Question 1

If a person's marginal utility from an additional hour of leisure is less than the marginal utility gained from goods bought with the wages earned from an additional hour of labour,then this person should:

Accepted Answer

A)  continue to work the hours he or she is working. 
B)  work less since he or she is working more than the optimal number of hours. 
C)  work more since he or she is working less than the optimal number of hours. 
D)  quit work since he or she is not earning enough to satisfy his or her time allocation.

Question 2

In terms of labour supply,the substitution effect of a higher wage causes a(n):

Accepted Answer

A)  increase in leisure time. 
B)  decrease in the quantity of labour supplied. 
C)  substitution of work for leisure. 
D)  reduction of work time to zero.

Question 3

Use the following to answer questions : $\text {Table: Value of the Marginal}$
 $\text {Product of Labour at Demand}$

$\begin{array} { cc}
\hline \text {Quantity of Labour}&
\text {Total Product}\ 
\hline 0 & 0 \ 1 & 20 \ 2 & 50 \ 3 & 90 \ 4 & 120 \ 5 & 140 \ 6 & 150 \ 7 & 150 \ 8 & 140 \
\hline\end{array}$
-(Table: Value of the Marginal Product of Labour and Demand)Use Table: Value of the Marginal Product of Labour and Demand.In the table,the total product of labour 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 $2 and the wage rate is $90 per hour,the profit-maximizing quantity of labour is _____ workers.

Accepted Answer

A)  0 
B)  2 
C)  4 
D)  6

Question 4

Wage differences across jobs reflecting the fact that some jobs are less pleasant or safe than others are called compensating differentials.

Accepted Answer

A) True 
 B)False

Question 5

Assume that perfect competition exists in output and factor markets.The P = MC rule for profit maximization implies the same level of labour use that would be implied by using the VMPL = W rule.

Accepted Answer

A) True 
 B)False

Question 6

When labour is hired in a competitive market,the value of the marginal product of labour is computed by:

Accepted Answer

A)  multiplying the price of the output by the marginal product of labour. 
B)  multiplying the price of the output by the wage paid to labour. 
C)  multiplying the wage paid to labour by the marginal product of labour. 
D)  dividing the marginal product of labour by the price of the output.

Question 7

As the _____ of labour used in production increases,ceteris paribus,eventually the _____ of labour will _____.

Accepted Answer

A)  price;supply;increase 
B)  quantity;marginal product;fall 
C)  quantity;marginal product;rise 
D)  quantity;value of the marginal product;rise

Question 8

The fact that Carey Price,the goaltender for the Montreal Canadians,is paid more than a high school hockey coach is an example of a wage disparity most likely caused by differences in ability and talent.

Accepted Answer

A) True 
 B)False

Question 9

Although improved technology can either increase or decrease the demand for a factor of production,the usual effect of technological progress is to reduce demand for labour,holding everything else constant.

Accepted Answer

A) True 
 B)False

Question 10

Which statement is NOT true about the factor distribution of income?

Accepted Answer

A)  It is the division of total income among labour,land,and capital. 
B)  Labour receives the bulk of the income in the modern Canadian economy. 
C)  The returns to human capital are easily measured. 
D)  A part of the proprietor's income should be considered wages that the business owners pay themselves.

Question 11

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

Accepted Answer

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

Question 12

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

Question 13

The trade-off between work and leisure underlying the supply of labour involves the income effect and the _____ effect.

Accepted Answer

A)  substitution 
B)  elasticity 
C)  production 
D)  wage

Question 14

The quantity demanded of labour will decrease if:

Accepted Answer

A)  the price of the product that the labour produces increases. 
B)  the productivity of labour increases. 
C)  the price of labour rises. 
D)  there is an increase in the supply of a factor labour uses.

Question 15

A wage _____ raises the quantity of labour supplied through a strong _____ effect.

Accepted Answer

A)  decrease;substitution 
B)  increase;substitution 
C)  increase;income 
D)  decrease;complement

Question 16

Assume that Stan just received a promotion and raise.In terms of labour supply,the substitution effect of a higher wage will lead him to:

Accepted Answer

A)  supply fewer hours of labour. 
B)  supply more hours of labour. 
C)  substitute leisure for work. 
D)  reduce work time to zero.

Question 17

An increase in the demand for autoworkers would NOT come about because of a(n):

Accepted Answer

A)  increase in the price of cars. 
B)  decrease in the market wage rate. 
C)  increase in the productivity of autoworkers. 
D)  increase in the supply of other factors that autoworkers use in production.

Exam 19: Factor Markets and the Distribution of Income

If a person's marginal utility from an additional hour of leisure is less than the marginal utility gained from goods bought with the wages earned from an additional hour of labour,then this person should:

In terms of labour supply,the substitution effect of a higher wage causes a(n) :

Wage differences across jobs reflecting the fact that some jobs are less pleasant or safe than others are called compensating differentials.

Assume that perfect competition exists in output and factor markets.The P = MC rule for profit maximization implies the same level of labour use that would be implied by using the VMPL = W rule.

When labour is hired in a competitive market,the value of the marginal product of labour is computed by:

As the ___ of labour used in production increases,ceteris paribus,eventually the _ of labour will ___.

The fact that Carey Price,the goaltender for the Montreal Canadians,is paid more than a high school hockey coach is an example of a wage disparity most likely caused by differences in ability and talent.

Although improved technology can either increase or decrease the demand for a factor of production,the usual effect of technological progress is to reduce demand for labour,holding everything else constant.

Which statement is NOT true about the factor distribution of income?

The government increases the sales tax on all goods but does not change the tax on income earned from labour.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.

The trade-off between work and leisure underlying the supply of labour involves the income effect and the _____ effect.

The quantity demanded of labour will decrease if:

A wage _ raises the quantity of labour supplied through a strong _ effect.

Assume that Stan just received a promotion and raise.In terms of labour supply,the substitution effect of a higher wage will lead him to:

An increase in the demand for autoworkers would NOT come about because of a(n) :