Question 1

Table 10.2
 $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { labour }
\end{array} & \begin{array} { c } 
\text { Output of iPods per } \
\text { Week }
\end{array} & \begin{array} { c } 
\text { Marginal Product of } \
\text { labour }
\end{array} & \begin{array} { c } 
\text { Product Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Wage } \
\text { (dollars) }
\end{array} \
\hline 1 & 8 & 8 & \$ 300 & \$ 350 \
\hline 2 & 15 & 7 & 280 & 350 \
\hline 3 & 21 & 6 & 260 & 350 \
\hline 4 & 26 & 5 & 240 & 350 \
\hline 5 & 30 & 4 & 220 & 350 \
\hline 6 & 33 & 3 & 200 & 350 \
\hline 7 & 35 & 2 & 180 & 350 \
\hline
\end{array}$$
-Refer to Table 10.2.What is the marginal revenue product of labour from the third unit of labour?

Accepted Answer

A)  $5460 
B)  $1560 
C)  $1260 
D)  $780

Question 2

Table 10.2
 $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { labour }
\end{array} & \begin{array} { c } 
\text { Output of iPods per } \
\text { Week }
\end{array} & \begin{array} { c } 
\text { Marginal Product of } \
\text { labour }
\end{array} & \begin{array} { c } 
\text { Product Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Wage } \
\text { (dollars) }
\end{array} \
\hline 1 & 8 & 8 & \$ 300 & \$ 350 \
\hline 2 & 15 & 7 & 280 & 350 \
\hline 3 & 21 & 6 & 260 & 350 \
\hline 4 & 26 & 5 & 240 & 350 \
\hline 5 & 30 & 4 & 220 & 350 \
\hline 6 & 33 & 3 & 200 & 350 \
\hline 7 & 35 & 2 & 180 & 350 \
\hline
\end{array}$$
-Refer to Table 10.2.The firm represented in the table

Accepted Answer

A)  has market power in the factor market. 
B)  has market power in the output market. 
C)  has market power in both the factor and product market. 
D)  has no market power in the factor or product market.

Question 3

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 4

The marginal productivity theory of income states that a person's total income is determined by

Accepted Answer

A)  the amount and productivity of factors of production the individual owns. 
B)  how much the individual works. 
C)  how profitable the firm the individual works for is. 
D)  how much the individual has inherited.

Question 5

What are compensating differentials?

Accepted Answer

A)  Nonmonetary benefits from being employed, such as health-care benefits. 
B)  Wages paid to workers where the supply of labour is great relative to demand. 
C)  Higher wages that compensate workers for unpleasant aspects of a job. 
D)  Higher wages that compensate the more experienced workers in a field.

Question 6

A monopsony is a term used to refer to a firm that is the sole seller of a good or service.

Accepted Answer

A) True 
 B)False

Question 7

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations,and over time the wage differential has been increasing.What could have caused this?

Accepted Answer

A)  The supply of star athletes has decreased. 
B)  The supply of star athletes has increased due to university athletic programs. 
C)  Technological advances such as cable television has increased the demand for sports entertainment. 
D)  The market power of athletes' unions has increased.

Question 8

How much is a bond that pays $50 in coupon payments for 3 years and $1000 at the end of the third year worth if the interest rate is 10 per cent?

Accepted Answer

A)  $876 
B)  $952 
C)  $1045 
D)  $1150

Question 9

If the demand for labour is unchanged,population growth will increase the supply of labour and increase the equilibrium wage.

Accepted Answer

A) True 
 B)False

Question 10

Differences in marginal revenue products are the most important factor in explaining wage differences.Other factors that explain wage differences include all but one of the following.Which factor does not help explain differences in wages?

Accepted Answer

A)  Cognitive differentials 
B)  Compensating differentials 
C)  Discrimination 
D)  Labour unions

Question 11

Technological advancements that increase labour's productivity shift the labour supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 12

An organisation of employees that has the legal right to bargain with employers about wages and working conditions is called a _________.

Accepted Answer

A)  closed shop 
B)  guild 
C)  labour union 
D)  monopsony

Question 13

A firm's labour demand curve is also its marginal revenue product curve.For both the perfectly competitive firm and the output price maker,the labour demand curve slopes downwards.However,there is a difference in the reasons why the labour demand curve slopes downwards.What is this difference?

Accepted Answer

The answer of A firm's labour demand curve is also...

Question 14

The market demand curve for labour

Accepted Answer

A)  is determined by adding up the quantity of labour demanded by each firm at each wage, holding constant the other variables that affect the willingness of firms to hire workers. 
B)  is the same as the market demand curve for the product labour produces because it is a derived demand. 
C)  is determined by adding up the demand for labour by each firm at each wage, holding constant the other variables that affect the willingness of firms to hire workers. 
D)  is perfectly inelastic because there is a finite number of workers in the market for labour.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If you put $100 into a bank account that earns 5 per cent interest per year,what is the formula you should use to determine the account's future value in 1 year?

Accepted Answer

A)  Future value equals the present value divided by the rate of interest. 
B)  Future value equals the present value multiplied by the rate of interest. 
C)  Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D)  All of these yield the same answer.

Question 17

What is the combined effect (both income and substitution)of a wage increase?

Accepted Answer

A)  The substitution effect always dominates, leading to more work at a higher wage. 
B)  The income effect always dominates, leading to less work at a higher wage. 
C)  If the substitution effect outweighs the income effect, the labour supply curve slopes upward, but if the income effect outweighs the substitution effect, the labour supply curve is backward bending. 
D)  If the substitution effect outweighs the income effect, the labour supply curve is backward bending, but if the income effect outweighs the substitution effect, the labour supply curve slopes upward.

Question 18

Figure 10.1  Figure 10.1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies.
-Refer to Figure 10.1.If the wage rate is $40,Dale should hire _______.

Accepted Answer

A)  6 labour units 
B)  5 labour units 
C)  4 labour units 
D)  3 labour units

Question 19

The primary purpose of labour 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 20

While labour unions tend to negotiate above-equilibrium wage rates for their members,they also tend to reduce the quantity of labour hired.

Accepted Answer

A) True 
 B)False

Exam 10: The Markets for Labour and Other Factors of Production

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.

The marginal productivity theory of income states that a person's total income is determined by

What are compensating differentials?

A monopsony is a term used to refer to a firm that is the sole seller of a good or service.

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations,and over time the wage differential has been increasing.What could have caused this?

How much is a bond that pays $50 in coupon payments for 3 years and $1000 at the end of the third year worth if the interest rate is 10 per cent?

If the demand for labour is unchanged,population growth will increase the supply of labour and increase the equilibrium wage.

Differences in marginal revenue products are the most important factor in explaining wage differences.Other factors that explain wage differences include all but one of the following.Which factor does not help explain differences in wages?

Technological advancements that increase labour's productivity shift the labour supply curve to the right.

An organisation of employees that has the legal right to bargain with employers about wages and working conditions is called a _________.

A firm's labour demand curve is also its marginal revenue product curve.For both the perfectly competitive firm and the output price maker,the labour demand curve slopes downwards.However,there is a difference in the reasons why the labour demand curve slopes downwards.What is this difference?

The market demand curve for labour

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

If you put $100 into a bank account that earns 5 per cent interest per year,what is the formula you should use to determine the account's future value in 1 year?

What is the combined effect (both income and substitution) of a wage increase?

Figure 10.1 Figure 10.1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 10.1.If the wage rate is $40,Dale should hire _______.

The primary purpose of labour unions is to

While labour unions tend to negotiate above-equilibrium wage rates for their members,they also tend to reduce the quantity of labour hired.