Question 1

Equilibrium occurs in the market for oil when the

Accepted Answer

A) price of the oil equals the interest rate. 
B) increase in the price of oil equals the expected increase in the interest rate. 
C) expected increase in the price of oil over time is equal to the interest rate. 
D) stock of oil is eventually depleted. 
E) price of oil today equals the expected future price. 
A) price of the oil equals the interest rate. 
B) increase in the price of oil equals the expected increase in the interest rate. 
C) expected increase in the price of oil over time is equal to the interest rate. 
D) stock of oil is eventually depleted. 
E) price of oil today equals the expected future price.

Question 2

When compared to a monopsony labour market with the same value of marginal product curve and labour supply curve, a perfectly competitive labour market will pay a

Accepted Answer

A) lower wage and employ fewer workers. 
B) lower wage and employ more workers. 
C) higher wage and employ fewer workers. 
D) higher wage and employ more workers. 
E) higher wage and employ the same amount of workers. 
A) lower wage and employ fewer workers. 
B) lower wage and employ more workers. 
C) higher wage and employ fewer workers. 
D) higher wage and employ more workers. 
E) higher wage and employ the same amount of workers.

Question 3

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 4

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 5

Use the figure below to answer the following questions.
   
Figure 18.3.2
-If a union and the monopsonist in Figure 18.3.2 agree to bargaining, the outcome is an hourly wage rate

Accepted Answer

A) of $7. 
B) between $4 and $7. 
C) between $4 and $9. 
D) between $7 and $9. 
E) of $9. 
A) of $7. 
B) between $4 and $7. 
C) between $4 and $9. 
D) between $7 and $9. 
E) of $9.

Question 6

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 7

If the present value of $500 to be received in one year is $463, the interest rate is

Accepted Answer

A) 5 percent per year. 
B) 8 percent per year. 
C) 10 percent per year. 
D) 20.8 percent per year. 
E) 37 percent per year. 
A) 5 percent per year. 
B) 8 percent per year. 
C) 10 percent per year. 
D) 20.8 percent per year. 
E) 37 percent per year.

Question 8

The demand curve for labour will shift leftward as a result of

Accepted Answer

A) a decrease in the wage rate. 
B) an increase in the wage rate. 
C) a decrease in the price of a substitute factor of production. 
D) an increase in the price of a substitute factor of production. 
E) an increase in the price of the firm's output. 
A) a decrease in the wage rate. 
B) an increase in the wage rate. 
C) a decrease in the price of a substitute factor of production. 
D) an increase in the price of a substitute factor of production. 
E) an increase in the price of the firm's output.

Question 9

Assuming r is the rate of interest, to compute the present value of a dollar to be received a year from today, you

Accepted Answer

A) multiply the dollar by r. 
B) divide the dollar by (1 - r). 
C) multiply the dollar by (1 + r). 
D) divide the dollar by r. 
E) divide the dollar by (1 + r). 
A) multiply the dollar by r. 
B) divide the dollar by (1 - r). 
C) multiply the dollar by (1 + r). 
D) divide the dollar by r. 
E) divide the dollar by (1 + r).

Question 10

The idea that the demand for tire workers stems from the demand for automobiles is

Accepted Answer

A) the value of the marginal product of labour. 
B) the value of the marginal product of tire workers. 
C) the value of the marginal product of auto workers. 
D) an output demand. 
E) a derived demand. 
A) the value of the marginal product of labour. 
B) the value of the marginal product of tire workers. 
C) the value of the marginal product of auto workers. 
D) an output demand. 
E) a derived demand.

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 this labour market is controlled by a monopsony, then the monopsonist

Accepted Answer

A) pays a wage rate that is greater than the value of marginal product of labour. 
B) pays a wage rate exactly equal to the value of marginal product of labour. 
C) pays a wage rate that is less than the value of marginal product of labour. 
D) employs more labour hours per week than in a competitive labour market. 
E) pays a wage equal to the marginal cost of labour. 
A) pays a wage rate that is greater than the value of marginal product of labour. 
B) pays a wage rate exactly equal to the value of marginal product of labour. 
C) pays a wage rate that is less than the value of marginal product of labour. 
D) employs more labour hours per week than in a competitive labour market. 
E) pays a wage equal to the marginal cost of labour.

Question 12

If the annual rate of interest is 10 percent per year, what is the present value of $100 received one year from now?

Accepted Answer

A) $90.00 
B) $90.91 
C) $95.45 
D) $100.00 
E) $110.00 
A) $90.00 
B) $90.91 
C) $95.45 
D) $100.00 
E) $110.00

Question 13

The income effect of a higher wage is defined as

Accepted Answer

A) the increased income workers must be paid to be willing to work more. 
B) the increased prices of consumer goods that result from increased worker incomes. 
C) the increased demand for leisure that results from increased worker incomes. 
D) the increased workers' purchasing power that results from increased worker incomes. 
E) the desire for workers to purchase more normal goods and fewer inferior goods as income rises. 
A) the increased income workers must be paid to be willing to work more. 
B) the increased prices of consumer goods that result from increased worker incomes. 
C) the increased demand for leisure that results from increased worker incomes. 
D) the increased workers' purchasing power that results from increased worker incomes. 
E) the desire for workers to purchase more normal goods and fewer inferior goods as income rises.

Question 14

For a monopsonist facing an upward-sloping supply curve of labour, the marginal cost of labour curve

Accepted Answer

A) intersects the value of marginal product curve of labour at the equilibrium wage rate. 
B) is below and parallel to the supply of labour curve. 
C) is identical to the supply of labour curve. 
D) is above and parallel to the supply of labour curve. 
E) is above the supply curve of labour. 
A) intersects the value of marginal product curve of labour at the equilibrium wage rate. 
B) is below and parallel to the supply of labour curve. 
C) is identical to the supply of labour curve. 
D) is above and parallel to the supply of labour curve. 
E) is above the supply curve of labour.

Question 15

Use the information below to answer the following questions.
Fact 18.4.1
Water is a natural resource that is plentiful in Canada but not plentiful in Arizona and southern California. Suppose Canadians start to export bulk water to Arizona and southern California.
-Refer to Fact 18.4.1. The price of bulk water in Arizona and southern California will ________. Water is a ________ natural resource.

Accepted Answer

A) fall; renewable 
B) rise; nonrenewable 
C) rise; renewable 
D) fall; nonrenewable 
E) not change; nonrenewable 
A) fall; renewable 
B) rise; nonrenewable 
C) rise; renewable 
D) fall; nonrenewable 
E) not change; nonrenewable

Question 16

If the present value of $100 received one year from now is $80, what is the annual interest rate?

Accepted Answer

A) 8 percent 
B) 10 percent 
C) 20 percent 
D) 25 percent 
E) 50 percent 
A) 8 percent 
B) 10 percent 
C) 20 percent 
D) 25 percent 
E) 50 percent

Question 17

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 18

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) they want the minimum wage to be a living wage. 
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) they want the minimum wage to be a living wage.

Question 19

A decrease in the price of factors of production that are substitutes for labour shifts the labour

Accepted Answer

A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve leftward. 
D) supply curve rightward. 
E) demand curve leftward and the labour supply curve leftward. 
A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve leftward. 
D) supply curve rightward. 
E) demand curve leftward and the labour supply curve leftward.

Question 20

The ________ of a future amount of money is the amount that, if invested today, will grow to be as large as that future amount when the interest it earns is taken into account.

Accepted Answer

A) current value 
B) future value 
C) present value 
D) market value 
E) profit value 
A) current value 
B) future value 
C) present value 
D) market value 
E) profit value

Exam 18: Markets for Factors of Production

Equilibrium occurs in the market for oil when the

When compared to a monopsony labour market with the same value of marginal product curve and labour supply curve, a perfectly competitive labour market will pay a

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

Use the figure below to answer the following questions. Figure 18.3.2 -If a union and the monopsonist in Figure 18.3.2 agree to bargaining, the outcome is an hourly wage rate

The four factors of production are

If the present value of $500 to be received in one year is $463, the interest rate is

The demand curve for labour will shift leftward as a result of

Assuming r is the rate of interest, to compute the present value of a dollar to be received a year from today, you

The idea that the demand for tire workers stems from the demand for automobiles is

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, then the monopsonist

If the annual rate of interest is 10 percent per year, what is the present value of $100 received one year from now?

The income effect of a higher wage is defined as

For a monopsonist facing an upward-sloping supply curve of labour, the marginal cost of labour curve

If the present value of $100 received one year from now is $80, what is the annual interest rate?

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

Unions try to raise minimum wages because

A decrease in the price of factors of production that are substitutes for labour shifts the labour

The ________ of a future amount of money is the amount that, if invested today, will grow to be as large as that future amount when the interest it earns is taken into account.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments 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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

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