Question 1

When a firm is a profit maximiser:

Accepted Answer

A)  it is driven to produce as much of its product as possible 
B)  it does not care directly about the number of workers it hires 
C)  it will measure its success by the number of employees it has 
D)  its revenue will always be maximised as well 
A)  it is driven to produce as much of its product as possible 
B)  it does not care directly about the number of workers it hires 
C)  it will measure its success by the number of employees it has 
D)  its revenue will always be maximised as well

Question 2

What happens to the demand for piano tuners and the wage paid to piano tuners when the price of pianos increases?

Accepted Answer

A)  demand for tuners increases, and so does their wage 
B)  demand for tuners increases, and their wages fall 
C)  demand for tuners falls, and so does their wage 
D)  demand for tuners falls while their wage rises 
A)  demand for tuners increases, and so does their wage 
B)  demand for tuners increases, and their wages fall 
C)  demand for tuners falls, and so does their wage 
D)  demand for tuners falls while their wage rises

Question 3

If there is a change in the supply of labour there is no change to the earnings from capital and land.

Accepted Answer

A) True 
 B)False

Question 4

Grahame has a crocodile farm. He collects eggs from the wild which are hatched on the farm. Suppose flooding is very severe this year and eggs become much harder to find. As a result, Grahame should expect to see the marginal productivity of his capital:

Accepted Answer

A)  decrease 
B)  increase 
C)  remain unchanged 
D)  turn negative 
A)  decrease 
B)  increase 
C)  remain unchanged 
D)  turn negative

Question 5

The term 'factor markets' is used to describe markets for:

Accepted Answer

A)  labour only 
B)  all inputs into the production process 
C)  all factors determining supply and demand 
D)  fixed inputs only 
A)  labour only 
B)  all inputs into the production process 
C)  all factors determining supply and demand 
D)  fixed inputs only

Question 6

Profit-maximising competitive firms hire labour until marginal cost rises to equal:

Accepted Answer

A)  average wages 
B)  marginal product 
C)  the minimum wage 
D)  the price 
A)  average wages 
B)  marginal product 
C)  the minimum wage 
D)  the price

Question 7

An important determinant of labour productivity is the:

Accepted Answer

A)  amount of technological knowledge available to workers 
B)  market for the final product produced by labour 
C)  level of minimum wage 
D)  elasticity of labour supply 
A)  amount of technological knowledge available to workers 
B)  market for the final product produced by labour 
C)  level of minimum wage 
D)  elasticity of labour supply

Question 8

The Luddites were originally:

Accepted Answer

A)  descendants of General Ned Ludd 
B)  workers who supported new technology 
C)  Australian convicts 
D)  workers who revolted against new technology 
A)  descendants of General Ned Ludd 
B)  workers who supported new technology 
C)  Australian convicts 
D)  workers who revolted against new technology

Question 9

Which of the following statements is true of factor markets? (i) when the supply of a factor falls, its equilibrium price falls
(ii) when the supply of a factor rises, its equilibrium price falls
(iii) when the supply of a factor falls, its equilibrium price rises

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 10

The change in supply of one factor:

Accepted Answer

A)  will not lower the price of other factors, but may alter their marginal productivity 
B)  alters the earnings of all factors 
C)  will not alter the marginal productivity of other factors, but may lower their price 
D)  will not change the value of marginal product for other factors 
A)  will not lower the price of other factors, but may alter their marginal productivity 
B)  alters the earnings of all factors 
C)  will not alter the marginal productivity of other factors, but may lower their price 
D)  will not change the value of marginal product for other factors

Question 11

Capital income does not include income paid to households for the use of their capital.

Accepted Answer

A) True 
 B)False

Question 12

Table 18-1
  
-Refer to Table 18-1. What is the marginal product of the fourth worker?

Accepted Answer

A)  40 
B)  80 
C)  100 
D)  280 
A)  40 
B)  80 
C)  100 
D)  280

Question 13

Table 18-1
  
-Refer to Table 18-1. It is apparent from this table that increasing marginal product:

Accepted Answer

A)  never occurs 
B)  occurs only after the first worker is hired 
C)  occurs only after the second worker is hired 
D)  occurs only after the third worker is hired 
A)  never occurs 
B)  occurs only after the first worker is hired 
C)  occurs only after the second worker is hired 
D)  occurs only after the third worker is hired

Question 14

Graph 18-1
   This graph represents the value of marginal product for a firm that sells its product in a competitive market. Use the graph to answer the following question(s).
-Refer to Graph 18-1. The value of the marginal product curve shown here is equivalent to which of the following?

Accepted Answer

A)  the demand curve for labour 
B)  the supply curve for labour 
C)  the labour production function 
D)  the total revenue curve 
A)  the demand curve for labour 
B)  the supply curve for labour 
C)  the labour production function 
D)  the total revenue curve

Question 15

A key determinant of labour productivity is:

Accepted Answer

A)  the market for final product demand 
B)  the amount of physical capital available to workers 
C)  the cultural value of work effort 
D)  labour market supply 
A)  the market for final product demand 
B)  the amount of physical capital available to workers 
C)  the cultural value of work effort 
D)  labour market supply

Question 16

If Alpha Star is a competitive firm in the market for labour, it has great influence over the wage it pays its employees.

Accepted Answer

A) True 
 B)False

Question 17

Graph 18-2
  
-Refer to Graph 18-2. If the apple pickers start working fewer hours, the equilibrium wage will change due to changes in which of the following? (i) the marginal product of labour
(ii) the value of the marginal product of labour
(iii) the price of the final good

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 18

If the forestry sector decreases its demand for land, then the equilibrium land rental price will rise but the land made available for forestry will not change.

Accepted Answer

A) True 
 B)False

Question 19

When a profit-maximising firm makes a decision to employ a worker, that decision is based on:

Accepted Answer

A)  the familial relationship between the employer and the employee 
B)  how much output the worker can produce 
C)  the individual contribution that the worker makes to the profit of the firm 
D)  the total output produced by the firm 
A)  the familial relationship between the employer and the employee 
B)  how much output the worker can produce 
C)  the individual contribution that the worker makes to the profit of the firm 
D)  the total output produced by the firm

Question 20

Graph 18-1
   This graph represents the value of marginal product for a firm that sells its product in a competitive market. Use the graph to answer the following question(s).
-Refer to Graph 18-1. The shape of the curve suggests the presence of:

Accepted Answer

A)  increasing returns to scale 
B)  increased productivity with increased labour 
C)  decreased productivity with decreased labour 
D)  diminishing marginal product 
A)  increasing returns to scale 
B)  increased productivity with increased labour 
C)  decreased productivity with decreased labour 
D)  diminishing marginal product

Exam 19: The Markets for the Factors of Production

When a firm is a profit maximiser:

What happens to the demand for piano tuners and the wage paid to piano tuners when the price of pianos increases?

If there is a change in the supply of labour there is no change to the earnings from capital and land.

Grahame has a crocodile farm. He collects eggs from the wild which are hatched on the farm. Suppose flooding is very severe this year and eggs become much harder to find. As a result, Grahame should expect to see the marginal productivity of his capital:

The term 'factor markets' is used to describe markets for:

Profit-maximising competitive firms hire labour until marginal cost rises to equal:

An important determinant of labour productivity is the:

The Luddites were originally:

Which of the following statements is true of factor markets? (i) when the supply of a factor falls, its equilibrium price falls (ii) when the supply of a factor rises, its equilibrium price falls (iii) when the supply of a factor falls, its equilibrium price rises

The change in supply of one factor:

Capital income does not include income paid to households for the use of their capital.

Table 18-1 -Refer to Table 18-1. What is the marginal product of the fourth worker?

Table 18-1 -Refer to Table 18-1. It is apparent from this table that increasing marginal product:

Graph 18-1 This graph represents the value of marginal product for a firm that sells its product in a competitive market. Use the graph to answer the following question(s). -Refer to Graph 18-1. The value of the marginal product curve shown here is equivalent to which of the following?

A key determinant of labour productivity is:

If Alpha Star is a competitive firm in the market for labour, it has great influence over the wage it pays its employees.

Graph 18-2 -Refer to Graph 18-2. If the apple pickers start working fewer hours, the equilibrium wage will change due to changes in which of the following? (i) the marginal product of labour (ii) the value of the marginal product of labour (iii) the price of the final good

If the forestry sector decreases its demand for land, then the equilibrium land rental price will rise but the land made available for forestry will not change.

When a profit-maximising firm makes a decision to employ a worker, that decision is based on:

Graph 18-1 This graph represents the value of marginal product for a firm that sells its product in a competitive market. Use the graph to answer the following question(s). -Refer to Graph 18-1. The shape of the curve suggests the presence of:

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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