Question 1

If a firm finds that, at its current level of employment, VMP > W, it will

Accepted Answer

A)  be maximizing profits. 
B)  be minimizing profits. 
C)  increase the amount of labor it hires. 
D)  decrease the amount of labor it hires. 
A)  be maximizing profits. 
B)  be minimizing profits. 
C)  increase the amount of labor it hires. 
D)  decrease the amount of labor it hires.

Question 2

According to the Hotelling Principle, the price of a nonrenewable resource is expected to

Accepted Answer

A)  rise at a rate higher than the interest rate. 
B)  rise at a rate lower than the interest rate. 
C)  rise at a rate equal to the interest rate. 
D)  fall at a rate equal to the interest rate. 
A)  rise at a rate higher than the interest rate. 
B)  rise at a rate lower than the interest rate. 
C)  rise at a rate equal to the interest rate. 
D)  fall at a rate equal to the interest rate.

Question 3

Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week. If Lynn charges $100 to clean a house, and she pays her employee $400 a week, should she hire this employee?

Accepted Answer

A)  Yes, because the value of marginal product of the worker is less than the wage. 
B)  Yes, because the value of marginal product of the worker is greater than the wage. 
C)  No, because the value of marginal product of the worker is greater than the wage. 
D)  No, because the value of marginal product of the worker is less than the wage. 
A)  Yes, because the value of marginal product of the worker is less than the wage. 
B)  Yes, because the value of marginal product of the worker is greater than the wage. 
C)  No, because the value of marginal product of the worker is greater than the wage. 
D)  No, because the value of marginal product of the worker is less than the wage.

Question 4

As a person's wage rate increases, the substitution effect motivates an increase in work and the income effect motivates a decrease in work.

Accepted Answer

A) True 
 B)False

Question 5

-In the figure above, the substitution effect outweighs the income effect in all segments EXCEPT

Accepted Answer

A)  0a. 
B)  0c. 
C)  bc. 
D)  cd. 
A)  0a. 
B)  0c. 
C)  bc. 
D)  cd.

Question 6

The interest rate is 5 percent. How does $500 to be received a year from today compare in value to $500 right now?

Accepted Answer

With an interest rate of 5 percent, $500

Question 7

The process of converting a future amount of money into its value today is called

Accepted Answer

A)  trending. 
B)  depreciation. 
C)  discounting. 
D)  compounding. 
A)  trending. 
B)  depreciation. 
C)  discounting. 
D)  compounding.

Question 8

If the wage rate paid in the fast-food outlets in a small town is greater than the reservation wage of all the teenagers in the town and less than the reservation wage of all the adults, then the fast-food outlets will hire ________.

Accepted Answer

A)  mostly adults and a few teenagers 
B)  some adults and some teenagers 
C)  only adults 
D)  only teenagers 
A)  mostly adults and a few teenagers 
B)  some adults and some teenagers 
C)  only adults 
D)  only teenagers

Question 9

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. The firm's value of marginal product of labor for the third worker is equal to

Accepted Answer

A)  $264. 
B)  $48. 
C)  $8. 
D)  $6. 
A)  $264. 
B)  $48. 
C)  $8. 
D)  $6.

Question 10

A labor market monopsony

Accepted Answer

A)  has a marginal cost of labor curve that lies above the labor supply curve. 
B)  has a marginal cost of labor curve that lies below the labor supply curve. 
C)  is a labor market in which the firm has an elastic demand for labor. 
D)  is a labor market in which the firm has an inelastic demand for labor. 
A)  has a marginal cost of labor curve that lies above the labor supply curve. 
B)  has a marginal cost of labor curve that lies below the labor supply curve. 
C)  is a labor market in which the firm has an elastic demand for labor. 
D)  is a labor market in which the firm has an inelastic demand for labor.

Question 11

An increase in the price of a firm's output increases the firm's demand for labor because the

Accepted Answer

A)  marginal product of each worker increases. 
B)  value of marginal product of each worker increases. 
C)  value of marginal product curve becomes steeper. 
D)  value of marginal product curve becomes flatter. 
A)  marginal product of each worker increases. 
B)  value of marginal product of each worker increases. 
C)  value of marginal product curve becomes steeper. 
D)  value of marginal product curve becomes flatter.

Question 12

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

Accepted Answer

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

Question 13

The income effect means that at a high enough wage rate labor supply curve has a

Accepted Answer

A)  positive slope because an increase in the wage rate increases income. 
B)  positive slope because an increase in income increases the demand for leisure. 
C)  negative slope because an increase in income increases the demand for leisure. 
D)  negative slope because an increase in the wage rate increases hours worked to earn more income. 
A)  positive slope because an increase in the wage rate increases income. 
B)  positive slope because an increase in income increases the demand for leisure. 
C)  negative slope because an increase in income increases the demand for leisure. 
D)  negative slope because an increase in the wage rate increases hours worked to earn more income.

Question 14

Which answer below CORRECTLY describes the relationship between the demand for labor curve and the value of marginal product curve?

Accepted Answer

A)  The curves intersect to determine the equilibrium quantity of labor. 
B)  The value of marginal product curve lies to the right and above the demand for labor curve. 
C)  The curves are the same. 
D)  The value of marginal product curve lies to the left of the demand for labor curve. 
A)  The curves intersect to determine the equilibrium quantity of labor. 
B)  The value of marginal product curve lies to the right and above the demand for labor curve. 
C)  The curves are the same. 
D)  The value of marginal product curve lies to the left of the demand for labor curve.

Question 15

Assuming r is the interest rate, 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 (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 (1 + r).

Question 16

-If there is a monopsony operating in the labor market illustrated in the figure above, the equilibrium wage and quantity of labor hired is

Accepted Answer

A)  $15 and 50 hours. 
B)  $10 and 100 hours. 
C)  $10 and 50 hours. 
D)  $5 and 50 hours. 
A)  $15 and 50 hours. 
B)  $10 and 100 hours. 
C)  $10 and 50 hours. 
D)  $5 and 50 hours.

Question 17

If a union restricts the supply of labor but cannot change the demand for labor, the union ________ the wage rate and ________ the level of employment.

Accepted Answer

A)  raises; decreases 
B)  raises; increases 
C)  lowers; decreases 
D)  lowers; increases 
A)  raises; decreases 
B)  raises; increases 
C)  lowers; decreases 
D)  lowers; increases

Question 18

What is the present value of $1,000 to be received 2 years in the future with an interest rate of 8 percent?

Accepted Answer

A)  $857.34 
B)  $925.93 
C)  $1080.00 
D)  $1166.40 
A)  $857.34 
B)  $925.93 
C)  $1080.00 
D)  $1166.40

Question 19

-The figure above shows a labor market. If this labor market is perfectly competitive, the wage rate is

Accepted Answer

A)  $4 per hour. 
B)  $6 per hour. 
C)  $8 per hour. 
D)  $10 per hour. 
A)  $4 per hour. 
B)  $6 per hour. 
C)  $8 per hour. 
D)  $10 per hour.

Question 20

The value of marginal product (VMP) of labor is the extra revenue generated by

Accepted Answer

A)  selling one additional unit of output. 
B)  raising the price of the good by one dollar. 
C)  hiring one additional unit of labor. 
D)  price discrimination. 
A)  selling one additional unit of output. 
B)  raising the price of the good by one dollar. 
C)  hiring one additional unit of labor. 
D)  price discrimination.

If a firm finds that, at its current level of employment, VMP > W, it will

According to the Hotelling Principle, the price of a nonrenewable resource is expected to

Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week. If Lynn charges $100 to clean a house, and she pays her employee $400 a week, should she hire this employee?

As a person's wage rate increases, the substitution effect motivates an increase in work and the income effect motivates a decrease in work.

-In the figure above, the substitution effect outweighs the income effect in all segments EXCEPT

The interest rate is 5 percent. How does $500 to be received a year from today compare in value to $500 right now?

The process of converting a future amount of money into its value today is called

If the wage rate paid in the fast-food outlets in a small town is greater than the reservation wage of all the teenagers in the town and less than the reservation wage of all the adults, then the fast-food outlets will hire ________.

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. The firm's value of marginal product of labor for the third worker is equal to

A labor market monopsony

An increase in the price of a firm's output increases the firm's demand for labor because the

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

The income effect means that at a high enough wage rate labor supply curve has a

Which answer below CORRECTLY describes the relationship between the demand for labor curve and the value of marginal product curve?

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

-If there is a monopsony operating in the labor market illustrated in the figure above, the equilibrium wage and quantity of labor hired is

If a union restricts the supply of labor but cannot change the demand for labor, the union the wage rate and the level of employment.

What is the present value of $1,000 to be received 2 years in the future with an interest rate of 8 percent?

-The figure above shows a labor market. If this labor market is perfectly competitive, the wage rate is

The value of marginal product (VMP) of labor is the extra revenue generated by

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

Public Choices, Public Goods, and Healthcare

Externalities

Economic Inequality

Uncertainty and Information

Filters

Exam 18: Markets for Factors of Production

If a firm finds that, at its current level of employment, VMP > W, it will

According to the Hotelling Principle, the price of a nonrenewable resource is expected to

Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week. If Lynn charges $100 to clean a house, and she pays her employee $400 a week, should she hire this employee?

As a person's wage rate increases, the substitution effect motivates an increase in work and the income effect motivates a decrease in work.

-In the figure above, the substitution effect outweighs the income effect in all segments EXCEPT

The interest rate is 5 percent. How does $500 to be received a year from today compare in value to $500 right now?

The process of converting a future amount of money into its value today is called

If the wage rate paid in the fast-food outlets in a small town is greater than the reservation wage of all the teenagers in the town and less than the reservation wage of all the adults, then the fast-food outlets will hire ________.

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. The firm's value of marginal product of labor for the third worker is equal to

A labor market monopsony

An increase in the price of a firm's output increases the firm's demand for labor because the

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

The income effect means that at a high enough wage rate labor supply curve has a

Which answer below CORRECTLY describes the relationship between the demand for labor curve and the value of marginal product curve?

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

-If there is a monopsony operating in the labor market illustrated in the figure above, the equilibrium wage and quantity of labor hired is

If a union restricts the supply of labor but cannot change the demand for labor, the union ________ the wage rate and ________ the level of employment.

What is the present value of $1,000 to be received 2 years in the future with an interest rate of 8 percent?

-The figure above shows a labor market. If this labor market is perfectly competitive, the wage rate is

The value of marginal product (VMP) of labor is the extra revenue generated by

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

Public Choices, Public Goods, and Healthcare

Externalities

Economic Inequality

Uncertainty and Information

Filters

If a union restricts the supply of labor but cannot change the demand for labor, the union the wage rate and the level of employment.