Test IIIB Microeconomics

The economic term for a firm that is the sole buyer in a market is: monopsonist. monopolist. bilateral competitor. bilateral monopolist.

monopsonist

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

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

The purely competitive employer of resource A will maximize the profits from A by equating the: price of A with the MRP of A. marginal productivity of A with the MRC of A. marginal productivity of A with the price of A. price of A with the MRC of A.

price of a with the MRP of a

Which of the following is not an important source of revenue for the Federal government? corporate income taxes property taxes payroll taxes personal income taxes

property taxes

n 2008, the average income for households in the United States was about: $68,424. $42,820. $19,610. $62,725.

$68,424.

Transfer payments are about ____ of U.S. domestic output (as of 2009). 35 percent 8 percent 15 percent 22 percent

15 percent

Total governmental purchases—Federal, state, and local combined—account for about what percentage of domestic output? 35 percent 20 percent 10 percent 5 percent

20 percent

In the quintile distribution of income, the term "quintile" represents: 5 percent of the income receivers. 10 percent of the income receivers. 20 percent of the income receivers. 25 percent of the income receivers.

20 percent of the income receivers

The lowest quintile of households in the income distribution receives about: 2.2 percent of the total income. 3.4 percent of the total income. 8.5 percent of the total income. 10 percent of the total income.

3.4 percent of the total income.

Picture Refer to the above diagram. If this labor market is monopsonistic, the wage rate and level of employment respectively will be: D and E. C and F. B and F. A and F.

A and f

Which of the following will not shift the demand curve for labor? the use of a larger stock of capital with the labor force a change in the wage rate an increase in the price of the product which labor is helping to produce the adoption of a more efficient method of combining labor and capital in the production process

A change in wage rate

Which of the following statements best illustrates the concept of derived demand? As income goes up the demand for farm products will increase by a smaller relative amount. A decline in the price of margarine will reduce the demand for butter. A decline in the demand for shoes will cause the demand for leather to decline. When the price of gasoline goes up, the demand for motor oil will decline.

A decline in the demand for shoes will cause the demand for leather to decline.

Data on education and earnings reveal: negative age-earnings profiles for male workers. no relationship between the two. a positive relationship between the two. a negative relationship between the two.

A positive relationship between the two

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

Amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource

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

B and G

According to international comparisons, which nation had the highest hourly wages in U.S. dollar terms in 2007? United States Germany Denmark Sweden

Germany

Which of the following is correct? Income is a stock and wealth is a flow concept. Both income and wealth are flow concepts. Both income and wealth are stock concepts. Income is a flow and wealth is a stock concept.

Income is a flow and wealth is a stock concept

Which of the following tactics is most associated with the demand-enhancement union model? Reducing the price of inputs that are substitutes for union workers. Lobbying for increases in public expenditures on the product it is producing. Restricting the number of workers allowed to work in the industry. Increasing the price of products that are complements for the one it is producing.

Lobbying for increases in public expenditures on the product it is producing.

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

MRP curve to shift to the right

Wealth in the United States is: distributed in a way that reduces the degree of income inequality. more unequally distributed than is income. less unequally distributed than is income. distributed in a way that has no effect on income inequality.

More unequally distributed than is income

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

Regressive tax

Bilateral monopoly occurs where: a monopsonistic employer bargains with an inclusive union. a monopsonistic employer bargains with an exclusive union. a craft union bargains with a purely competitive employer. an industrial union bargains with a purely competitive employer.

a monopsonistic employer bargains with an inclusive union.

The basic economic argument for greater income equality is that: an equal distribution of income is the logical outcome of any tax-transfer program. because citizens enjoy political equality, they are also entitled to economic equality. a more equal distribution of income will tend to maximize incentives to work, invest, and assume risk. a more equal distribution of a given amount of income will increase the total utility of consumers.

a more equal distribution of a given amount of income will increase the total utility of consumers.

If the wage rate increases: a purely competitive producer will hire less labor, but an imperfectly competitive producer will not. an imperfectly competitive producer will hire less labor, but a purely competitive producer will not. a purely competitive and an imperfectly competitive producer will both hire less labor. an imperfectly competitive producer may find it profitable to hire either more or less labor.

a purely competitive and an imperfectly competitive producer will both hire less labor.

Which of the following would likely reduce income inequality? A reduction in the number of high school dropouts. A reduction in social security benefits. Greater inequality in the distribution of wealth. More stringent requirements to obtain occupational licenses.

a reduction in the number of high school dropouts

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

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

As a proportion of domestic output, taxes in the United States: are lower than in most other industrially advanced countries. are higher than in most other industrially advanced countries. are approximately the same as in most other industrially advanced countries. doubled in the 1990s.

are lower than in most other industrially advanced countries.

Other things equal, the resource demand curve of an imperfectly competitive seller will: lie below its marginal revenue product curve. be subject to increasing marginal productivity. be less elastic than that of a purely competitive seller. be more elastic than that of a purely competitive seller.

be less elastic than that of a purely competitive seller.

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: ability-to-pay principle of taxation. benefits-received principle of taxation. single-tax theory of taxation. pay-as-you go theory of taxation.

benefits-received principle of taxation.

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases? medical assistants biomedical engineers home health aides software engineers

biomedical engineers

In the United States: taxes decrease, but transfers increase, income inequality. taxes increase, but transfers reduce, income inequality. both taxes and transfers decrease income inequality. both taxes and transfers increase income inequality.

both taxes and transfers decrease income inequality.

The MRP curve is the resource demand curve for: neither the purely competitive nor the imperfectly competitive seller. the imperfectly competitive seller, but not the purely competitive seller. the purely competitive seller, but not the imperfectly competitive seller. both the purely competitive and imperfectly competitive seller.

both the purely competitive and imperfectly competitive seller

The marginal tax rate is: the difference between the total tax rate and the average tax rate. the percentage of total income paid as taxes. change in taxes/change in taxable income. total taxes/total taxable income.

change in taxes/change in taxable income.

Which of the following will not cause a shift in the demand for resource X? a decline in the price of resource X an increase in the price of the product resource X is producing a decrease in the price of substitute resource Y an increase in the productivity of resource X

decline in the price of resource x

Other things equal, we would expect the labor demand curve of a monopolistic seller to: decline more rapidly than that of a purely competitive seller. decline less rapidly than that of a purely competitive seller. decline at the same rate as that of a purely competitive seller. be more elastic than that of a purely competitive seller.

decline more rapidly than a purely competitive seller

The addition of government to the circular-flow model illustrates that government: purchases resources in the resource market. provides services to businesses and households. purchases goods in the product market. does all of these.

does all of these

The elasticity of resource demand will be greater the: smaller the portion of the product's total costs accounted for by the resource. less the elasticity of demand for the product it is producing. easier it is to substitute other resources in production. less the elasticity of resource supply.

easier it is to substitute other resources in production.

Occupational licensing has much the same effect as: inclusive unionism. exclusive unionism. bilateral monopoly. monopsony.

exclusive unionism

The concept of investment in human capital indicates that: union workers are better educated and more productive than nonunion workers. expenditures on education can be explained in essentially the same way as expenditures on machinery and equipment. worker productivity correlates negatively with annual earnings. the level of education is unrelated to the level of one's income.

expenditures on education can be explained in essentially the same way as expenditures on machinery and equipment.

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: labor supply curve is upsloping. supply of labor is inelastic. firm is hiring labor under purely competitive conditions. firm is hiring labor under imperfectly competitive conditions.

firm is hiring labor under imperfectly competitive conditions

In 2008, a household with an annual income of $95,000 would find itself in the: second lowest quintile of the household income distribution. third quintile of the household income distribution. fourth quintile of the household income distribution. fifth (highest) quintile of the household income distribution.

fourth quintile of the household income distribution

The long-run trend of real wages: cannot be determined from available data on nominal wages and the price level. has been downward because the price level has risen faster than nominal wages. has been upward. has been downward because labor's share of the domestic income has fallen.

has been upward

Real wages in the United States in the long run: show no discernible relationship to output per worker. have increased at about the same rate as increases in output per worker. have increased slower than increases in output per worker. have increased faster than increases in output per worker.

have increased at about the same rate as increases in output per worker.

Increases in the productivity of labor result partly from: the law of diminishing returns. improvements in technology. reductions in wage rates. increases in the quantity of labor.

improvements in technology

The basic argument for income inequality is that: the very rich establish consumption patterns that are desirable for the rest of society to emulate. the rich buy luxury goods that soon become affordable to everyone else because of economies of scale. income inequality is essential to maintain incentives to produce. inequality undermines incentives and tends to reduce the size of the national income.

income inequality is essential to maintain incentives to produce.

The movement of individuals and households from one income quintile to another over time is called: income averaging. wealth turnover. income mobility. the ratchet effect.

income mobility

Marginal revenue product (MRP) of labor refers to the: increase in total revenue resulting from the sale of an additional unit of output. amount by which a firm's total resource cost increases when it employs one more unit of labor. increase in total revenue resulting from the hire of one more unit of labor. price at which additional units of labor can be employed in a monopsonized labor market.

increase in total revenue resulting from the hire of one more unit of labor.

A decline in the price of resource A will: increase the demand for complementary resource B. shift the demand curve for A to the left. shift the demand curve for A to the right. reduce the demand for complementary resource B.

increase the demand for complememtary resource b

When the elasticity coefficient for resource demand is less than one, resource demand is: inelastic. elastic. unit-elastic. infinitely elastic.

inelastic

Sellers will opt out of markets in which: there are significant negative externalities. standardized products exist. there are only foreign buyers. information about buyers is inadequate, and some buyers can impose high costs on the sellers.

information about buyers is inadequate and some buyers can impose high costs on the sellers

Other things equal, the monopsonistic employer will pay a: lower wage rate and hire fewer workers than will a purely competitive employer. higher wage rate but hire fewer workers than will a purely competitive employer. lower wage rate but hire a larger number of workers than will a purely competitive employer. higher wage rate and hire a larger number of workers than will a purely competitive employer.

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

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

marginal resource cost is equal to their mrp

A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until: marginal revenue product is zero. marginal revenue product exceeds marginal resource (labor) cost by the greatest amount. marginal resource cost is zero. marginal revenue product equals marginal resource (labor) cost.

marginal revenue product equals marginal resource (labor) cost.

A change in an input price will alter both production costs and the profit-maximizing output. Thus a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor. This describes the: output effect. substitution effect. idea of derived demand. law of diminishing returns.

output effect

The largest category of Federal spending is for: health care. science, space, and technology. pensions and income security. national defense.

pensions and income security

Elasticity of resource demand is measured by the: absolute change in resource quantity demanded divided by the absolute change in resource price. percentage change in resource quantity demanded divided by the percentage change in resource price. absolute change in resource price divided by the absolute change in resource quantity demanded. percentage change in resource price divided by the percentage change in resource quantity demanded.

percentage change in resource quantity demanded divided by the percentage change in resource price.

An income tax is progressive if the: absolute amount paid as taxes varies directly with income. percentage of income paid as taxes is the same regardless of the size of income. percentage of income paid as taxes increases as income increases. tax rate varies inversely with income.

percentage of income paid as taxes increases as income increases.

A firm operating in a purely competitive resource market faces a resource supply curve that is: perfectly inelastic. perfectly elastic. highly inelastic. highly elastic.

perfectly elastic

If discrimination based on gender and race was eliminated, we would expect the: personal distribution of income to become less equal. personal distribution of income to become more equal. personal distribution of income to be unaffected. functional distribution of income to change in favor of profits and interest.

personal distribution of income to become more equal.

The largest source of tax revenue for the U.S. Federal government is: personal income taxes. property taxes. corporate income taxes. sales and excise taxes.

personal income taxes

The three most important sources of Federal tax revenue in order of descending importance are: sales, payroll, and personal income taxes. personal income, corporate income, and sales taxes. personal income, corporate income, and payroll taxes. personal income, payroll, and corporate income taxes.

personal income, payroll, and corporate income taxes.

With respect to local finance: death and gift taxes are the major source of revenue and most expenditures are for hospitals and health services. the corporate income tax is the major source of revenue and natural resource development the major type of expenditure. property taxes are the basic source of revenue and education is the major type of expenditure. sales and excise taxes are the major source of revenue and highway construction and maintenance is the major type of expenditure.

property taxes are the basic source of revenue and education is the major type of expenditure.

With respect to state finance, for most states: estate taxes are the major source of revenue and most expenditures are for health services. the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure. property taxes are the basic source of revenue and education is the major type of expenditure. sales and excise taxes are the major source of revenue and education is the major type of expenditure.

property taxes are the basic source of revenue and education is the major type of expenditure.

The field of economics that analyzes government decision making, politics, and elections is called: public finance. public choice theory. collective economics. political economy.

public choice theory

The highest quintile of households in the income distribution: receives about 50 percent of the total income. is comprised of 10 percent of all households. is comprised of 5 percent of all households. receives about 35 percent of the total income.

receives about 50 percent of the total income.

A profit-maximizing firm will: expand employment if marginal revenue product exceeds marginal resource cost. reduce employment if marginal revenue product exceeds marginal resource cost. expand employment if marginal revenue product equals marginal resource cost. reduce employment if marginal revenue product equals marginal resource cost.

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

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

relatively high, but not as high as some other industriallly advanced nations.

the marginal utility of income for the poor exceeds that of the rich

resource prices are a major determinant of money incomes

The elasticity of resource demand measures the: responsiveness of workers to changes in wage rates. responsiveness of producers to changes in resource prices. ratio of marginal revenue product to resource price. sensitivity of marginal revenue product to changes in product price.

responsiveness of producers to change in resource prices

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

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

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

slopes downward because the marginal product of successive workers declines

Inclusive unionism is practiced mostly by: professional and semiprofessional employees. small unions comprised of skilled workers, such as the bricklayers. industrial unions. craft unions.

small unions comprised of skilled workers, such as the bricklayers.

A progressive tax is such that: tax rates are higher the greater one's income. the same tax rate applies to all income receivers, so that the rich pay absolutely more taxes than the poor. entrepreneurial income is exempt from taxation. the revenues it yields are spent on transfer payments.

tax rates are higher the greater one's income.

If a firm is hiring a certain type of labor under purely competitive conditions: its labor demand curve will be perfectly elastic at the market-determined wage rate. the labor supply curve will lie above the marginal labor cost curve. the labor supply and marginal labor (resource) cost curves will coincide and be upsloping. the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic.

the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic.

If a firm is selling in an imperfectly competitive product market, then: average product will be less than marginal product for any number of workers hired. the marginal products of successive workers must be sold at lower prices. the marginal products of successive workers can be sold at higher prices. the marginal products of successive workers can be sold at a constant price.

the marginal products of successive workers must be sold at lower prices

Because the Federal government typically provides disaster relief to farmers, many farmers do not buy crop insurance even through it is federally subsidized. This illustrates: the adverse selection problem. the moral hazard problem. the special interest effect. logrolling.

the moral hazard problem

In response to the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible in the future. This illustrates: the adverse selection problem. the moral hazard problem. the principal-agent problem. logrolling.

the moral hazard problem

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

the output effect is greater than the substiution effect

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

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

Employers will hire more units of a resource if the: price of the resource increases. productivity of the resource increases. price of the good being produced declines. price of a complementary resource rises.

the productivity of the resource increases

Buyers will opt out of markets in which: there are significant negative externalities. standardized products are being produced. there is inadequate information about sellers and their products. there are only foreign sellers.

there are significant negative externalities

The average tax rate is: change in taxes/change in taxable income. total taxes/total taxable income. the sum of the marginal tax rate and the rate of transfer payments. the tax on incremental income less the tax on total income.

total taxes/total taxable income.

If an exclusive union is successful in restricting the supply of labor, the: wage rate will rise. quantity of labor demanded will rise. number of job opportunities in the firm or industry will increase. demand for labor curve will shift leftward.

wage rate will rise

The incidence of a tax pertains to: the degree to which it alters the distribution of income. how easy it is to evade the tax. who actually bears the burden of a tax. the progressiveness or regressiveness of tax rates.

who actually bears the burden of a tax

Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus the demand for labor: will increase. will decrease. may either increase or decrease. will not change.

will decrease

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

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

In the United States professional football players earn much higher incomes than professional soccer players. This occurs because: most football players are good soccer players while the reverse is not true. consumers have a greater demand for football games than for soccer games. football and soccer games are highly substitutable products for most consumers. the marginal productivity of soccer players exceeds that of football players.

consumers have greater demand for football games than soccer games

When the elasticity coefficient for resource demand is greater than one, resource demand is: inelastic. elastic. unit-elastic. perfectly inelastic.

elastic

In a monopsonistic labor market the employer will maximize profits by employing workers up to that point at which: the difference between the wage rate and marginal resource (labor) cost is at a maximum. marginal revenue product equals marginal resource (labor) cost. the wage rate equals marginal revenue product. the wage rate equals marginal resource (labor) cost.

marginal revenue product equals marginal resource (labor) cost.

Government borrowing: is the primary means of financing public expenditures. provides a stimulus to government spending with no opportunity cost. may crowd out private sector investment. is prohibited by the U.S. constitution.

may crowd out private sector investment.

Critics of minimum-wage legislation argue that it: keeps inefficient producers in business. reduces employment. undermines incentives to work. is deflationary.

reduces employment

he elasticity of resource demand measures the: responsiveness of workers to changes in wage rates. responsiveness of producers to changes in resource prices. ratio of marginal revenue product to resource price. sensitivity of marginal revenue product to changes in product price.

responsiveness of producers to changes in resource prices

Proprietary income refers to: revenue flowing to the government from taxes. money borrowed by the government to finance its operations. revenue generated by government-run businesses. transfer payments from the government to the owners of property resources.

revenue generated by government-run businesses.

The earnings of highly educated workers: rise more slowly than those of less-educated workers. rise more rapidly than those of less-educated workers. rise at about the same rate as those of less-educated workers. stagnate earlier than do those of less-educated workers.

rise more rapidly than those of less-educated workers.

A craft union attempts to increase wage rates by: equating the MRP and the MRC curves. shifting the labor supply curve to the left. shifting the labor supply curve to the right. shifting the MRP curve to the right.

shifting the labor supply curve to the left

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

slopes downward because of diminishing marginal productivity

Marginal resource cost is: the increase in total resource cost associated with the production of one more unit of output. the increase in total resource cost associated with the hire of one more unit of the resource. total resource cost divided by the number of inputs employed. the change in total revenue associated with the employment of one more unit of the resource.

th eincrease in total resource cost associated with the hire of one more unit of the resource

A competitive employer should hire additional labor as long as: the MRP exceeds the wage rate. the wage rate is less than MP. average product exceeds MP. MC exceeds MR.

the MRP exceeds the wage rates

Marginal product is: the output of the least skilled worker. a worker's output multiplied by the price at which each unit can be sold. the amount an additional worker adds to the firm's total output. the amount any given worker contributes to the firm's total revenue.

the amount of additional worker adds to the firm's total output

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

the firm's resource demand schedule

The labor demand curve of a firm: will shift to the left if the price of the product the labor is producing falls. is perfectly elastic if the firm is selling its product in a purely competitive market. reflects a direct relationship between the number of workers hired and the money wage rate. is the same as its marginal product curve.

will shift to the left if the price of the product the labor is producing falls