Question 1

The opportunity cost of leisure is

Accepted Answer

A)  the substitution effect. 
B)  the income effect. 
C)  a person's income. 
D)  a person's wage rate. 
A)  the substitution effect. 
B)  the income effect. 
C)  a person's income. 
D)  a person's wage rate.

Question 2

-The table above gives information about the labor market in Lantis, a community in which the labor market is perfectly competitive. If the price of the good increases and increases the value of marginal product of labor by $10 an hour, the equilibrium wage rate ________ an hour and the quantity of labor employed ________.

Accepted Answer

A)  rises to $10; increases to 600 
B)  stays at $15; decreases to 300 hours 
C)  rises to $20; increases to 500 hours 
D)  None of the above answers is correct. 
A)  rises to $10; increases to 600 
B)  stays at $15; decreases to 300 hours 
C)  rises to $20; increases to 500 hours 
D)  None of the above answers is correct.

Question 3

-In the above figure, the competitive wage rate is ________ and the quantity of labor is ________.

Accepted Answer

A)  $7.00; 150 hours 
B)  $8.00; 200 hours 
C)  $6.00; 100 hours 
D)  $8.00; 100 hours 
A)  $7.00; 150 hours 
B)  $8.00; 200 hours 
C)  $6.00; 100 hours 
D)  $8.00; 100 hours

Question 4

If the value of marginal product of the last worker hired is $24 and the wage rate is $25, then

Accepted Answer

A)  more workers should be hired. 
B)  the worker should be fired. 
C)  the firm has hired the profit maximizing number of workers. 
D)  the firm is earning $1 of profit from this worker. 
A)  more workers should be hired. 
B)  the worker should be fired. 
C)  the firm has hired the profit maximizing number of workers. 
D)  the firm is earning $1 of profit from this worker.

Question 5

Because the marginal cost of labor curve lies above the labor supply curve, a monopsony will pay a wage that is

Accepted Answer

A)  equal to the wage paid in a competitive market. 
B)  equal to value of marginal product. 
C)  greater than value of marginal product. 
D)  less than the wage paid in a competitive market. 
A)  equal to the wage paid in a competitive market. 
B)  equal to value of marginal product. 
C)  greater than value of marginal product. 
D)  less than the wage paid in a competitive market.

Question 6

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. If a worker costs $800 per month, how many workers will Peter employ to maximize profit?

Accepted Answer

A)  zero 
B)  one 
C)  two 
D)  four 
A)  zero 
B)  one 
C)  two 
D)  four

Question 7

-The above figure shows the market for labor. The employer is a monopsony. At the equilibrium level of employment, which of the following is correct?

Accepted Answer

A) MCL = VMP B) VMP > W C) W < MCL D) All of the above are correct. A) MCL = VMP B) VMP > W C) W < MCL D) All of the above are correct.

Question 8

To maximize its profit, a firm will hire more workers as long as

Accepted Answer

A)  marginal revenue exceeds the wage rate. 
B)  marginal revenue is less than the wage rate. 
C)  value of marginal product exceeds the wage rate. 
D)  marginal product exceeds the wage rate. 
A)  marginal revenue exceeds the wage rate. 
B)  marginal revenue is less than the wage rate. 
C)  value of marginal product exceeds the wage rate. 
D)  marginal product exceeds the wage rate.

Question 9

The demand for the services of labor ________ a derived demand and the demand for the services of land ________ a derived demand.

Accepted Answer

A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not 
A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not

Question 10

Starbucks is considering opening a new store on the Drexel University Campus in Philadelphia. To analyze this decision Starbucks must compare the costs of starting the new store, which will be incurred today, with the profit the store will create in the future. When making this decision, the higher is the interest rate, the ________ is the discounted present value of the profits and the ________ likely Starbucks will be to open the store.

Accepted Answer

A)  higher; more 
B)  higher; less 
C)  lower; more 
D)  lower; less 
A)  higher; more 
B)  higher; less 
C)  lower; more 
D)  lower; less

Question 11

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate is $24 per worker, what quantity of labor will maximize profits?

Accepted Answer

A)  1 worker 
B)  2 workers 
C)  4 workers 
D)  5 workers 
A)  1 worker 
B)  2 workers 
C)  4 workers 
D)  5 workers

Question 12

One reason unions might support an increase in the minimum wage is because such a policy would cause a leftward shift in the demand curve for union labor.

Accepted Answer

A) True 
 B)False

Question 13

The reservation wage is the

Accepted Answer

A)  highest wage for which a person is willing to supply labor. 
B)  lowest wage for which a person is willing to supply labor. 
C)  wage for which a person is willing to work full time. 
D)  wage for which a person is willing to work overtime. 
A)  highest wage for which a person is willing to supply labor. 
B)  lowest wage for which a person is willing to supply labor. 
C)  wage for which a person is willing to work full time. 
D)  wage for which a person is willing to work overtime.

Question 14

The demand for labor increases (that is, the demand for labor curve shifts rightward) if the

Accepted Answer

A)  wage rate increases. 
B)  wage rate decreases. 
C)  price of the firm's output rises. 
D)  price of the firm's output falls. 
A)  wage rate increases. 
B)  wage rate decreases. 
C)  price of the firm's output rises. 
D)  price of the firm's output falls.

Question 15

The change in total revenue that results from employing one more unit of labor is called the

Accepted Answer

A)  wage rate. 
B)  value of marginal product of labor. 
C)  average revenue. 
D)  marginal product of labor. 
A)  wage rate. 
B)  value of marginal product of labor. 
C)  average revenue. 
D)  marginal product of labor.

Question 16

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate falls from $24 per worker to $12 per worker, the quantity of labor hired ________ and the new number of workers employed is ________.

Accepted Answer

A)  increases; 2 
B)  decreases; 2 
C)  increases; 5 
D)  increase; 3 
A)  increases; 2 
B)  decreases; 2 
C)  increases; 5 
D)  increase; 3

Question 17

In order for there to be a backward-bending supply of labor curve, it must be the case that

Accepted Answer

A)  at low wage rates, the income effect of a wage increase exceeds the substitution effect, but at high wage rates the substitution effect of a wage increase exceeds the income effect. 
B)  at low wage rates, the substitution effect of a wage increase exceeds the income effect, but at high wage rates the income effect of a wage increase exceeds the substitution effect. 
C)  the income effect of a wage increase exceeds the substitution effect at all wage rates. 
D)  the substitution effect of a wage increase exceeds the income effect at all wage rates. 
A)  at low wage rates, the income effect of a wage increase exceeds the substitution effect, but at high wage rates the substitution effect of a wage increase exceeds the income effect. 
B)  at low wage rates, the substitution effect of a wage increase exceeds the income effect, but at high wage rates the income effect of a wage increase exceeds the substitution effect. 
C)  the income effect of a wage increase exceeds the substitution effect at all wage rates. 
D)  the substitution effect of a wage increase exceeds the income effect at all wage rates.

Question 18

Changes in which of the following change the demand for capital and shifts the demand curve for capital?

Accepted Answer

A)  current income 
B)  expected future income 
C)  the rental rate 
D)  the marginal product of capital 
A)  current income 
B)  expected future income 
C)  the rental rate 
D)  the marginal product of capital

Question 19

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, what is the value of marginal product of the 4th worker?

Accepted Answer

A)  $240 
B)  $70 
C)  $10 
D)  $40 
A)  $240 
B)  $70 
C)  $10 
D)  $40

Question 20

The present value of a future sum of money is the amount that, if invested today, will grow

Accepted Answer

A)  as large as that future sum, given the interest rate. 
B)  at a constant rate forever. 
C)  as large as that future sum, less taxes payable. 
D)  as large as that future sum, if the interest rate is zero. 
A)  as large as that future sum, given the interest rate. 
B)  at a constant rate forever. 
C)  as large as that future sum, less taxes payable. 
D)  as large as that future sum, if the interest rate is zero.

Exam 18: Markets for Factors of Production

The opportunity cost of leisure is

-In the above figure, the competitive wage rate is ________ and the quantity of labor is ________.

If the value of marginal product of the last worker hired is $24 and the wage rate is $25, then

Because the marginal cost of labor curve lies above the labor supply curve, a monopsony will pay a wage that is

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. If a worker costs $800 per month, how many workers will Peter employ to maximize profit?

-The above figure shows the market for labor. The employer is a monopsony. At the equilibrium level of employment, which of the following is correct?

To maximize its profit, a firm will hire more workers as long as

The demand for the services of labor ________ a derived demand and the demand for the services of land ________ a derived demand.

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate is $24 per worker, what quantity of labor will maximize profits?

One reason unions might support an increase in the minimum wage is because such a policy would cause a leftward shift in the demand curve for union labor.

The reservation wage is the

The demand for labor increases (that is, the demand for labor curve shifts rightward) if the

The change in total revenue that results from employing one more unit of labor is called the

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate falls from $24 per worker to $12 per worker, the quantity of labor hired ________ and the new number of workers employed is ________.

In order for there to be a backward-bending supply of labor curve, it must be the case that

Changes in which of the following change the demand for capital and shifts the demand curve for capital?

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, what is the value of marginal product of the 4th worker?

The present value of a future sum of money is the amount that, if invested today, will grow

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-In the above figure, the competitive wage rate is and the quantity of labor is .

The demand for the services of labor a derived demand and the demand for the services of land a derived demand.

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate falls from $24 per worker to $12 per worker, the quantity of labor hired and the new number of workers employed is .