Question 1

Time allocation refers to:

Accepted Answer

A)  how many hours an employer should hire a worker for.
B)  how many hours people choose to spend on different activities.
C)  how many hours unions will choose for their members to work.
D)  how different types of talents determine the wages people will earn. B

Question 2

Use the following to answer question:
Figure: Equilibrium in the Labor Market 
-(Figure: Equilibrium in the Labor Market)Use Figure: Equilibrium in the Labor Market.In the figure,an increase in the productivity of labor,when everything else stays the same,will lead to a(n)_____ in the equilibrium quantity of labor and a(n)_____ in the equilibrium price of labor.

Accepted Answer

A)  decrease;increase
B)  increase;decrease
C)  decrease;decrease
D)  increase;increase D

Question 3

Andy's individual labor supply curve is positively sloped,so for Andy,the substitution effect dominates the income effect.

Accepted Answer

A) True 
 B)False  True

Question 4

Above-equilibrium wages paid by some employers as an incentive for better performance are called efficiency wages.

Accepted Answer

A) True 
 B)False

Question 5

The price of an extra hour of leisure is:

Accepted Answer

A)  $1.
B)  the hourly wage rate.
C)  the same as the price of money.
D)  the total utility of labor.

Question 6

Workers with more human capital usually generate a higher value of the marginal product.

Accepted Answer

A) True 
 B)False

Question 7

At Hamill Manufacturing of Pennsylvania,highly skilled senior machinists are paid $70,000,excluding benefits,but the average skilled machinist generates approximately $137,000 in value added.This difference is due to the fact that the:

Accepted Answer

A)  marginal productivity theory of income distribution does not apply in this case.
B)  equilibrium wage rate includes other costs,such as employee benefits,that have to be subtracted from the $70,000 salary.
C)  equilibrium wage rate includes other costs,such as employee benefits,that have to be added to the $70,000 salary.
D)  value of the marginal product of the last machinist hired is equal to the average of all machinists employed.

Question 8

Large disparities in wages are often used as:

Accepted Answer

A)  evidence of the importance of profit maximization.
B)  a means to question the validity of the marginal productivity theory of income distribution.
C)  evidence of diminishing returns.
D)  evidence to illustrate the absence of market failures in factor markets.

Question 9

Decisions about labor supply result from decisions about time allocation,which deals with determining how many hours to spend on different activities.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer question: 
-(Table: Value of the Marginal Product of Labor and Demand)Use Table: Value of the Marginal Product of Labor and Demand.In the table,the total product of labor is shown for the hourly production of power cords.Assume that the market for power cords is perfectly competitive.If the price of a power cord is $4 and the market wage rate is $80 per hour,the profit-maximizing quantity of labor is _____ worker(s).

Accepted Answer

A)  1
B)  3
C)  5
D)  7

Question 12

The fact that Tom Brady,the quarterback of the New England Patriots,is paid more than is a high school football coach is an example of a wage disparity most likely caused by differences in ability and talent.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer question:
Figure: The Value of the Marginal Product Curve 
-(Figure: The Value of the Marginal Product Curve)Use Figure: The Value of the Marginal Product Curve.In the figure,if the price of the good increases and everything else stays the same,then the profit-maximizing quantity of labor:

Accepted Answer

A)  will increase.
B)  will decrease.
C)  will stay the same.
D)  cannot be determined.

Question 14

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 15

Above-equilibrium wages paid by some employers as an incentive for better performance are called compensating differentials.

Accepted Answer

A) True 
 B)False

Question 16

(Table: Workers and Art Output)Use Table: Workers and Art Output.Suppose that you achieve your dream of opening an art studio specializing in selling mud statues.You pay $10 in fixed costs for equipment and $9 per day to each of your workers who make the mud statues.The industry is perfectly competitive,with a current market price of $1.How many statues should you produce?

Accepted Answer

A)  25
B)  35
C)  43
D)  3

Question 17

In terms of contribution to total income in the United States,the single MOST important factor of production is:

Accepted Answer

A)  capital.
B)  labor.
C)  land.
D)  entrepreneurship.

Question 18

Which statement about unions is TRUE?

Accepted Answer

A)  Laws allow unions to discriminate on the basis of gender and ethnicity.
B)  Unions bargain for better working conditions at the cost of higher wages.
C)  Unions cause a surplus of labor by bargaining for wages that are higher than the value of the marginal product of labor.
D)  Unions cause compensating differentials.

Question 19

At Hamill Manufacturing of Pennsylvania,highly skilled senior machinists are paid $70,000,excluding benefits,but the average skilled machinist generates approximately $137,000 in value added.This is partially because diminishing returns to labor cause the value of the marginal product of the last machinist hired to be less than the average of all of the machinists currently employed.

Accepted Answer

A) True 
 B)False

Question 20

In the past 30 years,the ability of unions to increase wages and improve working conditions for their members has:

Accepted Answer

A)  increased.
B)  decreased.
C)  remained constant.
D)  proved the marginal productivity theory of income distribution to be false.

Exam 19: Factor Markets and the Distribution of Income

Time allocation refers to:

Andy's individual labor supply curve is positively sloped,so for Andy,the substitution effect dominates the income effect.

Above-equilibrium wages paid by some employers as an incentive for better performance are called efficiency wages.

The price of an extra hour of leisure is:

Workers with more human capital usually generate a higher value of the marginal product.

At Hamill Manufacturing of Pennsylvania,highly skilled senior machinists are paid $70,000,excluding benefits,but the average skilled machinist generates approximately $137,000 in value added.This difference is due to the fact that the:

Large disparities in wages are often used as:

Decisions about labor supply result from decisions about time allocation,which deals with determining how many hours to spend on different activities.

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

The fact that Tom Brady,the quarterback of the New England Patriots,is paid more than is a high school football coach is an example of a wage disparity most likely caused by differences in ability and talent.

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

Above-equilibrium wages paid by some employers as an incentive for better performance are called compensating differentials.

In terms of contribution to total income in the United States,the single MOST important factor of production is:

Which statement about unions is TRUE?

In the past 30 years,the ability of unions to increase wages and improve working conditions for their members has: