Econ ch 8 and 14 bonus

Refer to Figure 18-1. Suppose the firm sells its output for $13 per unit, and it pays each of its workers $75 per day. How many workers will the firm hire to maximize its profit? 3 4 2 5

2

Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax? Market A only Markets A and C only Markets B and D only Market C only

Markets B and D only

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed P1. P2. P3. P4.

P4.

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: ​ Refer to Figure 14-2. If the market price is $6, what is the firm's short-run economic profit? $0 $12 $15 $18

$0

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 200 units. The deadweight loss from the tax is $3,000. $1,500. $107.5. $92.5.

$1,500.

The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-3. As a result of the tax, consumer surplus decreases by $130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60. $150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60. $160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80. $240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80.

$160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80.

Harry owns a snow-removal business. He hires workers to shovel driveways for him during the winter. The first worker he hires can shovel 12 driveways in one day. When Harry hires two workers, they can shovel a total of 22 driveways in one day. When Harry hires a third worker, he shovels an additional eight driveways in one day. Refer to Scenario 18-1. Suppose that Harry pays each worker $80 per day and that he charges each customer $20 to have his driveway shoveled. What is the value of the marginal product of labor for the second worker? $200 $240 $800 $960

$200

Suppose a firm in a competitive market earned $3,000 in total revenue and had a marginal revenue of $30 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? $5 and 50 units $5 and 100 units $100 and 30 units $30 and 100 units

$30 and 100 units

Refer to Figure 18-1. Suppose the firm hires each unit of labor for $53 per day, and each unit of output sells for $11. What is the value of the marginal product of the fifth worker? $66 $55 $33 $44

$33

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: ​ Refer to Figure 14-2. If the market price is $10, what is the firm's total cost? $15 $30 $35 $50

$35

The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-3. The deadweight loss associated with this tax amounts to $80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

$80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Figure 14-4 In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms. ​ Graph (a): FirmGraph (b): Market Refer to Figure 14-4. If there are 100 identical firms in this market, what is the value of Q2? 10,000 20,000 40,000 80,000

20,000

Refer to Table 18-1. Suppose that the firm pays its workers $46 per day. Each unit of output sells for $12. How many workers should the firm hire? 5 2 3 4

4

Refer to Figure 19-3. Suppose the manufacturing labor market, which is nonunionized, is in equilibrium at a wage equal to $25. Suppose now that the AFL-CIO (a labor organization) organizes the workers in the manufacturing market and negotiates a wage of $30 per hour. Because of the union, 80 people who were once employed are now unemployed. 40 people who were once employed are now unemployed. 80 people who were once unemployed are now employed. 40 people who were once unemployed are now employed.

40 people who were once employed are now unemployed.

Refer to Table 18-1. What is the marginal product of the second worker? 9 6 4 3

9

Which of the following scenarios exhibits statistical discrimination? The hiring manager at a firm will not interview women for a surgical role because this industry is predominantly male. A law office currently employs females for 80% of its administrative staff. A study comes out showing that brunettes are more likely to work harder than blondes, so employers prefer hiring brunettes. In order to apply for medical school, you have to take the MCAT standardized exam.

A study comes out showing that brunettes are more likely to work harder than blondes, so employers prefer hiring brunettes.

Suppose that a violent earthquake causes the uninhabited Hawaiian island of Mokuauia (also called Goat Island) to fall into the Pacific Ocean. No people are killed or injured, and since the island is undeveloped, no buildings are destroyed. The island was a source of tourist income for Hawaiian landowners. Which of the following statements correctly describes the rents earned by the people who own land on the surrounding islands? As the supply of vacation land decreases, the marginal productivity of the remaining land will decrease; thus rents will decrease. As the supply of vacation land decreases, the marginal productivity of the remaining land will increase; thus, rents will decrease. As the supply of vacation land decreases, the marginal productivity of the remaining land will increase; thus, rents will increase. There would be no change in the rents earned by the other landowners because the effects of supply and demand would exactly cancel each other out.

As the supply of vacation land decreases, the marginal productivity of the remaining land will increase; thus, rents will increase.

Dr. Benson is regarded as, by far, the best dentist in his part of the country, yet his income is not significantly higher than the average income for a dentist in his area. In contrast, Bo Johnson, the best baseball player in that region, earns five times the average salary of all baseball players. The most likely explanation is that the widespread perception that Dr. Benson is a great dentist is, in fact, incorrect. the baseball players' union is more powerful than the professional association of dentists. Bo Johnson, unlike Dr. Benson, can provide his services to millions of people simultaneously. chance plays a role in determining people's incomes, resulting in earnings discrepancies that are hard to explain or justify.

Bo Johnson, unlike Dr. Benson, can provide his services to millions of people simultaneously.

Which of the following could explain the changing gap in income between unskilled and skilled workers in the United States? International trade has decreased the domestic demand for skilled labor and increased the domestic demand for unskilled labor. Certain technological changes such as the introduction of computers have increased the domestic demand for skilled labor and decreased the domestic demand for unskilled labor. The average educational attainment of an unskilled worker continues to increase. There is greater domestic demand for unskilled labor compared to skilled labor.

Certain technological changes such as the introduction of computers have increased the domestic demand for skilled labor and decreased the domestic demand for unskilled labor.

Scenario 19-4 Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently, the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive. Refer to Scenario 19-4. Competition in the market for haircuts is consistent with which of the following statements? Firms hiring nonbald barbers will have a cost advantage, leading to an increase in the demand for nonbald barbers. All firms that hire only bald barbers will go out of business. Firms hiring bald barbers will enter the market, increasing the demand for bald barbers. Firms hiring nonbald barbers will enter the market, increasing the demand for nonbald barbers.

Firms hiring bald barbers will enter the market, increasing the demand for bald barbers.

Refer to Figure 8-8. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax? Graph (a) Graph (b) Graph (c) Graph (d)

Graph (a)

Which theory is supportive of the idea that increasing educational levels for all workers would raise all workers' productivity and therefore their wages? The theory of compensating differentials The efficient-market hypothesis Human-capital theory Signaling theory

Human-capital theory

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as T/Q. T + Q. T × Q. (T × Q)/Q.

T × Q.

Refer to Figure 18-6. Which of the following events would most likely explain a shift of the labor demand curve from D2 back to D1? The price of automobiles decreased. A large number of immigrants entered the automobile-worker market. A technological advance increased the marginal product of automobile workers. The demand for automobiles increased.

The price of automobiles decreased.

Assuming that all other things are equal, including the wage, which of the following statements is correct? The quantity of labor supplied for difficult jobs exceeds that for easy jobs. The quantity of labor supplied for fun jobs exceeds that for dull jobs. The quantity of labor supplied for dangerous jobs exceeds that for safe jobs. The quantity of labor supplied for dirty, outdoor jobs exceeds that for jobs in clean environments.

The quantity of labor supplied for fun jobs exceeds that for dull jobs.

Diminishing marginal product affects the shape of the production The slope of the production function decreases as the quantity of input increases. The production function becomes steeper as the quantity of input increases. The production function slopes downward. The production function is horizontal beyond a certain quantity of input.

The slope of the production function decreases as the quantity of input increases.

Suppose the wage earned by pear pickers suddenly falls. Which of the following effects would we most likely observe as a result? The supply of orange pickers would increase and the equilibrium wage of orange pickers would increase. The supply of orange pickers would increase and the equilibrium wage of orange pickers would decrease. The demand for orange pickers would increase and the equilibrium wage of orange pickers would decrease. The demand for orange pickers would decrease and the equilibrium wage of orange pickers would decrease.

The supply of orange pickers would increase and the equilibrium wage of orange pickers would decrease.

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9? The tax on airline tickets increases from $20 per ticket to $60 per ticket. The tax on airline tickets increases from $20 per ticket to $90 per ticket. The tax on airline tickets increases from $15 per ticket to $60 per ticket. The tax on airline tickets increases from $15 per ticket to $135 per ticket.

The tax on airline tickets increases from $20 per ticket to $60 per ticket.

he vertical distance between points A and B represents a tax in the market. Refer to Figure 8-3. Which of the following statements is correct? Total surplus before the tax is imposed is $500. After the tax is imposed, consumer surplus is 45 percent of its pre-tax value. After the tax is imposed, producer surplus is 45 percent of its pre-tax value. Total surplus after the tax is imposed is $500.

Total surplus before the tax is imposed is $500.

What happens to the total surplus in a market when the government imposes a tax? Total surplus increases by the amount of the tax. Total surplus increases but by less than the amount of the tax. Total surplus decreases. Total surplus is unaffected by the tax.

Total surplus decreases.

Construction work is much riskier than working as a server at a restaurant. As a result, we'd expect a difference in wages between the two jobs. The difference is known as an efficiency wage. a compensating differential. a wage adjustment. a minimum wage.

a compensating differential.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then a one-unit increase in output will increase the firm's profit. a one-unit decrease in output will increase the firm's profit. total revenue exceeds total cost. total cost exceeds total revenue.

a one-unit decrease in output will increase the firm's profit.

Most economists believe that the higher average salaries earned by men in comparison to women arise from discrimination. a variety of factors, including differences in human capital and compensating differentials; few economists believe that gender discrimination in earnings exists. differences in human capital as the primary reason. a variety of factors, including differences in human capital, compensating differentials, and discrimination.

a variety of factors, including differences in human capital, compensating differentials, and discrimination.

As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of diminishing returns applies to all factors of production, she should expect to see an increase in the marginal productivity of her remaining capital and an increase in the marginal productivity of her labor. an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor. a decrease in the marginal productivity of her remaining capital and an increase in the marginal productivity of her labor. a decrease in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.

an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.

Suppose that the market for labor is initially in equilibrium. An increase in worker productivity will cause the equilibrium wage and the equilibrium quantity of labor to rise. and the equilibrium quantity of labor to fall. to rise and the equilibrium quantity of labor to fall. to fall and the equilibrium quantity of labor to rise.

and the equilibrium quantity of labor to rise.

Profit-maximizing firms enter a competitive market when existing firms in that market have total revenues that exceed fixed costs. total revenues that exceed total variable costs. average total costs that exceed average revenue. average total costs that are less than market price.

average total costs that are less than market price.

Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently, the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive. Refer to Scenario 19-4. If some consumers in the market for haircuts have a strong preference for having their hair cut by a barber who is not going bald, then the difference in wages will eventually disappear since a haircut is a homogeneous good. barbershops that hire barbers with hair will be able to charge a higher price for a haircut to those consumers who have a strong preference for barbers with hair. barbershops that hire barbers with hair will always be much more profitable. barbershops that hire bald barbers will always be much more profitable.

barbershops that hire barbers with hair will be able to charge a higher price for a haircut to those consumers who have a strong preference for barbers with hair.

A change in the supply of one factor of production can alter the earnings of all of the other factors. alters the earnings of capital and labor but not land. will not change the marginal productivities of other factors but may change their prices. alters the earnings of that factor only.

can alter the earnings of all of the other factors.

Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently, the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive. Refer to Scenario 19-4. If consumers do not discriminate between bald barbers and barbers with hair, then competitive pressure in the market for haircuts will eventually cause the equilibrium wage in both markets to be identical. the equilibrium wage in the "bald" market will eventually fall. the equilibrium wage in the "hairy" market will eventually rise. wages in the market for barbers can never be in equilibrium.

competitive pressure in the market for haircuts will eventually cause the equilibrium wage in both markets to be identical.

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should drop the flight immediately. continue the flight. continue flying until the lease expires and then drop the run. drop the flight now but renew the lease if conditions improve.

continue flying until the lease expires and then drop the run.

Because of diminishing returns, a factor in abundant supply has a high marginal product and a high rental price. high marginal product and a low rental price. low marginal product and a high rental price. low marginal product and a low rental price.

low marginal product and a low rental price.

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue increases if MR < ATC and decreases if MR > ATC. does not change. always increases. always decreases.

does not change.

Sometimes wages are set above the equilibrium level when firms pay workers with more seniority higher wages than newly hired workers. efficiency wages to reduce turnover. compensating differentials to workers who work the night shift. more attractive salespeople higher wages than less attractive salespeople.

efficiency wages to reduce turnover.

When a tax is imposed on a good, the supply curve for the good always shifts. demand curve for the good always shifts. amount of the good that buyers are willing to buy at each price always remains unchanged. equilibrium quantity of the good always decreases.

equilibrium quantity of the good always decreases.

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. not fall in the short run because firms will exit to maintain the price.

fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

Competitive markets are characterized by a small number of buyers and sellers. unique products. the interdependence of firms. free entry and exit by firms.

free entry and exit by firms.

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will decrease tax revenue and decrease the deadweight loss. decrease tax revenue and increase the deadweight loss. increase tax revenue and decrease the deadweight loss. increase tax revenue and increase the deadweight loss

increase tax revenue and decrease the deadweight loss.

Consider the market for capital equipment. Suppose the market price of firms' output increases. Holding all else constant, the equilibrium quantity of capital equipment will decrease. increase. not change. not be able to be determined without more information.

increase.

Assume the market for hats is competitive. An increase in the market price of hats increases the demand for workers who make hats and increases their equilibrium wage. decreases the demand for workers who make hats and increases their equilibrium wage. increases the demand for workers who make hats and decreases their equilibrium wage. decreases the demand for workers who make hats and decreases their equilibrium wage.

increases the demand for workers who make hats and increases their equilibrium wage.

If the value of the marginal product of labor exceeds the wage, then hiring another worker decreases the firm's total output. decreases the firm's total cost. decreases the firm's total revenue. increases the firm's profit.

increases the firm's profit.

Evidence of discrimination in labor markets applies only to race and gender. is conclusively identified by large differences in average wages rates between men and women. is difficult to verify by reference to differences in average wage rates. is more easily identified on the basis of race than gender

is difficult to verify by reference to differences in average wage rates

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ Refer to Figure 14-1. The firm should shut down if the market price is above $6.5. above $3 but less than $6.5. above $6.5 but less than $10. less than $3.

less than $3.

If there is systematic discrimination against a group of workers, then the wage paid to those workers likely will be lower due to a higher supply of workers in that group. lower due to a lower demand for workers in that group. higher due to a lower supply of workers in that group. higher due to a higher demand for workers in that group.

lower due to a lower demand for workers in that group.

If the size of a tax increases, tax revenue increases. decreases. remains the same. may increase, decrease, or remain the same.

may increase, decrease, or remain the same.

Suppose that a firm in a competitive market has the following cost curves: ​ Refer to Figure 14-1. If the market price rises above $6.5, the firm will earn positive economic profits in the short run. negative economic profits in the short run but remain in business. negative economic profits and shut down. zero economic profits in the short run.

positive economic profits in the short run.

If the demand curve for wedding cakes shifts to the right, then the value of the marginal product of labor for bakers will rise. fall. remain unchanged. rise or fall; either is possible.

rise.

The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-3. As a result of the tax, consumer surplus decreases from $200 to $80. producer surplus decreases from $200 to $145. the market experiences a deadweight loss of $80.

the market experiences a deadweight loss of $80.

Figure 18-3 The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. ​ Refer to Figure 18-3. The firm would choose to hire three workers if the market wage for a day's work is $220. the market wage for a day's work is $260. the output price is $220. the output price is $260.

the market wage for a day's work is $220.

Refer to Figure 19-1. If the minimum wage in this market is $6, then employment is 12 million. employment is 14 million. there is a surplus of 1 million workers. there is a surplus of 3 million workers.

there is a surplus of 3 million workers.

Refer to Figure 18-1. Suppose the firm sells its output for $14 per unit, and it pays each of its workers $33 per day. When the number of workers increases from 4 to 5, the marginal revenue is $42 per unit of output, and the marginal cost is $33 per unit of output. value of the marginal product of labor is $99, and the marginal cost per unit of output is $33. value of the marginal product of labor is $42, and the marginal cost per unit of output is about $11. firm's profit increases.

value of the marginal product of labor is $42, and the marginal cost per unit of output is about $11.

Scenario 18-4 Suppose that workers from northern Minnesota, North Dakota, and Montana decide to immigrate to southern Canada. Refer to Scenario 18-4. In the labor market in southern Canada, the equilibrium wage and the equilibrium quantity of labor will rise. and the equilibrium quantity of labor will fall. will rise, and the equilibrium quantity of labor will fall. will fall, and the equilibrium quantity of labor will rise.

will fall, and the equilibrium quantity of labor will rise.