AP Microeconomics Section 13 & 14 Practice Exam

Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource cost curve. If this were a monopsonistic labor market, the equilibrium wage rate and level of employment would be

$5 and 3

Debbie owns a bakery and can hire workers to produce cakes selling in a competitive output market at $10 each. The table shows the relationship between the number of workers and the number of cakes produced. What is the value of the marginal product for the fourth worker?

$50

Refer to the above data. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ

1 worker

Refer to the above data. If the wage rate is $20, how many workers will the firm choose to employ?

2

When the demand for automobiles is high, the demand for workers who build automobiles is high. This relationship between the market for autos and the market for the labor that builds autombiles is why the demand in a factor market is called _______

A derived demand

Brian has a cell phone and he is a customer of SuperDuperCellNet, his cell phone service provider. When he calls his wife, Jackie, andother SuperDuperCellNet customer, he does not have to pay for those minutes. The more SuperDuperCellNet customers there are in the market, the more benefit Brian receives. This is an example of

A network externality

Which of the following goods is most likely a common resource?

A public park

In the figure above, the VMPL curve will shift to the right if

A technological advance makes labor more productive

Which of the following goods best fits the characteristics of a private good?

An ice cream cone

The provision of specific goods and services (rather than cash) to needy people is

An in-kind benefit

If a nation's Gini coefficient is rising over time, it is an indicator of

An increase in income inequality

In which of the following situations is adverse selection most likely to be a problem?

Buying a house directly from the previous owner

Which of the following best describes the value of the marginal product?

Change in total revenue generated from a unit change in the quantity of a variable input

Stan has an employee, Barbara, who is the only female security guard at the company. Barbara is a "night owl" and loves to work the midnight shift to 8 am shift for the company. Stan knows that working through the night is potentially more dangerous than working during the day, so he pays her an additional $2 an hour. This wage differential is likely an example of

Compensating differentrials

Benny employs people to sell candy bars at intersections. The marginal product of the last worker Benny hired is 20 candy bars per hour. Benny pays $7 per worker per hour and sells the candy bars for $1 each. If the price of candy bars rises to $2, then the _______

Demand for labor increases

John is an entrepreneur who runs his own auto body repair shop. Suppose that John's business is booming and his salary is rising. John's labor supply curve will be

Downward-sloping if the substitution effect is smaller than the income effect

Oscars Wilderness Flower Shop maximizes profits by hiring four workers in a perfectly competitive labor market. The table shows Lara's production function. The workers and their VMPLs are Alfred-$40, Barbara-$35, Calvin-$27, and Diana-$15. Which is true?

Each worker would be paid $15

Laws that restrict or prohibit leaf burning or trash burning is an example of

Environmental standards

Pigouvian taxes are designed to reduce

External costs

Above a given wage, a higher wage may induce an individual to work ____ hours and the labor supply curve may then _____

Fewer; bend backward

Debbie owns a bakery and can hire workers to produce cakes selling in a competitive output market at $10 each. The table shows the relationship between the number of workers and the number of cakes produced. If Debbie must pay each workwr a competitive market wage of $40 per day, how many workers will she hire to maximize profit?

Five

Sarah owns a small flower shop and the industry is perfecrly competitive. She is considering whether or not to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units produced is $10 per unit. What should Sarah do?

Hire the additional worker because the balue of the marginal product exceeds the wage

Now that Sheila has completed her bachelor's degree, she has decided to pursue her master's degree. Sheila's choice of additional education is called an investment in _______

Human capital

Laura is a price-taking farmer who produces corn. Assume that the wage rate for workers is $125 and the price per unit of corn is $10. The table shows Laura's production function. Suppose Laura is currently employing seven workers. If she lets the seventh worker go and reduces employment to six workers, her profit will

Increase by $105

Max employs both labor and capital to produce his trinkets. Currently, the last unit of labor employed has a marginal product of 15 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $3 per unit and the price of capital is $10 per unit. If Max is going to find the least-cost combination of labor and capital, he needs to ______ his employment of labor and ____ his employment of capital.

Increase; decrease

A wage ____ reduces the quantity of labor supplied through the ____ effect

Increase; subsitution

No individual willing to pay for providing the efficient level of a public good since the

Individual's marginal benefit is less than the marginal social benefit

Negative income tax

Is a program in which low-income families receive income supplements rather than having to pay positive taxes

For a good to be efficiently provided by a market economy, which of the followig characteristics is essential?

It needs to be both rival in consumption and excludable

Other things equal, the monopsonistic employer will pay a

Lower wage rate and hire fewer workers than will a purely competitive employer

The difference between the marginal social benefit curve and the market demand curve is the

Marginal external benefit

If one worker can pick $30 worth of grapes and two workers can pick $50, the

Marginal revenue product of the second worker is $20

You insure your car against theft. Consequently, you rarely lock the car. This describes the problem of

Moral hazard

Other things the same, we would expect the labor demand curve of a purely competitive seller to be

More elastic than that of an imperfectly competitive seller

Assuming a firm is selling its output in a purely competitive marker, its resource demand curve can be determined by

Multiplying marginal product by product price

The best example of a public good is

National defense

An individual is more likely to free ride when a good is

Non-excludable

National defense and electronic books are similar in that bother are _______, but they differ in that national defense is _______, while electronic books are not.

Non-rival in consumption; non-excludable

If drivers decide to make cell phone calls without considering the costs imposed on others, the

Number of phone calls made while driving will be above the socially optimal quantity

Marginal resource cost is

The increase in total resource cost associated with the hire of one more unit of the resource

Which of the following is most likely an artificially scarce good?

Pay-per-view of a boxing match

The Coase theorem states that in the presence of externalities, a market economy will

Reach an efficient solution if transactions costs are sufficiently low

Private or asymmetric information

Refers to information that would be relevant for an economic transition, and this is known only by some of the people involved in the transaction

Refer to the above data. This firm is

Selling its product in an imperfectly competitive market

When innovations by one firm are quickly emulated and improved on by rival firms in the same industry or in other industries, this is

Technology spillover

Marginal product is

The amount an additional worker adds to the firm's total output

Automobile emissions generate pollution and cause higher costs and discomfort to residents of a city. In this case

The externality can be internalized into the market by imposing a specific tax on drivers

Given that there is general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is

The level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution

When each factor is paid a payment equal to the value of the marinal product of the last unit of that factor employed in the factor market as a whole, this is referred to as

The marginal productivity theory of income distrubution

If the marginal benefit received from pollution is greater than its marginal cost, then

The market is producing too little pollution

To maximize profits a firm will employ workers up to the point at which for the last worker employed _____

The value of the marginal product is equal to the wage rate

If the extra output that is produced by hiring one more unit of labor adds more to ______ than to _______, the firm will increase its profit by increasing the use of labor.

Total revenue; total cost

The organized exchange of licenses that enable the holder to pollute up to a specified amount during a given time period is called

Tradable emissions permits

The individual producer's labor demand curve is the _____

Value of the marginal product of labor curve

Which is an example of an activity generating a positive externality?

Your next-door neighbor installs a bat house and the bats eat mosquitoes

If a good produces a positive externality and the government does not correct it, the equilibrium market quantity is ____ than the socially optimal quantity and the equilibrium market price is ___ than the socially optimal price.

lower; lower

A ____ program is one for which the recipient qualifies on the basis of _____

means-tested; income

When Liam watched a movie, his viewing was _____ in consumption because other people _____ able to view the movie at the same time Liam did.

nonrival; were