Question 1

Christopher owns and manages a small tea shop. We assume that Christopher

Accepted Answer

A)  (i) and (ii) only 
B)  (i), (ii), and (v) only 
C)  (iii) and (iv) only 
D)  (iii), (iv), and (v) only 
A)  (i) and (ii) only 
B)  (i), (ii), and (v) only 
C)  (iii) and (iv) only 
D)  (iii), (iv), and (v) only

Question 2

The Black Death in fourteenth-century Europe resulted in

Accepted Answer

A)  a lower marginal product of labor of surviving workers. 
B)  a higher marginal product of land. 
C)  economic hardship for surviving peasants. 
D)  economic hardship for surviving landowners. 
A)  a lower marginal product of labor of surviving workers. 
B)  a higher marginal product of land. 
C)  economic hardship for surviving peasants. 
D)  economic hardship for surviving landowners.

Question 3

To say that a firm is competitive in the labor market is to say that the firm can choose

Accepted Answer

A)  both the wage it pays its workers and the number of workers it hires. 
B)  neither the wage it pays its workers nor the number of workers it hires. 
C)  the wage it pays its workers, but it cannot choose how many workers to hire. 
D)  the number of workers it hires, but it cannot choose the wage it pays its workers. 
A)  both the wage it pays its workers and the number of workers it hires. 
B)  neither the wage it pays its workers nor the number of workers it hires. 
C)  the wage it pays its workers, but it cannot choose how many workers to hire. 
D)  the number of workers it hires, but it cannot choose the wage it pays its workers.

Question 4

Suppose that a large rogue wave destroys the (thankfully unoccupied) fleet of swordfish fishing boats docked in the Gloucester, Massachusetts harbor. What happens to the earnings of fishermen and women in Gloucester?

Accepted Answer

A)  The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall. 
B)  The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall. 
C)  The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise. 
D)  The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise. 
A)  The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall. 
B)  The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall. 
C)  The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise. 
D)  The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise.

Question 5

For a competitive, profit-maximizing firm, the labor demand curve is the same as the

Accepted Answer

A)  marginal cost curve. 
B)  value of marginal product curve. 
C)  production function. 
D)  profit function. 
A)  marginal cost curve. 
B)  value of marginal product curve. 
C)  production function. 
D)  profit function.

Question 6

Suppose that due to a severe drought in Texas, 100,000 farmers relocate from Texas to Louisiana. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners in Louisiana?

Accepted Answer

A)  Both wages and rents would increase. 
B)  Both wages and rents would decrease. 
C)  Wages would increase, and rents would decrease. 
D)  Wages would decrease, and rents would increase. 
A)  Both wages and rents would increase. 
B)  Both wages and rents would decrease. 
C)  Wages would increase, and rents would decrease. 
D)  Wages would decrease, and rents would increase.

Question 7

Describe the difference between the purchase price of capital and the rental price of capital. If you know the value of marginal product from the flow of capital services, how would you determine the market price for the capital stock?

Accepted Answer

The purchase price of capital is a refle

Question 8

The current value of the marginal product of land influences the

Accepted Answer

A)  demand for land. 
B)  equilibrium rental price of land. 
C)  equilibrium purchase price of land. 
D)  all of the above. 
A)  demand for land. 
B)  equilibrium rental price of land. 
C)  equilibrium purchase price of land. 
D)  all of the above.

Question 9

Figure 18-4
The graph below illustrates the market for nurses who work in doctors' offices.  
-Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?

Accepted Answer

A)  Demand increases from D1 to D2. 
B)  Demand decreases from D2 to D1. 
C)  Supply increases from S1 to S2. 
D)  Supply decreases from S2 to S1. 
A)  Demand increases from D1 to D2. 
B)  Demand decreases from D2 to D1. 
C)  Supply increases from S1 to S2. 
D)  Supply decreases from S2 to S1.

Question 10

Capital income does not include income paid to households for the use of their capital.

Accepted Answer

A) True 
 B)False

Question 11

Linda's Autoplex performs oil changes on automobiles, light trucks, and sport utility vehicles. She is a profit­ maximizing business owner whose firm operates in a competitive market. The marginal cost of an oil change is $10. The marginal productivity of the last worker that Linda hired was 1.5 oil changes per hour. What is the maximum hourly wage that Linda was willing to pay the last worker hired?

Accepted Answer

A)  $10 
B)  $15 
C)  $20 
D)  $30 
A)  $10 
B)  $15 
C)  $20 
D)  $30

Question 12

Which of the following accurately describes how earnings from capital eventually get paid to households?

Accepted Answer

A)  Households can own a stock of capital and rent it to firms. 
B)  Households lend money to firms, who then pay interest to the households. 
C)  Households that own stock in firms receive dividends. 
D)  All of the above are correct. 
A)  Households can own a stock of capital and rent it to firms. 
B)  Households lend money to firms, who then pay interest to the households. 
C)  Households that own stock in firms receive dividends. 
D)  All of the above are correct.

Question 13

The accumulation of machinery and buildings used in the production of new goods and services is referred to as

Accepted Answer

A)  production factors. 
B)  output factors. 
C)  capital. 
D)  equity. 
A)  production factors. 
B)  output factors. 
C)  capital. 
D)  equity.

Question 14

Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output per week.  
-Refer to Figure 18-1. The shape of the curve suggests the presence of

Accepted Answer

A)  an inverted production function. 
B)  diminishing total product. 
C)  increasing marginal product. 
D)  diminishing marginal product. 
A)  an inverted production function. 
B)  diminishing total product. 
C)  increasing marginal product. 
D)  diminishing marginal product.

Question 15

Suppose that the labor market for life guards is initially in equilibrium. Whistles are an important safety tool that life guards use as a part of their jobs. A fire destroys the largest factory that produces whistles. In the market for life guards the equilibrium wage

Accepted Answer

A)  increases because the marginal productivity of life guards increases. 
B)  decreases because the marginal productivity of life guards decreases. 
C)  increases because the supply of life guards increases. 
D)  decreases because the supply of life guards decreases. 
A)  increases because the marginal productivity of life guards increases. 
B)  decreases because the marginal productivity of life guards decreases. 
C)  increases because the supply of life guards increases. 
D)  decreases because the supply of life guards decreases.

Question 16

When a firm decides to retain its earnings instead of paying dividends, the stockholders necessarily suffer.

Accepted Answer

A) True 
 B)False

Question 17

"The firm hires the factor up to the point where the value of the factor's marginal product is equal to the factor's price." This statement applies to which factor of production?

Accepted Answer

A)  labor only 
B)  land only 
C)  capital only 
D)  land, labor, and capital 
A)  labor only 
B)  land only 
C)  capital only 
D)  land, labor, and capital

Question 18

Christine works for a firm that makes tires for cars. How is Christine's wage affected if the demand for cars increases?

Accepted Answer

The increase in the demand for

Question 19

Scenario 18-8
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to graduate school in economics to become a university economics professor.
Event 2: A decreasing number of students in U.S. primary and secondary schools decreases the number of students entering college, decreasing the output price of university economics professors' services.
-Refer to Scenario 18-8. As a result of these two events, holding all else constant, the equilibrium quantity of university economics professors will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is not possible to determine what will happen to the equilibrium quantity. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is not possible to determine what will happen to the equilibrium quantity.

Question 20

Which of the following events can cause the labor-supply curve to shift?

Accepted Answer

A)  an increase in the wage rate 
B)  an increase in the price of output 
C)  an increase in the rate of immigration 
D)  a technological advance 
A)  an increase in the wage rate 
B)  an increase in the price of output 
C)  an increase in the rate of immigration 
D)  a technological advance

Exam 18: The Markets for the Factors of Production

Christopher owns and manages a small tea shop. We assume that Christopher

The Black Death in fourteenth-century Europe resulted in

To say that a firm is competitive in the labor market is to say that the firm can choose

Suppose that a large rogue wave destroys the (thankfully unoccupied) fleet of swordfish fishing boats docked in the Gloucester, Massachusetts harbor. What happens to the earnings of fishermen and women in Gloucester?

For a competitive, profit-maximizing firm, the labor demand curve is the same as the

Suppose that due to a severe drought in Texas, 100,000 farmers relocate from Texas to Louisiana. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners in Louisiana?

Describe the difference between the purchase price of capital and the rental price of capital. If you know the value of marginal product from the flow of capital services, how would you determine the market price for the capital stock?

The current value of the marginal product of land influences the

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?

Capital income does not include income paid to households for the use of their capital.

Which of the following accurately describes how earnings from capital eventually get paid to households?

The accumulation of machinery and buildings used in the production of new goods and services is referred to as

Figure 18-1 On the graph, L represents the quantity of labor and Q represents the quantity of output per week. -Refer to Figure 18-1. The shape of the curve suggests the presence of

Suppose that the labor market for life guards is initially in equilibrium. Whistles are an important safety tool that life guards use as a part of their jobs. A fire destroys the largest factory that produces whistles. In the market for life guards the equilibrium wage

When a firm decides to retain its earnings instead of paying dividends, the stockholders necessarily suffer.

"The firm hires the factor up to the point where the value of the factor's marginal product is equal to the factor's price." This statement applies to which factor of production?

Christine works for a firm that makes tires for cars. How is Christine's wage affected if the demand for cars increases?

Which of the following events can cause the labor-supply curve to shift?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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