Question 1

Who receives income from capital in Australia?

Accepted Answer

A)  bank depositors 
B)  bondholders 
C)  households 
D)  all of the above 
A)  bank depositors 
B)  bondholders 
C)  households 
D)  all of the above

Question 2

Which of the following events would cause an increase in the labour supply curve?

Accepted Answer

A)  a lower retirement age 
B)  more married women deciding to work 
C)  fewer married men deciding to work 
D)  tighter restrictions on immigration policy 
A)  a lower retirement age 
B)  more married women deciding to work 
C)  fewer married men deciding to work 
D)  tighter restrictions on immigration policy

Question 3

Suppose that a change to early retirement laws leads to a decrease in labour supply. This means that:

Accepted Answer

A)  the marginal productivity of workers always decreases 
B)  profit-maximising firms increase employment 
C)  wages decrease as long as labour demand is downward-sloping 
D)  wages increase as long as supply is downward-sloping 
A)  the marginal productivity of workers always decreases 
B)  profit-maximising firms increase employment 
C)  wages decrease as long as labour demand is downward-sloping 
D)  wages increase as long as supply is downward-sloping

Question 4

Using the theory of wage determination, explain why wages in developing countries are typically quite low.

Accepted Answer

Wages are determined by the value of wor

Question 5

The decision on whether a firm should hire an additional worker is based on the impact of this on:

Accepted Answer

A)  productivity 
B)  wages 
C)  tax liabilities 
D)  total profit 
A)  productivity 
B)  wages 
C)  tax liabilities 
D)  total profit

Question 6

When workers are in an industry that is experiencing rapid improvements in technology, they can expect to:

Accepted Answer

A)  see their wages decline 
B)  experience wage increases, as their productivity is enhanced 
C)  see a reduction in the need for physical capital 
D)  see a reduction in demand for final products 
A)  see their wages decline 
B)  experience wage increases, as their productivity is enhanced 
C)  see a reduction in the need for physical capital 
D)  see a reduction in demand for final products

Question 7

In a competitive labour market, the wage does which of the following? (i) it adjusts to the balance of supply and demand for labour
(ii) it equals the price of the final good
(iii) it equals the value of the marginal product of labour

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii) 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii)

Question 8

Which of the following events would shift the labour supply curve?

Accepted Answer

A)  changes in tastes 
B)  changes in the number of women willing to work 
C)  changing attitudes towards work 
D)  all of the above 
A)  changes in tastes 
B)  changes in the number of women willing to work 
C)  changing attitudes towards work 
D)  all of the above

Question 9

A key determinant of labour productivity is:

Accepted Answer

A)  family size 
B)  the wage rate 
C)  the amount of human capital workers acquire through education and training 
D)  the demand for the final product produced by labour 
A)  family size 
B)  the wage rate 
C)  the amount of human capital workers acquire through education and training 
D)  the demand for the final product produced by labour

Question 10

What happens to the profit earned by apple producers and the wage earned by apple pickers when the price of apples falls?

Accepted Answer

A)  both profit and wage will rise 
B)  profit will rise and wage will fall 
C)  profit will fall and wage will rise 
D)  both profit and wage will fall 
A)  both profit and wage will rise 
B)  profit will rise and wage will fall 
C)  profit will fall and wage will rise 
D)  both profit and wage will fall

Question 11

When a petrol station sells petrol, which of the following would qualify as capital? (i) the service attendants' time
(ii) the physical space on which the station exists
(iii) the petrol tanks and pumps

Accepted Answer

A)  (i) only 
B)  (iii) only 
C)  (i) and (iii) 
D)  (ii) and (iii) 
A)  (i) only 
B)  (iii) only 
C)  (i) and (iii) 
D)  (ii) and (iii)

Question 12

Suppose that labour is the only input used by a perfectly competitive firm. The firm can hire workers for $100 per day. Each unit sells for $25. The firm's production function is as follows:
Labour Output
0 0
1 7
2 13
3 18
4 22
5 25
6 27
Calculate the value of the marginal product of labour at each input level, then determine how much labour the firm will employ.

Accepted Answer

The value of the marginal prod

Question 13

What is the best example of the diminishing product of labour on an orchard?

Accepted Answer

A)  when only a few workers are hired, they pick from only the best (most productive and accessible) trees in the orchard 
B)  as more workers are hired, the orchard might become crowded with fruit pickers 
C)  as more workers are hired, workers are required to pick from trees that have fewer fruit 
D)  all of the above are good explanations 
A)  when only a few workers are hired, they pick from only the best (most productive and accessible) trees in the orchard 
B)  as more workers are hired, the orchard might become crowded with fruit pickers 
C)  as more workers are hired, workers are required to pick from trees that have fewer fruit 
D)  all of the above are good explanations

Question 14

Amy has two jobs, one for the winter and one for the summer. In the winter, she works as a tour guide at a crocodile zoo and earns $15 an hour. During the summer, Amy works as an English tutor and earns $18 an hour.
-According to the information provided, if Amy takes more hours of leisure in the summer than in the winter we can assume that the:

Accepted Answer

A)  income effect dominates the substitution effect 
B)  substitution effect dominates the income effect 
C)  leisure effect dominates the work effect 
D)  income effect equals the substitution effect 
A)  income effect dominates the substitution effect 
B)  substitution effect dominates the income effect 
C)  leisure effect dominates the work effect 
D)  income effect equals the substitution effect

Question 15

Competitive firms hire an additional worker only if the additional profit created by the newly hired worker exceeds:

Accepted Answer

A)  the revenue collected 
B)  the wage she is paid 
C)  her marginal product 
D)  the value of her marginal product 
A)  the revenue collected 
B)  the wage she is paid 
C)  her marginal product 
D)  the value of her marginal product

Question 16

Amy has two jobs, one for the winter and one for the summer. In the winter, she works as a tour guide at a crocodile zoo and earns $15 an hour. During the summer, Amy works as an English tutor and earns $18 an hour.
-Refer to the information provided. Assume that Amy has an upward-sloping labour supply curve. If the opportunity cost of Amy's leisure time increases, she will respond by:

Accepted Answer

A)  working fewer hours 
B)  working more hours 
C)  working an equal number of hours 
D)  all of the above are possible 
A)  working fewer hours 
B)  working more hours 
C)  working an equal number of hours 
D)  all of the above are possible

Question 17

The hiring decision of a profit-maximising firm is directly linked to the:

Accepted Answer

A)  relationship between labour inputs and output described by the production function 
B)  value of leisure time to a worker 
C)  number of workers available for work 
D)  marginal satisfaction that a worker receives from labour 
A)  relationship between labour inputs and output described by the production function 
B)  value of leisure time to a worker 
C)  number of workers available for work 
D)  marginal satisfaction that a worker receives from labour

Question 18

The value of the marginal product of labour curve is:

Accepted Answer

A)  S-shaped 
B)  upward-sloping 
C)  downward-sloping at the start, then upward-sloping at the middle 
D)  downward-sloping 
A)  S-shaped 
B)  upward-sloping 
C)  downward-sloping at the start, then upward-sloping at the middle 
D)  downward-sloping

Question 19

In general, less productive workers are paid less than more productive workers.

Accepted Answer

A) True 
 B)False

Question 20

The labour supply curve shifts when:

Accepted Answer

A)  employers need to hire more people 
B)  employers develop new technology 
C)  workers become more productive 
D)  workers change the amount they want to work at any given wage 
A)  employers need to hire more people 
B)  employers develop new technology 
C)  workers become more productive 
D)  workers change the amount they want to work at any given wage

Exam 19: The Markets for the Factors of Production

Who receives income from capital in Australia?

Which of the following events would cause an increase in the labour supply curve?

Suppose that a change to early retirement laws leads to a decrease in labour supply. This means that:

Using the theory of wage determination, explain why wages in developing countries are typically quite low.

The decision on whether a firm should hire an additional worker is based on the impact of this on:

When workers are in an industry that is experiencing rapid improvements in technology, they can expect to:

In a competitive labour market, the wage does which of the following? (i) it adjusts to the balance of supply and demand for labour (ii) it equals the price of the final good (iii) it equals the value of the marginal product of labour

Which of the following events would shift the labour supply curve?

A key determinant of labour productivity is:

What happens to the profit earned by apple producers and the wage earned by apple pickers when the price of apples falls?

When a petrol station sells petrol, which of the following would qualify as capital? (i) the service attendants' time (ii) the physical space on which the station exists (iii) the petrol tanks and pumps

What is the best example of the diminishing product of labour on an orchard?

Competitive firms hire an additional worker only if the additional profit created by the newly hired worker exceeds:

The hiring decision of a profit-maximising firm is directly linked to the:

The value of the marginal product of labour curve is:

In general, less productive workers are paid less than more productive workers.

The labour supply curve shifts when:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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