Question 1

Figure 10-4  
-Refer to Figure 10-4.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 2

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

Accepted Answer

A) True 
 B)False

Question 3

What is the difference between a firm's marginal revenue and its marginal revenue product?

Accepted Answer

A)  Marginal revenue is the change in sales revenue from selling one more unit of output, while marginal revenue product is the profit earned from hiring one more worker. 
B)  Marginal revenue is the change in sales revenue from selling one more unit of output, while marginal revenue product is the change in total revenue from hiring one more worker. 
C)  Marginal revenue is the increase in revenue when a firm raises its output price, while marginal revenue product is the increase in marginal product when a firm hires an additional worker. 
D)  There is no difference between the two terms. 
A)  Marginal revenue is the change in sales revenue from selling one more unit of output, while marginal revenue product is the profit earned from hiring one more worker. 
B)  Marginal revenue is the change in sales revenue from selling one more unit of output, while marginal revenue product is the change in total revenue from hiring one more worker. 
C)  Marginal revenue is the increase in revenue when a firm raises its output price, while marginal revenue product is the increase in marginal product when a firm hires an additional worker. 
D)  There is no difference between the two terms.

Question 4

Which of the following statements regarding equilibrium in the markets for capital and for a natural resource used in producing a good is true?

Accepted Answer

A)  The marginal revenue product of capital will equal the marginal revenue product of the natural resource. 
B)  The rental price of capital will equal the price of the natural resource. 
C)  The marginal product of capital will equal the rental price of capital and the marginal product of the natural resource will equal the price of the natural resource. 
D)  The marginal revenue product of capital will equal the rental price of capital and the marginal revenue product of the natural resource will equal the price of the natural resource. 
A)  The marginal revenue product of capital will equal the marginal revenue product of the natural resource. 
B)  The rental price of capital will equal the price of the natural resource. 
C)  The marginal product of capital will equal the rental price of capital and the marginal product of the natural resource will equal the price of the natural resource. 
D)  The marginal revenue product of capital will equal the rental price of capital and the marginal revenue product of the natural resource will equal the price of the natural resource.

Question 5

Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:
Prize 1: $150 000 to be received right away,with three additional payments of $150 000 to be received each year for the next three years.
Prize 2: $500 000 to be received right away.
If the interest rate is 5 per cent,what is the present value of each prize?

Accepted Answer

Prize 1: Present value = $150

Question 6

Table 10-3
   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 10-3 shows the relationship between the quantity of labour it hires and the quantity of microwave ovens it produces.
-Refer to Table 10-3.What is the amount of profit added as a result of hiring the 4th worker?

Accepted Answer

A)  $7200 
B)  $1200 
C)  $800 
D)  $400 
A)  $7200 
B)  $1200 
C)  $800 
D)  $400

Question 7

An increase in the supply of capital,which is a substitute to labour,will lead to a decrease in the demand for labour.

Accepted Answer

A) True 
 B)False

Question 8

Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system,many companies continue to pay their workers' salaries.Which of the following is one reason why firms choose a salary system?

Accepted Answer

A)  Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system. 
B)  Firms often use salary systems to overcome their principal-agent problems. 
C)  Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs. 
D)  Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission. 
A)  Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system. 
B)  Firms often use salary systems to overcome their principal-agent problems. 
C)  Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs. 
D)  Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission.

Question 9

If you own a $1000 face value bond with one year remaining to maturity and a 5 per cent coupon rate,and new bonds are paying 12 per cent,what is the most you can get for your old bond?

Accepted Answer

A)  $1120 
B)  $1000 
C)  $937.50 
D)  Impossible to determine without additional information 
A)  $1120 
B)  $1000 
C)  $937.50 
D)  Impossible to determine without additional information

Question 10

Personnel economics is

Accepted Answer

A)  the study of the factors that determine wage rates. 
B)  the study of how workers are affected by tax law changes. 
C)  the application of economic analysis to human resource issues. 
D)  the application of economic analysis to the hiring decision. 
A)  the study of the factors that determine wage rates. 
B)  the study of how workers are affected by tax law changes. 
C)  the application of economic analysis to human resource issues. 
D)  the application of economic analysis to the hiring decision.

Question 11

In general,the labour supply curve

Accepted Answer

A)  slopes downward because firms will hire fewer workers at higher wages. 
B)  slopes upward because as the wage rises, the opportunity cost of leisure increases. 
C)  is vertical at the equilibrium wage rate. 
D)  is perfectly elastic at the equilibrium wage rate. 
A)  slopes downward because firms will hire fewer workers at higher wages. 
B)  slopes upward because as the wage rises, the opportunity cost of leisure increases. 
C)  is vertical at the equilibrium wage rate. 
D)  is perfectly elastic at the equilibrium wage rate.

Question 12

Figure 10-2   Figure 10-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets.
-Refer to Figure 10-2.Suppose the market price of bracelets falls to $2.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 left. 
D)  We cannot answer the question without knowing if Becca 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 left. 
D)  We cannot answer the question without knowing if Becca would want to hire more workers.

Question 13

The labour market is considered to be one of the more important markets in an economy because

Accepted Answer

A)  most people typically earn the bulk of their income from wages and salaries. 
B)  most people are concerned that wages determined in the labour market are unfair. 
C)  the usual market forces do not hold in the labour market. 
D)  the labour market does not reach an equilibrium. 
A)  most people typically earn the bulk of their income from wages and salaries. 
B)  most people are concerned that wages determined in the labour market are unfair. 
C)  the usual market forces do not hold in the labour market. 
D)  the labour market does not reach an equilibrium.

Question 14

Table 10-5
  
-Refer to Table 10-5.Dante owns a pencil factory and faces the situation shown in the table,and the cost of renting a machine is $240 per week.
a.Fill in the blanks in the table and determine the profit-maximising number of machines for Dante to rent.Explain why renting this number of machines is profit maximising.
b.Draw Dante's demand curve for capital.

Accepted Answer

@#IMG-DLM& a.Dante should rent 4 machine

Question 15

A number of economists have estimated the impact of unionisation on workers' wages.Which of the following is one conclusion reached by these studies?

Accepted Answer

A)  Union workers earn less than they would if they were not unionised. This is because of the impact of workers' strikes, during which union members do not receive wages. 
B)  Holding constant the impact of other factors that affect wages, being in a union has no impact on a worker's wages. 
C)  Being in a union increases a worker's wages by about 10 per cent, holding constant other factors that influence wages. 
D)  The share of national income received by workers has increased significantly over time; unions have been responsible for about one-half of the increase in workers' share of national income from the end of World War II to 2000. 
A)  Union workers earn less than they would if they were not unionised. This is because of the impact of workers' strikes, during which union members do not receive wages. 
B)  Holding constant the impact of other factors that affect wages, being in a union has no impact on a worker's wages. 
C)  Being in a union increases a worker's wages by about 10 per cent, holding constant other factors that influence wages. 
D)  The share of national income received by workers has increased significantly over time; unions have been responsible for about one-half of the increase in workers' share of national income from the end of World War II to 2000.

Question 16

If you want to know the present value of a future payment received in one year,what formula can you use?

Accepted Answer

A)  Present value equals future payment times the current market rate of interest. 
B)  Present value equals future payment divided by one plus the rate of interest. 
C)  Present value equals one plus the rate of interest in decimals divided by future payment. 
D)  Present value equals future payments times one plus the rate of interest. 
A)  Present value equals future payment times the current market rate of interest. 
B)  Present value equals future payment divided by one plus the rate of interest. 
C)  Present value equals one plus the rate of interest in decimals divided by future payment. 
D)  Present value equals future payments times one plus the rate of interest.

Question 17

Because leisure is a normal good,an increase in the wage rate will result in

Accepted Answer

A)  an increase in the quantity of labour supplied because of both the substitution effect and the income effect. 
B)  a decrease in the quantity of labour supplied because of the substitution effect and an increase in the quantity of labour supplied because of the income effect. 
C)  an increase in the quantity of labour supplied because of the substitution effect and a decrease in the quantity of labour supplied because of the income effect. 
D)  an increase in the quantity of labour supplied because of the substitution effect. At low wages the income effect causes an increase in the quantity of labour supplied, but at high wages the income effect causes a decrease in the quantity of labour supplied as the wage rises. 
A)  an increase in the quantity of labour supplied because of both the substitution effect and the income effect. 
B)  a decrease in the quantity of labour supplied because of the substitution effect and an increase in the quantity of labour supplied because of the income effect. 
C)  an increase in the quantity of labour supplied because of the substitution effect and a decrease in the quantity of labour supplied because of the income effect. 
D)  an increase in the quantity of labour supplied because of the substitution effect. At low wages the income effect causes an increase in the quantity of labour supplied, but at high wages the income effect causes a decrease in the quantity of labour supplied as the wage rises.

Question 18

All else being equal,a decrease in the supply of labour will shift the labour supply curve to the left and decrease the equilibrium wage.

Accepted Answer

A) True 
 B)False

Question 19

In the legal sector in America,some practice areas have declined in recent years.For example,personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits,out-of-state plaintiffs and payouts on damages,and securities class-action litigation has declined in part because of a buoyant stock market.How does this affect the market for lawyers?

Accepted Answer

A)  The demand for lawyers shifts to the left. 
B)  The supply of lawyers shifts to the left. 
C)  The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. 
D)  Both the demand and supply curves decrease. 
A)  The demand for lawyers shifts to the left. 
B)  The supply of lawyers shifts to the left. 
C)  The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. 
D)  Both the demand and supply curves decrease.

Question 20

The most important factor contributing to wage differences in the labour market is differences in the level of education and training among workers.

Accepted Answer

A) True 
 B)False

Figure 10-4 -Refer to Figure 10-4.Which of the following is true if the wage rate increases from W₀ to W₁?

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

What is the difference between a firm's marginal revenue and its marginal revenue product?

Which of the following statements regarding equilibrium in the markets for capital and for a natural resource used in producing a good is true?

An increase in the supply of capital,which is a substitute to labour,will lead to a decrease in the demand for labour.

Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system,many companies continue to pay their workers' salaries.Which of the following is one reason why firms choose a salary system?

If you own a $1000 face value bond with one year remaining to maturity and a 5 per cent coupon rate,and new bonds are paying 12 per cent,what is the most you can get for your old bond?

Personnel economics is

In general,the labour supply curve

Figure 10-2 Figure 10-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. -Refer to Figure 10-2.Suppose the market price of bracelets falls to $2.What happens to the curve given in the diagram?

The labour market is considered to be one of the more important markets in an economy because

A number of economists have estimated the impact of unionisation on workers' wages.Which of the following is one conclusion reached by these studies?

If you want to know the present value of a future payment received in one year,what formula can you use?

Because leisure is a normal good,an increase in the wage rate will result in

All else being equal,a decrease in the supply of labour will shift the labour supply curve to the left and decrease the equilibrium wage.

The most important factor contributing to wage differences in the labour market is differences in the level of education and training among workers.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 10: Monopoly and Antitrust

Figure 10-4 -Refer to Figure 10-4.Which of the following is true if the wage rate increases from W0 to W1?

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

What is the difference between a firm's marginal revenue and its marginal revenue product?

Which of the following statements regarding equilibrium in the markets for capital and for a natural resource used in producing a good is true?

An increase in the supply of capital,which is a substitute to labour,will lead to a decrease in the demand for labour.

Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system,many companies continue to pay their workers' salaries.Which of the following is one reason why firms choose a salary system?

If you own a $1000 face value bond with one year remaining to maturity and a 5 per cent coupon rate,and new bonds are paying 12 per cent,what is the most you can get for your old bond?

Personnel economics is

In general,the labour supply curve

Figure 10-2 Figure 10-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. -Refer to Figure 10-2.Suppose the market price of bracelets falls to $2.What happens to the curve given in the diagram?

The labour market is considered to be one of the more important markets in an economy because

A number of economists have estimated the impact of unionisation on workers' wages.Which of the following is one conclusion reached by these studies?

If you want to know the present value of a future payment received in one year,what formula can you use?

Because leisure is a normal good,an increase in the wage rate will result in

All else being equal,a decrease in the supply of labour will shift the labour supply curve to the left and decrease the equilibrium wage.

The most important factor contributing to wage differences in the labour market is differences in the level of education and training among workers.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Figure 10-4 -Refer to Figure 10-4.Which of the following is true if the wage rate increases from W₀ to W₁?