econ test 4

c. increase in the supply of gasoline.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n) Multiple Choice a. increase in the demand for gasoline. b. decrease in the demand for gasoline. c. increase in the supply of gasoline. d. decrease in the supply of gasoline.

d. A rising rate of labor productivity growth

Which is a valid explanation for real wage growth? Multiple Choice a. The rising cost of capital accumulation b. A contraction of employment in manufacturing industries c. An increase in the quantity of labor d. A rising rate of labor productivity growth

d. All of these are consequences of rent controls.

Which of the following is a consequence of rent controls established to keep housing affordable for the poor? Multiple Choice a. Less rental housing is available, as prospective landlords find it unprofitable to rent at restricted prices. b. The quality of rental housing declines as landlords lack the funds and incentive to maintain properties. c. Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled. d. All of these are consequences of rent controls.

d. The nominal and the real wage may both fall.

Which of the following is correct? Multiple Choice a. The nominal wage may fall, but the real wage can never decline. b. The real wage may fall, but the nominal wage can never decline. c. Both the nominal and the real wage must always rise. d. The nominal and the real wage may both fall.

a. an increase in supply

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? Multiple Choice a. an increase in supply b. an increase in demand c. a decrease in supply d. a decrease in demand

a. a decline in the price of resource X

Which of the following will not cause a shift in the demand for resource X? Multiple Choice a. a decline in the price of resource X b. an increase in the price of the product that resource X is producing c. a decrease in the price of substitute resource Y d, an increase in the productivity of resource X

b. a reduction in the price of cattle feed

Which of the following would not shift the demand curve for beef? Multiple Choice a. a widely publicized study that indicates beef consumption increases one's cholesterol b. a reduction in the price of cattle feed c. an effective advertising campaign by pork producers d. a change in the incomes of beef consumers

d. Demand is the "active," and supply the "passive," determinant of land rent

Which statement is correct? Multiple Choice a. Rent performs an incentive function, but not a rationing function b. The transactions demand for money is highly sensitive to changes in the rate of interest c. Economic profits would tend to expand in a purely competitive, static economy d. Demand is the "active," and supply the "passive," determinant of land rent

a. increase equilibrium price and quantity if the product is a normal good.

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will Multiple Choice a. increase equilibrium price and quantity if the product is a normal good. b. decrease equilibrium price and quantity if the product is a normal good. c. have no effect on equilibrium price and quantity. d. reduce the quantity demanded but not shift the demand curve.

d. 5 units

a. 3 units b. 4 units c. 6 units d. 5 units

c. 4 and 5.

a. 5 only. b. 3 only. c. 4 and 5. d. 1 and 2.

c. W2

a. W4. b. W3. c. W2. d. W1.

c. the higher wage needed to attract additional workers must also be paid to the workers already employed.

a. any number of workers can be hired at the going equilibrium wage rate. b. the firm must lower product price to increase its sales. c. the higher wage needed to attract additional workers must also be paid to the workers already employed. d. there is an inverse relationship between wage rate and the amount of labor employed.

d. 0F represents a price that would result in a shortage of AC.

a. at any price above 0G a shortage would occur. b. 0F represents a price that would result in a surplus of AC. c. a surplus of GH would occur. d. 0F represents a price that would result in a shortage of AC.

d. increase from F to G.

a. decrease from G to F. b. increase from E to F. c. increase from B to C. d. increase from F to G.

b. decrease by approximately 12 percent.

a. increase by approximately 12 percent. b. decrease by approximately 12 percent. c. decrease by approximately 32 percent. d. decrease by approximately 26 percent.

c. unit elastic for price increases that reduce quantity demanded from 5 units to 4 units.

a. inelastic for price declines that increase quantity demanded from 2 units to 3 units. b. elastic for price declines that increase quantity demanded from 5 units to 6 units. c. unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. d. inelastic for price increases that reduce quantity demanded from 4 units to 3 units.

a. is 0abc

a. is 0abc. b. is 0Wbc. c. is Wab. d. cannot be determined.

c. decreases as the labor input L increases.

a. is constant at all levels of L. b. increases at an increasing rate as L increases. c. decreases as the labor input L increases. d. increases at a decreasing rate as L increases.

b. increase the quantity of loanable funds demanded.

a. lower capital investment. b. increase the quantity of loanable funds demanded. c. come about when there is a shortage of loanable funds. d. result from an increase in the desire of firms to borrow funds.

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

a. move from a to b on D1. b. shift from D2 to D3, assuming the output effect exceeds the substitution effect. c. shift from D3 to D2, assuming the output effect exceeds the substitution effect. d. move from b to a on D1.

c. shift from D3 to D2.

a. move from a to b on D1. b. shift from D2 to D3. c. shift from D3 to D2. d. move from b to a on D1.

c. relatively elastic.

a. of unit elasticity. b. relatively inelastic. c. relatively elastic. d. perfectly elastic.

b. an increase in demand has been more than offset by an increase in supply.

a. the equilibrium position has shifted from M to K. b. an increase in demand has been more than offset by an increase in supply. c. the new equilibrium price and quantity are both greater than originally. d. point M shows the new equilibrium position.

b. would be a free resource if demand were D4 or less.

a. will cease to be used in production if demand falls below D4. b. would be a free resource if demand were D4 or less. c. would be an economic (scarce) resource in the case of all four demand curves. d. would be a free resource in the case of all four demand curves.

c. More elastic is the demand for the product the factor helps to make

A change in a factor's price will have a greater effect on the quantity of the factor demanded the: Multiple Choice a. Smaller the change in the factor's price b. Smaller the factor's share of total cost of production c. More elastic is the demand for the product the factor helps to make d. More inelastic is the demand for the product the factor helps to make

a. Decrease in the quantity demanded of the resource

A decrease in the price of a productive resource, ceteris paribus, will cause all of the following except a(n): Multiple Choice a. Decrease in the quantity demanded of the resource b. Substitution of the resource for other productive resources c. Increase in the quantities produced and sold of commodities using the resource d. Downward shift of the average total cost curves for all firms using the resource

b. indicates the quantity demanded at each price in a series of prices.

A demand curve Multiple Choice a. shows the relationship between price and quantity supplied. b. indicates the quantity demanded at each price in a series of prices. c. graphs as an upsloping line. d. shows the relationship between income and spending.

a. More B and less A should be used

A firm combines two resources, A and B, to produce an output Q. Their respective marginal revenue products are $30 and $21. A costs $15 a unit and B $7 a unit. To reduce the cost of Q: Multiple Choice a. More B and less A should be used b. More A and less B should be used c. More of both resources should be used d. Less of both resources should be used

b. Will shift to the left if the price of the product the labor is producing should fall

A firm's demand curve for labor: Multiple Choice a. Is its marginal product curve b. Will shift to the left if the price of the product the labor is producing should fall c. Is perfectly elastic if the firm is selling its product in a purely competitive market d. Reflects a direct (positive) relationship between the number of workers hired and the money wage rate

b. Monopsonist

A market where there is only a single buyer is called a(n): Multiple Choice a. Monopolist b. Monopsonist c. Oligopolist d. Dominant firm

c. the "price" required to retain entrepreneurial talent in some particular line of production.

A normal profit is Multiple Choice a. the average profitability of a firm over one complete business cycle. b. calculated by subtracting explicit costs from total revenue. c. the "price" required to retain entrepreneurial talent in some particular line of production. d. the amount by which total revenue exceeds total operating costs.

b. can be represented by a line parallel to the vertical axis.

A perfectly inelastic demand schedule Multiple Choice a. rises upward and to the right but has a constant slope. b. can be represented by a line parallel to the vertical axis. c. cannot be shown on a two-dimensional graph. d. can be represented by a line parallel to the horizontal axis.

a. expand employment if marginal revenue product exceeds marginal resource cost.

A profit-maximizing firm will Multiple Choice a. expand employment if marginal revenue product exceeds marginal resource cost. b. reduce employment if marginal revenue product exceeds marginal resource cost. c. expand employment if marginal revenue product equals marginal resource cost. d. reduce employment if marginal revenue product equals marginal resource cost.

c. consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that Multiple Choice a. consumer incomes have declined, and consumers now want to buy less of A at each possible price. b. the price of A has increased and, as a result, consumers want to purchase less of it. c. consumer preferences have changed in favor of A so that they now want to buy more at each possible price. d. the price of A has declined and, as a result, consumers want to purchase more of it.

c. The same as the marginal revenue product schedule

According to the marginal productivity theory of resource demand, the labor-demand schedule for a producer selling in a purely competitive market is: Multiple Choice a. The same as the marginal resource cost schedule b. The same as the marginal productivity schedule c. The same as the marginal revenue product schedule d. Independent of the value of the product being produced

d. Accidents to employees

All of the following are uninsurable business risks, except: Multiple Choice a. Changes in consumer tastes b. Changes in government policies c. Economic recession d. Accidents to employees

a. and employment will both be lower.

As compared to a purely competitive labor market, in a nonunionized monopsonistic labor market, wages Multiple Choice a. and employment will both be lower. b. will be higher, but employment will be lower. c. will be lower, but employment will be higher. d. and employment will both be higher.

b. the output effect is greater than the substitution effect.

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore, Multiple Choice a. capital is very highly substitutable for labor. b. the output effect is greater than the substitution effect. c. the income effect is greater than the output effect. d. the substitution effect is greater than the output effect.

b. the quantity demanded at each price in a set of prices is greater.

By an "increase in demand," economists mean that Multiple Choice a. product price has fallen, so consumers move down to a new point on the demand curve. b. the quantity demanded at each price in a set of prices is greater. c. the quantity demanded at each price in a set of prices is smaller. d. a leftward shift of the demand curve has occurred.

c. Lower wage rates and hire fewer workers than the purely competitive firm

Compared to a purely competitive firm, a monopsonist will pay: Multiple Choice a. A higher wage rate to its workers b. Lower wages but hire more workers than the purely competitive firm c. Lower wage rates and hire fewer workers than the purely competitive firm d. Lower wages while hiring the same quantity of workers as the purely competitive firm

a. producing its output with the least costly combination of resources but is not producing the profit-maximizing output.

If MPa / Pa = MPb / Pb and MRPa / Pa = MRPb / Pb > 1, this firm is Multiple Choice a. producing its output with the least costly combination of resources but is not producing the profit-maximizing output. c. maximizing profits but failing to minimize costs. neither maximizing profits nor minimizing costs. d. combining resources a and b so as to minimize costs and maximize profits.

a. MRC curve is also upsloping.

If a firm faces an upsloping labor supply curve (and there is no union or minimum wage), its Multiple Choice a. MRC curve is also upsloping. b. MRC curve is perfectly elastic. c. MRP curve is perfectly inelastic. d. MRP curve is also upsloping.

a. MRPD / MRCD = MRPF / MRCF = 1.

If a firm is hiring variable resources D and F in imperfectly competitive input markets, it will maximize profits by employing D and F in such quantifies that Multiple Choice a. MRPD / MRCD = MRPF / MRCF = 1. b. MRPD / MRCD = MRPF / MRCF. c. MRPD / PD = MRPF / PF = 1. d. MRPD / PD = MRPF / PF.

d. neither the equilibrium price nor the equilibrium quantity will be affected.

If a legal ceiling price is set above the equilibrium price, Multiple Choice a. a shortage of the product will occur. b. a surplus of the product will occur. c. a black market will evolve. d. neither the equilibrium price nor the equilibrium quantity will be affected.

d. Less labor should be employed

If the marginal revenue product (MRP) of labor is less than the wage rate: Multiple Choice a. The firm is making profits b. The firm is incurring losses c. More labor should be employed d. Less labor should be employed

a. Real rate of interest is 8 percent

If you pay $1,980 annually on an $18,000 loan and the rate of inflation is 3 percent, then the: Multiple Choice a. Real rate of interest is 8 percent b. Nominal rate of interest is 8 percent c. Real rate of interest is 11 percent d. Nominal rate of interest is 14 percent

a. Payments for land may be used by the government to further the wellbeing of the nation

In a market system, private ownership of land leads to the following results, except: Multiple Choice a. Payments for land may be used by the government to further the wellbeing of the nation b. Land rent would reflect the opportunity cost of land c. Land would be allocated to its best possible uses d. It would aid economic growth and development because land rents would reflect changes in tastes and technologies

a. amount by which the addition of one more worker increases a firm's total revenue.

Marginal revenue product measures the Multiple Choice a. amount by which the addition of one more worker increases a firm's total revenue. b. decline in product price that a firm must accept to sell the extra output of one more worker. c. increase in total resource cost resulting from the hire of one extra unit of a resource. d. increase in total revenue resulting from the production of one more unit of a product.

c. Larger the number of close substitute resources available

Other things being equal, the elasticity of demand for labor will be greater the: Multiple Choice a. Smaller the proportion of total costs accountable for by labor costs b. Smaller the elasticity of demand for the product it produces c. Larger the number of close substitute resources available d. More rapid the decline in its marginal productivity

a. The higher the risk involved

Other things equal, the interest rate on a loan will be larger: Multiple Choice a. The higher the risk involved b. The larger the amount of the loan c. The shorter the length of the loan d. If loan interest is exempt from taxation

c. The longer the length of the loan

Other things equal, the interest rate on a loan will be larger: Multiple Choice a. The less the risk involved b. The larger the amount of the loan c. The longer the length of the loan d. If loan interest is exempt from taxation

b. the development of a low-cost electric automobile

Other things equal, which of the following might shift the demand curve for gasoline to the left? Multiple Choice a. the discovery of vast new oil reserves in Montana b. the development of a low-cost electric automobile c. an increase in the price of train and air transportation d. a large decline in the price of automobiles

a. an increase in the minimum wage would increase the total incomes of teenage workers as a group.

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that Multiple Choice a. an increase in the minimum wage would increase the total incomes of teenage workers as a group. b. an increase in the minimum wage would decrease the total incomes of teenage workers as a group. c. the unemployment effect of an increase in the minimum wage would be relatively large. d. the cross elasticity of demand between teenage and adult workers is positive and very large.

c. $.25

Suppose a competitive firm in both the factor and product markets is using inputs such that the marginal product of labor is 16 and the price of labor is $4 per unit, while the marginal product of capital is 12 and the price of capital is $3 per unit. At the maximum profit equilibrium point, the price of the product is: Multiple Choice a. $3 b. $4 c. $.25 d. Between $3 and $4

b. $1,600.

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is Multiple Choice a. $400. b. $1,600. c. $160. d. $85.

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

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: Multiple Choice a. The union will have difficulty recruiting new members b. Union members will be able to work more overtime than before c. This firm will make up for the higher wage rate by expanding output d. Not everyone who wants to work at the new wage will be able to find jobs

c. positive, and therefore these goods are substitutes.

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is Multiple Choice a. negative, and therefore these goods are substitutes. b. negative, and therefore these goods are complements. c. positive, and therefore these goods are substitutes. d. positive, and therefore these goods are complements.

a. the labor demand curve must have independently shifted to the right.

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded increased by 10 percent. We can conclude that Multiple Choice a. the labor demand curve must have independently shifted to the right. b. labor demand is highly elastic. c. the coefficient of labor demand elasticity is less than 1. d. labor demand is unit-elastic.

a. improved technology for producing Z

Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices? Multiple Choice a. improved technology for producing Z b. an increase in the prices of the resources used to make Z c. an increase in the excise tax on product Z d. increases in the incomes of the buyers of Z

d. No conclusion can be reached with respect to the elasticity of supply.

Suppose the price of a product rises and the total revenue of sellers increases. Multiple Choice a. It can be concluded that the demand for the product is elastic. b. It can be concluded that the supply of the product is elastic. c. It can be concluded that the supply of the product is inelastic. d. No conclusion can be reached with respect to the elasticity of supply.

b. Craft union

The American Medical Association, a physicians' union, is a good example of a(n): Multiple Choice a. Demand-enhancing union b. Craft union c. Inclusive union d. Industrial union

c. Demand for the resource decreases

The aggregate economic rent received by a productive resource will decrease, ceteris paribus, whenever the: Multiple Choice a. Demand for the resource increases b. Price of the resource decreases c. Demand for the resource decreases d. Supply curve shifts to the right

b. Labor demand has increased more rapidly than labor supply

The basic explanation for high real wages in the United States and other industrially advanced economies is that the: Multiple Choice a. Labor supply has increased more rapidly than labor demand b. Labor demand has increased more rapidly than labor supply c. Unemployment in these nations has remained relatively consistent d. Inflation rate in these nations has increased faster than the rate of increase in nominal wages

c. the marginal revenue product.

The change in a firm's total revenue that results from hiring an additional worker is measured by Multiple Choice a. the marginal product. b. the marginal revenue. c. the marginal revenue product. d. the average revenue product.

b. a decrease in the productivity of labor.

The demand curve for labor would shift leftward as the result of Multiple Choice a. an increase in the price of the product labor is producing. b. a decrease in the productivity of labor. c. an increase in the price of labor. d. a decrease in the price of capital, provided the output effect exceeds the substitution effect.

a. less price elastic than the demand for Honda Accords.

The demand for autos is likely to be Multiple Choice a. less price elastic than the demand for Honda Accords. b. more price elastic than the demand for Honda Accords. c. of the same price elasticity as the demand for Honda Accords. d. perfectly inelastic.

c. relatively price inelastic.

The demand schedules for such products as eggs, bread, and electricity tend to be Multiple Choice a. perfectly price elastic. b. of unit price elasticity. c. relatively price inelastic. d. relatively price elastic.

b. the quantities demanded and supplied of loanable funds.

The equilibrium interest rate equates Multiple Choice a. nominal and real interest rates. b. the quantities demanded and supplied of loanable funds. c. consumption and saving. d. taxes and government spending.

d. Is perfectly elastic

The individual firm which hires labor under competitive conditions faces a labor supply curve which: Multiple Choice a. Slopes downward to the right b. Is perfectly elastic c. Is perfectly inelastic d. Is of unit elasticity

a. production technology.

The location of the product supply curve depends on Multiple Choice a. production technology. b. the number of buyers in the market. c. the tastes of buyers. d. the location of the demand curve.

a. price of A with the MRP of A.

The purely competitive employer of resource A will maximize the profits from A by equating the Multiple Choice a. price of A with the MRP of A. b. marginal productivity of A with the MRC of A. c. marginal productivity of A with the price of A. d. price of A with the MRC of A.

d. subtracting the rate of inflation from the nominal interest rate.

The real interest rate can be estimated by Multiple Choice a. subtracting the pure interest rate from the nominal interest rate. b. dividing the nominal interest rate by the consumer price index. c. subtracting the nominal interest rate from the rate of inflation. d. subtracting the rate of inflation from the nominal interest rate.

b. Lenders are more willing to lend at higher, rather than lower, interest rates

The supply curve for loanable funds is upward-sloping because: Multiple Choice a. Lenders are more willing to lend at lower, rather than higher, interest rates b. Lenders are more willing to lend at higher, rather than lower, interest rates c. Borrowers are more willing to borrow at lower, rather than higher, interest rates d. Borrowers are more willing to borrow at higher, rather than lower, interest rates

d. 7 percent and quantity supplied rises by 5 percent.

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by Multiple Choice q. 5 percent and quantity supplied rises by 7 percent. b. 8 percent and quantity supplied rises by 8 percent. c. 10 percent and quantity supplied remains the same. d. 7 percent and quantity supplied rises by 5 percent.

c. perfectly inelastic.

The total supply of land is Multiple Choice a. upsloping. b. perfectly elastic. c. perfectly inelastic. d. greater in the short run than in the long run.

c. a higher minimum wage makes less-skilled workers less substitutable for union workers.

Unions might support a higher minimum wage because Multiple Choice a. their constitutions obligate them to do so. b. they feel a higher minimum wage will lower labor's tax payments for welfare programs. c. a higher minimum wage makes less-skilled workers less substitutable for union workers. d. the minimum wage is better targeted than are alternative income-maintenance programs.

c. decrease the demand for union labor through the output effect.

Unions often oppose increases in the prices of complementary inputs. (For example, truck drivers may oppose increases in taxes on diesel fuel.) They do this because increases in the prices of complementary inputs might Multiple Choice a. increase the supply of competing labor through the output effect. b. increase the supply of competing labor through the substitution effect. c. decrease the demand for union labor through the output effect. d. decrease the demand for union labor through the substitution effect.

b. related to the demand for the product or service labor is producing.

When economists say that the demand for labor is a derived demand, they mean that it is Multiple Choice a. dependent on government expenditures for public goods and services. b. related to the demand for the product or service labor is producing. c. based on the desire of businesses to exploit labor by paying below equilibrium wage rates. d. based on the assumption that workers are trying to maximize their money incomes.