Question 1

In equilibrium,labor will be allocated across industries in such a way that the:

Accepted Answer

A) real wage is highest in the most profitable industries. 
B) capital-to-labor ratio is equalized across industries. 
C) wages are equalized across industries. 
D) the economic rents are equalized across industries. 
A) real wage is highest in the most profitable industries. 
B) capital-to-labor ratio is equalized across industries. 
C) wages are equalized across industries. 
D) the economic rents are equalized across industries.

Question 2

The key assumption of the income-leisure model:

Accepted Answer

A) is not applicable to the real world and so negates the usefulness of the model. 
B) is not valid as employers will not cater to workers' income-leisure choices. 
C) holds good in general because workers can vary work hours with overtime,leaves without pay and early retirement. 
D) is only applicable to entrepreneurs and not salaried workers who are associated with less promising financial rewards. 
A) is not applicable to the real world and so negates the usefulness of the model. 
B) is not valid as employers will not cater to workers' income-leisure choices. 
C) holds good in general because workers can vary work hours with overtime,leaves without pay and early retirement. 
D) is only applicable to entrepreneurs and not salaried workers who are associated with less promising financial rewards.

Question 3

Which of the following correctly describes an interest rate?

Accepted Answer

A) It is the portion of the payment to an input supplier in excess of the minimum amount necessary to retain the input in its present use. 
B) It is paid by suppliers of loanable funds. 
C) It equates the value of future and present consumption. 
D) It is the price paid to purchase an asset. 
A) It is the portion of the payment to an input supplier in excess of the minimum amount necessary to retain the input in its present use. 
B) It is paid by suppliers of loanable funds. 
C) It equates the value of future and present consumption. 
D) It is the price paid to purchase an asset.

Question 4

Which of the following is not a source of equilibrium differences in wage rates?

Accepted Answer

A) The level of risk associated with an occupation 
B) The level of skills that workers possess 
C) The economic rent associated with the labor input 
D) The aptitude that workers have for an occupation 
A) The level of risk associated with an occupation 
B) The level of skills that workers possess 
C) The economic rent associated with the labor input 
D) The aptitude that workers have for an occupation

Question 5

Interest rates charged on loans tend to be higher for corporations than for the U.S.government because:

Accepted Answer

A) corporations borrow in illiquid money markets unlike the government. 
B) the cost of administering the loan is greater for the government than for a corporation. 
C) the tax rate on corporate bonds is higher than on government bonds. 
D) loans to the government are always for shorter time periods than loans to corporations. 
A) corporations borrow in illiquid money markets unlike the government. 
B) the cost of administering the loan is greater for the government than for a corporation. 
C) the tax rate on corporate bonds is higher than on government bonds. 
D) loans to the government are always for shorter time periods than loans to corporations.

Question 6

An individual's supply curve of labor is backward bending when:

Accepted Answer

A) the income effect dominates at lower wage rates and the substitution effect dominates at higher wage rates. 
B) the substitution effect dominates at lower wage rates and the income effect dominates at higher wage rates. 
C) the substitution and income effect work in the same direction at lower wage rates but in opposite directions at higher wage rates. 
D) the substitution and income effect offset each other at lower wage rates but work in opposite directions at higher wage rates. 
A) the income effect dominates at lower wage rates and the substitution effect dominates at higher wage rates. 
B) the substitution effect dominates at lower wage rates and the income effect dominates at higher wage rates. 
C) the substitution and income effect work in the same direction at lower wage rates but in opposite directions at higher wage rates. 
D) the substitution and income effect offset each other at lower wage rates but work in opposite directions at higher wage rates.

Question 7

Differences exist in specific interest rates in equilibrium.Which of the following is not a reason for this difference in interest rates?

Accepted Answer

A) The level of risk associated with an investment 
B) The duration of loans 
C) The variations in tax rates 
D) The present value of consumption 
A) The level of risk associated with an investment 
B) The duration of loans 
C) The variations in tax rates 
D) The present value of consumption

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.If union members cartelize the supply side of the market,_____ workers are employed 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

Using a graph,explain the welfare effects of an effectively organized union in the labor market.

Accepted Answer

The graph shows the demand and supply cu

Question 10

A comparison of wages in the U.S.and in less developed countries shows that:

Accepted Answer

A) high-wage U.S.labor cannot compete with low-wage labor in many developing countries. 
B) workers in the U.S.are more productive than workers in less developed countries. 
C) the substitution of labor for capital depresses wages and increases unemployment. 
D) the supply of labor in developed countries had increased faster than demand. 
A) high-wage U.S.labor cannot compete with low-wage labor in many developing countries. 
B) workers in the U.S.are more productive than workers in less developed countries. 
C) the substitution of labor for capital depresses wages and increases unemployment. 
D) the supply of labor in developed countries had increased faster than demand.

Question 11

When might a compensating wage differential go the "wrong way"? Explain with a graph.

Accepted Answer

It is typically assumed that all workers

Question 12

Suppose that a firm has an opportunity to invest $100,000 in a project that over its one year life is likely to yield $115,000 in revenue.To maximize its return on investment the firm should:

Accepted Answer

A) finance the investment through borrowed funds if the interest rate is 25 percent or less. 
B) finance the investment out of retained earnings if the interest rate is less than 15 percent. 
C) borrow funds to finance the investment if the interest rate is 15 percent or less. 
D) borrow funds to finance the investment as the present value of money is higher than the future value. 
A) finance the investment through borrowed funds if the interest rate is 25 percent or less. 
B) finance the investment out of retained earnings if the interest rate is less than 15 percent. 
C) borrow funds to finance the investment if the interest rate is 15 percent or less. 
D) borrow funds to finance the investment as the present value of money is higher than the future value.

In equilibrium,labor will be allocated across industries in such a way that the:

The key assumption of the income-leisure model:

Which of the following correctly describes an interest rate?

Which of the following is not a source of equilibrium differences in wage rates?

Interest rates charged on loans tend to be higher for corporations than for the U.S.government because:

An individual's supply curve of labor is backward bending when:

Differences exist in specific interest rates in equilibrium.Which of the following is not a reason for this difference in interest rates?

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,_____ workers are employed at a wage of .

Using a graph,explain the welfare effects of an effectively organized union in the labor market.

A comparison of wages in the U.S.and in less developed countries shows that:

When might a compensating wage differential go the "wrong way"? Explain with a graph.

Suppose that a firm has an opportunity to invest $100,000 in a project that over its one year life is likely to yield $115,000 in revenue.To maximize its return on investment the firm should:

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

In equilibrium,labor will be allocated across industries in such a way that the:

The key assumption of the income-leisure model:

Which of the following correctly describes an interest rate?

Which of the following is not a source of equilibrium differences in wage rates?

Interest rates charged on loans tend to be higher for corporations than for the U.S.government because:

An individual's supply curve of labor is backward bending when:

Differences exist in specific interest rates in equilibrium.Which of the following is not a reason for this difference in interest rates?

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,_____ workers are employed at a wage of .

Using a graph,explain the welfare effects of an effectively organized union in the labor market.

A comparison of wages in the U.S.and in less developed countries shows that:

When might a compensating wage differential go the "wrong way"? Explain with a graph.

Suppose that a firm has an opportunity to invest $100,000 in a project that over its one year life is likely to yield $115,000 in revenue.To maximize its return on investment the firm should:

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