Question 1

The Hotelling Principle is the idea that the price of a ________ is expected to rise at a rate equal to the ________.

Accepted Answer

A) nonrenewable natural resource;inflation rate 
B) unit of capital;interest rate 
C) nonrenewable natural resource;interest rate 
D) unit of capital;inflation rate 
E) nonrenewable natural resource;percentage increase in demand 
A) nonrenewable natural resource;inflation rate 
B) unit of capital;interest rate 
C) nonrenewable natural resource;interest rate 
D) unit of capital;inflation rate 
E) nonrenewable natural resource;percentage increase in demand C

Question 2

Use the figure below to answer the following questions.
   
Figure 18.3.1
-Refer to Figure 18.3.1.This figure shows the value of marginal product of labour curve,the labour supply curve,and the marginal cost of labour curve.If this labour market is competitive,the wage rate is

Accepted Answer

A) $3 an hour. 
B) $5 an hour. 
C) $6 an hour. 
D) $7 an hour. 
E) greater than $7 an hour. 
A) $3 an hour. 
B) $5 an hour. 
C) $6 an hour. 
D) $7 an hour. 
E) greater than $7 an hour. C

Question 3

Use the information below to answer the following questions.
Fact 18.5.1
The Burning Belly Taco Stand is considering buying some new special ovens.Each oven will cost $1,000, and will last for 2 years before it wears out.The ovens will be used to make the Taco Stands famous "Burning Ring of Fire" tacos, and will generate a value of marginal product of $600 for the first oven, $570 for the second oven, and $530 for the third oven.(Assume all revenues are earned at the end of the year.)
-Consider Fact 18.5.1.If the rate of interest is 10 percent,how many ovens will the Burning Belly Taco Stand buy?

Accepted Answer

A) zero 
B) 1 
C) 2 
D) 3 
E) insufficient information to answer 
A) zero 
B) 1 
C) 2 
D) 3 
E) insufficient information to answer B

Question 4

What is the most an investor would be willing to pay for a stock that will pay $210 next year and nothing before or after?

Accepted Answer

A) $200 regardless of the interest rate. 
B) $200 if the interest rate is 5 percent per year. 
C) $190.91 if the interest rate is 10 percent per year. 
D) B and C. 
E) None of the above. 
A) $200 regardless of the interest rate. 
B) $200 if the interest rate is 5 percent per year. 
C) $190.91 if the interest rate is 10 percent per year. 
D) B and C. 
E) None of the above.

Question 5

The labour supply curve may eventually become "backward bending" at high wages because

Accepted Answer

A) the income effect of the higher wage is dominated by the substitution effect. 
B) the income effect of the higher wage dominates the substitution effect of the higher wage. 
C) firms will demand added productivity from the workers as the wage reaches very high levels. 
D) firms will demand longer hours in trade for the higher wages. 
E) people get tired of working so many hours and refuse to increase their labour supply. 
A) the income effect of the higher wage is dominated by the substitution effect. 
B) the income effect of the higher wage dominates the substitution effect of the higher wage. 
C) firms will demand added productivity from the workers as the wage reaches very high levels. 
D) firms will demand longer hours in trade for the higher wages. 
E) people get tired of working so many hours and refuse to increase their labour supply.

Question 6

As the wage rate rises,a household will have a backward-bending supply of labour curve if

Accepted Answer

A) the income effect reinforces the substitution effect. 
B) the wage rate rises above the reservation wage. 
C) the substitution effect dominates the income effect. 
D) the income effect dominates the substitution effect. 
E) leisure is an inferior good. 
A) the income effect reinforces the substitution effect. 
B) the wage rate rises above the reservation wage. 
C) the substitution effect dominates the income effect. 
D) the income effect dominates the substitution effect. 
E) leisure is an inferior good.

Question 7

The four factors of production are

Accepted Answer

A) productive factors, neutral factors, entrepreneurial factors, and nonproductive factors. 
B) men, women, animals, and children. 
C) labour, capital, entrepreneurship, and land. 
D) machines, factories, buildings, and farms. 
E) labour, money, profits, and land. 
A) productive factors, neutral factors, entrepreneurial factors, and nonproductive factors. 
B) men, women, animals, and children. 
C) labour, capital, entrepreneurship, and land. 
D) machines, factories, buildings, and farms. 
E) labour, money, profits, and land.

Question 8

Unions try to raise minimum wages because

Accepted Answer

A) they wish to encourage employment among the poor. 
B) they wish to help those on minimum wages. 
C) this will decrease the supply of labour in their industry. 
D) this will increase the demand for labour in their industry. 
E) none of the above. 
A) they wish to encourage employment among the poor. 
B) they wish to help those on minimum wages. 
C) this will decrease the supply of labour in their industry. 
D) this will increase the demand for labour in their industry. 
E) none of the above.

Question 9

If the wage rate decreases,the substitution effect gives a household the incentive to

Accepted Answer

A) raise its reservation wage. 
B) increase leisure and decrease work 
C) increase work and decrease work. 
D) increase both work and leisure. 
E) decrease both work and leisure. 
A) raise its reservation wage. 
B) increase leisure and decrease work 
C) increase work and decrease work. 
D) increase both work and leisure. 
E) decrease both work and leisure.

Question 10

Use the figure below to answer the following questions.
   
Figure 18.3.1
-Refer to Figure 18.3.1.This figure shows the value of marginal product of labour curve,the labour supply curve,and the marginal cost of labour curve.If this labour market is controlled by a monopsony,the wage rate is

Accepted Answer

A) $7 an hour. 
B) $6 an hour. 
C) $3 an hour. 
D) $5 an hour. 
E) zero, because the market would shut down. 
A) $7 an hour. 
B) $6 an hour. 
C) $3 an hour. 
D) $5 an hour. 
E) zero, because the market would shut down.

Question 11

Use the figure below to answer the following questions.
   
Figure 18.3.1
-Refer to Figure 18.3.1.This figure shows the value of marginal product of labour curve,the labour supply curve,and the marginal cost of labour curve.If a union and the monopsonist in Figure 18.3.1 are equally strong,the outcome will be an hourly wage

Accepted Answer

A) of $7. 
B) between $5 and $6. 
C) between $5 and $7. 
D) between $6 and $7. 
E) of $6 
A) of $7. 
B) between $5 and $6. 
C) between $5 and $7. 
D) between $6 and $7. 
E) of $6

Question 12

Coal in an Alberta coal mine is ________ natural resource.Algonquin Park is ________ natural resource.

Accepted Answer

A) a nonrenewable;a nonrenewable 
B) a renewable;a renewable 
C) a nonrenewable;a renewable 
D) a renewable;a nonrenewable 
E) a nonrenewable;not a 
A) a nonrenewable;a nonrenewable 
B) a renewable;a renewable 
C) a nonrenewable;a renewable 
D) a renewable;a nonrenewable 
E) a nonrenewable;not a

Question 13

Use the table below to answer the following questions.
Table 18.2.2
Wendy owns an apple orchard and she employs students
to pick the apples.In an hour they can pick the following amounts:
  
-Consider Table 18.2.2.If the price of apples is $0.50 per kilogram,and the wage rate for apple pickers is $7.50 per hour,then the number of pickers that Wendy will hire is

Accepted Answer

A) 1. 
B) 3. 
C) 5. 
D) 7. 
E) 8. 
A) 1. 
B) 3. 
C) 5. 
D) 7. 
E) 8.

Question 14

A shift in a firm's demand curve for labour occurs for all of the following reasons except a change in

Accepted Answer

A) the prices of other factors of production. 
B) technology. 
C) the price of the firm's output. 
D) wage rate. 
E) marginal product of labour. 
A) the prices of other factors of production. 
B) technology. 
C) the price of the firm's output. 
D) wage rate. 
E) marginal product of labour.

Question 15

The supply of a nonrenewable natural resource is determined by all of the following factors except

Accepted Answer

A) the value of marginal product. 
B) the known reserves of the natural resource. 
C) the scale of current production facilities. 
D) the expected future price. 
E) all of the above determine supply of a nonrenewable resource. 
A) the value of marginal product. 
B) the known reserves of the natural resource. 
C) the scale of current production facilities. 
D) the expected future price. 
E) all of the above determine supply of a nonrenewable resource.

Question 16

The income effect on labour supply refers to

Accepted Answer

A) the fact that at higher wages the worker earns more income. 
B) the fact that as the wage rate increases and income increases, labourers demand more of all normal goods, including leisure activities. 
C) the increase in the income of firms that is necessary to pay higher wages. 
D) the fact that as workers become more productive, they earn more income. 
E) the fact that as the wage rate increases and income increases, labourers demand more of all normal goods, including labour. 
A) the fact that at higher wages the worker earns more income. 
B) the fact that as the wage rate increases and income increases, labourers demand more of all normal goods, including leisure activities. 
C) the increase in the income of firms that is necessary to pay higher wages. 
D) the fact that as workers become more productive, they earn more income. 
E) the fact that as the wage rate increases and income increases, labourers demand more of all normal goods, including labour.

Question 17

If the price of a natural resource is expected to rise at a rate that exceeds the interest rate,demand ________,supply ________,and the price ________.

Accepted Answer

A) decreases;increases;falls 
B) increases;decreases;rises 
C) increases;increases;rises, falls, or remains unchanged 
D) decreases;decreases;rises, falls, or remains unchanged 
E) increases;does not change;rises 
A) decreases;increases;falls 
B) increases;decreases;rises 
C) increases;increases;rises, falls, or remains unchanged 
D) decreases;decreases;rises, falls, or remains unchanged 
E) increases;does not change;rises

Question 18

If the present value of the $1,000 to be received in one year is $800,the interest rate is

Accepted Answer

A) 25 percent per year. 
B) 8 percent per year. 
C) 10 percent per year. 
D) 12 percent per year. 
E) 125 percent per year. 
A) 25 percent per year. 
B) 8 percent per year. 
C) 10 percent per year. 
D) 12 percent per year. 
E) 125 percent per year.

Question 19

If marginal product of a restaurant employee is 10 customers per hour,and the price of a meal is $15,the restaurant employee's value of marginal product is

Accepted Answer

A) $15. 
B) $7.5. 
C) $12.5. 
D) $10. 
E) $150. 
A) $15. 
B) $7.5. 
C) $12.5. 
D) $10. 
E) $150.

Question 20

Use the figure below to answer the following questions.
   
Figure 18.3.3
-Refer to Figure 18.3.3.For the monopsonist employer illustrated in this figure,the profit-maximizing wage rate is ________ and the quantity of labour hired is ________.

Accepted Answer

A) $9 per hour;300 hours 
B) $8 per hour;350 hours 
C) $8 per hour;500 hours 
D) $7 per hour;400 hours 
E) $6 per hour;300 hours 
A) $9 per hour;300 hours 
B) $8 per hour;350 hours 
C) $8 per hour;500 hours 
D) $7 per hour;400 hours 
E) $6 per hour;300 hours

Exam 18: Markets for Factors of Production

The Hotelling Principle is the idea that the price of a ________ is expected to rise at a rate equal to the ________.

Use the figure below to answer the following questions. Figure 18.3.1 -Refer to Figure 18.3.1.This figure shows the value of marginal product of labour curve,the labour supply curve,and the marginal cost of labour curve.If this labour market is competitive,the wage rate is

What is the most an investor would be willing to pay for a stock that will pay $210 next year and nothing before or after?

The labour supply curve may eventually become "backward bending" at high wages because

As the wage rate rises,a household will have a backward-bending supply of labour curve if

The four factors of production are

Unions try to raise minimum wages because

If the wage rate decreases,the substitution effect gives a household the incentive to

Use the figure below to answer the following questions. Figure 18.3.1 -Refer to Figure 18.3.1.This figure shows the value of marginal product of labour curve,the labour supply curve,and the marginal cost of labour curve.If this labour market is controlled by a monopsony,the wage rate is

Coal in an Alberta coal mine is ________ natural resource.Algonquin Park is ________ natural resource.

A shift in a firm's demand curve for labour occurs for all of the following reasons except a change in

The supply of a nonrenewable natural resource is determined by all of the following factors except

The income effect on labour supply refers to

If the price of a natural resource is expected to rise at a rate that exceeds the interest rate,demand ________,supply ________,and the price ________.

If the present value of the $1,000 to be received in one year is $800,the interest rate is

If marginal product of a restaurant employee is 10 customers per hour,and the price of a meal is $15,the restaurant employee's value of marginal product is

Use the figure below to answer the following questions. Figure 18.3.3 -Refer to Figure 18.3.3.For the monopsonist employer illustrated in this figure,the profit-maximizing wage rate is ________ and the quantity of labour hired is ________.

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

Externalities

Public Goods and Common Resources

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

The Hotelling Principle is the idea that the price of a is expected to rise at a rate equal to the .

Coal in an Alberta coal mine is natural resource.Algonquin Park is natural resource.

If the price of a natural resource is expected to rise at a rate that exceeds the interest rate,demand ,supply ,and the price .

Use the figure below to answer the following questions. Figure 18.3.3 -Refer to Figure 18.3.3.For the monopsonist employer illustrated in this figure,the profit-maximizing wage rate is and the quantity of labour hired is .