Question 1

Figure 12.4  
-Refer to Figure 12.4.Which of the following is true if the wage rate increases from W1 to W2?

Accepted Answer

A) The income effect is larger than the substitution effect. 
B) The substitution effect is larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is unit-elastic. 
A) The income effect is larger than the substitution effect. 
B) The substitution effect is larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is unit-elastic. A

Question 2

Figure 12.1   Figure 12.1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies.
-Refer to Figure 12.1.Suppose the market price of doilies rises to $3.What happens to the curve given in the diagram?

Accepted Answer

A) Nothing, because labour's productivity has not changed. 
B) There will be a movement along the curve. 
C) The curve shifts to the right. 
D) We cannot answer the question without knowing if Dale would want to hire more workers. 
A) Nothing, because labour's productivity has not changed. 
B) There will be a movement along the curve. 
C) The curve shifts to the right. 
D) We cannot answer the question without knowing if Dale would want to hire more workers. C

Question 3

Holding the price of a firm's output constant, if the marginal product of labour increases

Accepted Answer

A) the marginal revenue product of labour decreases. 
B) the marginal revenue product of labour also increases. 
C) the marginal products of other inputs also increase. 
D) the marginal revenue product of labour may increase or decrease. 
A) the marginal revenue product of labour decreases. 
B) the marginal revenue product of labour also increases. 
C) the marginal products of other inputs also increase. 
D) the marginal revenue product of labour may increase or decrease. B

Question 4

As non-union construction workers replace a unionised work force, the average wage in the construction sector is likely to rise.

Accepted Answer

A) True 
 B)False

Question 5

Table 12.3   Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets.The firm hires labour at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80.Table 12.3 shows the relationship between the quantity of labour it hires and the quantity of microwave ovens it produces.
-Refer to Table 12.3.The amount of revenue added as a result of hiring a fourth worker is

Accepted Answer

A) $1200 
B) $7200 
C) 15 microwaves 
D) 90 microwaves 
A) $1200 
B) $7200 
C) 15 microwaves 
D) 90 microwaves

Question 6

Table 12.1  
-Refer to Table 12.1.Suppose the output price is $3.If the wage rate is $90, the profit-maximising quantity of labour that the firm should hire is

Accepted Answer

A) 7 units 
B) 5 units 
C) 4 units 
D) 3 units 
A) 7 units 
B) 5 units 
C) 4 units 
D) 3 units

Question 7

Along an upward sloping labour supply curve, as the wage rate increases, the opportunity cost of leisure ________, causing individuals to supply a ________ quantity of labour.

Accepted Answer

A) increases; greater 
B) increases; lower 
C) decreases; greater 
D) remains constant, constant 
A) increases; greater 
B) increases; lower 
C) decreases; greater 
D) remains constant, constant

Question 8

One implication of compensating differentials is that laws passed to protect the health and safety of workers may not make workers better off than they were prior to the passages of the laws.Why is this so?

Accepted Answer

A) Workers may suffer from cognitive dissonance, which means that the perception workers have that their jobs are hazardous is not true. 
B) If the laws make the work environment safer, there is no reason to pay workers a compensating differential for the risk associated with their jobs. 
C) The principal-agent problem that exists in the workplace may cause workers to shirk more after the work environment becomes safer. 
D) In non-competitive markets, workers are unlikely to receive a compensating differential to compensate for jobs with extra risk.As a result, after the laws are passed, their wages will not change. 
A) Workers may suffer from cognitive dissonance, which means that the perception workers have that their jobs are hazardous is not true. 
B) If the laws make the work environment safer, there is no reason to pay workers a compensating differential for the risk associated with their jobs. 
C) The principal-agent problem that exists in the workplace may cause workers to shirk more after the work environment becomes safer. 
D) In non-competitive markets, workers are unlikely to receive a compensating differential to compensate for jobs with extra risk.As a result, after the laws are passed, their wages will not change.

Question 9

What is a firm's primary interest when it hires an additional worker?

Accepted Answer

A) The cost of hiring the additional worker. 
B) How the average output of the firm will be affected by this new worker. 
C) The extra revenue the firm realises from hiring that worker. 
D) Whether or not the new worker gets along with the firm's existing workers. 
A) The cost of hiring the additional worker. 
B) How the average output of the firm will be affected by this new worker. 
C) The extra revenue the firm realises from hiring that worker. 
D) Whether or not the new worker gets along with the firm's existing workers.

Question 10

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Accepted Answer

A) 300/(1.5)5 
B) 300/(1.05)5 
C) 300 × 1.5 × 5 
D) 5)05/300 
A) 300/(1.5)5 
B) 300/(1.05)5 
C) 300 × 1.5 × 5 
D) 5)05/300

Question 11

Consider the market for pilots.What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?

Accepted Answer

A) The equilibrium wage and the equilibrium quantity of pilots rise. 
B) The equilibrium wage and the equilibrium quantity of pilots fall. 
C) The equilibrium wage falls and the equilibrium quantity of pilots rises. 
D) The equilibrium wage rises and the equilibrium quantity of pilots falls. 
A) The equilibrium wage and the equilibrium quantity of pilots rise. 
B) The equilibrium wage and the equilibrium quantity of pilots fall. 
C) The equilibrium wage falls and the equilibrium quantity of pilots rises. 
D) The equilibrium wage rises and the equilibrium quantity of pilots falls.

Question 12

Compensating differentials are associated most closely with which of the following?

Accepted Answer

A) Hazardous jobs 
B) Comparable worth 
C) Economic discrimination 
D) Differences in education 
A) Hazardous jobs 
B) Comparable worth 
C) Economic discrimination 
D) Differences in education

Question 13

As more output is produced, the marginal product of labour declines

Accepted Answer

A) because of the law of diminishing returns. 
B) if firms reduce the wage paid to labour. 
C) if the firm's output supply curve is inelastic. 
D) because the firm's marginal revenue declines. 
A) because of the law of diminishing returns. 
B) if firms reduce the wage paid to labour. 
C) if the firm's output supply curve is inelastic. 
D) because the firm's marginal revenue declines.

Question 14

The labour supply curve

Accepted Answer

A) shows the relationship between the wage rate and the quantity of labour supplied. 
B) shows the quantity of jobs supplied at various wage rates. 
C) is unit-elastic. 
D) is U-shaped. 
A) shows the relationship between the wage rate and the quantity of labour supplied. 
B) shows the quantity of jobs supplied at various wage rates. 
C) is unit-elastic. 
D) is U-shaped.

Question 15

Figure 12.4  
-Refer to Figure 12.4.Which of the following is true if the wage rate increases from W0 to W1?

Accepted Answer

A) The income effect is larger than the substitution effect. 
B) The substitution effect is larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is unit-elastic. 
A) The income effect is larger than the substitution effect. 
B) The substitution effect is larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is unit-elastic.

Question 16

An increase in the equilibrium wage would be caused by

Accepted Answer

A) the supply of labour increases more than the demand for labour. 
B) the supply of jobs increases more than the demand for jobs. 
C) the demand for labour increases faster than the supply of labour. 
D) the supply of labour increases and the demand for labour decreases. 
A) the supply of labour increases more than the demand for labour. 
B) the supply of jobs increases more than the demand for jobs. 
C) the demand for labour increases faster than the supply of labour. 
D) the supply of labour increases and the demand for labour decreases.

Question 17

The marginal product of labour curve is the demand curve for labour.

Accepted Answer

A) True 
 B)False

Question 18

To what does an increase in the demand for orthodontic services lead?

Accepted Answer

A) An increase in the supply of orthodontists. 
B) Lower prices for orthodontic care. 
C) An increase in the demand for orthodontists. 
D) A rise in the rates of dental insurance. 
A) An increase in the supply of orthodontists. 
B) Lower prices for orthodontic care. 
C) An increase in the demand for orthodontists. 
D) A rise in the rates of dental insurance.

Question 19

If a stock's dividend is expected to grow at a constant rate of eight per cent in the future and it has just paid a dividend of $1.25 a share, and you have an alternative investment of equal risk that will earn a 12 per cent rate of return, what would you be willing to pay per share for this stock?

Accepted Answer

A) $31.25 
B) $1.40 
C) $1.25 
D) $1.12 
A) $31.25 
B) $1.40 
C) $1.25 
D) $1.12

Question 20

How much is a bond that pays $20 in interest payments for 4 years and $1000 at the end of the fourth year worth if the interest rate is 5%?

Accepted Answer

A) $822.70 
B) $893.62 
C) $1070.92 
D) $1080 
A) $822.70 
B) $893.62 
C) $1070.92 
D) $1080

Figure 12.4 -Refer to Figure 12.4.Which of the following is true if the wage rate increases from W₁ to W₂?

Figure 12.1 Figure 12.1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 12.1.Suppose the market price of doilies rises to $3.What happens to the curve given in the diagram?

Holding the price of a firm's output constant, if the marginal product of labour increases

As non-union construction workers replace a unionised work force, the average wage in the construction sector is likely to rise.

Table 12.1 -Refer to Table 12.1.Suppose the output price is $3.If the wage rate is $90, the profit-maximising quantity of labour that the firm should hire is

Along an upward sloping labour supply curve, as the wage rate increases, the opportunity cost of leisure , causing individuals to supply a quantity of labour.

One implication of compensating differentials is that laws passed to protect the health and safety of workers may not make workers better off than they were prior to the passages of the laws.Why is this so?

What is a firm's primary interest when it hires an additional worker?

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Consider the market for pilots.What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?

Compensating differentials are associated most closely with which of the following?

As more output is produced, the marginal product of labour declines

The labour supply curve

Figure 12.4 -Refer to Figure 12.4.Which of the following is true if the wage rate increases from W₀ to W₁?

An increase in the equilibrium wage would be caused by

The marginal product of labour curve is the demand curve for labour.

To what does an increase in the demand for orthodontic services lead?

If a stock's dividend is expected to grow at a constant rate of eight per cent in the future and it has just paid a dividend of $1.25 a share, and you have an alternative investment of equal risk that will earn a 12 per cent rate of return, what would you be willing to pay per share for this stock?

How much is a bond that pays $20 in interest payments for 4 years and $1000 at the end of the fourth year worth if the interest rate is 5%?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 12: The Markets for Labour and Other Factors of Production

Figure 12.4 -Refer to Figure 12.4.Which of the following is true if the wage rate increases from W1 to W2?

Figure 12.1 Figure 12.1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 12.1.Suppose the market price of doilies rises to $3.What happens to the curve given in the diagram?

Holding the price of a firm's output constant, if the marginal product of labour increases

As non-union construction workers replace a unionised work force, the average wage in the construction sector is likely to rise.

Table 12.1 -Refer to Table 12.1.Suppose the output price is $3.If the wage rate is $90, the profit-maximising quantity of labour that the firm should hire is

Along an upward sloping labour supply curve, as the wage rate increases, the opportunity cost of leisure ________, causing individuals to supply a ________ quantity of labour.

One implication of compensating differentials is that laws passed to protect the health and safety of workers may not make workers better off than they were prior to the passages of the laws.Why is this so?

What is a firm's primary interest when it hires an additional worker?

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Consider the market for pilots.What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?

Compensating differentials are associated most closely with which of the following?

As more output is produced, the marginal product of labour declines

The labour supply curve

Figure 12.4 -Refer to Figure 12.4.Which of the following is true if the wage rate increases from W0 to W1?

An increase in the equilibrium wage would be caused by

The marginal product of labour curve is the demand curve for labour.

To what does an increase in the demand for orthodontic services lead?

If a stock's dividend is expected to grow at a constant rate of eight per cent in the future and it has just paid a dividend of $1.25 a share, and you have an alternative investment of equal risk that will earn a 12 per cent rate of return, what would you be willing to pay per share for this stock?

How much is a bond that pays $20 in interest payments for 4 years and $1000 at the end of the fourth year worth if the interest rate is 5%?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Figure 12.4 -Refer to Figure 12.4.Which of the following is true if the wage rate increases from W₁ to W₂?

Along an upward sloping labour supply curve, as the wage rate increases, the opportunity cost of leisure , causing individuals to supply a quantity of labour.

Figure 12.4 -Refer to Figure 12.4.Which of the following is true if the wage rate increases from W₀ to W₁?