Micro Exam 4
The rising demand for health-care industry workers is due to the following factors, except
decreasing prices of labor in the health-care industry.
A union might increase the demand for the labor services of its members by
decreasing the prices of complementary inputs.
A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is
$15
Refer to the total product curve shown in the graph, and assume a competitive labor market. If the firm can sell widgets for $12, then what is the maximum amount it will pay the fourth worker each day?
$24
Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit?
$32
Refer to the table representing Kara's bank account. Assuming that $2,000 was deposited into her account at the beginning of year 1 and no further deposits or withdrawals were made, the interest rate Kara is receiving on her account
10%
In 2015, about ____ percent of employed wage and salary workers belonged to unions.
11.1%
Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be
12 percent and $22 billion
The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assume that the prices of a and b are $15 and $20, respectively. To maximize profits, what combination of a and b should the employer hire?
3 of a and 5 of b
Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. What is the marginal product of the sixth worker?
3 units
Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the demand for this land is given in the table. How much of the farmland will be rented?
400000 acres
Refer to the labor market diagrams. The case of bilateral monopoly is represented by Figure
5
A purely competitive firm in the factor and product markets sells its output for $1 and pays factors PL = $4 and PC = $3. What is the profit-maximizing combination of L and C for the firm?
6 of L and 6 of C
A bank charges one borrower (A) 8 percent interest per year and another borrower (B) 10 percent interest per year. Which of the following is a plausible reason for the higher interest rate for B?
A is borrowing a larger amount than B.
Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that
Alpha should specialize in Y and Beta in X.
Suppose that the opportunity-cost ratio for sugar and almonds is 4S ≡ 1A in Hawaii but 1S ≡ 2A in California. Which state has the comparative advantage in producing almonds?
California
Answer the question on the basis of the accompanying 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
A firm will be hiring labor and capital in profit-maximizing amounts when
MRP capital/price of capital equals MRP labor/price of labor equals 1.
In the short run, a tool manufacturer has a fixed amount of capital. Labor is a variable input. The cost and output structure that the firm faces is depicted in the table below. Assume the product price is $3. Calculate the marginal revenue product and the marginal resource cost, and then complete the table.
MRP: 42, 36, 30, 24,18 MR (labor) C: 18, 20, 22, 24, 26 wage rate: $11 14 workers
"NAFTA" stands for
North American Free Trade Agreement
Which of the following is correct?
Real capital is a resource, but money is not.
Which of the following statements about the European Union (EU) is true?
The EU has abolished most trade barriers among participating countries and has common tariffs applied to non-EU goods.
Which of the following would cause an increase in interest rates in credit markets?
an increase in consumer demand for credit
A shift in union labor demand from D1 to D2 in the diagram might be the result of
an increase in tariffs on products competing with those produced by relevant union workers.
Which is an example of a nontariff barrier (NTB)?
box-by-box inspection requirements for imported fruit
The principal-agent problem, as applied to the labor market, would have the
employer as the principal and the worker as the agent.
In the labor market shown in the graph, if a minimum wage level is set at Wm, it will cause
employment to decrease from B to A.
Occupational licensing has much the same effect as
exclusive unionism.
Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will
export wheat
Which of the following is not a component of the demand for loanable funds?
household saving
Refer to the market for loanable funds, as shown in the graph. Suppose the market for loanable funds is originally in equilibrium at interest rate i0 and quantity Q0. In the next period, the equilibrium interest rate increases to i1 and quantity decreases to Q1. Which of the following could be the cause of this shift?
households decide to save less
A protective tariff will
increase the price and sales of domestic producers.
The labor demand curve of a firm that sells its product in a purely competitive market
is downsloping and flatter than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic) market.
Refer to the diagram. The production of Q1 units of output at an average cost of a
is not possible, given present technology and resource prices.
As it relates to international trade, dumping
is the practice of selling goods in a foreign market at less than cost
In the theory of comparative advantage, a good should be produced in that nation where
its cost is least in terms of alternative goods that might otherwise be produced.
Tariffs
may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).
The primary gain from international trade is
more goods than would be attainable through domestic production alone
If a nation has a comparative advantage in the production of X, this means the nation
must give up less of other goods than other nations in producing a unit of X.
If you pay $10,625 annually on a $125,000 loan and the rate of inflation is 3 percent, then the
nominal rate of interest is 8.5 percent.
If MPa / Pa = MPb / Pb and MRPa / Pa = MRPb / Pb > 1, this firm is
producing its output with the least costly combination of resources but is not producing the profit-maximizing output.
The terms of trade reflect the
ratio at which nations will exchange two goods.
Which type of income contributes the smallest share to total income in the U.S.?
rent
Which of the following resource payments is considered by economists as surplus payments?
rent for land
The elasticity of resource demand measures the
responsiveness of producers to changes in resource prices.
Refer to the graph. Other things equal, an increase in labor productivity would cause a
shift from D2 to D3.
Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that
the firm will use relatively more capital and relatively less labor.
Refer to the diagram. The MRC curve lies above the labor supply curve because
the higher wage needed to attract additional workers must also be paid to the workers already employed.
The World Trade Organization
was established to resolve disputes arising under world trade rules.
A firm considering whether to borrow money to purchase a capital good will compare the rate of interest for the loan with the
rate of return on the investment
Refer to the graph of the supply and demand for loanable funds. A limit of 10 percent on the interest rate that banks can charge for loans will
save borrowers 5 percent and cost lenders 5 percent on the amount loaned
Assume a pencil manufacturer is employing resources C and D in such quantities that the MRPs of the last units hired are $80 and $50, respectively. The price of resource C is $90, and the price of D is $35. This firm
should hire less of C and more of D.
Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?
the infant industry argument
Which factor will increase the demand for loanable funds?
a technological advance that increases returns on investments
Refer to the table, in which the values for columns (2) through (5) are in acres. Positive land rent will occur if the relevant columns are
1), (2), and (3) and (1), (2), and (4).
A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. How many workers will the profit-maximizing firm hire if the wage rate is $8 per day?
5
The table shows a total-product schedule for a resource. Assume that the quantities of other resources the firm employs remain constant. If the firm's product sells for a constant $2 and the price of the resource is a constant $16, the firm will employ how many units of the resource?
5
The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $5 and $8, respectively, what is the profit-maximizing combination of resources?
5 of a and 7 of b
The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest
ATC for that output.
If the wage rate increases,
a purely competitive producer and an imperfectly competitive producer will both hire less labor.
Suppose that you own a 10-acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $30 per acre for seed, $80 per acre for fertilizer, and $70 per acre for equipment rentals and labor. With these inputs, the land will yield 40 bushels of wheat per acre. Now suppose the price at which wheat can be sold is $5 per bushel and that farmers want to earn a normal profit of $10 per acre.
What is the most that any farmer would pay to rent your 10 acres? $100 What if the price of wheat rose to $6 per bushel?$500
In Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles?
country A
If the price of a resource is greater than its marginal revenue product, the firm should
decrease the units of the resource used in order to increase profits.
Noncompeting groups of workers are the result of
differences in the innate and acquired abilities of workers.
Which of the following is not a source of loanable funds?
government budget deficits
Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n)
import quota.
Increases in the productivity of labor result partly from
improvements in technology.
Unnecessary occupational licensing requirements in an industry tend to
raise the price of the product.
"Proprietor's income" refers to income received by
owners of small, unincorporated enterprises.
Compensation paid in proportion to the number of units of personal output best describes
piece rates.
Holding revenues constant, cost minimization by firms is equivalent to
profit maximization.
Refer to the diagrams. Assume that only wheat can be grown on the three grades of land shown in Figures (a), (b), and (c). Also assume that identical amounts of labor, capital, and other needed inputs are used in farming each grade of land. On the basis of these three figures, we can say that
the land shown in Figure (a) only is a "free good."
In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except
the price of labor that the employers must pay.
(Last Word) Frederic Bastiat's satirical argument against protectionism called for protecting domestic producers from
the sun
In comparing a tariff and an import quota, we find that
the tariff generates revenue for the U.S. Treasury, but the quota does not
(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of
the time-value of money
