Question 1

Suppose Jack earns $10 an hour which is subject to a tax of 10 percent.If the government raises the tax rate to 50 percent,he will:

Accepted Answer

A) increase hours of work if the income effect of the change in wage is less than the substitution effect. 
B) increase hours of work if the income effect of the change in wage is greater than the substitution effect. 
C) reduce hours of work if the income effect of the change in wage rate exactly offsets the substitution effect. 
D) reduce hours of work if the income and substitution effects operate in opposite directions. 
A) increase hours of work if the income effect of the change in wage is less than the substitution effect. 
B) increase hours of work if the income effect of the change in wage is greater than the substitution effect. 
C) reduce hours of work if the income effect of the change in wage rate exactly offsets the substitution effect. 
D) reduce hours of work if the income and substitution effects operate in opposite directions.

Question 2

What does the height of the supply curve in a labor market represent?

Accepted Answer

A) The marginal revenue product of a worker 
B) The value of the output produced by a worker 
C) The marginal value product of a worker 
D) The minimum payment required to induce the worker to work 
A) The marginal revenue product of a worker 
B) The value of the output produced by a worker 
C) The marginal value product of a worker 
D) The minimum payment required to induce the worker to work

Question 3

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 OL3 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 4

Which of the following correctly explains why wages are higher in the United States than in less developed countries?

Accepted Answer

A) The number of hours worked per worker in the U.S.is higher than it is in less developed countries. 
B) The aggregate labor supply curve in the U.S.is highly inelastic. 
C) The output produced by each worker is higher in the U.S.than in less developed countries. 
D) The substitution effect of a wage increase is greater for the U.S.residents than it is for residents of less developed countries. 
A) The number of hours worked per worker in the U.S.is higher than it is in less developed countries. 
B) The aggregate labor supply curve in the U.S.is highly inelastic. 
C) The output produced by each worker is higher in the U.S.than in less developed countries. 
D) The substitution effect of a wage increase is greater for the U.S.residents than it is for residents of less developed countries.

Question 5

Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

Accepted Answer

A) the worker will work more if the income effect of the wage increase is greater than the substitution effect. 
B) the worker will work less if the income effect of the wage increase is greater than the substitution effect. 
C) the supply curve of labor will be backward bending if the substitution effect of the wage increase is greater than the income effect. 
D) the supply curve of labor will be upward sloping throughout if the income effect of the wage increase is greater than the substitution effect. 
A) the worker will work more if the income effect of the wage increase is greater than the substitution effect. 
B) the worker will work less if the income effect of the wage increase is greater than the substitution effect. 
C) the supply curve of labor will be backward bending if the substitution effect of the wage increase is greater than the income effect. 
D) the supply curve of labor will be upward sloping throughout if the income effect of the wage increase is greater than the substitution effect.

Question 6

Jane,who works at a publishing firm,chooses to work fewer hours following an increase in her wage.Which of the following is correct?

Accepted Answer

A) Jane has a backward-bending labor supply curve. 
B) Jane considers leisure to be an inferior good. 
C) Jane's has an upward-sloping labor supply curve. 
D) Jane considers work to be a normal good. 
A) Jane has a backward-bending labor supply curve. 
B) Jane considers leisure to be an inferior good. 
C) Jane's has an upward-sloping labor supply curve. 
D) Jane considers work to be a normal good.

Question 7

In some professions,a few people earn enormously high salaries,with the vast majority earning significantly less.This "superstar phenomenon" is often seen in the entertainment industry.For example,the movie star Brad Pitt earns millions of dollars per film and the baseball player Barry Bonds earns millions of dollars per season,while most actors and non-Major League baseball players do not even approach that level.In other words,the difference between the highest paid and least paid actors and baseball players is much greater than the same difference for carpenters or surgeons.Can you explain this phenomenon?

Accepted Answer

First,the workers in any occupation are

Question 8

As a result of the substitution effect of a wage increase,a worker will:

Accepted Answer

A) increase his work effort. 
B) increase his leisure time. 
C) reduce his work effort. 
D) keep leisure time unchanged. 
A) increase his work effort. 
B) increase his leisure time. 
C) reduce his work effort. 
D) keep leisure time unchanged.

Question 9

What is meant by human capital?

Accepted Answer

A) It refers to the quantity of labor input employed in the production process. 
B) It refers to the earning capacity of workers which is enhanced by education and experience. 
C) It refers to the number of workers that will be required to replace one unit of capital. 
D) It refers to the total number of employees working in an organization. 
A) It refers to the quantity of labor input employed in the production process. 
B) It refers to the earning capacity of workers which is enhanced by education and experience. 
C) It refers to the number of workers that will be required to replace one unit of capital. 
D) It refers to the total number of employees working in an organization.

Question 10

What is meant by the gross marginal productivity of an investment?

Accepted Answer

A) It is the total addition to productivity contributed by capital investment. 
B) It is the addition to total revenue from the sale of an extra unit of output. 
C) It is the increase in production by proportionately increasing all inputs. 
D) It is the increase in the average product from an extra unit of capital investment. 
A) It is the total addition to productivity contributed by capital investment. 
B) It is the addition to total revenue from the sale of an extra unit of output. 
C) It is the increase in production by proportionately increasing all inputs. 
D) It is the increase in the average product from an extra unit of capital investment.

Question 11

For an input with a vertical supply curve,an increase in the demand for the input will lead to:

Accepted Answer

A) an increase in economic rent which is less than the payment to the input. 
B) an increase in economic rent equal to the payment to the input. 
C) a decrease in economic rent equal to the payment to an input. 
D) a decrease in economic rent which is higher than the payment to the input. 
A) an increase in economic rent which is less than the payment to the input. 
B) an increase in economic rent equal to the payment to the input. 
C) a decrease in economic rent equal to the payment to an input. 
D) a decrease in economic rent which is higher than the payment to the input.

Question 12

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.If union members cartelize the supply side of the market,the deadweight loss associated with the union is shown by the area _____.

Accepted Answer

A) ABL1L2 
B) BCL2L1 
C) W2AL2O 
D) ABC 
A) ABL1L2 
B) BCL2L1 
C) W2AL2O 
D) ABC

Question 13

Which of the following is true of wage differentials between different occupations in equilibrium?

Accepted Answer

A) Wages cannot differ across occupations if there is free mobility of labor. 
B) Wages can differ across occupations due to differences in training,abilities,and preferences. 
C) Wages can differ across occupations depending on the size of the labor force in the economy. 
D) Wages cannot differ across occupations if there are equal opportunity employment laws. 
A) Wages cannot differ across occupations if there is free mobility of labor. 
B) Wages can differ across occupations due to differences in training,abilities,and preferences. 
C) Wages can differ across occupations depending on the size of the labor force in the economy. 
D) Wages cannot differ across occupations if there are equal opportunity employment laws.

Question 14

The equilibrium wage paid to college professors is generally thrice that of kindergarten teachers.The correct explanation for this difference in wages is:

Accepted Answer

A) the excess demand for kindergarten teachers as compared to college professors. 
B) the higher funds available to universities as compared to schools. 
C) the high investment required to become a college professor. 
D) the lower value placed by society on kindergarten teachers. 
A) the excess demand for kindergarten teachers as compared to college professors. 
B) the higher funds available to universities as compared to schools. 
C) the high investment required to become a college professor. 
D) the lower value placed by society on kindergarten teachers.

Question 15

A study showed that Americans aged 15-64 currently work 50 percent more than working-age Europeans.Which of the following best explains this difference in work hours?

Accepted Answer

A) The European work ethic is relatively laid-back compared to the American work ethic. 
B) Unemployment benefits in European countries are higher than that in the U.S.which reduces the incentive to work in Europe. 
C) The marginal tax rates on labor supply in Europe are higher relative to the United States. 
D) Since the labor market in Europe is tightly regulated,European firms employ fewer workers than American firms. 
A) The European work ethic is relatively laid-back compared to the American work ethic. 
B) Unemployment benefits in European countries are higher than that in the U.S.which reduces the incentive to work in Europe. 
C) The marginal tax rates on labor supply in Europe are higher relative to the United States. 
D) Since the labor market in Europe is tightly regulated,European firms employ fewer workers than American firms.

Question 16

If identical workers are paid an extra $1 per hour to work the night shift,then one can conclude that:

Accepted Answer

A) workers who work the day shift should also be paid an extra $1. 
B) the night shift is intrinsically more attractive to all workers. 
C) the value of working the day shift is at least $1 per hour to some workers. 
D) the marginal product of night shift workers is higher than the day shift workers. 
A) workers who work the day shift should also be paid an extra $1. 
B) the night shift is intrinsically more attractive to all workers. 
C) the value of working the day shift is at least $1 per hour to some workers. 
D) the marginal product of night shift workers is higher than the day shift workers.

Question 17

Payment to an input which is in excess of the minimum amount required to retain the input in its present use is called _____.

Accepted Answer

A) total revenue 
B) factor payment 
C) economic rent 
D) surplus value 
A) total revenue 
B) factor payment 
C) economic rent 
D) surplus value

Question 18

Which of the following does not explain differences in specific interest rates in equilibrium?

Accepted Answer

A) The level of risk 
B) The duration of the loan 
C) The economy's productive capacity 
D) The cost of administering a loan 
A) The level of risk 
B) The duration of the loan 
C) The economy's productive capacity 
D) The cost of administering a loan

Question 19

Which of the following is true of the net marginal productivity of a capital investment?

Accepted Answer

A) The net marginal productivity falls with an increase in the additional output generated. 
B) The net marginal productivity increases when the rate of interest increases. 
C) The net marginal productivity falls with a higher rate of investment. 
D) The net marginal productivity increases if the initial cost of capital increases. 
A) The net marginal productivity falls with an increase in the additional output generated. 
B) The net marginal productivity increases when the rate of interest increases. 
C) The net marginal productivity falls with a higher rate of investment. 
D) The net marginal productivity increases if the initial cost of capital increases.

Question 20

The aggregate investment demand curve slopes downward because:

Accepted Answer

A) the cost of the investment falls at lower interest rates. 
B) of the law of diminishing marginal returns. 
C) the total addition to productivity increases at higher interest rates. 
D) an expansion in investment pushes up interest rates. 
A) the cost of the investment falls at lower interest rates. 
B) of the law of diminishing marginal returns. 
C) the total addition to productivity increases at higher interest rates. 
D) an expansion in investment pushes up interest rates.

Suppose Jack earns $10 an hour which is subject to a tax of 10 percent.If the government raises the tax rate to 50 percent,he will:

What does the height of the supply curve in a labor market represent?

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 OL₃ after a change in the wage rate,it implies that:

Which of the following correctly explains why wages are higher in the United States than in less developed countries?

Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

Jane,who works at a publishing firm,chooses to work fewer hours following an increase in her wage.Which of the following is correct?

As a result of the substitution effect of a wage increase,a worker will:

What is meant by human capital?

What is meant by the gross marginal productivity of an investment?

For an input with a vertical supply curve,an increase in the demand for the input will lead to:

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.If union members cartelize the supply side of the market,the deadweight loss associated with the union is shown by the area _____.

Which of the following is true of wage differentials between different occupations in equilibrium?

The equilibrium wage paid to college professors is generally thrice that of kindergarten teachers.The correct explanation for this difference in wages is:

A study showed that Americans aged 15-64 currently work 50 percent more than working-age Europeans.Which of the following best explains this difference in work hours?

If identical workers are paid an extra $1 per hour to work the night shift,then one can conclude that:

Payment to an input which is in excess of the minimum amount required to retain the input in its present use is called _____.

Which of the following does not explain differences in specific interest rates in equilibrium?

Which of the following is true of the net marginal productivity of a capital investment?

The aggregate investment demand curve slopes downward because:

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

Suppose Jack earns $10 an hour which is subject to a tax of 10 percent.If the government raises the tax rate to 50 percent,he will:

What does the height of the supply curve in a labor market represent?

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 OL3 after a change in the wage rate,it implies that:

Which of the following correctly explains why wages are higher in the United States than in less developed countries?

Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

Jane,who works at a publishing firm,chooses to work fewer hours following an increase in her wage.Which of the following is correct?

As a result of the substitution effect of a wage increase,a worker will:

What is meant by human capital?

What is meant by the gross marginal productivity of an investment?

For an input with a vertical supply curve,an increase in the demand for the input will lead to:

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.If union members cartelize the supply side of the market,the deadweight loss associated with the union is shown by the area _____.

Which of the following is true of wage differentials between different occupations in equilibrium?

The equilibrium wage paid to college professors is generally thrice that of kindergarten teachers.The correct explanation for this difference in wages is:

A study showed that Americans aged 15-64 currently work 50 percent more than working-age Europeans.Which of the following best explains this difference in work hours?

If identical workers are paid an extra $1 per hour to work the night shift,then one can conclude that:

Payment to an input which is in excess of the minimum amount required to retain the input in its present use is called _____.

Which of the following does not explain differences in specific interest rates in equilibrium?

Which of the following is true of the net marginal productivity of a capital investment?

The aggregate investment demand curve slopes downward because:

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 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 OL₃ after a change in the wage rate,it implies that: