AP Microeconomics Section 13 & 14 Practice Exam
Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource cost curve. If this were a monopsonistic labor market, the equilibrium wage rate and level of employment would be
$5 and 3
Debbie owns a bakery and can hire workers to produce cakes selling in a competitive output market at $10 each. The table shows the relationship between the number of workers and the number of cakes produced. What is the value of the marginal product for the fourth worker?
$50
Refer to the above data. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ
1 worker
Refer to the above data. If the wage rate is $20, how many workers will the firm choose to employ?
2
When the demand for automobiles is high, the demand for workers who build automobiles is high. This relationship between the market for autos and the market for the labor that builds autombiles is why the demand in a factor market is called _______
A derived demand
Brian has a cell phone and he is a customer of SuperDuperCellNet, his cell phone service provider. When he calls his wife, Jackie, andother SuperDuperCellNet customer, he does not have to pay for those minutes. The more SuperDuperCellNet customers there are in the market, the more benefit Brian receives. This is an example of
A network externality
Which of the following goods is most likely a common resource?
A public park
In the figure above, the VMPL curve will shift to the right if
A technological advance makes labor more productive
Which of the following goods best fits the characteristics of a private good?
An ice cream cone
The provision of specific goods and services (rather than cash) to needy people is
An in-kind benefit
If a nation's Gini coefficient is rising over time, it is an indicator of
An increase in income inequality
In which of the following situations is adverse selection most likely to be a problem?
Buying a house directly from the previous owner
Which of the following best describes the value of the marginal product?
Change in total revenue generated from a unit change in the quantity of a variable input
Stan has an employee, Barbara, who is the only female security guard at the company. Barbara is a "night owl" and loves to work the midnight shift to 8 am shift for the company. Stan knows that working through the night is potentially more dangerous than working during the day, so he pays her an additional $2 an hour. This wage differential is likely an example of
Compensating differentrials
Benny employs people to sell candy bars at intersections. The marginal product of the last worker Benny hired is 20 candy bars per hour. Benny pays $7 per worker per hour and sells the candy bars for $1 each. If the price of candy bars rises to $2, then the _______
Demand for labor increases
John is an entrepreneur who runs his own auto body repair shop. Suppose that John's business is booming and his salary is rising. John's labor supply curve will be
Downward-sloping if the substitution effect is smaller than the income effect
Oscars Wilderness Flower Shop maximizes profits by hiring four workers in a perfectly competitive labor market. The table shows Lara's production function. The workers and their VMPLs are Alfred-$40, Barbara-$35, Calvin-$27, and Diana-$15. Which is true?
Each worker would be paid $15
Laws that restrict or prohibit leaf burning or trash burning is an example of
Environmental standards
Pigouvian taxes are designed to reduce
External costs
Above a given wage, a higher wage may induce an individual to work ____ hours and the labor supply curve may then _____
Fewer; bend backward
Debbie owns a bakery and can hire workers to produce cakes selling in a competitive output market at $10 each. The table shows the relationship between the number of workers and the number of cakes produced. If Debbie must pay each workwr a competitive market wage of $40 per day, how many workers will she hire to maximize profit?
Five
Sarah owns a small flower shop and the industry is perfecrly competitive. She is considering whether or not to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units produced is $10 per unit. What should Sarah do?
Hire the additional worker because the balue of the marginal product exceeds the wage
Now that Sheila has completed her bachelor's degree, she has decided to pursue her master's degree. Sheila's choice of additional education is called an investment in _______
Human capital
Laura is a price-taking farmer who produces corn. Assume that the wage rate for workers is $125 and the price per unit of corn is $10. The table shows Laura's production function. Suppose Laura is currently employing seven workers. If she lets the seventh worker go and reduces employment to six workers, her profit will
Increase by $105
Max employs both labor and capital to produce his trinkets. Currently, the last unit of labor employed has a marginal product of 15 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $3 per unit and the price of capital is $10 per unit. If Max is going to find the least-cost combination of labor and capital, he needs to ______ his employment of labor and ____ his employment of capital.
Increase; decrease
A wage ____ reduces the quantity of labor supplied through the ____ effect
Increase; subsitution
No individual willing to pay for providing the efficient level of a public good since the
Individual's marginal benefit is less than the marginal social benefit
Negative income tax
Is a program in which low-income families receive income supplements rather than having to pay positive taxes
For a good to be efficiently provided by a market economy, which of the followig characteristics is essential?
It needs to be both rival in consumption and excludable
Other things equal, the monopsonistic employer will pay a
Lower wage rate and hire fewer workers than will a purely competitive employer
The difference between the marginal social benefit curve and the market demand curve is the
Marginal external benefit
If one worker can pick $30 worth of grapes and two workers can pick $50, the
Marginal revenue product of the second worker is $20
You insure your car against theft. Consequently, you rarely lock the car. This describes the problem of
Moral hazard
Other things the same, we would expect the labor demand curve of a purely competitive seller to be
More elastic than that of an imperfectly competitive seller
Assuming a firm is selling its output in a purely competitive marker, its resource demand curve can be determined by
Multiplying marginal product by product price
The best example of a public good is
National defense
An individual is more likely to free ride when a good is
Non-excludable
National defense and electronic books are similar in that bother are _______, but they differ in that national defense is _______, while electronic books are not.
Non-rival in consumption; non-excludable
If drivers decide to make cell phone calls without considering the costs imposed on others, the
Number of phone calls made while driving will be above the socially optimal quantity
Marginal resource cost is
The increase in total resource cost associated with the hire of one more unit of the resource
Which of the following is most likely an artificially scarce good?
Pay-per-view of a boxing match
The Coase theorem states that in the presence of externalities, a market economy will
Reach an efficient solution if transactions costs are sufficiently low
Private or asymmetric information
Refers to information that would be relevant for an economic transition, and this is known only by some of the people involved in the transaction
Refer to the above data. This firm is
Selling its product in an imperfectly competitive market
When innovations by one firm are quickly emulated and improved on by rival firms in the same industry or in other industries, this is
Technology spillover
Marginal product is
The amount an additional worker adds to the firm's total output
Automobile emissions generate pollution and cause higher costs and discomfort to residents of a city. In this case
The externality can be internalized into the market by imposing a specific tax on drivers
Given that there is general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is
The level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution
When each factor is paid a payment equal to the value of the marinal product of the last unit of that factor employed in the factor market as a whole, this is referred to as
The marginal productivity theory of income distrubution
If the marginal benefit received from pollution is greater than its marginal cost, then
The market is producing too little pollution
To maximize profits a firm will employ workers up to the point at which for the last worker employed _____
The value of the marginal product is equal to the wage rate
If the extra output that is produced by hiring one more unit of labor adds more to ______ than to _______, the firm will increase its profit by increasing the use of labor.
Total revenue; total cost
The organized exchange of licenses that enable the holder to pollute up to a specified amount during a given time period is called
Tradable emissions permits
The individual producer's labor demand curve is the _____
Value of the marginal product of labor curve
Which is an example of an activity generating a positive externality?
Your next-door neighbor installs a bat house and the bats eat mosquitoes
If a good produces a positive externality and the government does not correct it, the equilibrium market quantity is ____ than the socially optimal quantity and the equilibrium market price is ___ than the socially optimal price.
lower; lower
A ____ program is one for which the recipient qualifies on the basis of _____
means-tested; income
When Liam watched a movie, his viewing was _____ in consumption because other people _____ able to view the movie at the same time Liam did.
nonrival; were