Unit 5 Micro Test Review

According to the information in the table below, the twelfth worker would increase * the hourly profit by

$1.30

If output sells for $20 per unit, what is the marginal revenue product of the fifth worker?

$40

If the firm can sell as many potatoes as it wants for $2 per pound and has to pay * each worker $5 per hour, how many workers should the firm employ to maximize profits?

3

Which of the following will shift the supply curve for apples to the right?

A decrease in the rental price for apple harvesting equipment

Assume that the market for tomatoes is in equilibrium at a price of $35 per bushel. If the demand for tomatoes decreases, which of the following will occur?

A surplus at $35, leading to a decrease in price and in quantity supplied

Which of the following is most likely to shift the demand for aircraft mechanics to the fight?

An increase in the demand for air travel

Which of the following statements about the relationship between the demand for apple pickers and the demand for apples is true?

An increase in the demand for apples increases the demand for apple pickers.

The diagram below shows the production possibilities curves for two countries, Country X and Country Y. Assume that both countries use equal amounts of resources in production. If the two countries engage in trade, both would be better off under which of the following conditions?

Country Y specializes in the production of cars, because it has a comparative advantage in the production of cars.

Dana and Robin produce smoothies and pizza. In one hour Dana can make 20 smoothies or 10 pizzas. In one hour Robin can make 18 smoothies or 6 pizzas. Which of the following statements is true?

Dana has a comparative advantage in making pizzas, and Robin has a comparative advantage in making smoothies.

Assume that mustard and ketchup are considered substitutes by consumers. If the price of mustard increases, which of the following graphs represents the most likely response in the ketchup market?

Demand Shifts Right

At its current employment level of labor and capital, a firm observes the following: * Marginal product of labor = 30 units. Marginal product of capital = 60 units. Price of labor = $3 per unit. Price of capital = $15 per unit. Which of the following actions should the firm take in order to achieve the least-cost combination of labor and capital and produce the same level of output?

Increase the amount of labor and decrease the amount of capital hired

For a certain firm, the marginal revenue product for the last unit of labor is $60, and the marginal revenue product for the last unit of capital is $100. Which of the following combinations of factor prices would be necessary for the firm to maximize profits?

Price of Labor $60 and Price of Capital =$100

Assume that the government imposes a $4 per-unit tax on sellers of a good in the' market described by the graph below. What is the price paid by buyers, the after-tax price received by sellers, and the deadweight loss?

Price paid by buyers. $8: Price received by sellers: $4: Deadweight loss: $200

If an unusually cold summer destroyed a large portion of the bee population, the * equilibrium price and quantity of honey produced by bees will most likely change in which of the following ways?

Price will increase and quantity will decrease

Which of the following is associated with a command economy?

Public ownership of the means of production

The year is 2023. The Panthers make an interesting trade (hindsight is 20/20). Bryce Young is drafted number one overall by the Carolina Panthers. His agent goes into contract negotiations willing to accept a base contract of $10 million per year. Young ends up signing a contract worth $14.5 million per year. This situation best demonstrates:

That Bryce Young is earning an economic rent of $4.5 million per year.

According to the law of diminishing marginal utility, which of the following is true?

The additional satisfaction received from consuming extra units of a good decreases as consumption of the good increases.

Motivated by lower import prices, United States manufacturers increase their imports of steel from other steel-producing countries. Which of the following best describes the impact of the increased steel imports on the labor market for steelworkers in the United States?

The demand for United States steelworkers will decline, putting downward pressure on steelworker wages

A perfectly competitive firm currently produces 1,000 units of output and hires its resources in a perfectly competitive factor market. It uses both labor and capital as inputs. The price of labor is $40; the price of capital is $100. The marginal product of labor is 8 units, and the marginal product of capital is 10 units. Which of the following must be true?

The firm can produce more than 1,000 units without increasing the total cost if it uses more labor and less capital.

Assume that a firm is hiring labor in a perfectly competitive labor market. If the marginal revenue product of labor is greater than the wage rate, which of the following will be true?

The firm should employ more workers

Suppose that a large number of unskilled workers enter a nation's labor market. If the labor market is competitive, the number of unskilled workers hired and the wage rate will most likely change in which of the following ways?

The number of unskilled workers hired will increase and the wage rate will decrease

The demand curve for labor shows which of the following?

The number of workers a firm is willing and able to hire at various wage rates

Assume good Z is produced in a competitive output market that is in long-run equilibrium. In the short run, the variable input is unskilled labor whose wage is determined in a competitive labor market. Suppose there is an increase in consumer demand for good Z. Which of the following explains the resulting change in the labor market for unskilled workers in the short run?

The price of good Z increases, and the labor demand curve shifts to the right along the existing labor supply curve, resulting in higher wages and employment of unskilled workers.

Suppose that people who work in the paint industry face a great risk of developing an incurable disease. A medical breakthrough that eliminates the risk will most likely cause which of the following shifts in the supply and demand curves for workers in the paint industry?

The supply curve will shift right and the demand curve will not shift

In the current labor market, suppose that the wage rate for accountants is significantly higher than the wage rate for economists. In the long run, if you observed that the wage rate for economists rose while the wage rate for accountants fell, which of the following would best explain your observation?

The supply of economists must have decreased, and the supply of accountants must have increased.

Which of the following will occur when wage rates decrease in a given labor market?

The supply of labor will decrease

Country Z is both a producer and an importer of cloth, Which of the following will happen if the government of Country Z imposes a tariff on cloth and the country continues to import some cloth from abroad?

There will be a decrease in consumer surplus for domestic consumers.

The graph below shows the conditions that a monopsonist faces in a labor market. How many workers would this monopsonist hire and what wage rate would it pay?

They would hire 10 workers and pay a wage rate of $20

Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent? a. When the Price Elasticity of Demand is elastic, an increase in price, will cause an increase in total revenues b. When the Price Elasticity of Demand is elastic, a decrease in price, will cause a decrease in total revenues c. When the Price Elasticity of Demand is unit elastic, a decrease in price, will cause an increase in total revenues d. When the Price Elasticity of Demand is inelastic, a decrease in price, will cause an increase in total revenues e. When the Price Elasticity of Demand is inelastic, a decrease in price, will cause a decrease in total revenues

When the Price Elasticity of Demand is inelastic, a decrease in price, will cause a decrease in total revenues.

If a 10 percent increase in the price of good X results in a 20 percent decrease in * the quantity of good Y demanded, which of the following is true? a. Good X and good Y are complementary goods, and the cross-price elasticity is - 0.5. b. Good X and good Y are substitute goods, and the income elasticity is +2. c. Good X and good Y are complementary goods, and the cross-price elasticity is -2. d. Good X and good Y are normal goods, and the income elasticity is +2. e. Good X and good Y are substitute goods, and the cross-price elasticity is -2.

c. Good X and good Y are complementary goods, and the cross-price elasticity is -2.

Assuming a single, profit-maximizing employer in a labor market with many workers, which of the following statements relating to this monopsony is true? a. This single employer will hire more labor than if the market were perfectly competitive but will pay a lower wage. b. This single employer is a wage taker, needing to pay the equilibrium wage for the geographic area. c. In Increasing employment, the marginal factor cost of an additional unit of labor exceeds the wage rate paid to the laborer. d. The profit-maximizing monopsonist will hire the quantity of labor where the marginal revenue product of labor intersects the labor supply curve. e. The first workers hired are paid a higher wage than any additional workers hired by the monopsonist.

c. In Increasing employment, the marginal factor cost of an additional unit of labor exceeds the wage rate paid to the laborer.

Marginal resource (factor) cost can be defined as a. the change in total resource cost caused by the production of one more unit of output b. the change in total revenue caused by the addition of one more unit of a resource c. the change in total resource cost caused by the addition of one more unit of a resource d. the total resource cost included by the number of inputs used e. total resource cost divided by output

c. the change in total resource cost caused by the addition of one more unit of a resource

The table above describes the production function of an auto parts manufacturer. Assume that the firm can hire as many workers it wants at the market wage rate of $600 per week per worker and sell as many auto parts as it wants at the price of $10 per part. To maximize profits, the firm should hire a. 0 worker b. 1 worker c. 3 workers d. 5 workers e. 7 workers

d. 5 workers

If the income elasticity of demand for good X is negative and the cross-prise elasticity of demand between good X and good Y is negative, which of the following must he true of Good X? a. X is a normal good and is a substitute for Y b. X is a normal good and is a complement to Y c. X is an inferior good and is a substitute for Y d. X Is an inferior good and is a complement to Y e. X is a normal good, and Y is an inferior good.

d. X Is an inferior good and is a complement to Y

A firm's demand curve for labor is equal to a segment of its a. average variable cost curve b. total revenue curve c. marginal cost curve d. marginal revenue product curve e. average product curve

d. marginal revenue product curve

Given the information below, which of the following is true for a firm buying its labor and capital inputs in a perfectly competitive market? The marginal product of labor equals 250 units of output. The marginal product of capital equals 750 units of output, and The price of labor is $50 per person. The price of capital is $100 per unit a. The firm is producing its current output level with the least-cost combination of labor and capital. b. The firm is maximizing profits with its current combination of inputs. c. The firm's level of output will remain the same if 1 unit of capital is substituted for 2 units of labor. d. The firm's input costs will decrease if 2 units of labor are substituted for 1 unit of capital. e. The firm can reduce the cost of its current level of output by laying off workers and employing more capital

e. The firm can reduce the cost of its current level of output by laying off workers and employing more capital

In a monopsonistic labor market, a firm will continue to hire workers until the marginal revenue product of labor

equals marginal factor (resource) cost, resulting in fewer workers being hired at a lower wage compared with a perfectly competitive labor market

The table below shows the per-unit prices and marginal utility for the last unit of video games and comic books that Kyle purchased. Kyle spent all of his allocated budget on video games and comic books. To maximize his utility, Kyle should have purchased

fewer video games and more comic books

A production possibilities curve is bowed out, indicating increasing opportunity cost because of

imperfect adaptability of resources to alternative uses

Which of the following would cause an outward shift of the PPC for a nation's economy?

l and Il only

The wage rate is $10 per hour and the last worker hired by the firm increased output by 100 units. Computers rent for $100 per hour and the last computer rented by the firm increased output by 2,000 units. To minimize costs the firm should

lay off workers and rent more computers because computers produce more output per dollar of additional expenditure

A profit maximizing firm will continue to hire workers until the marginal revenue product of labor is equal to the

marginal factor cost

The amount of product Z that must be forgone in order to obtain some amount of product Y is called

opportunity cost

A change in which of the following will NOT cause a shift in the demand curve for a factor of production? Demand for the goods produced by the factor a. Prices of the goods produced by the factor b. Demand of the goods produced by the factor c. Prices of substitute factors (resources) d. Supply of the factor e. Prices of complementary factors (resources)

d. Supply of the factor