Question 1

A professional tennis player enters fewer tournaments each year as the prize money she won increased. This observation indicates that the tennis player

Accepted Answer

A)  is irrational. 
B)  has shifted her labor demand curve leftward. 
C)  has shifted her labor supply curve rightward. 
D)  has a backward bending labor supply curve. 
A)  is irrational. 
B)  has shifted her labor demand curve leftward. 
C)  has shifted her labor supply curve rightward. 
D)  has a backward bending labor supply curve.

Question 2

-In the table above, the value of marginal product of the third unit of labor is

Accepted Answer

A)  $3. 
B)  $4. 
C)  $12. 
D)  $16. 
A)  $3. 
B)  $4. 
C)  $12. 
D)  $16.

Question 3

Which of the following will increase the wage rate?

Accepted Answer

A)  an increase in the adult population 
B)  an increase in the retirement age 
C)  an improvement in technology that increases the marginal product of labor 
D)  Both answers A and B are correct. 
A)  an increase in the adult population 
B)  an increase in the retirement age 
C)  an improvement in technology that increases the marginal product of labor 
D)  Both answers A and B are correct.

Question 4

If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire

Accepted Answer

A)  less labor, which will increase the VMP. 
B)  more labor, which will decrease the VMP. 
C)  no more or less labor, because profits are greatest when W < VMP. 
D)  more labor, because hiring more labor will increase both W and VMP until they are equal. 
A)  less labor, which will increase the VMP. 
B)  more labor, which will decrease the VMP. 
C)  no more or less labor, because profits are greatest when W < VMP. 
D)  more labor, because hiring more labor will increase both W and VMP until they are equal.

Question 5

Jose owns a local coffee shop. When Jose calculates how his total revenue changes in response to hiring an extra worker, Jose is calculating the

Accepted Answer

A)  marginal revenue. 
B)  value of marginal product of labor. 
C)  marginal product of labor. 
D)  total revenue. 
A)  marginal revenue. 
B)  value of marginal product of labor. 
C)  marginal product of labor. 
D)  total revenue.

Question 6

A worker supplies labor to the market if the

Accepted Answer

A)  wage is less than the reservation wage. 
B)  wage is greater than the reservation wage. 
C)  minimum wage is less than the reservation wage. 
D)  demand for labor exceeds the supply of labor. 
A)  wage is less than the reservation wage. 
B)  wage is greater than the reservation wage. 
C)  minimum wage is less than the reservation wage. 
D)  demand for labor exceeds the supply of labor.

Question 7

-Hank's Propane Storage Company is a profit-maximizing monopsony in the local labor market for propane handling, delivery, and other associated services. The supply and marginal cost of labor curves are shown in the figure above. Hank's demand for labor curve is the curve labeled VMP = D. At what level should a minimum wage be set in order to achieve the wage rate and quantity of employment that would be attained in a competitive labor market?

Accepted Answer

A)  $4 per hour 
B)  $6 per hour 
C)  $8 per hour 
D)  $12 per hour 
A)  $4 per hour 
B)  $6 per hour 
C)  $8 per hour 
D)  $12 per hour

Question 8

A rise in the minimum wage increases the demand for union labor because this policy change

Accepted Answer

A)  lowers the wage rate paid to union labor. 
B)  raises the productivity of union labor. 
C)  lowers the cost of a substitute for union labor. 
D)  raises the cost of a substitute for union labor. 
A)  lowers the wage rate paid to union labor. 
B)  raises the productivity of union labor. 
C)  lowers the cost of a substitute for union labor. 
D)  raises the cost of a substitute for union labor.

Question 9

The income effect of a higher wage rate results in a I. higher income as people work more.
II) person choosing to decrease work hours as income increases.
III) backward-bending labor supply curve.

Accepted Answer

A)  I and II 
B)  II and III 
C)  I and III 
D)  II only 
A)  I and II 
B)  II and III 
C)  I and III 
D)  II only

Question 10

For many jobs, as wages increase, the quantity supplied of labor increases. This set of facts is evidence that the

Accepted Answer

A)  substitution effect is larger than the income effect and the supply of labor curve is upward sloping. 
B)  income effect is larger than the substitution effect and the supply of labor curve is upward sloping. 
C)  substitution effect is larger than the income effect and the supply of labor curve is backward bending. 
D)  income effect is larger than the substitution effect and the supply of labor curve is backward bending. 
A)  substitution effect is larger than the income effect and the supply of labor curve is upward sloping. 
B)  income effect is larger than the substitution effect and the supply of labor curve is upward sloping. 
C)  substitution effect is larger than the income effect and the supply of labor curve is backward bending. 
D)  income effect is larger than the substitution effect and the supply of labor curve is backward bending.

Question 11

Unions support minimum wage laws, because

Accepted Answer

A)  union workers are typically paid the minimum wage. 
B)  an increase in the minimum wage paid to low-skilled labor increases the opportunity cost of employing high-skilled union labor and, hence, increases the demand for union labor. 
C)  an increase in the minimum wage paid to low-skilled labor increases the opportunity cost of employing low-skilled labor and, hence, increases the demand for union labor. 
D)  an increase in the minimum wage paid to low-skilled labor causes the supply curve of low-skilled labor to shift leftward and, hence, increases the demand for union labor. 
A)  union workers are typically paid the minimum wage. 
B)  an increase in the minimum wage paid to low-skilled labor increases the opportunity cost of employing high-skilled union labor and, hence, increases the demand for union labor. 
C)  an increase in the minimum wage paid to low-skilled labor increases the opportunity cost of employing low-skilled labor and, hence, increases the demand for union labor. 
D)  an increase in the minimum wage paid to low-skilled labor causes the supply curve of low-skilled labor to shift leftward and, hence, increases the demand for union labor.

Question 12

Usually the demand for labor decreases (that is, the demand for labor curve shifts leftward) if the

Accepted Answer

A)  wage rate increases. 
B)  wage rate decreases. 
C)  price of the firm's output rises. 
D)  prices of other factors fall. 
A)  wage rate increases. 
B)  wage rate decreases. 
C)  price of the firm's output rises. 
D)  prices of other factors fall.

Question 13

If a union cannot increase the demand for union labor, then an increase in union wages will result in a decrease in union employment.

Accepted Answer

A) True 
 B)False

Question 14

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. Initially the market price of peanuts is $2.00 per pound. If the market price of peanuts fall to $1 per pound and a worker costs $800 per month, how many workers will Peter employ to maximize his profit?

Accepted Answer

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

Question 15

Discuss the difference between renewable and nonrenewable resources. Given an example of each.

Accepted Answer

A renewable natural resource can be used

Question 16

Other things being equal, a technological change that raises the value of marginal product of capital raises the rental rate of capital because the

Accepted Answer

A)  supply curve of capital shifts leftward. 
B)  supply curve of capital shifts rightward. 
C)  demand curve for capital shifts rightward. 
D)  demand curve for capital shifts leftward. 
A)  supply curve of capital shifts leftward. 
B)  supply curve of capital shifts rightward. 
C)  demand curve for capital shifts rightward. 
D)  demand curve for capital shifts leftward.

Question 17

What effect does an increase in the price of the firm's output have on its demand curve for labor? Why?

Accepted Answer

An increase in the price of its output s

Question 18

-In the table above, the marginal product of the first unit of labor is ________ units of output.

Accepted Answer

A)  4 
B)  5 
C)  16 
D)  20 
A)  4 
B)  5 
C)  16 
D)  20

Question 19

The union representing the bread makers at the Hostess Bread Company went on strike and demanded higher wages than what the firm wanted to pay. I. If the firm is in a competitive labor market the union can only raise wages by decreasing employment.
II) If the firm is a monopsony in the labor market the union can only raise wages by decreasing employment.
III) If the firm is a monopsony in the labor market the union can both raise wages and increase employment.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  I and III 
A)  I only 
B)  II only 
C)  I and II 
D)  I and III

Question 20

Which of the following is a method used by unions to increase the demand for their members' labor?

Accepted Answer

A)  Support import restrictions. 
B)  Decrease the marginal product of union members. 
C)  Oppose immigration restrictions. 
D)  Oppose minimum wage laws. 
A)  Support import restrictions. 
B)  Decrease the marginal product of union members. 
C)  Oppose immigration restrictions. 
D)  Oppose minimum wage laws.

A professional tennis player enters fewer tournaments each year as the prize money she won increased. This observation indicates that the tennis player

-In the table above, the value of marginal product of the third unit of labor is

Which of the following will increase the wage rate?

If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire

Jose owns a local coffee shop. When Jose calculates how his total revenue changes in response to hiring an extra worker, Jose is calculating the

A worker supplies labor to the market if the

A rise in the minimum wage increases the demand for union labor because this policy change

The income effect of a higher wage rate results in a I. higher income as people work more. II) person choosing to decrease work hours as income increases. III) backward-bending labor supply curve.

For many jobs, as wages increase, the quantity supplied of labor increases. This set of facts is evidence that the

Unions support minimum wage laws, because

Usually the demand for labor decreases (that is, the demand for labor curve shifts leftward) if the

If a union cannot increase the demand for union labor, then an increase in union wages will result in a decrease in union employment.

Discuss the difference between renewable and nonrenewable resources. Given an example of each.

Other things being equal, a technological change that raises the value of marginal product of capital raises the rental rate of capital because the

What effect does an increase in the price of the firm's output have on its demand curve for labor? Why?

-In the table above, the marginal product of the first unit of labor is ________ units of output.

Which of the following is a method used by unions to increase the demand for their members' labor?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Economic Inequality

Uncertainty and Information

Filters

Exam 18: Markets for Factors of Production

A professional tennis player enters fewer tournaments each year as the prize money she won increased. This observation indicates that the tennis player

-In the table above, the value of marginal product of the third unit of labor is

Which of the following will increase the wage rate?

If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire

Jose owns a local coffee shop. When Jose calculates how his total revenue changes in response to hiring an extra worker, Jose is calculating the

A worker supplies labor to the market if the

A rise in the minimum wage increases the demand for union labor because this policy change

The income effect of a higher wage rate results in a I. higher income as people work more. II) person choosing to decrease work hours as income increases. III) backward-bending labor supply curve.

For many jobs, as wages increase, the quantity supplied of labor increases. This set of facts is evidence that the

Unions support minimum wage laws, because

Usually the demand for labor decreases (that is, the demand for labor curve shifts leftward) if the

If a union cannot increase the demand for union labor, then an increase in union wages will result in a decrease in union employment.

Discuss the difference between renewable and nonrenewable resources. Given an example of each.

Other things being equal, a technological change that raises the value of marginal product of capital raises the rental rate of capital because the

What effect does an increase in the price of the firm's output have on its demand curve for labor? Why?

-In the table above, the marginal product of the first unit of labor is ________ units of output.

Which of the following is a method used by unions to increase the demand for their members' labor?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Economic Inequality

Uncertainty and Information

Filters