Question 1

As a result of the income effect of a higher wage,hours of work will:

Accepted Answer

A) increase due to a lower opportunity cost of leisure time. 
B) fall due to a higher real income enabling greater leisure time. 
C) increase due to a higher real income eliciting greater leisure time. 
D) fall due to a lower opportunity cost of leisure time. 
A) increase due to a lower opportunity cost of leisure time. 
B) fall due to a higher real income enabling greater leisure time. 
C) increase due to a higher real income eliciting greater leisure time. 
D) fall due to a lower opportunity cost of leisure time.

Question 2

Using an indifference curve and budget line,explain the effect of a wage increase on the income and leisure choices of an individual who considers leisure a normal good.

Accepted Answer

The graph shows the weekly income of an

Question 3

Economic rent accrues to:

Accepted Answer

A) owners of monopsony firms. 
B) owners of monopoly firms 
C) consumers in competitive markets. 
D) suppliers in input markets. 
A) owners of monopsony firms. 
B) owners of monopoly firms 
C) consumers in competitive markets. 
D) suppliers in input markets.

Question 4

In equilibrium,interest rates on different assets will differ for all of the following reasons,except for differences in _____.

Accepted Answer

A) the risks associated with the asset 
B) the asset prices 
C) the duration of the loan 
D) the tax treatment of the investment 
A) the risks associated with the asset 
B) the asset prices 
C) the duration of the loan 
D) the tax treatment of the investment

Question 5

Given that g is the rate of return on an investment,C is the initial cost,and R is the addition to output,which of the following equations can be used to calculate g?

Accepted Answer

A) C = R/(1+g) 
B) C = R/g 
C) C= (R+1)/g 
D) C = R + 1/g 
A) C = R/(1+g) 
B) C = R/g 
C) C= (R+1)/g 
D) C = R + 1/g

Question 6

State governments in the U.S.can borrow at lower interest rates than corporations because:

Accepted Answer

A) corporations borrow money by issuing short-term debt securities. 
B) the government's investment need calls for smaller loans. 
C) the cost of administering loans to the government is low. 
D) the interest on bonds issued by the government is not subject to tax. 
A) corporations borrow money by issuing short-term debt securities. 
B) the government's investment need calls for smaller loans. 
C) the cost of administering loans to the government is low. 
D) the interest on bonds issued by the government is not subject to tax.

Question 7

Which of the following correctly explains the reason for the decline in union membership in the U.S.post 1970s?

Accepted Answer

A) The implementation of minimum wage laws that force employers to compensate low-skilled workers more. 
B) The fall in elasticity of demand for the products of certain industries,leading to an increase in the elasticity of the labor input. 
C) The irrelevance of union membership in technology sectors where demand for workers outstrips supply. 
D) The increase in labor supply due to a large number of baby boomers entering the workforce. 
A) The implementation of minimum wage laws that force employers to compensate low-skilled workers more. 
B) The fall in elasticity of demand for the products of certain industries,leading to an increase in the elasticity of the labor input. 
C) The irrelevance of union membership in technology sectors where demand for workers outstrips supply. 
D) The increase in labor supply due to a large number of baby boomers entering the workforce.

Question 8

The following figure shows the demand [D],marginal revenue [MR],and supply [S] curves in the market for labor.
Figure 17-2  
-Refer to Figure 17-2.Under competitive conditions _____ workers are hired at a wage of _____.

Accepted Answer

A) L1 and W1 
B) L1 and W2 
C) L2 and W1 
D) L2 and W2 
A) L1 and W1 
B) L1 and W2 
C) L2 and W1 
D) L2 and W2

Question 9

An increase in investment in the present would mean that _____ in the future.

Accepted Answer

A) both income and consumption will remain unchanged 
B) both income and consumption will increase 
C) consumption will fall but income will increase 
D) income will fall but consumption will increase 
A) both income and consumption will remain unchanged 
B) both income and consumption will increase 
C) consumption will fall but income will increase 
D) income will fall but consumption will increase

Question 10

The value of economic rent _____.

Accepted Answer

A) is directly related to the elasticity of supply of the input 
B) decreases with an increase in the total payment made for the use of the input 
C) increases with an increase in the total payment made for the use of the input 
D) is inversely related to the elasticity of supply of the input 
A) is directly related to the elasticity of supply of the input 
B) decreases with an increase in the total payment made for the use of the input 
C) increases with an increase in the total payment made for the use of the input 
D) is inversely related to the elasticity of supply of the input

Question 11

Which of the following is the best example of economic rent?

Accepted Answer

A) Bob leases a two-bedroom apartment in town for $1,000 that he could have got for $700. 
B) Ann was paid a $20,000 bonus this year for selling $500,000 more than her required sales quota. 
C) Diane received a $20,000 raise to counter a job offer she received from a competing firm. 
D) Carl,a union member,earns $20,000 more than a worker who is not a member of the union. 
A) Bob leases a two-bedroom apartment in town for $1,000 that he could have got for $700. 
B) Ann was paid a $20,000 bonus this year for selling $500,000 more than her required sales quota. 
C) Diane received a $20,000 raise to counter a job offer she received from a competing firm. 
D) Carl,a union member,earns $20,000 more than a worker who is not a member of the union.

Question 12

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line.
Figure 17-1  
-In Figure 17-1,if the reference time period is one week,N equals _____ hours.

Accepted Answer

A) 24 
B) 72 
C) 168 
D) 672 
A) 24 
B) 72 
C) 168 
D) 672

Question 13

Anna and James decide to apply for individual personal loans at a bank.Anna will have to pay a higher interest rate than James if:

Accepted Answer

A) the inflation rate in the economy increases. 
B) the duration of James' loan is longer. 
C) James opts for a loan that is paid in installments. 
D) James has a lower credit score than Anna. 
A) the inflation rate in the economy increases. 
B) the duration of James' loan is longer. 
C) James opts for a loan that is paid in installments. 
D) James has a lower credit score than Anna.

Question 14

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line.
Figure 17-1  
-Refer to Figure 17-1.If the number of leisure hours is OL2 after a change in the wage rate,it implies that:

Accepted Answer

A) the income effect of the wage change is greater than the substitution effect. 
B) the income effect of the wage change is less than the substitution effect. 
C) the income effect of the wage change exactly offsets the substitution effect. 
D) the income and substitution effects of a wage change operate in the same direction. 
A) the income effect of the wage change is greater than the substitution effect. 
B) the income effect of the wage change is less than the substitution effect. 
C) the income effect of the wage change exactly offsets the substitution effect. 
D) the income and substitution effects of a wage change operate in the same direction.

Question 15

In the market for loanable funds,an increase in the interest rate leads to _____ if the income effect dominates the substitution effect.

Accepted Answer

A) a decrease in demand 
B) an increase in supply 
C) an increase in demand 
D) a decrease in supply 
A) a decrease in demand 
B) an increase in supply 
C) an increase in demand 
D) a decrease in supply

Question 16

What are the sources of variation in wages across individuals?

Accepted Answer

Wages differ across individuals in equil

Question 17

Consider an individual whose income increases substantially.This allows him to increase consumption of all normal goods and services.If he increases the consumption of leisure,it implies that:

Accepted Answer

A) the substitution effect of a wage increase is larger than the income effect. 
B) the labor supply curve is upward sloping at all wage rates. 
C) he is on the backward bending portion of the labor supply curve. 
D) the labor supply curve is downward sloping at all wage rates. 
A) the substitution effect of a wage increase is larger than the income effect. 
B) the labor supply curve is upward sloping at all wage rates. 
C) he is on the backward bending portion of the labor supply curve. 
D) the labor supply curve is downward sloping at all wage rates.

Question 18

Which of the following did contributed to the slowdown in the growth of real wages during the 1970s in the U.S.?

Accepted Answer

A) A change in technology 
B) A decrease in the supply of labor 
C) A high rate of inflation due to high oil prices 
D) An increase in the rate of investment 
A) A change in technology 
B) A decrease in the supply of labor 
C) A high rate of inflation due to high oil prices 
D) An increase in the rate of investment

Question 19

A compensating wage differential is the extra wage that is paid _____.

Accepted Answer

A) in occupations where there is excess supply of labor 
B) for working overtime 
C) in intrinsically less attractive jobs 
D) to compensate the worker for the effects of inflation 
A) in occupations where there is excess supply of labor 
B) for working overtime 
C) in intrinsically less attractive jobs 
D) to compensate the worker for the effects of inflation

Question 20

Karen works as an emergency-room nurse at a hospital.Although her regular shifts last 8 hours,she has to work twelve-hour shifts on Saturday and Sunday.For these extra hours that she puts in during the weekends,Karen's hourly wage is doubled.Karen's income during the weekends is an example of:

Accepted Answer

A) a labor-leisure tradeoff. 
B) a compensating wage differential. 
C) increasing marginal revenue product. 
D) the diminishing marginal product of labor. 
A) a labor-leisure tradeoff. 
B) a compensating wage differential. 
C) increasing marginal revenue product. 
D) the diminishing marginal product of labor.

As a result of the income effect of a higher wage,hours of work will:

Using an indifference curve and budget line,explain the effect of a wage increase on the income and leisure choices of an individual who considers leisure a normal good.

Economic rent accrues to:

In equilibrium,interest rates on different assets will differ for all of the following reasons,except for differences in _____.

Given that g is the rate of return on an investment,C is the initial cost,and R is the addition to output,which of the following equations can be used to calculate g?

State governments in the U.S.can borrow at lower interest rates than corporations because:

Which of the following correctly explains the reason for the decline in union membership in the U.S.post 1970s?

The following figure shows the demand [D],marginal revenue [MR],and supply [S] curves in the market for labor. Figure 17-2 -Refer to Figure 17-2.Under competitive conditions _ workers are hired at a wage of _.

An increase in investment in the present would mean that _____ in the future.

The value of economic rent _____.

Which of the following is the best example of economic rent?

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line. Figure 17-1 -In Figure 17-1,if the reference time period is one week,N equals _____ hours.

Anna and James decide to apply for individual personal loans at a bank.Anna will have to pay a higher interest rate than James if:

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line. Figure 17-1 -Refer to Figure 17-1.If the number of leisure hours is OL₂ after a change in the wage rate,it implies that:

In the market for loanable funds,an increase in the interest rate leads to _____ if the income effect dominates the substitution effect.

What are the sources of variation in wages across individuals?

Consider an individual whose income increases substantially.This allows him to increase consumption of all normal goods and services.If he increases the consumption of leisure,it implies that:

Which of the following did contributed to the slowdown in the growth of real wages during the 1970s in the U.S.?

A compensating wage differential is the extra wage that is paid _____.

Karen works as an emergency-room nurse at a hospital.Although her regular shifts last 8 hours,she has to work twelve-hour shifts on Saturday and Sunday.For these extra hours that she puts in during the weekends,Karen's hourly wage is doubled.Karen's income during the weekends is an example of:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 17: Wages, Rent, Interest, and Profit

As a result of the income effect of a higher wage,hours of work will:

Using an indifference curve and budget line,explain the effect of a wage increase on the income and leisure choices of an individual who considers leisure a normal good.

Economic rent accrues to:

In equilibrium,interest rates on different assets will differ for all of the following reasons,except for differences in _____.

Given that g is the rate of return on an investment,C is the initial cost,and R is the addition to output,which of the following equations can be used to calculate g?

State governments in the U.S.can borrow at lower interest rates than corporations because:

Which of the following correctly explains the reason for the decline in union membership in the U.S.post 1970s?

The following figure shows the demand [D],marginal revenue [MR],and supply [S] curves in the market for labor. Figure 17-2 -Refer to Figure 17-2.Under competitive conditions _____ workers are hired at a wage of _____.

An increase in investment in the present would mean that _____ in the future.

The value of economic rent _____.

Which of the following is the best example of economic rent?

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line. Figure 17-1 -In Figure 17-1,if the reference time period is one week,N equals _____ hours.

Anna and James decide to apply for individual personal loans at a bank.Anna will have to pay a higher interest rate than James if:

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line. Figure 17-1 -Refer to Figure 17-1.If the number of leisure hours is OL2 after a change in the wage rate,it implies that:

In the market for loanable funds,an increase in the interest rate leads to _____ if the income effect dominates the substitution effect.

What are the sources of variation in wages across individuals?

Consider an individual whose income increases substantially.This allows him to increase consumption of all normal goods and services.If he increases the consumption of leisure,it implies that:

Which of the following did contributed to the slowdown in the growth of real wages during the 1970s in the U.S.?

A compensating wage differential is the extra wage that is paid _____.

Karen works as an emergency-room nurse at a hospital.Although her regular shifts last 8 hours,she has to work twelve-hour shifts on Saturday and Sunday.For these extra hours that she puts in during the weekends,Karen's hourly wage is doubled.Karen's income during the weekends is an example of:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

The following figure shows the demand [D],marginal revenue [MR],and supply [S] curves in the market for labor. Figure 17-2 -Refer to Figure 17-2.Under competitive conditions _ workers are hired at a wage of _.

The following figure shows the weekly income (in dollars)and leisure (in hours)of a worker using an indifference curve and a budget line. Figure 17-1 -Refer to Figure 17-1.If the number of leisure hours is OL₂ after a change in the wage rate,it implies that: