ECON 101 Practice Exam

Nominal monthly wages increase from $1,500 to $1,800 while the price level increases by 4%. The percentage change in real monthly wages is about

12%

Which of the following is an explanation for the high labor-productivity in the United States?

plentiful capital resources

Use the graph below to answer the next question. Other things equal, a decrease in the price of a substitute resource would cause a

shift from D2 to D3 assuming the output effect exceeds the substitution effect.

The demand for airline pilots results from the demand for air travel. This fact is an example of

the derived demand for labor.

The marginal revenue product schedule is

the firm's resource demand schedule.

A maximum limit set on the amount of a specific good that may be imported into a country over a given period of time is called a

quota.

The labor demand curve of a purely competitive seller

slopes downward because of diminishing marginal productivity.

Labor unions may attempt to raise wage rates by

forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.

Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MP of the second barber is

18 haircuts.

Use the following diagrams to answer the next question. The firm Correct Answer

has a constant marginal resource cost of $5.

Which of the following has not been a major factor contributing to the high productivity of labor in the United States?

high wage rates

If the marginal revenue product (MRP) of labor is less than the wage rate

less labor should be employed.

A profit-maximizing firm should hire an input as long as the

marginal revenue product of the input is at least as much as the cost of hiring the input.

Marginal resource cost is

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

Assume that there are two nations, Alpha and Beta. Each nation produces two products, wheat and steel. Alpha has a comparative advantage in the production of wheat. If the two nations trade, the trade price of wheat in terms of steel will be

greater than the domestic opportunity cost of wheat in Alpha and less than the domestic opportunity cost of wheat in Beta.

Which statement is correct?

The percentage change in the nominal wage minus the percentage change in the price level equals the percentage change in real wage.

Use the following graph, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product to answer the next question.

result in an increase of producer surplus equal to area E.

Domestic producers might oppose free trade agreements because

there is a decrease in producer surplus.

Wayne's Jacket Shop sells Wayne's jackets for $20 each. Wayne finds that his total revenues change according to the number of workers he hires, as shown in the table below.

$600

If Countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the production possibilities schedules below. In country A the opportunity cost of 1 paper clip is

1/2 rubber band.

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired; 32 when two workers are hired; 37 when three are hired; and 40 when four are hired. The farmer's product sells for $3 per unit and the wage rate is $13 per worker. How many workers should the farmer hire?

3

Answer the next question based on the data provided in the tables below for two hypothetical nations, Wat and Xat. The nations have the following production possibilities for rice and corn:

50 units of rice and 50 units of corn.

Use the following graphs to answer the next question. if union workers decide to take more leisure, while the prices of the products produced by union workers decrease, this situation is depicted in graph

D.

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. As it relates to strawberry pickers, we could expect the

MRP curve to shift to the right.

What other economic process needs to accompany international trade, for nations to benefit from such trade?

Specialization in production.

Which of the following will not cause a shift in the demand for resource X?

a decline in the price of resource X

Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will Correct Answer

import copper.

If the nominal wages of carpenters rose by 5% in 2013 and the price level increased by 3%, then the real wages of carpenters

increased by 2%.

Marginal revenue product measures the

increase in total revenue resulting from the production of one more unit of a product.

Import quotas on products will reduce the quantity of the imported products and

increase the price to the consumers.

If the world price for good A is below the domestic price for good A without trade, then consumer surplus will ________ and total economic surplus will ________ with trade.

increase, increase

A firm will find it profitable to hire workers up to the point at which their

marginal resource cost is equal to their MRP.

A profit-maximizing firm will

reduce employment if marginal revenue product is less than marginal resource cost.

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

multiplying marginal product by product price.

Suppose a powerful labor union negotiates a wage for its members above the equilibrium wage rate in a nonunionized market. A likely result of this is that

not everyone who wants to work at the new wage will be able to find jobs.

A competitive employer will hire inputs up to the point where the

price of the input equals the marginal revenue product of the input.

Marginal product is

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

Graphical analysis of tariffs reveals that

they increase domestic production of the good for which imports face tariffs.

A profit-maximizing firm operates in purely competitive product and resource markets, with the following resource and production schedules. The product price is $10 per unit and the cost per worker is $540. How many workers will the firm employ?

5

Answer the next question on the basis of the data given for two regions, East and West, of a hypothetical world. The nations have the production possibilities for units of food and clothing given below. Which of the following is true?

For the West region, the cost of 15 units of food is 5 units of clothing.

Use the following table to answer the next question. In maximizing its profit, this firm will employ

3 units of labor.

The following table is for a purely competitive market for resources. At a wage rate of $23 per worker, the firm will choose to employ

3 workers.

Use the following figure showing the domestic demand and supply curves for product B in a hypothetical economy to answer the next question. Prior to trade (autarky) consumer surplus equals area

A + B + C

Answer the next question on the basis of the following production possibilities tables for two countries, Latalia and Trombonia: If these two nations specialize on the basis of comparative advantage

Latalia will produce beans and Trombonia will produce pork.

Use the following graph, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product to answer the next question. If this economy was entirely closed to international trade, equilibrium price and quantity would be

Pa and x.

Use the following graph where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product to answer the next question. If the economy is opened to free trade, the price and quantity sold of this product would be

Pc and z.

Suppose two workers can harvest $46 and three workers can harvest $60 worth of apples per day. On the basis of this information we can say that the

marginal revenue product of the third worker is $14.

The change in a firm's total revenue that results from hiring an additional worker is measured by the

marginal revenue product.

Use the graph below to answer the next question. Other things equal, an increase in labor productivity would cause a

shift from D2 to D3.

If the supply of labor in a purely competitive labor market increases, then the product

supply curve for a single employer will shift to the right