MicroQuiz4

a) MRP of labor = MRC of labor.

A profit-maximizing firm will employ labor up to the point where the a) MRP of labor = MRC of labor. b) MP of labor = MRC of labor. c) MC = MRP. d) MP = MC.

b) an increase in product demand

As the baby boomers in America grow older, the demand for health care workers increases. This would be an example of which determinant of labor demand? a) an increase in labor productivity b) an increase in product demand c) a decrease in the price of another resource d) an increase in the price of another resource

d) the amount to which some current sum of money will grow over time.

The "future value" of a sum of money refers to a) the estimated value of that money invested in a stock portfolio at some future date. b) the purchasing power of a given amount of money adjusted for price changes. c) today's value of a sum of money to be received in the future. d) the amount to which some current sum of money will grow over time.

b) craft union.

The American Medical Association, a physicians' union, is a good example of a(n) a) demand-enhancing union. b) craft union. c) inclusive union. d) industrial union.

b) 25 percent.

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is a) 20 percent. b) 25 percent. c) 30 percent. d) 40 percent.

c) raise the price by $1.

If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will a) raise the price by less than $1. b) raise the price by more than $1. c) raise the price by $1. d) lower the price by $1.

a) entirely on the buyer.

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be a) entirely on the buyer. b) mostly on the buyer. c) entirely on the seller. d) mostly on the seller.

d) 20 percent

If the desired real rate of interest is 5 percent and the expected rate of inflation is 15 percent, what is the nominal rate of interest? a) 5 percent b) 10 percent c) 15 percent d) 20 percent

a) $8,638

If the interest rate is 5 percent, what is the present value of $10,000 received three years from now? a) $8,638 b) $9,000 c) $11,600 d) $11,000

d) less labor should be employed.

If the marginal revenue product (MRP) of labor is less than the wage rate, 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) greater, the more elastic the demand for the product.

If the price of capital declines, the consequent output effect would be a) greater, the more elastic the demand for the product. b) greater, the less elastic the demand for the product. c) negative. d) of consequence only if capital and labor are used in fixed proportions.

b) marginal resource cost curve for a single competitive firm in the industry to shift up.

If the wage rate in a purely competitive labor market increases, it will cause the a) marginal resource cost curve for a single competitive firm in the industry to shift down. b) marginal resource cost curve for a single competitive firm in the industry to shift up. c) labor supply curve for a single competitive firm to shift downward. d) labor supply curve for the industry to shift rightward.

d) quantity employed will decrease, but the effect on wages is indeterminate.

If there is a decrease in the demand for union electrical workers and at the same time there is a drastic cutback in the numbers of electricians trained by the union, then the a) wages of electricians are likely to increase and the quantity employed will decrease. b) wages of electricians are likely to increase and the quantity employed will increase. c) quantity employed will increase, but the effect on wages is indeterminate. d) quantity employed will decrease, but the effect on wages is indeterminate.

c) 22.4

In 2016, U.S. governments (local, state, and federal) employed approximately how many million workers? a) 14.0 b) 19.4 c) 22.4 d) 11.9

c) postal service and national defense

In 2016, the largest portion of federal employees were in which of the following sectors? a) education and health care b) police and natural resources c) postal service and national defense d) judicial, police, and administration

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 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.

c) consumer credit-card rate

Which of the following interest rates is usually the highest? a) 30-year mortgage rate b) 20-year Treasury bond rate c) consumer credit-card rate d) prime rate of banks

c) a NASA payment to Boeing Corporation for space hardware

Which of the following is an exhaustive governmental outlay? a) a federal $5,000 subsidy check to an Illinois farmer b) a Temporary Assistance to Needy Families payment made by the state of New York c) a NASA payment to Boeing Corporation for space hardware d) a federal old age insurance payment to a retired coal miner

d) capital

Which of the following is considered to be an economic resource? a) rent b) money c) interest d) capital

c) The primary federal tax system is progressive, while the primary state and local tax systems are regressive.

Which of the following is correct about the U.S. tax system? a) The primary federal tax system is regressive, while the primary state and local tax systems are progressive. b) Both the primary federal tax system and the primary state and local tax systems are regressive. c) The primary federal tax system is progressive, while the primary state and local tax systems are regressive. d) Both the primary federal tax system and the primary state and local tax systems are progressive.

c) The nominal interest rate is the real interest rate less the rate of inflation.

Which of the following is incorrect? a) The nominal interest rate is the rate of interest expressed in terms of current dollars. b) The real interest rate is the rate of interest expressed in terms of dollars of constant, or inflation-adjusted, value. c) The nominal interest rate is the real interest rate less the rate of inflation. d)During periods of inflation, the nominal interest rate will exceed the real interest rate.

c) education

Which of the following is the largest expenditure item of local governments? a) highways b) welfare c) education d) public safety

c) sales and excise taxes

Which of the following is the most important source of tax revenue for state governments? a) personal income tax b) property taxes c) sales and excise taxes d) corporate income tax

c) the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product

Which of the following represents an uninsurable risk to a business firm? a) the possibility that its warehouse will burn down b) the possibility that several of its workers will be injured at work c) the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product d) the possibility that a tornado will damage the plant and stop production for a month

b) rent for land

Which of the following resource payments is considered by economists as surplus payments? a) wages for labor b) rent for land c) interest for capital d) profits for entrepreneurship

a) Bob is willing to forgo receiving $100 today in order to receive $110 next month.

Which of the following statements best illustrates the time-value of money concept? a) Bob is willing to forgo receiving $100 today in order to receive $110 next month. b) Tom is indifferent between receiving $50 now and receiving $50 six months from now. c) Terry works for an hourly wage instead of a fixed salary. d) Jeff would prefer to receive $200 at the end of the year instead of $220 now.

d) general sales taxes

Which of the following taxes is most likely to be regressive? a) personal income taxes b) corporate income taxes c) estate taxes d) general sales taxes

b) talent.

(Consider This) A winner-takes-all market, like that for entertainers, exhibits huge differences between the top talents and the next tier of artists in all of the following aspects, except a) marginal revenue product. b) talent. c) earnings. d) media hype.

d) Lotteries are progressive in nature, with higher income families playing more frequently.

(Consider This) Which of the following claims is not made by defenders of lotteries? a) Lotteries are a relatively painless way to fund important government services. b) Lotteries help reduce organized crime by providing an alternative to illegal gambling. c) Lotteries are preferable to taxes because they are voluntary. d) Lotteries are progressive in nature, with higher income families playing more frequently.

d) The distribution of after-tax income would become less equal.

(Last Word) Which of the following is necessarily true if the government were to replace a progressive income tax system with a proportional one? a) Lower income groups would pay less tax. b) Higher income groups would pay less tax. c) Lower income groups would pay more tax. d) The distribution of after-tax income would become less equal.

b) A is borrowing a larger amount than B.

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) A is borrowing the money for a longer period than B. b) A is borrowing a larger amount than B. c) B is using the money for a less risky project than A. d) B has a better credit rating than A.

b) "wage-taker" behavior by workers.

A characteristic of a purely competitive labor market would be a) "price-maker" behavior by the workers. b) "wage-taker" behavior by workers. c) many firms selling the same product. d) many workers with different skills.

c) MPx/ Px = MPy / Py.

A cost-minimizing firm using two inputs, x and y, will employ inputs so that a) MPx = MPy. b) Px / MPy = Py / MPx. c) MPx/ Px = MPy / Py. d) Px = Py.

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, 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.

c) 8

A firm faces the labor productivity and cost schedule in the table. How many workers will this profit-maximizing firm employ? a) 6 b) 7 c) 8 d) 9

d) revenue product equals the additional cost of hiring an extra worker.

A firm finds that it must increase wages to attract extra workers. The firm will hire labor up to the point where the marginal a) product of labor equals the wage rate. b) revenue product of labor is greater than the wage rate. c) revenue product of labor starts to decline. d) revenue product equals the additional cost of hiring an extra worker.

b) 3/5 = 0.6

A firm is observed using 15 units of input X when the price of X is $2. If the price of X increases to $4, the firm uses only 6 units of it. What is the price elasticity of demand for input X? (Use the simple formula for percentage change: [(new# −old#)/old#] × 100%.) a) 1/2 = 0.5 b) 3/5 = 0.6 c) 5/3 = 1.67 d) 2

d) the current amounts of labor and capital.

A firm is producing 100 pencils per week. The production process requires labor and capital as inputs. Labor costs $6 per labor hour, and capital costs $12 per machine hour. Currently, the marginal product of labor is 18 pencils and the marginal product of capital is 36 pencils. To minimize the cost of producing this level of output, the firm should use a) more capital and less labor. b) more labor and less capital. c) less labor and less capital. d) the current amounts of labor and capital.

b) perfectly elastic.

A firm operating in a purely competitive resource market faces a resource supply curve that is a) perfectly inelastic. b) perfectly elastic. c) highly inelastic. d) highly elastic.

b) substitution effect.

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the a) output effect. b) substitution effect. c) idea of derived demand. d) law of diminishing returns.

d) marginal resource cost is equal to their MRP.

A firm will find it profitable to hire workers up to the point at which their a) marginal resource cost equals their wage rate. b) wage rate equals product price. c) MP is equal to their MRP. d) marginal resource cost is equal to their MRP.

c) faces a marginal resource (labor) cost that is greater than the wage rate.

A monopsonistic employer a) has a perfectly elastic labor supply curve. b) is necessarily a monopolist in the product market. c) faces a marginal resource (labor) cost that is greater than the wage rate. d) faces a marginal resource (labor) cost that is less than the wage rate.

d) lies above the labor supply curve because the higher wage paid to an additional worker must also be paid to all other employed workers.

A monopsonistic employer's marginal resource (labor) cost curve a) is always more elastic than the labor supply curve. b) coincides with the labor supply curve. c) lies below the labor supply curve because the higher wage paid to an additional worker must also be paid to all other employed workers. d) lies above the labor supply curve because the higher wage paid to an additional worker must also be paid to all other employed workers.

b) regressive tax.

A tax that takes a larger proportion of income from low-income groups than from high-income groups is a a) stabilizing tax. b) regressive tax. c) progressive tax. d) proportional tax

b) decreasing the prices of complementary inputs.

A union might increase the demand for the labor services of its members by a) decreasing the demand for the product it is producing. b) decreasing the prices of complementary inputs. c) decreasing the prices of substitute inputs. d) increasing the prices of complementary inputs.

b) it reduces turnover among minimum-wage workers, prompts employers to use them more efficiently, and thus raises their average productivity.

According to some supporters of the minimum wage, it has very small or even nonexistent negative employment effects because a) the demand for minimum-wage labor is highly elastic. b) it reduces turnover among minimum-wage workers, prompts employers to use them more efficiently, and thus raises their average productivity. c) it encourages teenagers to stay in school. d) employers substitute lower fringe benefits for higher pay, keeping their compensation costs the same.

a) the resources they use.

All firms have to incur costs because of a) the resources they use. b) buyers they sell to. c) the profits they earn. d) revenues they receive.

c) $20 billion.

Answer the question using the table. Figures are in billions of dollars. A usury law that sets the interest rate 4 percent below the market rate of interest will result in a shortage of loanable funds of a) $10 billion. b) $14 billion. c) $20 billion. d) $30 billion.

c) 12 percent and $180 billion.

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 a) 8 percent and $140 billion. b) 10 percent and $140 billion. c) 12 percent and $180 billion. d) 14 percent and $240 billion.

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, 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.

c) decrease in output will be greater the more elastic the demand curve.

Assume the supply curve for product X is perfectly elastic and that government imposes a $2-per-unit excise tax. We can conclude that the resulting a) increase in output will be greater the less elastic the demand curve. b) decrease in output will be greater the less elastic the demand curve. c) decrease in output will be greater the more elastic the demand curve. d) increase in output will be greater the more elastic the demand curve.

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

Compared to a purely competitive firm, a monopsonist will pay 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.

c) decreasing the supply of labor through licensing and training requirements.

Craft unions have typically been most effective in raising wage rates by a) legislating a minimum wage rate above the competitive equilibrium level. b) increasing the demand for labor of union members. c) decreasing the supply of labor through licensing and training requirements. d) organizing all of the employees in a factory or industry and demanding wage hikes.

d) working for someone else.

Economic profits are not payments received for a) taking uninsurable risks in a firm. b) making products or production innovations. c) starting up a business. d) working for someone else.

d) keep some low-income people from obtaining credit and loans.

Effective usury laws a) subsidize lenders. b) penalize those who borrow at the below-market interest rate. c) improve efficiency in investing. d) keep some low-income people from obtaining credit and loans.

b) hospitals may possess some degree of monopsony power.

Empirical studies suggest that, other things equal, the smaller the number of hospitals in a city, the lower are nurses' wages. This is evidence that a) the labor markets of nurses are purely competitive. b) hospitals may possess some degree of monopsony power. c) the minimum wage does not apply to nurses. d) labor unions have been ineffective in increasing the wages of nurses.

d) MRP = MRC >W.

Given: MRP = marginal revenue product; MRC = marginal resource cost; W = wage rate. A firm that sells its product in a purely competitive market, but is a monopsonist in its labor market, would hire the quantity of labor where a) MRP = MRC = W. b) MRP > MRC = W. c) MRP > MRC >W. d) MRP = MRC >W.

d) influence the interest rate and the levels of investment, output, and prices in the economy.

Government monetary authorities manipulate the supply of money in the economy primarily to a) ensure high profits for commercial banks. b) provide sufficient currency to individuals and businesses to conduct their daily business. c) keep the dollar strong measured against the currencies of foreign nations. d) influence the interest rate and the levels of investment, output, and prices in the economy.

b) exhaustive because they directly absorb or employ resources and account for production.

Government purchases of goods and services are a) nonexhaustive because they do not directly absorb resources and account for production. b) exhaustive because they directly absorb or employ resources and account for production. c) both exhaustive and nonexhaustive because in some cases they do directly absorb resources or account for production and in other cases they do not. d) neither exhaustive nor nonexhaustive because of the tax revenues that finance these purchases.

a) the productive skills and knowledge that workers acquire from education and training.

Human capital is best defined as a) the productive skills and knowledge that workers acquire from education and training. b) the substitution of labor for machinery in the production process. c) any piece of machinery that must be combined with labor to be productive. d) the exchange of money for real assets.

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 a) producing its output with the least costly combination of resources but is not producing the profit-maximizing output. b) maximizing profits but failing to minimize costs. c) 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 a) MRC curve is also upsloping. b) MRC curve is perfectly elastic. c) MRP curve is perfectly inelastic. d) MRP curve is also upsloping.

c) a bilateral monopoly.

If a single large employer bargains with an inclusive union, the resulting labor market model can best be described as a) a cartel. b) countervailing power. c) a bilateral monopoly. d) an internal labor market.

d) as the tax base increases, the marginal tax rate is greater than the average tax rate.

If a tax is progressive, then a) the average and marginal tax rates are always equal. b) as the tax base increases, the marginal tax rate declines. c) as the tax base rises, the average tax rate is greater than the marginal tax rate. d) as the tax base increases, the marginal tax rate is greater than the average tax rate.

c) monopsony.

In a certain labor market, workers are required to have a certain skill-set. There are many workers who have the skill-set, but they can only find employment in one company. That one company is called a a) pure monopoly. b) monopolistic competitor. c) monopsony. d) natural monopoly.

b) increase in the price of the resource.

In a competitive resource market, a decrease in the demand for a productive resource, ceteris paribus, will cause all of the following except a(n) a) decrease in the price of the resource. b) increase in the price of the resource. c) decrease in the total income earned by all units of the resource. d) decrease in the number of units of the resource that are employed.

a) Private owners will face no cost in using land for one purpose rather than another.

In a market system, private ownership of land does not lead to which of the following results? a) Private owners will face no cost in using land for one purpose rather than another. b) Land rent reflects the opportunity cost of land. c) Land is allocated to its best possible uses. d) Private land ownership aids economic growth because land rents reflect changes in tastes and technologies.

b) total income earned by households.

In considering real-world situations, we must recognize the fact that by "wages" in this chapter, we mean the following, except the a) total price that employers pay to obtain labor. b) total income earned by households. c) total compensation of workers. d) total of direct payments and fringe benefits to workers.

b) economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy.

In his book Progress and Poverty, Henry George argued that a) poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs. b) economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy. c) rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth. d) taxes on rents are undesirable because they have a severe disincentive effect on landlords.

b)real interest rate.

In making an investment decision, a business firm is most interested in the a) nominal interest rate. b)real interest rate. c) nominal interest rate minus the real interest rate. d) future supply of loanable funds.

b) real interest rate.

In making an investment decision, a business firm is most interested in the a)nominal interest rate. b)real interest rate. c) nominal interest rate minus the real interest rate. d) future supply of loanable funds.

c) the wage rate paid by the employer varies directly with the number of workers employed.

In monopsony, a) each firm employs a small portion of the total supply of labor. b) the workforce is highly mobile. c) the wage rate paid by the employer varies directly with the number of workers employed. d) the employer is a "wage taker."

b) C only.

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by producers is shown by area(s) a) A + B + F. b) C only. c) A + B + C. d) E + F.

c) A + B + C.

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total tax payment to government is shown by area(s) a) A only. b) A + B + C + E + F. c) A + B + C. d) E + F.

d) net taxes.

In the diagram, if box E represents government, box C businesses, and box A households, then flows (11) and (12) would represent a) goods and services. b) government expenditures. c) resources. d) net taxes.

a) the services of NASA astrophysicists.

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (4) might represent a) the services of NASA astrophysicists. b) the purchase of stealth bombers. c) personal income taxes. d) investment spending by private corporations.

a) price paid for the use of money.

Interest is the a) price paid for the use of money. b) opportunity cost of time. c) expectation of a future return on investment. d) reward for consuming rather than saving.

a) Jack has a chronic illness and would lose health care coverage if he changed jobs.

Jack and Jill have identical skills and training, but Jill earns higher wages in her job. Which of the following reasons would best explain why Jill earns more than Jack? a) Jack has a chronic illness and would lose health care coverage if he changed jobs. b) Jill suffers from gender discrimination in the workplace. c) Jack has better access to information about available jobs in his field. d) Jill is reluctant to move to a new city because she wants to live near family.

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

Labor unions may attempt to raise wage rates by a) increasing the supply of labor. b) forcing employers, under the threat of a strike, to pay above-equilibrium wage rates. c) decreasing the demand for labor. d) increasing the price of complementary resources.

d) amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

Marginal resource cost refers to the a) increase in total revenue resulting from the sale of the extra output of one more worker. b) price at which additional units of a resource can be hired in an imperfectly competitive resource market. c) increase in total cost resulting from producing one more unit of output. d) amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

b) exclusive unionism.

Occupational licensing has much the same effect as a) inclusive unionism. b) exclusive unionism. c) bilateral monopoly. d) monopsony.

b) the firm uses labor-intensive production techniques.

Other things being equal, a firm's demand for labor is likely to be more elastic than its demand for capital if a) labor costs are a smaller proportion of total costs than capital costs. b) the firm uses labor-intensive production techniques. c) substitutions of one resource for another are difficult. d) the demand for its final product is price elastic.

b) increases in wage rates will result in greater payrolls.

Other things being the same, if the demand for labor is inelastic, a) decreases in wage rates will result in greater payrolls. b) increases in wage rates will result in greater payrolls. c) increases in wage rates will result in smaller payrolls. d) decreases in wage rates will increase both employment and worker incomes.

b) increase the demand for loanable funds and increase the equilibrium interest rate.

Other things equal, an increase in the productivity of capital goods will a) increase the demand for loanable funds and decrease the equilibrium interest rate. b) increase the demand for loanable funds and increase the equilibrium interest rate. c) increase the supply of loanable funds and decrease the equilibrium interest rate. d) increase the supply of loanable funds and increase the equilibrium interest rate.

a) large proportion of total costs and product demand is elastic.

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a a) large proportion of total costs and product demand is elastic. b) small proportion of total costs and product demand is elastic. c) large proportion of total costs and product demand is inelastic. d) small proportion of total costs and product demand is inelastic.

d) principal-agent problem.

Pay-for-performance systems seek to deal with the a) unemployment problem. b) monitoring problem. c) discouraged worker problem. d) principal-agent problem.

b) relatively high, but not as high as in some other industrially advanced nations.

Real wages in the United States are a) the highest in the world. b) relatively high, but not as high as in some other industrially advanced nations. c) much higher than output per worker. d) higher than nominal wages.

b) prices of goods and services rose less rapidly than nominal-wage rates.

Real wages would rise if the a) prices of goods and services rose more rapidly than nominal-wage rates. b) prices of goods and services rose less rapidly than nominal-wage rates. c) prices of goods and services and wage rates both rose. d) prices of goods and services and wage rates both fell.

d) not affect the quantity of land available to society.

Refer to the diagram. If demand is D2, a tax of $X per acre will a) encourage the substitution of land for other productive resources. b) lower the cost of land to individual farmers. c) reduce the demand for land to, say, D3 or D4. d) not affect the quantity of land available to society.

c) B and G.

Refer to the diagram. If this labor market is purely competitive, the wage rate and level of employment respectively will be a) D and E. b) C and E. c) B and G. d) B and F.

c) can say that the land in Figure (c) is most productive.

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 a) can say that the land in Figure (a) is most productive. b) can say that the land in Figure (b) is most productive. c) can say that the land in Figure (c) is most productive. d) cannot compare the productivity of the three grades of land.

c) is a "wage taker."

Refer to the diagrams. The firm a) is a monopsonist in the hiring of labor. b) must be selling its product in an imperfectly competitive market. c) is a "wage taker." d) must pay a higher marginal resource cost for each successive worker.

a) $102.

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, the firm's economic profits will be a) $102. b) $82. c) $67. d) $28.

b) an increase in the wage rate.

Refer to the graph. A move from b to a along labor demand curve D1 would result from a) a decrease in the price of a substitute resource, assuming that the substitution effect exceeds the output effect. b) an increase in the wage rate. c) a decrease in the wage rate. d) an increase in the demand for the product that this labor is helping to produce.

b) Wu.

Refer to the graph. An inclusive union or an industrial union will set the wage rate at a) Wc. b) Wu. c) Wm. d) a rate that cannot be determined from the graph.

a) $1 from the buyers and $3 from the sellers.

Refer to the graph. Assume the market for this product is in equilibrium at the intersection of D2 and S1. The shift in supply from S1 to S2 is due to an excise tax imposed on the product. The incidence of the tax is a) $1 from the buyers and $3 from the sellers. b) $3 from the buyers and $3 from the sellers. c) $1 from the buyers and $1 from the sellers. d) $4 from the buyers and $0 from the sellers.

b) curve B.

Refer to the graph. The relationship between the average tax rate and the tax base in a proportional tax would be represented by a) curve A. b) curve B. c) curve C. d) none of the curves.

c) the supply curve would be perfectly elastic for the first four workers and the MRC would be $6 for the first four workers.

Refer to the labor market diagram, where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. If an inclusive union was able to get the monopsonist to pay a $6 wage rate, then a) the supply curve would be perfectly elastic for the first four workers, but the MRC curve would be unaffected. b) the supply curve would be perfectly elastic for all workers and the MRC curve would coincide with it. c) the supply curve would be perfectly elastic for the first four workers and the MRC would be $6 for the first four workers. d) seven workers would be hired.

a) 5.

Refer to the labor market diagrams. The case of bilateral monopoly is represented by Figure a) 5. b) 4. c) 2. d) 1.

a) more equal than the before-tax distribution.

Refer to the personal income tax schedule given in the table. This tax is such that the after-tax distribution of income will be a) more equal than the before-tax distribution. b) less equal than the before-tax distribution. c) distributed in precisely the same way as the before-tax distribution. d) less than the before-tax distribution by the same percentage at each income level.

d) selling its product in an imperfectly competitive market.

Refer to the table. The resource demand data indicate that the firm is a) buying its resource in an imperfectly competitive market. b) buying its resource in a perfectly competitive market. c) selling its product in a perfectly competitive market. d) selling its product in an imperfectly competitive market.

c) Consumers are expected to save more and consume less.

Some countries have negative nominal interest rates. Which of the following statements about this situation is not true? a) A saver or lender will get back less than the amount she invested. b) This is mostly a result of deliberate central bank policies. c) Consumers are expected to save more and consume less. d) Consumers are expected to borrow more and spend more.

a) do not affect the supply of land.

Some economists advocate taxes on land because such taxes a) do not affect the supply of land. b) increase the supply of land. c)improve the allocation of land by shifting it from low-productivity to high-productivity uses. d) have a positive incentive function.

c) $0.25.

Suppose a competitive firm in both the resource 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 a)$3. b) $4. c) $0.25. d) between $3 and $4.

d) 750

Suppose a single firm has the marginal revenue product schedule for a particular type of labor given in the left table. Assume there are 150 firms with the same marginal-revenue-product schedules for this particular type of labor. How many workers will be hired at equilibrium? a) 300 b) 450 c) 600 d) 750

b) wage rates at Ajax to be lower than at Acme.

Suppose all workers are identical but working for Ajax is more pleasant than working for Acme. In all other nonwage aspects, the two firms offer the same job characteristics. We would expect a) wage rates at Ajax to be higher than at Acme. b) wage rates at Ajax to be lower than at Acme. c) wage rates at Ajax and Acme to be the same. d) workers at Ajax would have to be monitored more closely than those at Acme.

a) MRP curve to shift to the right.

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. As it relates to strawberry pickers, we could expect the a) MRP curve to shift to the right. b) MRP curve to shift to the left. c) MRC curve to shift downward. d) MP curve to shift downward.

b) benefits-received principle of taxation.

The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the a) ability-to-pay principle of taxation. b) benefits-received principle of taxation. c) single-tax theory of taxation. d) pay-as-you-go theory of taxation.

b) technological advances make land more productive.

The demand for farmland will increase if a) the demand for food decreases. b) technological advances make land more productive. c) the price of farm labor increases and the output effect exceeds the substitution effect. d) the supply of farmland increases.

a) monopsonist.

The economic term for a firm that is the sole buyer in a market is a) monopsonist. b) monopolist. c) bilateral competitor. d) bilateral monopolist.

a) affects both the size of total output and its composition.

The equilibrium interest rate a) affects both the size of total output and its composition. b) falls when the demand for loanable funds increases. c) determines the composition of R&D spending but not its total amount. d) increases when the expected rate of return on R&D spending falls.

b) resource prices do not always measure contributions to output.

The fact that monopoly and monopsony exist in resource markets means that a) the marginal productivity theory of income distribution is valid. b) resource prices do not always measure contributions to output. c) the resulting income distribution is ethically correct. d) income shares do not exhaust the total output.

b) offsets some of the progressivity of the federal tax system.

The federal payroll (Social Security) tax a) increases the progressivity of the federal tax system. b) offsets some of the progressivity of the federal tax system. c) offsets some of the regressivity of the federal tax system. d) decreases the proportionality of the federal tax system.

d) regulating the activities of firms in the financial sector of the economy,

The following are government activities that are involved in public finance, except a) providing public goods and services, such as national defense and education. b) running government-owned enterprises, such as hospitals, utilities, and lotteries c) redistributing income through various taxes and income-transfer payments, d) regulating the activities of firms in the financial sector of the economy,

c) firm is hiring labor under purely competitive conditions.

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the a) labor supply curve is upsloping. b) supply of labor is inelastic. c) firm is hiring labor under purely competitive conditions. d) firm is hiring labor under imperfectly competitive conditions.

a) $3

The graph illustrates the market for a product on which an excise tax has been imposed by government. How much of the excise tax per unit is shouldered by the buyers? a) $3 b) $5 c) $6 d) $8

d) higher than L0.

The graph shows a firm that buys its inputs and sells its output in competitive markets. If the firm develops a new technology that increases labor productivity, the equilibrium level of employment for this firm is expected to be a) L0. b) zero. c) lower than L0. d) higher than L0.

c) 75 percent by buyers and 25 percent by sellers.

The graph shows the supply curve for a product before tax (S0) and after an excise tax is imposed (S1). The excise tax on the product is ultimately paid a) by buyers only. b) by sellers only. c) 75 percent by buyers and 25 percent by sellers. d) 25 percent by buyers and 75 percent by sellers.

d) to explain wage rate differences based on differing nonmonetary aspects of jobs.

The idea of compensating differences is used a) by inclusive unions as an argument in bargaining for wage rate increases. b) to justify the application of minimum wages to low-wage labor markets. c) to explain the divergence between wage rates and marginal resource cost. d) to explain wage rate differences based on differing nonmonetary aspects of jobs.

b) is perfectly elastic.

The individual firm that hires labor under competitive conditions faces a labor supply curve that a) slopes downward to the right. b) is perfectly elastic. c) is perfectly inelastic. d) is of unit elasticity.

b) slopes downward because of diminishing marginal productivity.

The labor demand curve of a purely competitive seller a) slopes downward because the elasticity of demand is always less than unity. b) slopes downward because of diminishing marginal productivity. c) is perfectly elastic at the going wage rate. d) slopes downward because of diminishing marginal utility.

d) slopes downward because the marginal product of successive workers declines.

The labor demand curve of a purely competitive seller a) slopes downward because the firm must lower price to sell more output. b) slopes downward because labor productivity increases as successive workers are hired. c) is perfectly elastic because the firm is hiring an insignificant portion of the total labor supply. d) slopes downward because the marginal product of successive workers declines.

b) because of both diminishing returns and the necessity to lower price to sell more output

The labor demand curve of an imperfectly competitive seller is downsloping a) solely because of diminishing marginal utility. b) because of both diminishing returns and the necessity to lower price to sell more output. c) solely because product price must be reduced to sell more output. d) solely because of diminishing returns.

b) because of both diminishing returns and the necessity to lower price to sell more output.

The labor demand curve of an imperfectly competitive seller is downsloping a) solely because of diminishing marginal utility. b) because of both diminishing returns and the necessity to lower price to sell more output. c) solely because product price must be reduced to sell more output. d) solely because of diminishing returns.

a) sales taxes apply to a wide range of products, while excise taxes apply only to a select group of products.

The main difference between sales and excise taxes is that a) sales taxes apply to a wide range of products, while excise taxes apply only to a select group of products. b) excise taxes apply to a wide range of products, while sales taxes apply only to a select list of products. c) sales taxes are consumption taxes, while excise taxes are not. d) excise taxes are consumption taxes, while sales taxes are not.

d) noncompeting labor groups.

The major reason that presidents of major corporations receive an average salary of over $1 million a year, while police officers receive an average salary of about $64,540 a year, can best be explained by a) discrimination. b) lack of job information. c) compensating differences. d) noncompeting labor groups.

b) the firm's resource demand schedule.

The marginal revenue product schedule is a) the same whether the firm is selling in a purely competitive or imperfectly competitive market. b) the firm's resource demand schedule. c) the firm's resource supply schedule. d) upsloping.

d) a normal profit.

The minimum rate of return or payment necessary to keep an entrepreneur in some specific enterprise is referred to as a) the pure rate of interest. b) the real interest rate. c) an economic profit. d) a normal profit.

b)set at the federal level, but many states set their own minimums that are higher than the federal level.

The minimum wage in the U.S. is a) set at the federal level, and all states abide by that level. b)set at the federal level, but many states set their own minimums that are higher than the federal level. c) set at the federal level, but many states set their own minimums that are lower than the federal level. d) set at the state level, not by the federal government.

c) increases more rapidly than the general price level.

The real wage will rise if the nominal wage a) falls more rapidly than the general price level. b) increases at the same rate as labor productivity. c) increases more rapidly than the general price level. d) falls at the same rate as the general price level.

a) percentage of income paid as taxes falls as income rises.

The sales tax is a regressive tax because the a) percentage of income paid as taxes falls as income rises. b) administrative costs associated with the collection of the tax are relatively high. c) percentage of income paid as taxes is constant as income rises. d) tax tends to reduce the total volume of consumption expenditures.

b) 6 percent

The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. What is the equilibrium interest rate? a) 4 percent b) 6 percent c) 8 percent d) 10 percent

a) 20 percent.

The share of total income for "capitalists" in America (in the form of rent, interest, and profits) has been about a) 20 percent. b) 40 percent. c) 50 percent. d) 75 percent.

a) supply of the resource.

The strength of the demand for a resource depends on the following factors, except the a) supply of the resource. b) productivity of the resource. c) price of the product the resource helps to produce. d) demand for the product the resource helps to produce.

a) more of an input whose price has fallen and less of other inputs in producing a given output.

The substitution effect indicates that a profit-seeking firm will use a) more of an input whose price has fallen and less of other inputs in producing a given output. b)more of all inputs if production costs fall. c) more of those inputs whose marginal productivity is the greatest. d) less of an input whose price has fallen and more of other inputs in producing a given output.

b) $2,315.25

The table applies to a loan with an interest rate of 5 percent per period. What value goes in the cell labeled Z? a) $2,200 b) $2,315.25 c) $2,210 d) $2,205

b) $5.

The table gives data for the market for a product. If an excise tax of $3 per unit is imposed on this product, the new equilibrium price with tax will be a) $6. b) $5. c) $4. d) $2.

c) 15.0 percent.

The table represents a personal income tax schedule. The average tax rate at the $60,000 level of income is a) 10.0 percent. b) 11.6 percent. c) 15.0 percent. d) 20.8 percent.

a) A

The table shows four tax schedules for the given base of taxable income. Which of the tax schedules is a regressive tax schedule throughout? a) A b) B c) C d) none of the schedules

d) less than one-half of their expenditures.

The tax revenues of local governments are typically a) more than their expenditures. b) equal to their expenditures. c) slightly less than their expenditures. d) less than one-half of their expenditures.

d) personal income, payroll, and corporate income taxes.

The three most important sources of federal tax revenue in order of descending importance are a) sales, payroll, and personal income taxes. b) personal income, corporate income, and sales taxes. c) personal income, corporate income, and payroll taxes. d) personal income, payroll, and corporate income taxes.

c) costs

To firms, resource prices are a major part of a) revenues. b) total product. c) costs. d) profits.

c) shirking.

Traveling sales representative Harold Hill only calls on clients four days a week rather than the five days expected by his employer. This is an example of a) equalizing differences. b) a nonmonetary job disadvantage. c) shirking. d) the free-rider problem.

b) 2

What line in the graph would best represent the supply curve for land? a) 1 b) 2 c) 3 d) 4

b) elastic.

When the elasticity coefficient for resource demand is greater than one, resource demand is a) inelastic. b) elastic. c) unit-elastic. d) perfectly inelastic.

c) bilateral monopoly.

When the monopsony model is combined with the inclusive union model, the result is a case of a) occupational licensing. b) noncompeting groups. c) bilateral monopoly. d) institutional immobility.

d) purchasing stock in a pharmaceutical company

Which action taken by a worker would not be an investment in human capital? a) enrolling in college b) enrolling in trade school c) purchasing exercise equipment d) purchasing stock in a pharmaceutical company

c) a general business recession that produces high rates of unemployment

Which factor will decrease the demand for loanable funds? a) a change in the tax law to exempt savings from taxation b) expansion of social insurance to cover more fully the cost of retirement c) a general business recession that produces high rates of unemployment d) a technological advance that increases returns on investments

b) the interest rate is less on small loans than on larger loans.

Which of the following generalizations is false? Other things equal, a) interest rates are higher if lenders are imperfectly, rather than purely, competitive. b) the interest rate is less on small loans than on larger loans. c) long-term loans normally command higher interest rates than short-term loans. d) the greater the risk on a loan, the greater the interest rate.

a) high wage rates

Which of the following has not been a major factor contributing to the high productivity of labor in the United States? a) high wage rates b) technological advancement c) education and training of workers d) high levels of capital investment

b) Tourism increases in popularity, increasing the demand for workers at tourist resorts.

Which of the following increases in labor demand is due to a change in the product demand? a) Access to computers increases the productivity of mail order businesses, thus increasing the demand for their workers. b) Tourism increases in popularity, increasing the demand for workers at tourist resorts. c) A decrease in the price of trucks decreases the cost of transporting goods, thus increasing the demand for truckers. d) A change in work rules increases output per worker in the auto industry, thus increasing the demand for autoworkers.

d) an increase in consumer demand for credit

Which of the following would cause an increase in interest rates in credit markets? a) a decrease in business demand for credit b) an increase in the supply of consumer saving c) an increase in the supply of business saving d) an increase in consumer demand for credit

c) C only

Which of the lines in the diagram represent(s) a proportional tax? a) both A and B b) D only c) C only d) B only

a) A worker takes 20-minute coffee breaks although the employer allots only 15 minutes for this purpose.

Which one of the following best exemplifies the principal-agent problem in the employer-employee relationship? a) A worker takes 20-minute coffee breaks although the employer allots only 15 minutes for this purpose. b) A worker is on the job 50 hours per week although only 40 hours are required for promotion. c) A worker opts for early retirement in response to the firm's incentive plan. d) A worker's productivity is independent of the wage paid.

b) Our tax system does not by itself reallocate income; transfer payments help redistribute income from rich to poor.

Which statement best describes the overall tax and transfer systems of the United States? a) Our tax system makes the after-tax distribution of income much more equal than the before-tax distribution. b) Our tax system does not by itself reallocate income; transfer payments help redistribute income from rich to poor. c) Although some federal taxes are progressive, this effect is more than offset by the regressivity of state and local taxes, which make the overall system extremely regressive. d) Recent changes in corporate income taxes and payroll taxes have made our overall tax system more progressive.

b) Skilled labor has higher marginal revenue products than unskilled labor.

Why do skilled workers generally earn more than unskilled workers? a) The demand for unskilled labor is more inelastic than the demand for skilled labor. b) Skilled labor has higher marginal revenue products than unskilled labor. c) The demand for unskilled labor is greater than the demand for skilled labor. d) The supply of skilled labor is greater than the supply of unskilled labor.