Question 1

If the market for a nonrenewable natural resource is currently in equilibrium, the price of the resource

Accepted Answer

A) is equal to the value of marginal product of the resource. 
B) is expected to rise at a rate equal to the interest rate. 
C) is expected to fall at a rate equal to the interest rate. 
D) will actually rise at a rate equal to the interest rate. 
E) will actually fall at a rate equal to the interest rate. 
A) is equal to the value of marginal product of the resource. 
B) is expected to rise at a rate equal to the interest rate. 
C) is expected to fall at a rate equal to the interest rate. 
D) will actually rise at a rate equal to the interest rate. 
E) will actually fall at a rate equal to the interest rate.

Question 2

Use the figure below to answer the following questions.
   
Figure 18.3.2
-Refer to Figure 18.3.2. Suppose this industry is initially in a monopsony situation and then the government introduces a minimum wage of $8 per hour. Choose the correct statement.

Accepted Answer

A) The wage rate rises, but employment decreases. 
B) The wage rate rises, but employment stays the same. 
C) The wage rate rises to $8 per hour, and employment increases to 800 hours. 
D) The wage rate rises to $8 per hour, and employment increases to 600 hours. 
E) The wage rate rises to $8 per hour, and employment increases to 500 hours. 
A) The wage rate rises, but employment decreases. 
B) The wage rate rises, but employment stays the same. 
C) The wage rate rises to $8 per hour, and employment increases to 800 hours. 
D) The wage rate rises to $8 per hour, and employment increases to 600 hours. 
E) The wage rate rises to $8 per hour, and employment increases to 500 hours.

Question 3

To maximize profit, the firm must equate the

Accepted Answer

A) wage rate to the price of the good. 
B) wage rate to the marginal product of labour. 
C) value of marginal product to the factor price. 
D) marginal factor cost to the price of the output. 
E) marginal cost of the factor to the marginal product of the factor. 
A) wage rate to the price of the good. 
B) wage rate to the marginal product of labour. 
C) value of marginal product to the factor price. 
D) marginal factor cost to the price of the output. 
E) marginal cost of the factor to the marginal product of the factor.

Question 4

What will be the value in one year of $25 invested today at an annual interest rate of 5 percent?

Accepted Answer

A) $25 
B) $26.25 
C) $27.50 
D) $30 
E) $23.81 
A) $25 
B) $26.25 
C) $27.50 
D) $30 
E) $23.81

Question 5

The demand for a factor of production is

Accepted Answer

A) a determined demand. 
B) a derived demand. 
C) a kinked demand. 
D) an insatiable demand. 
E) a desperate demand. 
A) a determined demand. 
B) a derived demand. 
C) a kinked demand. 
D) an insatiable demand. 
E) a desperate demand.

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

Mr. Shaw has a small factory in Estevan, Saskatchewan. He will continue hiring labour as long as the value of marginal product of labour ________ the wage rate.

Accepted Answer

A) is greater than 
B) is less than 
C) is less than or equal to 
D) determines 
E) maximizes 
A) is greater than 
B) is less than 
C) is less than or equal to 
D) determines 
E) maximizes

Question 8

If the wage rate increases, the income 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 leisure. 
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 leisure. 
D) increase both work and leisure. 
E) decrease both work and leisure.

Question 9

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 10

Tim is opening a new online store. He plans to hire two workers at $10 an hour. Tim is also considering buying or leasing some new computers. The purchase price of a computer is $900 and after three years it is worthless. The annual cost of leasing a computer is $450. The price of capital equipment is ________. The rental rate of capital is ________.

Accepted Answer

A) $900; $450 
B) $450; $450 
C) $900; $900 
D) $450; $900 
E) 100 percent; 50 percent 
A) $900; $450 
B) $450; $450 
C) $900; $900 
D) $450; $900 
E) 100 percent; 50 percent

Question 11

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

Question 12

The substitution effect on labour supply refers to the degree to which

Accepted Answer

A) the firm can substitute other factors of production for labour. 
B) buyers can substitute other products for the products that are made by organized labour. 
C) labour is willing to substitute nonlabour income for wages. 
D) labour prefers to substitute nonmonetary payments for money wages. 
E) labour is willing to substitute work for leisure. 
A) the firm can substitute other factors of production for labour. 
B) buyers can substitute other products for the products that are made by organized labour. 
C) labour is willing to substitute nonlabour income for wages. 
D) labour prefers to substitute nonmonetary payments for money wages. 
E) labour is willing to substitute work for leisure.

Question 13

Use the table below to answer the following questions.
Table 18.2.1
  
-Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $4 a unit, what is the profit-maximizing number of workers if the wage rate is $12?

Accepted Answer

A) zero 
B) 10 
C) 4 
D) 8 
E) 6 
A) zero 
B) 10 
C) 4 
D) 8 
E) 6

Question 14

Suppose the interest rate is 5 percent per year. What is the present value of the $210 that will be received two years from today?

Accepted Answer

A) $210 
B) $190.48 
C) $231.53 
D) $200 
E) $42 
A) $210 
B) $190.48 
C) $231.53 
D) $200 
E) $42

Question 15

Choose the statement that is incorrect.

Accepted Answer

A) Entrepreneurship is a factor of production. 
B) Entrepreneurs receive the profit or bear the loss that results from their business decisions. 
C) Entrepreneurship consists of all the gifts of nature. 
D) Entrepreneurial services are traded in markets. 
E) Both C and D are incorrect. 
A) Entrepreneurship is a factor of production. 
B) Entrepreneurs receive the profit or bear the loss that results from their business decisions. 
C) Entrepreneurship consists of all the gifts of nature. 
D) Entrepreneurial services are traded in markets. 
E) Both C and D are incorrect.

Question 16

Suppose a gift shop in Corner Brook, Newfoundland, hires workers to personalize ornaments for Christmas. The store sells the personalized ornaments for $6 each. The value of marginal product of this store's fourth worker is $60. The marginal product of the fourth worker is

Accepted Answer

A) 6 ornaments. 
B) 10 ornaments. 
C) 60 ornaments. 
D) 360 ornaments. 
E) 90 ornaments. 
A) 6 ornaments. 
B) 10 ornaments. 
C) 60 ornaments. 
D) 360 ornaments. 
E) 90 ornaments.

Question 17

A union is formed to restrict labour supply in a previously perfectly competitive labour market. If the union succeeds in raising the wage, everything else remaining the same,

Accepted Answer

A) employment will fall. 
B) employment will rise. 
C) employment will not change. 
D) the total wage bill will rise. 
E) the total wage bill will fall. 
A) employment will fall. 
B) employment will rise. 
C) employment will not change. 
D) the total wage bill will rise. 
E) the total wage bill will fall.

Question 18

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 19

Water from the Mackenzie River is an example of

Accepted Answer

A) a nonrenewable natural resource. 
B) a natural resource that can be used repeatedly. 
C) capital. 
D) a static resource. 
E) a capital service. 
A) a nonrenewable natural resource. 
B) a natural resource that can be used repeatedly. 
C) capital. 
D) a static resource. 
E) a capital service.

Question 20

If the rate of interest is 15 percent per year, the present value of the $200 to be received in two years is

Accepted Answer

A) $170.00. 
B) $185.00. 
C) $173.91. 
D) $264.50. 
E) $151.23. 
A) $170.00. 
B) $185.00. 
C) $173.91. 
D) $264.50. 
E) $151.23.

Exam 18: Markets for Factors of Production

If the market for a nonrenewable natural resource is currently in equilibrium, the price of the resource

Use the figure below to answer the following questions. Figure 18.3.2 -Refer to Figure 18.3.2. Suppose this industry is initially in a monopsony situation and then the government introduces a minimum wage of $8 per hour. Choose the correct statement.

To maximize profit, the firm must equate the

What will be the value in one year of $25 invested today at an annual interest rate of 5 percent?

The demand for a factor of production is

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

Mr. Shaw has a small factory in Estevan, Saskatchewan. He will continue hiring labour as long as the value of marginal product of labour ________ the wage rate.

If the wage rate increases, the income effect gives a household the incentive to

The income effect on labour supply refers to

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

The substitution effect on labour supply refers to the degree to which

Use the table below to answer the following questions. Table 18.2.1 -Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $4 a unit, what is the profit-maximizing number of workers if the wage rate is $12?

Suppose the interest rate is 5 percent per year. What is the present value of the $210 that will be received two years from today?

Choose the statement that is incorrect.

Suppose a gift shop in Corner Brook, Newfoundland, hires workers to personalize ornaments for Christmas. The store sells the personalized ornaments for $6 each. The value of marginal product of this store's fourth worker is $60. The marginal product of the fourth worker is

A union is formed to restrict labour supply in a previously perfectly competitive labour market. If the union succeeds in raising the wage, everything else remaining the same,

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

Water from the Mackenzie River is an example of

If the rate of interest is 15 percent per year, the present value of the $200 to be received in two years is

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

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.