Question 1

The labour supply for an industry would decrease if

Accepted Answer

A)  the wage rate falls.
B)  the percentage of the population from age 16 to 65 decreases.
C)  the government welcomes foreign workers into the country.
D)  a greater percentage of women want to work outside the home.E) A) and B)
F) A) and C)

Question 2

An increase in the demand for orthodontic services leads to

Accepted Answer

A)  an increase in the supply of orthodontists.
B)  lower prices for orthodontic care.
C)  an increase in the demand for orthodontists.
D)  a rise in the rates of dental insurance.E) All of the above
F) B) and C)

Question 3

A firm chooses its profit-maximising quantity of capital by

Accepted Answer

A)  comparing the marginal revenue product of capital with the rental price of capital.
B)  comparing the price of capital with the price of labour.
C)  examining the total cost of capital equipment.
D)  determining the rate at which the firm can borrow funds to purchase plant and equipment.E) A) and C)
F) C) and D)

Question 4

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%?

Accepted Answer

A)  $876
B)  $952
C)  $1045
D)  $1150E) B) and C)
F) A) and D)

Question 5

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

Accepted Answer

A) True 
 B)False

Question 6

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.E) A) and B)
F) B) and C)

Question 7

If national laws protecting the health and safety of workers completely eliminate any and all risk,then

Accepted Answer

A)  workers in risky occupations become better off.
B)  compensating wage differentials disappear and workers in risky occupations may be no better off.
C)  compensating differentials would grow because workers could not be compensated by being given lower risk jobs.
D)  more people would be employed.E) B) and C)
F) A) and D)

Question 8

The application of economic analysis to human resources issues is called personnel economics.

Accepted Answer

A) True 
 B)False

Question 9

A decrease in the wage rate causes

Accepted Answer

A)  an increase in the quantity of labour demanded.
B)  a rightward shift of the firm's labour demand curve.
C)  a leftward shift of the firm's labour demand curve.
D)  a decrease in labour's productivity.E) A) and D)
F) A) and C)

Question 10

Suppose the following two events occur in the market for elementary school teachers:
A.Overcrowded schools and education budget cuts have discouraged young university students from pursuing careers in teaching.
B.With an increasing birth rate,the number of children entering the elementary school system is expected to increase significantly over the next ten years.
What is likely to happen to the equilibrium wage and quantity of teachers as a result of these two events?

Accepted Answer

A)  The equilibrium quantity and the equilibrium wage of elementary school teachers fall.
B)  The equilibrium wage rises and the effect on the equilibrium quantity of elementary school teachers is indeterminate.
C)  The equilibrium quantity falls and the effect on the equilibrium wage of elementary school teachers is indeterminate.
D)  The equilibrium quantity falls and the equilibrium wage of elementary school teachers rises.E) None of the above
F) B) and C)

Question 11

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labour.

Accepted Answer

A) True 
 B)False

Question 12

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.E) All of the above
F) A) and C)

Question 13

Which of the following is an example of a compensating wage differential?

Accepted Answer

A)  Nurse anesthetists are paid less than anesthesiologists (who have medical degrees) .
B)  Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills.
C)  In the market for lawyers,top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs.
D)  Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors.E) None of the above
F) A) and C)

Question 14

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.E) All of the above
F) A) and B)

Question 15

Economic rent is defined as

Accepted Answer

A)  what you pay to rent your apartment or house.
B)  the revenue received by a factor of production with an upward sloping supply curve.
C)  the price of a factor of production that is fixed in supply.
D)  the surplus received by employing a factor of production in its highest valued use.E) All of the above
F) A) and B)

Question 16

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.E) B) and C)
F) A) and D)

Question 17

Table 12-2
 
-Refer to Table 12-2.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.E) C) and D)
F) B) and C)

Question 18

If you put $100 into a bank account that earns five per cent interest per year,what is the formula you should use to determine the account's future value in one 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.E) A) and D)
F) A) and B)

Question 19

The typical labour supply curve is upward sloping,but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Accepted Answer

A)  This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.
B)  This would occur when the substitution effect from an increase in the wage becomes larger than the income effect.
C)  This would occur if leisure is an inferior good.
D)  This would occur when a large number of workers choose leisure rather than employment at low wages;only a very large increase in the wage will lead these workers to prefer employment to leisure.E) B) and C)
F) A) and C)

Question 20

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

Exam 12: The Markets for Labour and Other Factors of Production

Economic rent is defined as

Correct Answer
verified

The typical labour supply curve is upward sloping,but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Correct Answer
verified

The market demand curve for labour

Correct Answer
verified

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.

Correct Answer
verified

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

Correct Answer
verified

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%?

Correct Answer
verified

If national laws protecting the health and safety of workers completely eliminate any and all risk,then

Correct Answer
verified

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

Correct Answer
verified

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

Correct Answer
verified

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labour.

Correct Answer
verified

A decrease in the wage rate causes

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

An increase in the demand for orthodontic services leads to

Correct Answer
verified

The labour supply for an industry would decrease if

Correct Answer
verified

The application of economic analysis to human resources issues is called personnel economics.

Correct Answer
verified

Table 12-2 -Refer to Table 12-2.The firm represented in the table

Correct Answer
verified

Correct Answer
verified

Which of the following is an example of a compensating wage differential?

Correct Answer
verified

A firm chooses its profit-maximising quantity of capital by

Correct Answer
verified

Exam 12: The Markets for Labour and Other Factors of Production

Economic rent is defined as

Correct AnswerverifiedShow Answer

The typical labour supply curve is upward sloping,but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Correct AnswerverifiedShow Answer

The market demand curve for labour

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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%?

Correct AnswerverifiedShow Answer

If national laws protecting the health and safety of workers completely eliminate any and all risk,then

Correct AnswerverifiedShow Answer

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labour.

Correct AnswerverifiedShow Answer

A decrease in the wage rate causes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the demand for orthodontic services leads to

Correct AnswerverifiedShow Answer

The labour supply for an industry would decrease if

Correct AnswerverifiedShow Answer

The application of economic analysis to human resources issues is called personnel economics.

Correct AnswerverifiedShow Answer

Table 12-2 -Refer to Table 12-2.The firm represented in the table

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of a compensating wage differential?

Correct AnswerverifiedShow Answer

A firm chooses its profit-maximising quantity of capital by

Correct AnswerverifiedShow Answer

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