Question 1

The marginal revenue product of capital is

Accepted Answer

A) the cost to the firm of renting an additional unit of capital. 
B) the change in the firm's revenue as a result of employing one more unit of capital, such as a machine. 
C) the economic rent received by hiring an additional unit of capital. 
D) the revenue generated by substituting capital for labor in the production process.

Question 2

Painters who paint water towers earn higher wages relative to painters who paint houses because

Accepted Answer

A) the demand for tower painters is greater than the demand for residential painters. 
B) painting water towers is more risky than painting houses. 
C) the tower painters' union is probably more powerful than the house painters' union. 
D) the supply of water tower painters exceeds the supply of house painters.

Question 3

Labor demand is considered a derived demand because producers do not demand labor for itself but only because labor is used to produce output that consumers desire.

Accepted Answer

A) True 
 B)False

Question 4

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.

Accepted Answer

A) True 
 B)False

Question 5

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 analyses to human resource issues. 
D) the application of economic analysis to the hiring decision.

Question 6

If Alan Shaw reduces his work hours when his salary increases, then

Accepted Answer

A) the income effect of his salary increase dominates the substitution effect. 
B) the substitution effect of his salary increase dominates the income effect. 
C) the income effect of his salary increase is completely offset by the substitution effect. 
D) leisure is an inferior good to Alan.

Question 7

Which of the following helps to explain why the supply curve of labor is upward sloping?

Accepted Answer

A) The supply curve of labor is a derived supply curve; since the output supply curve is upward-sloping, so is the labor supply curve. 
B) As the wage rate rises, the income effect causes the quantity of labor supplied to increase. 
C) The substitution effect of a price change makes a good less expensive relative to other goods. 
D) As the wage rate rises, the opportunity cost of leisure rises.

Question 8

Workers who dislike risk

Accepted Answer

A) prefer to be paid monthly rather than weekly or daily. 
B) prefer a piece-rate compensation system to a salary system. 
C) prefer a salary system to a commission compensation system. 
D) prefer to be paid a salary rather than a wage.

Question 9

If an additional worker can produce an additional 20 units of output which can be sold for $4 per unit, what is the maximum wage that this perfectly competitive firm should pay to hire this worker?

Accepted Answer

A) $80 
B) $80 minus the firm's profit markup 
C) It depends on what the going wage rate is in the labor market. 
D) There is insufficient information to answer the question.

Question 10

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that

Accepted Answer

A) each additional unit of labor hired is less efficient than previously hired units. 
B) in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. 
C) the extra cost of hiring additional units of labor increases as a firm hires more units of labor. 
D) the firm's demand curve for the product that uses labor is downward sloping.

Question 11

Why are there superstar baseball players but no superstar chiropractors?

Accepted Answer

The answer of Why are there superstar baseball players but...

Question 12

The price of a factor of production that is in fixed supply is called

Accepted Answer

A) economic rent. 
B) economic profit. 
C) a compensating differential. 
D) opportunity cost.

Question 13

The primary purpose of labor unions is to

Accepted Answer

A) ensure that workers receive adequate safety training. 
B) ensure that all members earn identical incomes. 
C) negotiate with employers about wages and working conditions. 
D) endorse candidates and donate money to them.

Question 14

Customer discrimination occurs when

Accepted Answer

A) a firm pays workers different wages based on irrelevant factors. 
B) customers refuse to buy products produced by a racially diverse workforce. 
C) customers refuse to buy products they believe to be of poor quality. 
D) workers refuse to serve customers of a different race.

Question 15

The firm's gain in profit from hiring another worker is

Accepted Answer

A) the marginal revenue product of the extra worker. 
B) the difference between marginal revenue product and the wage of the worker. 
C) the extra output of the extra worker. 
D) the reduction in costs from hiring another worker.

Question 16

Figure 17-1
  
Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies.
-Refer to Figure 17-1.If Dale can sell her doilies at $2 each, what is the marginal product of the 5th worker?

Accepted Answer

A) $28 
B) 28 doilies 
C) 14 doilies 
D) $56

Question 17

What is a factor market?

Accepted Answer

A) It is a market where financial instruments are traded. 
B) It is a market where stocks and bonds are traded. 
C) It is a market where producers buy consumption and capital goods. 
D) It is a market where resources used to produce final goods are traded.

Question 18

Figure 17-3
 
-Refer to Figure 17-3.In Panel A, at low wages (segment i)

Accepted Answer

A) the substitution effect outweighs the income effect. 
B) the income effect outweighs the substitution effect. 
C) the substitution effect offsets the income effect. 
D) labor suppliers demand more leisure as wages increase.

Question 19

In a study conducted by Marianne Bertrand and Sendhil Mullianthan, identical resumes were sent in response to help wanted ads in newspapers, with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name.The study found that

Accepted Answer

A) employers were equally likely to interview workers with white-sounding names and with African-American-sounding names. 
B) employers were 50 percent more likely to interview workers with African-American-sounding names. 
C) employers were 50 percent more likely to interview workers with white-sounding names. 
D) no employers chose to interview workers with African-American-sounding names.

Question 20

Table 17-1
 
-Refer to Table 17-1.Suppose the output price is $3.If the wage rate is $90, what is the profit-maximizing quantity of labor that the firm should hire?

Accepted Answer

A) 7 units 
B) 5 units 
C) 4 units 
D) 3 units

Exam 17: The Markets for Labor and Other Factors of Production