Question 1

The present value of a future payment of money will be lower the

Accepted Answer

A) higher the interest rate or the further in the future the payment. 
B) lower the interest rate or the further in the future the payment. 
C) higher the interest rate or the nearer the date of the future payment. 
D) lower the interest rate or the nearer the date of the future payment. 
E) lower the interest rate, independent of the date of the future payment. 
A) higher the interest rate or the further in the future the payment. 
B) lower the interest rate or the further in the future the payment. 
C) higher the interest rate or the nearer the date of the future payment. 
D) lower the interest rate or the nearer the date of the future payment. 
E) lower the interest rate, independent of the date of the future payment.

Question 2

If the supply of labour decreases, which of the following events will occur?

Accepted Answer

A) The wage rate will decrease and firms will increase the number of workers to the point at which the value of marginal product equals the new wage rate. 
B) The wage rate will decrease and firms will decrease the number of workers to the point at which the value of marginal product equals the new wage rate. 
C) The wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product equals the new wage rate. 
D) The wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product is greater than the new wage rate. 
E) The wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product is less than the new wage rate. 
A) The wage rate will decrease and firms will increase the number of workers to the point at which the value of marginal product equals the new wage rate. 
B) The wage rate will decrease and firms will decrease the number of workers to the point at which the value of marginal product equals the new wage rate. 
C) The wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product equals the new wage rate. 
D) The wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product is greater than the new wage rate. 
E) The wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product is less than the new wage rate.

Question 3

A firm's value of marginal product of labour curve is also its

Accepted Answer

A) marginal cost curve of labour. 
B) demand curve for labour. 
C) supply curve of labour. 
D) supply curve of output. 
E) marginal product curve. 
A) marginal cost curve of labour. 
B) demand curve for labour. 
C) supply curve of labour. 
D) supply curve of output. 
E) marginal product curve.

Question 4

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

Question 5

The value of marginal product is

Accepted Answer

A) the value to the firm of hiring one more unit of a factor of production. 
B) the price of a unit of output multiplied by the marginal product of the factor of production. 
C) calculated as total revenue divided by the total quantity employed. 
D) calculated as marginal product divided by marginal benefit. 
E) calculated as marginal product divided by the price of a unit of output . 
A) the value to the firm of hiring one more unit of a factor of production. 
B) the price of a unit of output multiplied by the marginal product of the factor of production. 
C) calculated as total revenue divided by the total quantity employed. 
D) calculated as marginal product divided by marginal benefit. 
E) calculated as marginal product divided by the price of a unit of output .

Question 6

If the wage rate decreases, 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 7

Choose the correct statement.

Accepted Answer

A) The quantity of land demanded cannot be changed by people's decisions. 
B) The supply of each particular block of land is perfectly inelastic. 
C) The lower the rental rate, other things remaining the same, the smaller is the quantity of land demanded. 
D) Profit-maximizing firms rent the quantity of land at which the value of marginal product of land is equal to the quantity of land demanded. 
E) The supply of land is based on the value of marginal product of land. 
A) The quantity of land demanded cannot be changed by people's decisions. 
B) The supply of each particular block of land is perfectly inelastic. 
C) The lower the rental rate, other things remaining the same, the smaller is the quantity of land demanded. 
D) Profit-maximizing firms rent the quantity of land at which the value of marginal product of land is equal to the quantity of land demanded. 
E) The supply of land is based on the value of marginal product of land.

Question 8

If the marginal product of a baker is 10 loaves of bread, and the price of a loaf of bread is $2, the baker's value of marginal product is

Accepted Answer

A) $2.00. 
B) $20.00. 
C) $0.20. 
D) $5.00. 
E) $12.00. 
A) $2.00. 
B) $20.00. 
C) $0.20. 
D) $5.00. 
E) $12.00.

Question 9

Use the figure below to answer the following questions.
   
Figure 18.3.2
-If a union forms to face the monopsonist in Figure 18.3.2, the situation is one of

Accepted Answer

A) binding arbitration. 
B) derived demand. 
C) duopoly. 
D) collusive oligopoly. 
E) bilateral monopoly. 
A) binding arbitration. 
B) derived demand. 
C) duopoly. 
D) collusive oligopoly. 
E) bilateral monopoly.

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, then the monopsonist hires

Accepted Answer

A) zero hours of labour. 
B) 50 hours of labour. 
C) 75 hours of labour. 
D) 100 hours of labour. 
E) greater than 100 hours of labour. 
A) zero hours of labour. 
B) 50 hours of labour. 
C) 75 hours of labour. 
D) 100 hours of labour. 
E) greater than 100 hours of labour.

Question 11

A labour union is

Accepted Answer

A) an illegal conspiracy of workers formed to strike against employers. 
B) a legal organization of workers with a goal to overthrow the capitalist class. 
C) an organized group of workers that attempts to increase wages and influence other job conditions. 
D) an organized group of crime syndicates. 
E) a union with members working in the same industry, but in different jobs. 
A) an illegal conspiracy of workers formed to strike against employers. 
B) a legal organization of workers with a goal to overthrow the capitalist class. 
C) an organized group of workers that attempts to increase wages and influence other job conditions. 
D) an organized group of crime syndicates. 
E) a union with members working in the same industry, but in different jobs.

Question 12

If the interest rate is 10 percent per year, the present value of $100 in two years is

Accepted Answer

A) $80.00. 
B) $82.64. 
C) $90.91. 
D) $120.00. 
E) $121.00. 
A) $80.00. 
B) $82.64. 
C) $90.91. 
D) $120.00. 
E) $121.00.

Question 13

The reservation wage of labour is

Accepted Answer

A) the wage below which the labourer will be willing to work. 
B) the wage above which the worker would be willing to retire. 
C) the wage rate at which the firm would find it profitable to hire labour. 
D) the wage rate that makes it necessary for the firm to shut down rather than pay this wage to labour. 
E) the wage rate above which the worker would be willing to supply labour to the market. 
A) the wage below which the labourer will be willing to work. 
B) the wage above which the worker would be willing to retire. 
C) the wage rate at which the firm would find it profitable to hire labour. 
D) the wage rate that makes it necessary for the firm to shut down rather than pay this wage to labour. 
E) the wage rate above which the worker would be willing to supply labour to the market.

Question 14

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. Suppose the government passes a minimum wage law that prohibits anyone from hiring labour at less than $6.50 per hour. The monopsonist will hire

Accepted Answer

A) 50 hours of labour. 
B) 75 hours of labour. 
C) 62.5 hours of labour. 
D) 100 hours of labour. 
E) 125 hours of labour. 
A) 50 hours of labour. 
B) 75 hours of labour. 
C) 62.5 hours of labour. 
D) 100 hours of labour. 
E) 125 hours of labour.

Question 15

When the price of a firm's output increases,

Accepted Answer

A) the supply of labour increases. 
B) the firm hires less labour. 
C) the marginal product of labour increases. 
D) the firm's demand for labour curve shifts leftward. 
E) the value of marginal product of labour increases. 
A) the supply of labour increases. 
B) the firm hires less labour. 
C) the marginal product of labour increases. 
D) the firm's demand for labour curve shifts leftward. 
E) the value of marginal product of labour increases.

Question 16

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.)
-Refer to Fact 18.5.1. If the rate of interest is 5 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

Question 17

Which of the following is a nonrenewable natural resource?

Accepted Answer

A) coal 
B) land 
C) water 
D) trees 
E) rain 
A) coal 
B) land 
C) water 
D) trees 
E) rain

Question 18

In the short run, the market supply of land is

Accepted Answer

A) relatively elastic. 
B) relatively inelastic. 
C) perfectly elastic. 
D) perfectly inelastic. 
E) either elastic or inelastic depending on the productivity of the land. 
A) relatively elastic. 
B) relatively inelastic. 
C) perfectly elastic. 
D) perfectly inelastic. 
E) either elastic or inelastic depending on the productivity of the land.

Question 19

Use the figure below to answer the following questions.
   
Figure 18.3.2
-Refer to Figure 18.3.2. This figure illustrates a monopsonist in the labour market. The profit-maximizing wage rate is ________ and the quantity of labour hired is ________.

Accepted Answer

A) $4 per hour; 800 hours 
B) $4 per hour; 400 hours 
C) $7 per hour; 600 hours 
D) $9 per hour; 400 hours 
E) $2 per hour; 150 hours. 
A) $4 per hour; 800 hours 
B) $4 per hour; 400 hours 
C) $7 per hour; 600 hours 
D) $9 per hour; 400 hours 
E) $2 per hour; 150 hours.

Question 20

A constraint on union effectiveness is

Accepted Answer

A) the downward-sloping labour demand curve. 
B) the minimum wage law. 
C) the Fair Labour Standards Practices Act. 
D) increasing export competitiveness. 
E) the competition of other unions. 
A) the downward-sloping labour demand curve. 
B) the minimum wage law. 
C) the Fair Labour Standards Practices Act. 
D) increasing export competitiveness. 
E) the competition of other unions.

Exam 18: Markets for Factors of Production

The present value of a future payment of money will be lower the

If the supply of labour decreases, which of the following events will occur?

A firm's value of marginal product of labour curve is also its

The value of marginal product is

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

Choose the correct statement.

If the marginal product of a baker is 10 loaves of bread, and the price of a loaf of bread is $2, the baker's value of marginal product is

Use the figure below to answer the following questions. Figure 18.3.2 -If a union forms to face the monopsonist in Figure 18.3.2, the situation is one of

A labour union is

If the interest rate is 10 percent per year, the present value of $100 in two years is

The reservation wage of labour is

When the price of a firm's output increases,

Which of the following is a nonrenewable natural resource?

In the short run, the market supply of land is

Use the figure below to answer the following questions. Figure 18.3.2 -Refer to Figure 18.3.2. This figure illustrates a monopsonist in the labour market. The profit-maximizing wage rate is ________ and the quantity of labour hired is ________.

A constraint on union effectiveness is

What Is Economics

The Economic Problem

Demand and Supply

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Governments Actions in Markets

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Money, the Price Level, and Inflation

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Use the figure below to answer the following questions. Figure 18.3.2 -Refer to Figure 18.3.2. This figure illustrates a monopsonist in the labour market. The profit-maximizing wage rate is and the quantity of labour hired is .