor supplied will increase.

Accepted Answer

A) True 
 B)False

Question 6

As stock prices rise and workers' wealth increases, workers will increase the quantity supplied of labor because they will want to buy more stock.

Accepted Answer

A) True 
 B)False

Question 7

A small college employs two economists. Rob has been employed by the college for 15 years, and Nasrin has been employed for 1 year. Rob's salary is significantly higher than Nasrin's, although both have their doctoral degrees in economics. Each professor averages one publication per year, and both are excellent teachers. Given this information, the wage difference is best explained by:

Accepted Answer

A)  compensating differentials. 
B)  differences in human capital. 
C)  discrimination. 
D)  differences in talent. 
A)  compensating differentials. 
B)  differences in human capital. 
C)  discrimination. 
D)  differences in talent.

Question 8

A leftward shift in the labor supply curve will result if:

Accepted Answer

A)  people begin to value leisure more highly. 
B)  people have less nonlabor income. 
C)  transit costs to and from work decline. 
D)  the population increases. 
A)  people begin to value leisure more highly. 
B)  people have less nonlabor income. 
C)  transit costs to and from work decline. 
D)  the population increases.

Question 9

A profit-maximizing firm will hire workers up to the quantity of labor where:

Accepted Answer

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

Question 10

Your boss is trying to decide whether to buy out a rival company and asks for your advice. The boss says that she will buy the rival if there is evidence that the rival is operating inefficiently. (Your company will then improve its efficiency and increase profits.) She will not buy the rival if there is evidence that the rival is already operating efficiently. Your boss gives you the following data on the rival's operations: The average product of labor is 4, the marginal product of the last worker hired is 10, the wage is $20, and the price of output is $5. Based on this information, you should tell your boss to buy the rival.

Accepted Answer

A) True 
 B)False

Question 11

Because the efficiency wage is _____ the equilibrium wage, it may lead to a _____ of labor.

Accepted Answer

A)  below; shortage 
B)  below; surplus 
C)  above; shortage 
D)  above; surplus 
A)  below; shortage 
B)  below; surplus 
C)  above; shortage 
D)  above; surplus

Question 12

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is greater than the value of the marginal product of capital.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following best describes the value of the marginal product?

Accepted Answer

A)  the change in total output generated by a unit change in the quantity of a factor 
B)  the change in total revenue generated by a unit change in the quantity of a factor 
C)  the change in marginal cost generated by a unit change in the quantity of a factor 
D)  the ratio of total revenue to the quantity of a factor employed 
A)  the change in total output generated by a unit change in the quantity of a factor 
B)  the change in total revenue generated by a unit change in the quantity of a factor 
C)  the change in marginal cost generated by a unit change in the quantity of a factor 
D)  the ratio of total revenue to the quantity of a factor employed

Question 14

The fact that Tom Brady, the quarterback of the New England Patriots, is paid more than a high school football coach is an example of a wage disparity caused by compensating differentials.

Accepted Answer

A) True 
 B)False

Question 15

According to the marginal productivity theory of income distribution, every factor of production is paid a wage equal to the equilibrium value of its marginal product.

Accepted Answer

A) True 
 B)False

Question 16

According to the marginal productivity theory of income distribution, every factor of production is paid _____ the equilibrium value of its _____ product.

Accepted Answer

A)  just; marginal 
B)  more than; marginal 
C)  less than; marginal 
D)  just; average 
A)  just; marginal 
B)  more than; marginal 
C)  less than; marginal 
D)  just; average

Question 17

A backward-bending supply curve of labor shows that at relatively high wages the _____ effect dominates the _____ effect, and the supply curve has a _____ slope.

Accepted Answer

A)  income; substitution; positive 
B)  income; substitution; negative 
C)  substitution; income; positive 
D)  substitution; income; negative 
A)  income; substitution; positive 
B)  income; substitution; negative 
C)  substitution; income; positive 
D)  substitution; income; negative

Question 18

Differences in talent and ability of workers resulting in differences in their wages is consistent with the marginal productivity theory of income distribution.

Accepted Answer

A) True 
 B)False

Question 19

The government increases the sales tax on all goods. The government does not change the tax on income earned from labor. What happens?

Accepted Answer

A)  The quantity of labor demanded decreases, but the demand for labor does not shift. 
B)  The demand for labor decreases. 
C)  The supply of labor increases. 
D)  There is no change in the labor market. 
A)  The quantity of labor demanded decreases, but the demand for labor does not shift. 
B)  The demand for labor decreases. 
C)  The supply of labor increases. 
D)  There is no change in the labor market.

Question 20

According to the _____, workers may earn a wage rate higher than the value of their marginal product because it provides an incentive to perform efficiently.

Accepted Answer

A)  marginal productivity of income distribution theory 
B)  efficiency-wage model 
C)  diminishing-returns theory 
D)  increasing-returns model 
A)  marginal productivity of income distribution theory 
B)  efficiency-wage model 
C)  diminishing-returns theory 
D)  increasing-returns model

Exam 18: Factor Markets and the Distribution of Income

The value of the marginal product is calculated as:

Wage differences across jobs reflecting the fact that some jobs are less pleasant than others are called efficiency wages.

Since the Great Recession, which began in 2008, the U.S. labor supply curve has shifted to the left because many workers were disillusioned by bad job prospects and left the labor force.

Which of the following statements is TRUE?

When wages increase, if the income effect dominates, the quantity of labor supplied will increase.

As stock prices rise and workers' wealth increases, workers will increase the quantity supplied of labor because they will want to buy more stock.

A leftward shift in the labor supply curve will result if:

A profit-maximizing firm will hire workers up to the quantity of labor where:

Because the efficiency wage is _____ the equilibrium wage, it may lead to a _____ of labor.

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is greater than the value of the marginal product of capital.

Which of the following best describes the value of the marginal product?

The fact that Tom Brady, the quarterback of the New England Patriots, is paid more than a high school football coach is an example of a wage disparity caused by compensating differentials.

According to the marginal productivity theory of income distribution, every factor of production is paid a wage equal to the equilibrium value of its marginal product.

According to the marginal productivity theory of income distribution, every factor of production is paid _____ the equilibrium value of its _____ product.

A backward-bending supply curve of labor shows that at relatively high wages the _____ effect dominates the _____ effect, and the supply curve has a _____ slope.

Differences in talent and ability of workers resulting in differences in their wages is consistent with the marginal productivity theory of income distribution.

The government increases the sales tax on all goods. The government does not change the tax on income earned from labor. What happens?

According to the _____, workers may earn a wage rate higher than the value of their marginal product because it provides an incentive to perform efficiently.

First Principles

Economic Models- Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas- Meddling With Markets

Elasticity

Taxes

The Rational Consumer

International Trade

Decision Making by Individuals and Firms

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Uncertainty, Risk, and Private Information

Macroeconomics- the Big Picture

Gdp and the Consumer Price Index

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Macroeconomics- Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

Toward a Fuller Understanding

Consumer Preferences and Consumer Choice

Indifference Curve Analysis of Labor Supply

Filters

Because the efficiency wage is _ the equilibrium wage, it may lead to a _ of labor.

According to the marginal productivity theory of income distribution, every factor of production is paid _ the equilibrium value of its _ product.

A backward-bending supply curve of labor shows that at relatively high wages the ___ effect dominates the _ effect, and the supply curve has a ___ slope.