Question 1

A decrease in the price of a firm's output

Accepted Answer

A) decreases the supply of labour. 
B) increases the supply of labour. 
C) increases the value of marginal product of labour. 
D) decreases the quantity of labour demanded. 
E) decreases the value of marginal product of labour.

Question 2

Use the information below to answer the following questions.
Fact 18.3.1 In Modern Rarity, Workers Form Union at Small Chain
In New York's low-income neighbourhoods, labour unions have virtually no presence. But after a year-long struggle, 95 workers at a chain of 10 sneaker stores have formed a union. After months of negotiations, the two sides signed a three-year contract that sets the wage rate at $7.25 an hour.
Source: The New York Times, February 5, 2006
-Refer to Fact 18.3.1.The union can try to increase the demand for labour by doing all of the following except

Accepted Answer

A) supporting more immigration and increasing the number of low-skilled workers in New York. 
B) supporting minimum wage laws. 
C) supporting "buy-American" policies. 
D) creating training programs to boost productivity. 
E) encouraging people to buy goods produced by union labour.

Question 3

All of the following statements are correct except

Accepted Answer

A) the supply of capital is derived from the value of marginal product of capital. 
B) the lower the rental rate of capital, other things remaining the same, the greater is the quantity of capital demanded. 
C) the higher the rental rate, other things remaining the same, the greater is the quantity of capital supplied. 
D) profit-maximizing firms hire the quantity of capital services that makes the value of marginal product of capital equal to the rental rate of capital. 
E) if the present value of the future rental payments of an item of capital equipment is less than the cost of buying the capital, the firm will rent or lease the equipment.

Question 4

Total income equals

Accepted Answer

A) market income minus payments to firms by governments. 
B) market income plus cash payments to households by governments. 
C) the wages, interest, rent, and profit earned in factor markets before paying income taxes. 
D) the wages, interest, rent, and profit earned in factor markets after paying income taxes. 
E) market income minus cash payments to households by governments.

Question 5

Use the information below to answer the following questions.
Fact 18.2.1
Wanda's is a fish store that hires students to pack the fish. The fish market is competitive. Originally the price is 50¢ a kilogram. The market for packers is competitive and their market wage rate is $7.50 an hour. Then the market price of fish falls to 33.33¢ a kilogram but the wage rate of fish packers remains at $7.50 an hour.
-Refer to Fact 18.2.3.As a result,

Accepted Answer

A) Wanda's demand for labour curve shifts rightward and the firm hires more students. 
B) the value of marginal product decreases, but Wanda's still continues to hire the same number of students. 
C) Wanda's demand for labour curve shifts leftward and the firm hires fewer students. 
D) marginal product increases so Wanda's hires more students. 
E) Wanda's demand for labour curve shifts leftward and the students' supply of labour curve shifts leftward, and the firm hires fewer students.

Question 6

Mr.Smith's firm competes in a perfectly competitive market.The firm is currently hiring 30 workers.The value of marginal product of the last worker is $7.00 per hour.The wage rate is $8.00 per hour.To increase profit, Mr.Smith should

Accepted Answer

A) continue hiring 30 workers because the firm earns a surplus of $1.00 on each worker hired. 
B) increase the price of the firm's product so that the value of marginal product increases to $8.00 per hour. 
C) decrease the price of the firm's product so that the value of marginal product increases to $8.00 per hour. 
D) decrease the number of workers until the value of marginal product of labour equals $8.00. 
E) increase the number of workers until the value of marginal product of labour equals $8.00.

Question 7

Use the figure below to answer the following questions.
  
Figure 19.3.2
-Refer to Figure 19.3.2.At an employment level of 40 hours per week, the difference in the value of marginal product of high-skilled workers and low-skilled workers is

Accepted Answer

A) $0. 
B) $2 an hour. 
C) $6 an hour. 
D) $4 an hour. 
E) $3 an hour.

Question 8

Which of the following would unions be least likely to support?

Accepted Answer

A) an increase in the minimum wage 
B) immigration restrictions 
C) increasing the value of marginal product of their workers 
D) increasing demand for the goods their workers produce 
E) reducing barriers to imports

Question 9

The greater the value of marginal product of labour,

Accepted Answer

A) the greater is the supply of labour. 
B) the greater is the demand for labour. 
C) the greater is the marginal cost of production. 
D) the greater is unemployment. 
E) the lower is the wage rate.

Question 10

If the price of a natural resource is expected to rise at a rate that exceeds the interest rate, demand ________ and supply ________.

Accepted Answer

A) decreases; increases 
B) increases; decreases 
C) increases; increases 
D) decreases; decreases 
E) increases; does not change

Question 11

To maximize profit, the firm must equate the

Accepted Answer

A) wage rate to the price of the good. 
B) wage rate to the marginal product of labour. 
C) value of marginal product to the factor price. 
D) marginal factor cost to the price of the output. 
E) marginal cost of the factor to the marginal product of the factor.

Question 12

Economists who have compared the incomes of never-married men and never-married women have found that with equal amounts of human capital

Accepted Answer

A) men earn significantly more than women. 
B) women earn significantly more than men. 
C) the wages of the two groups are equal. 
D) men specialize more in home production. 
E) women tend to undertake more education.

Question 13

Comparing the distribution of income after taxes and benefits to the distribution of market income, it is true that the distribution of income after taxes and benefits is ________ the distribution of market income.

Accepted Answer

A) more equally distributed than 
B) less equally distributed than 
C) more equally distributed only for the middle quintile than 
D) as equally distributed as the 
E) more equally distributed for the bottom two quintiles and less equally distributed for the top three quintiles than

Question 14

Use the figure below to answer the following questions.
  
Figure 19.3.6
-Refer to Figure 19.3.6.This is the market for a group of workers.If point A represents the equilibrium for workers with higher human capital, which point represents the equilibrium for the workers with less human capital?

Accepted Answer

A) D 
B) B 
C) I 
D) C 
E) H

Question 15

The supply of a nonrenewable natural resource is determined by all of the following factors except

Accepted Answer

A) the value of marginal product. 
B) the known reserves of the natural resource. 
C) the scale of current production facilities. 
D) the expected future price. 
E) the marginal cost of extraction.

Question 16

Use the figure below to answer the following questions.
  
Figure 19.3.1
-Refer to Figure 19.3.1.At the equilibrium wage rates,

Accepted Answer

A) more high-skilled workers will be hired than low-skilled workers. 
B) more low-skilled workers will be hired than high-skilled workers. 
C) the horizontal distance between the two demand curves is the compensation for the cost of acquiring human capital. 
D) the horizontal distance between the two supply curves is the value of marginal product of skill. 
E) value of marginal product is maximized.

Question 17

Assuming r is the rate of interest, to compute the present value of a dollar to be received a year from today, you

Accepted Answer

A) multiply the dollar by r. 
B) divide the dollar by (1 - r). 
C) multiply the dollar by (1 + r). 
D) divide the dollar by r. 
E) divide the dollar by (1 + r).

Question 18

The demand for a factor of production is

Accepted Answer

A) a determined demand. 
B) a derived demand. 
C) a kinked demand. 
D) an insatiable demand. 
E) a desperate demand.

Question 19

Economic efficiency and economic equity have what relationship?

Accepted Answer

A) Redistribution of income reduces economic equality while it increases economic efficiency. 
B) Income is equitably distributed in free market systems without intervention by government. 
C) There is a no tradeoff between the two. 
D) There is a tradeoff between equality and efficiency. 
E) More equality is generally more efficient.

Question 20

Household characteristics that stand out when determining the incidence of poverty include all of the following except

Accepted Answer

A) household type. 
B) education. 
C) age of householder. 
D) ethnic background. 
E) number of children.

Exam 18: Markets for Factors of Production