Exam 4 Study Set

Angela puts $1,000 in a savings account that pays 3 percent per year. What is the future value of her money one year from now?

$1,030

What percentage of U.S. workers received health care through managed care?

65%

Looking ahead, what can we expect in regard to the demand for health care?

An increase

Which of the following are considered insurable risks?

Damage from fire Loss from theft

As the price of health care rises, what happens to total health care spending?

Increases

b. Now suppose that the cost of renting a vehicle doubles to $200 per day. What are the MRP and MRC?

MRP = $150 MRC = $200 Should the firm add a delivery vehicle under these circumstances: No

Which of the following are examples of natural resources that contribute to the high productivity of labor in advanced economies?

Minerals Energy sources Land Reason: Buildings are considered physical capital, not natural resources.

Which of the following describes why money is not an economic resource?

Money cannot produce goods and services.

Which of the following are determinants of demand for land?

The prices of other resources that are combined with the land The prices of the products produced on the land The productivity of the land

b. What would be the net impact on the location of the resource demand curve given below?

The resource demand schedule will shift right.

How do firms approach the amount of resources they use over the long run?

They can vary the amounts of all the resources they use.

The level of substitutability of a resource is a primary ______.

determinant of resource elasticity

Proponents of malpractice caps believe that such caps will ______.

decrease health care costs

The two main sources of revenue for the PPACA are _______.

new taxes a personal mandate to buy insurance

In a purely competitive labor market, each firm employs such a ______ fraction of the total available supply of a specific type of labor that no firm can influence the ______.

small; wage rate

When a product is in high demand with customers based on its value (quality) or price, the demand for the resources to produce that product will be ______.

very high

The income elasticity coefficient of demand for health care is about what?

1

What percentage of the population had no health insurance for the entire year?

9

What is exemplified by an insured individual paying 20% of the cost of a medical procedure and the insurance company paying the remaining 80%?

A copayment

Which of the following best describes a DRG system?

A system in which hospitals or doctors receive a fixed payment for treatment of a Medicare patient

The following statement is true about what type of market: the lower price accompanying each increase in output (total product) applies not only to the marginal product of each successive worker but also to all prior output units that otherwise could have been sold at a higher price.

An imperfectly competitive market

Which factor would increase the demand for loanable funds?

Anything that increases the rate of return on potential investments

The total or market labor demand curve for a particular labor service is found by ______ the labor demand curves of all individual firms in the industry.

Blank 1: adding, summing, or totaling

The general, or ______ level of wages, like the general level of prices, includes a wide range of different wage rates.

Blank 1: average or mean

Businesses borrow loanable funds primarily to increase their stock of ______ goods.

Blank 1: capital

The reason that money has time value is because of the potential for ________ interest.

Blank 1: compound

The amount of each year's health care costs that the insured pays before the insurer begins paying is called the _______.

Blank 1: deductible

Physicians who recommend more tests and procedures than medically necessarily as a protection against potential malpractice suits are said to practice _________ medicine.

Blank 1: defensive

Due to an aging population, we can expect a substantial surge in the _______ for health care in the future.

Blank 1: demand

Due to increasing _______ for physicians' services, their fees and incomes have increased more rapidly than average prices and incomes for the economy as a whole.

Blank 1: demand

The increase in the supply of physicians in the United States has not kept up with the increase in ________ for physicians' services.

Blank 1: demand

The total, or market, curve for a specific resource shows the various total amounts of the resource that firms will purchase or hire at various resource prices, other things equal.

Blank 1: demand

When the supplier, not the demander, decides what types and amounts of health care are to be consumed, it is called a case of supplier-induced ______.

Blank 1: demand

The difference between the wage rate received by one group of workers and the wage rate received by another group of workers is called a wage .

Blank 1: differential or difference

In a purely competitive labor market, the supply of labor available to an individual firm is perfectly ________.

Blank 1: elastic

The ______ of resource demand is the sensitivity of resource quantity to changes in resource prices.

Blank 1: elasticity

If a person agrees that resources should be paid based upon the value of their creation, then income payments based on marginal revenue product provide a fair and distribution of society's income.

Blank 1: equitable, equitible, or equal

When doctors are paid separately for each service they perform, it is called _______-for-service.

Blank 1: fee or pay

The supply curve of non-land resources is upward-sloping and provides a(n) _______ function.

Blank 1: incentive

Three-fourths of health care spending is financed by ________.

Blank 1: insurance

Noncompeting groups is a reason why ______ supply differs in various markets.

Blank 1: labor

When economists use the term ______ in its broadest sense, it applies to blue and white-collar workers, professional individuals such as lawyers, professors, and dentists, as well as small business owners.

Blank 1: labor

When economists use the term _______ in its broadest sense, it applies to blue and white-collar workers, professional individuals such as lawyers, professors, and dentists, as well as small business owners.

Blank 1: labor

In the _______ run, firms can vary the amounts of all the resources they use.

Blank 1: long

In an imperfectly competitive market, a _________ price accompanying each increase in output (total product) applies not only to the marginal _________ of each successive worker but also to all prior output units that otherwise could have been sold at a(n) _________ price.

Blank 1: lower, smaller, reduced, decreased, low, or lesser Blank 2: product or output Blank 3: higher, larger, increased, high, or greater

Supporters of ____ (one word) caps say that patients should receive full compensation for economic losses but not made wealthy through huge jury awards.

Blank 1: malpractice

Land has no _______ cost; it is a free and nonreproducible resource.

Blank 1: production

The PPACA aims to obtain needed revenue from personal mandates to buy insurance, as well as from new _______.

Blank 1: taxes or tax

In some labor markets, workers ______ and sell their labor services collectively.

Blank 1: unionize or union

How does the entrepreneur's pursuit of profit benefit society?

By improving allocative and productive efficiency

How do financial institutions generate profits?

By loaning funds at higher interest rates than they pay on deposited funds

Which of the following are components of a firm's nonlabor costs?

Capital payments Entrepreneurship payments Land payments

Which of the following are examples of incentive pay plans?

Commissions Piece rates Bonuses

Which of the following are features that health insurers use to reduce the incentive to overconsume health care?

Copayments Deductibles

A union whose members possess a particular skill, such as carpentry, masonry or plumbing is what type of union?

Craft union

What is used to measure the sensitivity of resource quantity to changes in resource prices along a fixed resource demand curve?

Elasticity of resource demand

Which of the following are all policies or legislation by which unions have, over the years, increased wage rates by reducing the supply of labor?

Encouraging compulsory retirement Enforcing a shorter workweek Reduction of child labor Restriction of permanent immigration

Match the following conditions regarding the elasticity of resource demand. Instructions

Erd > 1 = Resource demand is elastic. Erd< 1 = Resource demand is inelastic. Erd= 1 = Resource demand is unit-elastic.

True or false: Social Security and unemployment compensation are examples of incentive pay plans or schemes.

False Reason: Commissions, bonuses, piece rates, stock options, efficiency wages and profit sharing are examples of incentive pay plans.

True or false: Economic profit is expressed as a positive number.

False Reason: Economic profit may be either positive or negative (a loss).

Which of the following reduce access to health care?

Greater insurance premiums Higher health care costs

b. Now suppose that the cost of renting a vehicle doubles to $500 per day. What are the MRP and MRC?

MRP = $375 MRC = $500 Should the firm add a delivery vehicle under these circumstances: No

A delivery company is considering adding another vehicle to its delivery fleet; each vehicle is rented for $250 per day. Assume that the additional vehicle would be capable of delivering 1,500 packages per day and that each package that is delivered brings in $0.25 in revenue. Also assume that adding the delivery vehicle would not affect any other costs. Instructions: Enter your answers rounded to 2 decimal places. a. What is the MRP? What is the MRC?

MRP = $375 MRC = $250 Should the firm add this delivery vehicle: Yes

Why is a purely competitive seller's resource demand curve more elastic than an imperfectly competitive seller operating in a monopoly, oligopoly, or monopolistic competition?

Sellers in imperfect competition must lower prices to sell more, thus expanding labor by a lower percentage than purely competitive sellers.

Why do socialists believe that all land should be owned by the state?

So that payments for its use can be used by the government to further the well-being of the entire population.

In the graph shown, wages will fall somewhere between which two points for a bilateral monopoly?

Wm and Wu

Which of the following statements describe the principal-agent problem?

Workers may provide less than the agreed-upon effort. The interests of firms and workers are not identical. Workers may take unauthorized breaks.

Cindy is a baker and runs a large cupcake shop. She has already hired 11 employees and is thinking of hiring a 12th. Cindy estimates that a 12th worker would cost her $100 per day in wages and benefits while increasing her total revenue from $2,600 per day to $2,750 per day. Should Cindy hire a 12th worker?

Yes

A monopsony is a market in which ______ substantial buying (hiring) power.

a single firm has

Suppose that the interest rate is 5 percent. Instructions: Enter your answers rounded to 2 decimal places. a. What is the future value of $100 five years from now? How much of the future value is total interest? b. By how much would total interest be greater at an interest rate of 7 percent than at an interest rate of 5 percent?

a. $127.63 $27.63 b. $12.63

In 2018, General Motors (GM) announced that it would reduce employment by 14,000 workers. a. What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? b. Why didn't GM reduce employment by more than 14,000 workers or by fewer than 14,000 workers?

a. The MRC of those 14,000 workers was greater than the MRP. b. The company wanted to set the labor level where MRC equaled MRP to maximize profits.

a. An economist's use of the term "rent" differs from everyday usage. From an economist's perspective, economic rent b. Evaluate the statement: "Though rent need not be paid by society to make land available, rental payments are useful in guiding land into the most productive uses." This statement recognizes that

a. is the price paid for the use of land and other natural resources that are completely fixed in total supply. b. it makes sense to pay more for land that has a more profitable use.

a. A firm in a purely competitive labor market is a wage taker because b. If a firm decided to pay less than the going market wage rate,

a. that firm alone cannot influence the market wage rate. b. no workers would offer their services to that firm.

a. Economic rent is a surplus payment when viewed by the economy as a whole but a cost of production from the standpoint of individual firms and industries. This is because b. Evaluate: "Land rent performs no 'incentive function' for the overall economy." This statement is

a. the supply of land does not respond to changes in rent, but in order to use the land profitably, revenue must cover the rental payments. b. true, because changes in land rent do not change the supply of land.

When a monopsonist pays a higher wage to attract an additional worker, it must pay that higher wage to ______.

all the workers it is currently employing at a lower wage

A software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should:

decrease labor while increasing capital.

The supply of health care services has increased more slowly than ______.

demand

Market imperfections are a reason why:

demand and supply conditions differ in various labor markets

Because health care is a normal good, increases in domestic income have caused increases in the ______.

demand for health care

Ease of substitutability, elasticity of product demand and the ratio of resource cost to total cost are all factors that ______.

determine the elasticity of resource demand

Economic profit is a type of ______.

economic rent

The figure illustrates the formula for the ______.

elasticity of resource demand

Profit functions as a reward for ______ for taking on the uninsurable risks associated with running a business.

entrepreneurs

The PPACA's employer mandate requires that ______.

every firm with 50 or more employees must purchase health insurance for their employees

When doctors are paid separately for each service they perform it is known as ______.

fee for service Reason: A preferred provider payment is a payment to a preferred provider organization (PPO) or health plan that has contracts with a network of preferred providers from which consumers can choose.

Which of the following are employer mandates required by the PPACA?

firms with 50 or more workers opting not to buy insurance for their workers will be fined $2000 per worker every firm with 50 or more full-time employees must purchase health insurance for each employee

Which of the following are parts of the personal mandate of the PPACA?

individuals will be fined $695 if they refuse to purchase health insurance individuals must purchase health insurance for themselves and dependents

Risks that are measurable, such as floods and on-the-job accidents, are said to be ______.

insurable risks

Paying a relatively small known cost for protection against an uncertain and much larger cost is called ______.

insurance

A firm's nonlabor costs include implicit and explicit payments to ______.

land, capital, and entrepreneurship

A firm in a purely competitive labor market maximizes its profit by hiring workers to the point at which its wage rate equals ______.

marginal revenue product (MRP) Reason: Under this scenario, a firm could only hire one worker. Wage rate is equal to MRC at any level of hiring. To maximize its profits, the firm must hire to the point where marginal revenue product is equal to marginal resource cost.

Because resource demand is derived from product demand, the strength of the demand for any resource will depend on the _____.

market value or price of the good or service it helps produce demand for the good or service it helps produce productivity of the resource in helping to create a good or service Reason: Changes in demand for resources or consumer products result from changes in their prices or some determinant, other than price, that makes buyers desire more of a particular product.

In advanced economies, capital equipment is both more plentiful and ______ than in developing economies.

more technologically advanced

A national health insurance system was considered politically impossible in the United States in 2010 because _______.

opinion polls indicate that a majority of Americans with employer-provided health care are happy with their coverage

The supply curve for each type of labor slopes upward, which indicates that employers as a group must ______ to obtain more workers.

pay higher wage rates

Large, uninsured medical bills are one of the major causes of ______.

personal bankruptcy

Real hourly compensation is calculated as wages and salaries ______.

plus employers' contributions to social insurance and private benefit plans

Changes in quantity of a resource demanded are caused by a change in the ______.

price of a specific resource

The derived demand for an input will rise when it is highly productive in ______.

producing a highly valued commodity reducing the costs to produce a product

The output effect means that a firm will ______.

purchase more of one input when the price of another input falls and less of that particular input when the price of the other input rises

A hypothetical interest rate whose only function is to compensate lenders for the opportunities they forgo by not having access to the loaned funds is called the ______.

pure rate of interest

In a(n) ______ labor market, many firms compete with one another to hire a specific type of labor.

purely competitive

The Patient Protection and Affordable Care Act focused on ______.

reducing incentives to overconsume health care

Compensating differences is a reason why ______ conditions differ in various labor markets.

supply

The figure illustrates that the imperfectly competitive seller's downward slope is greater than that of a purely competitive seller's because ______.

the imperfectly competitive seller sells added output at lower prices making the resource demand curve less elastic the pure competitor can sell added output at a constant price making the resource demand curve more elastic

Health insurance can cause some insured people to be less careful about their health, due to ______.

the moral hazard problem

When the interests of firms and workers are not identical, it gives rise to ______.

the principal-agent problem

Derived demand for a resource depends on ______.

the productivity of the resource used to create the good or service the price or value received from the product it produces

Differing amounts of human capital is a source of ______.

wage differentials

The expenditures that firms incur in acquiring economic resources flow to households in the form of ______.

wages rent profit interest

People who borrow money value it for ______.

what it can purchase

The fact that interest is paid on invested funds means that a specific amount of money today is ______ in the future.

equal to a larger amount of money

Since 1960, health care expenditures as a percentage of GDP have greatly ______.

increased

To ensure adequate return on investment, high and rising education and training costs have necessitated high and rising ______.

physician fees

As shown in the table above, $1,000 invested at 10 percent compound interest will grow into $1,331 after three years. What is the present value of $2,662 in three years if it is discounted back to the present at a 10 percent compound interest rate? (Hint: $2,662 is twice as much as $1,331.) Instructions: Enter your answer as a whole number.

$ 2000

Suppose that hiring a third worker at the campus coffee shop increases sales from $115 per hour to $130 per hour. What is the marginal product of labor per hour from adding that third worker? Instructions: Enter your answer as a whole number.

15

a. How many workers will the firm hire if the market wage rate is $27.95? How many workers will the firm hire if the market wage rate is $19.95? Explain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates.

2 workers 4 workers

Health care is one of the largest U.S. industries, employing about how many people?

20 million Reason: The health care industry employs many more people. The health care industry employs more people.

Which are provisions of the PPACA in regard to preexisting conditions, caps, and dropping coverage?

An insurance company cannot deny coverage to anyone on the basis of a preexisting medical condition. An insurance company is prohibited from imposing annual or lifetime expenditure caps. An insurance company is allowed to drop a policyholder only in the case of policyholder fraud.

The ______ interest rate is the rate of interest expressed in purchasing power after being adjusted for inflation.

Blank 1: real

In a purely competitive labor market, total cost (wages plus other income payments) equals total ________. Therefore, a firm earns only a(n) ________ profit.

Blank 1: revenue or revenues Blank 2: normal

Where monopsony labor market outcomes might have occurred, _______ have sprung up to counteract that power by forcing firms to negotiate wages.

Blank 1: unions

Which of the following represents the trade-off between the two health care reform objectives of controlling costs and making health care accessible to everyone?

Greater access to the system means rising costs.

Complete the following labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market.

Instructions: Enter your answers as a whole number.

a. What would be the new values in the table?

Instructions: Enter your answers as a whole number.

Which of the following outcomes are most likely when wheat producers bid on land on which to grow their crops?

Land rent is highest in more fertile areas. Land rent is low in less fertile areas. Land rent is near zero in non-fertile areas.

Firms can acquire capital in which of the following ways?

Leasing it from households Purchasing it themselves

c. Next suppose that the cost of renting a vehicle falls back down to $250 per day but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation?

MRP = $262.50 incorrect ($187.50) MRC = $250 Would adding a vehicle under these circumstances increase the firm's profits: No

Businesses are likely to spend borrowed loanable funds on which of the following?

Machinery Warehouses

What is it called when income is distributed in society according to the contribution of the resource to society's output?

Marginal productivity theory of income distribution

______ is one of four reasons given why labor demand conditions differ in various markets.

Marginal revenue productivity

Which of the following are the general sources of uninsurable risks?

New products or production methods pioneered by rivals Changes in the general economic environment Changes in the structure of the economy Changes in government policy

Suppose a campus restaurant increases the number of workers it hires from 5 workers per day to 13 workers per day. As a result, its total revenue increases from $225 per day to $650 per day. Instructions: Enter your answers rounded to two decimal places. a. Assuming that each worker is equally productive, what is the marginal revenue product per day of each additional worker? b. Assuming the restaurant is using its resources in a profit-maximizing way, and that each worker works 5 days each week, what is the current weekly wage rate in the labor market?

$53 incorrect $265 incorrect

Suppose that the demand for loanable funds for car loans in the Milwaukee area is $11 million per month at an interest rate of 10 percent per year, $12 million at an interest rate of 9 percent per year, $13 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $14 million, what will be the equilibrium interest rate? Instructions: Enter your answer as a whole number.

% per year

The objections over the PPACA include ______.

-greater inefficiencies in health care due to federal control of pricing and content of insurance policies -the notion of a national health insurance system -concerns whether the PPACA would reduce the growth rate of health care expenditures

a. How many workers will the firm hire if the market wage rate is $27.95? How many workers will the firm hire if the market wage rate is $19.95? Explain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates. b. Show this firm's labor demand curve graphically. Instructions: Use the tool provided 'Demand' to plot the labor demand curve point by point (plot 6 points total).

2 worker(s) 4 worker(s)

If proprietors' income is included within the labor (wage) share, the combined rent, interest, and profit share of the income earned by Americans in a typical year would be almost _______ of national income.

20 percent

Projections for the year 2035 indicate that what percentage of the population will be 65+?

21

Children of parents with employer-provided health insurance stay on their parents' health insurance policy until age ______.

26

What fraction of health care spending is financed by insurance?

3/4

Which portion of all health care expenses are paid through public or private insurance?

3/4

Studies suggest that up to ____ percent of common medical tests and procedures are either inappropriate or of questionable value.

33

What percentage of common medical tests and procedures are either inappropriate or of questionable value?

33%

Wages and salaries from labor comprise about ______ percent of all income earned by Americans in a standard year.

70%

What percentage of Americans with employer-provided health insurance rated their coverage as good or very good?

75%

Which of the following exemplifies the substitution effect in regard to substitute resources?

A decline in the price of machinery prompts a firm to substitute machinery for labor, allowing it to produce output at the lower cost of machinery.

Which of the following summarizes the changes in demand in the resource market as a result of an increase or decrease in product demand?

A decrease in the demand for a product will decrease the demand for a resource used in its production. An increase in the demand for a product will increase the demand for a resource used in its production.

Which of the following is an example of the substitution effect in regard to substitute resources?

A firm can produce some specific amount of output using a relatively small amount of labor and a relatively large amount of capital or vice versa.

Which of the following describes the incentive function for suppliers of non-land resources?

A low price provides an incentive to offer less of the resource. A high price provides an incentive to offer more of the resource.

Supporters of a minimum wage argue that it can increase wage rates without causing significant unemployment in which type of labor market?

A low-pay labor market with monopsony power Reason: A minimum wage would not affect labor markets in which workers already earn more than the minimum.

Which of the following exemplifies the flow of research and development funds going to firms whose expected rate of return on R&D is the greatest?

Ace Microcircuits has an expected rate of return on R&D of 16% with an interest rate of 8%

A lower equilibrium interest rate results in which of the following?

An increase in total spending in the economy An increase in total output if the economy has unused resources An increase in business borrowing for investment

A means of protection against the huge monetary losses that can result from hazards is called what?

An insurance program

Which of the following would result in a rightward shift of the supply curve for loanable funds?

Anything that causes households to increase savings Reason: When households choose to save more, those funds that would have been spent become part of the money supply and available for banks to lend out. Thus, the supply of money increases, illustrated as a shift of the supply curve rightward.

As shown in the diagram, what happens to the quantity supplied of loanable funds as interest rates change?

As interest rates decrease, the quantity supplied of loanable funds also decreases. As interest rates increase, the quantity supplied of loanable funds also increases. Reason: There is a positive, or direct, relationship between price and quantity supplied. There is a positive, or direct, relationship between price and quantity supplied.

A _______ monopoly is a combination of the monopsony model and the inclusive or industrial unionism model.

Blank 1: bilateral

Plentiful physical ______ (one word), such as machinery and buildings, is one reason for the high productivity of labor in industrially advanced economies.

Blank 1: capital, resources, or capitol

When an increase in the quantity used of one resource leads to the increase of the use of another resource in the same production process and vice versa, the resources used are called resources.

Blank 1: complementary or complimentary

A union that raises wage rates by organizing all available workers and threatening to withhold labor via a strike is using the _______ union model. (Enter only one word per blank.)

Blank 1: inclusive or industrial

The public value that human life should be sustained as long as possible may ________ (increase/decrease) the demand for health care.

Blank 1: increase or raise

Other things equal, an increase in the demand for a product will ________ the demand for a resource used in its production, whereas a decrease in product demand will ______ the demand for that resource.

Blank 1: increase or raise Blank 2: decrease, lower, reduce, or lessen

When the productivity of a product resource increases and makes a firm's product more efficient and or effective, it will ________ (increase/decrease) the demand for the resource, and should the productivity of a resource decline, it will ________ (increase/decrease) the demand for the resource.

Blank 1: increase or raise Blank 2: decrease, reduce, or lower

Because health care is a normal good, growth in domestic incomes have caused the demand for health care to ________.

Blank 1: increase, rise, or grow

When the interest rate _____, more people will delay their consumption today for the future and make more loanable funds available to borrowers.

Blank 1: increases or rises

In the 1980s land prices in Japan surged upward in a "speculative bubble." Land prices then fell for 11 straight years between 1990 and 2001. What can we safely assume happened to land rent in Japan over those 11 years? Given that the supply of land is perfectly (Click to select) competitive inelastic elastic , the drop in prices must have resulted from (Click to select) increased decreased demand for land. The demand for land would (Click to select) fall rise not change if there were less of a return on the land, so we can safely assume that rent (Click to select) fell did not change rose in Japan between 1990 and 2001.

Blank 1: inelastic Blank 2: decreased Blank 3: fall Blank 4: fell

A(n) ________ program is a means of protection against the huge monetary losses that can result from hazards.

Blank 1: insurance

Three-fourths of health care spending is financed by

Blank 1: insurance

The health care industry employs about 20 million people, making it one of the ______ U.S. industries in terms of size.

Blank 1: largest, biggest, larger, or bigger

Insured individuals visit doctors more often, requesting more diagnostic tests and more complex treatments than they would if they were uninsured because, with health insurance, the price or opportunity cost of consuming health care is

Blank 1: minimal, low, less, small, smaller, or lower

Since the passage of the Fair Labor Standards Act in 1938, the US has had a federal ______ wage.

Blank 1: minimum

A labor market ______ is a situation in which a single employer has substantial buying power.

Blank 1: monopsony or monopsonist

Due to the ______ hazard problem, health insurance can cause some insured people to be less careful about their health.

Blank 1: moral

The _______ hazard problem is the tendency of one party to an agreement to alter his or her behavior in a way that is costly to the other party.

Blank 1: moral

In the resource market, the output effect means that a firm will purchase ______ of one particular input when the price of the other input falls and _______ of that particular input when the price of the other input rises.

Blank 1: more Blank 2: less

Socialists believe that land should be _________ for the sake of improving society as a whole.

Blank 1: nationalized

A(n) _______ wage is the actual amount of money a worker receives for services performed by the hour, day, or year, unadjusted for inflation.

Blank 1: nominal

International outsourcing, also called _______ _, has shifted jobs to developing countries.

Blank 1: offshoring, off shoring, or off-shoring

Health care spending in the United States is high and rising in both absolute terms and as percentage of domestic ______.

Blank 1: output, GDP, or production

High and rising education and training costs have necessitated high and rising _______ fees to ensure adequate return on investment.

Blank 1: physician, doctor, medical, or doctors'

Compensation paid according to the units of output a worker produces is called _______ rates.

Blank 1: piece or peace

Compensation paid according to the units of output a worker produces is called rates.

Blank 1: piece or peace

Every firm will maximize its profits or minimize its losses by hiring up to the point at which marginal revenue _____ is equal to marginal _____ cost.

Blank 1: product Blank 2: resource, factor, or input

The strength of the demand for any resource will depend on the ________ of the resource and the market ________ of the good or service that the resource helps produce.

Blank 1: productivity Blank 2: price or value

The strength of the demand for any resource will depend on the __________ of the resource and the market __________ of the good or service that the resource helps produce.

Blank 1: productivity Blank 2: price or value

The marginal ______ of any resource will vary with the ________ of other resources used with it.

Blank 1: productivity or product Blank 2: quantities , amount, quality, or quantity

In the figure, an increase in the wage rate (price) from $5 to $7 on the MRP = D curve has been caused by a change in the of labor at different wage rates rather than a distinct change in for labor causing the MRP = D curve to shift.

Blank 1: quantity Blank 2: demanded Blank 3: demand

To maximize profit, a firm should add additional units of a specific resource as long as each successive unit adds more to the firm's total _________ than it adds to the firm's total _________.

Blank 1: revenue or revenues Blank 2: cost or costs

There is a trade-off between the two health care reform objectives of controlling costs and making health care accessible to everyone. Greater access to the system will mean _____ health care costs.

Blank 1: rising, increasing, growing, expanding, higher, greater, more, or raised

Federal tax policy toward employer-financed health insurance works as a tax _____ that strengthens the demand for health care services.

Blank 1: subsidy

The degree to which resources are ______ is a fundamental determinant of elasticity.

Blank 1: substitutable or substitutional

On the ______ side of the labor market, workers are not homogeneous in their mental and physical capacities or in their education and training.

Blank 1: supply

The ______ curve for each type of labor slopes upward, indicating that employers as a group must pay higher wage rates to obtain more workers.

Blank 1: supply

A firm in a purely competitive labor market maximizes its profit by hiring workers to the point at which its _______ rate or MRC equals MRP.

Blank 1: wage

A firm in a purely competitive labor market maximizes its profit by hiring workers to the point at which its ________ rate or MRC equals MRP.

Blank 1: wage

In a purely competitive labor market, each firm employs such a small fraction of the total available supply of a specific type of labor that no single firm can influence the ________ rate.

Blank 1: wage

The term ______ (one word) refers to the price that employers pay for labor.

Blank 1: wage or wages

Which of the following best explains how banks attract loanable funds?

By paying interest to savers

How do governments respond to rising, unpredictable health care expenditures?

By reducing spending in other categories By raising taxes

How is the market labor demand curve for a particular labor service determined?

By summing the individual labor demand curves for every firm. Reason: The market demand is determined by summing (adding) the individual demand curves, not multiplying them. Market demand is determined by individual demand curves, not supply curves. Every firm has different labor demands. Assuming a single firm's demand curve is representative of the entire industry could provide inaccurate results.

Which of the following identifies how the productivity of any resource may be altered over the long run?

By the quantities of other resources Through technological advance Through the quality of the variable resource

True or false: Every American has health insurance.

False Reason: Many Americans, some 29 million in 2017, cannot afford health insurance premiums and therefore do not have health insurance.

True or false: Public and private insurance together pay for one-quarter of all health care costs.

False Reason: Public and private insurance together pay for three-quarters of all health care costs.

True or false: The marginal revenue product (MRP) of the imperfectly competitive seller falls for two reasons, MP diminishes and product price falls as output decreases.

False Reason: The marginal revenue product (MRP) of the imperfectly competitive seller falls because MP diminishes and product price falls as output increases.

True or false: Wage differentials refers to hourly wage rates and annual salaries differing only among firms.

False Reason: Wage differentials refers to hourly wage rates and annual salaries differing among occupations, similar workers, firms and ethnicities.

Wages are the price that employers pay to improve human capital.

False Reason: Wages are the price that employers pay for labor. Improving the productivity of workers through training and development is known as an investment in human capital.

Doctors have an incentive to suggest more health care services than are absolutely necessary due to which of the following?

Fee-for-service arrangements

Which of the following statements is agreed upon by all economists?

Firms will not hire workers who cost more per hour than the value of their hourly output. Reason: At a certain wage level, firms would end up paying more for labor than the workers would produce in output.

What are tax-free savings accounts into which people with high-deductible health insurance plans can place funds each year called?

HSAs

Which of the following are the effects of a competitive labor market on employment levels and wage rates as compared to those of a monopsony labor market?

Higher level of employment Higher wage rates

Which of the following are the most visible economic effects of rising health care costs?

Higher premiums to employers Higher out-of-pocket costs to workers

The following table depicts the weekly output of a firm that manufactures computer printers. The printers sell for $100 each. Calculate the marginal product and the marginal revenue product, and then fill in the blanks in the table below. Instructions: Enter your answers as a whole number.

If the weekly wage paid to workers is $1,600, the optimal number of workers to hire is 12.

The public value that human life should be sustained as long as possible can do what to the demand for health care?

Increase demand

Productivity growth in an industry tends to do which of the following?

Increase supply Reduce costs

What does a perfectly horizontal (flat) supply curve indicate in a labor supply and labor demand graph for an individual firm?

Individual firms cannot affect wage rates no matter how many or how few employees they hire.

Which of the following represents the income earned by households for providing capital to firms?

Interest Reason: Wages are earned from providing one's labor.

What are the critical prices that determine the level and composition of new capital goods investments?

Interest rates

A higher equilibrium interest rate has which of the following effects?

It reduces investment and total spending. It discourages business from borrowing for investment.

Which of the following is true about the marginal productivity of any resource?

It will vary with the quantities of other resources used with it

What are the three main methods entrepreneurs use to generate economic profits?

Keeping production costs below competitors' costs Creating popular new products Establishing a profitable monopoly

Supply is perfectly inelastic for which factor of production?

Land

______ is a reason why demand conditions differ in various labor markets.

Marginal revenue productivity Reason: The strength of labor demand differs due to how much various occupational groups contribute to the revenue of their respective employers, known as marginal revenue productivity. How much labor a firm demands does not depend on the quantity or supply of labor available.

A criticism of the diagnosis-related group (DRG) system is that it has lowered the quality of health care for ______.

Medicare patients

What are ways in which workers differ on the supply side of the labor market?

Mental capacities Physical capacities Education and training

How has the supply of health care services increased compared to the demand?

More slowly

What is the impact on federal, state, and local governments' budgets when there are unpredictable health care expenditures?

Negative

c. Now determine the firm's demand curve for labor, assuming that it is selling in an imperfectly competitive market and that, although it can sell 17 units at $2.20 per unit, it must lower product price by 5 cents in order to sell the marginal product of each successive labor unit. Instructions: For marginal product, enter your answers as a whole number. For all other answers, round your answers to 2 decimal places. Compare this demand curve with the one derived in a competitive market. Which curve is more elastic?

Perfectly competitive market

Which of the following is a reason for the high productivity of labor in industrially advanced economies?

Plentiful capital

What is it called when a firm in a purely competitive market is unable to influence the market price no matter how much output the firm produces?

Price taker

What can shift the resource demand curve?

Product demand Resource productivity Prices of other resources

Which of the following helps allocate resources among alternative lines of production, distribution, and sales?

Profit

Based on the figure given, what happens if unions can increase the current demand for union labor from D1 to D2?

Quantity of labor demanded changes from Qc to Qu Wage Rate changes from Wc to Wu

PPOs do which of the following?

Reduce health insurance premiums Reduce health care expenditures

a. What would be the new values in the table? Instructions: Enter your answers as a whole number.

See photo of updated graph.

The pure rate of interest is best approximated by which of the following?

The interest paid on long-term, virtually riskless securities Reason: This describes the loanable funds theory of interest which focuses on a more micro-based theory of interest rates. It states that the equilibrium interest rate on a particular type of loan is the rate at which the quantities of loanable funds supplied and demanded are equal for that type of loan. It is the hypothetical interest rate that would serve purely and solely to compensate lenders for their willingness to patiently forgo alternative consumption and investment opportunities until their money is repaid.

What determines the equilibrium wage rate and level of employment in a purely competitive labor market?

The intersection of the market labor demand curve and the market labor supply curve

Which of the following explains the interest rate in terms of the supply of and demand for funds available for lending and borrowing?

The loanable funds theory of interest

The allocation of funds to R&D projects benefits society when which of the following is true?

The projects have high enough expected rates of return to justify the use of scarce resources.

Which of the following statements are true of the United States?

The quality of treatment has been improving. The incidence of disease has been declining.

b. What would be the net impact on the location of the resource demand curve given below?

The resource demand schedule will shift to the right

What is the main cause of the relatively slow growth in the number of physicians?

The rising cost of medical school

Which of the following are inversely related and are present when the cost of an input changes?

The substitution and output effects. Reason: When the price of a resource changes, the substitution and output effects are both present and working in opposite directions. The effects of complementary resources and the substitution effect cannot occur simultaneously. Reason: The substitution and output effects work in opposite directions when the price of a resource (input) changes.

Which of the following describes the effect on the supply of loanable funds if interest earned on savings were to be suddenly exempted from taxes?

The supply of loanable funds would increase and shift to the right

Which of the following conveys the idea that a specific amount of money is more valuable to a person the sooner it can be obtained?

The time-value of money

What curve shows the various total amounts of the resource that firms will purchase or hire at various resource prices?

The total, or market demand curve for a specific resource

How have physician's fees and incomes changed as a result of the rising demand for their services?

They have rapidly increased

Given the table, what is the least-cost combination of labor and capital that should be used to produce 50 units of output?

Three units of labor and two units of capital

Why do doctors practice defensive medicine?

To protect themselves from malpractice suits

Which people are examples of the "less prevention" moral hazard problem?

Tony, who is insured and sky dives for fun Pam, who is insured and eats primarily junk food

According to the PPACA, when are health insurance providers allowed to drop policyholders?

When the policyholder commits fraud.

Here is the deal: You can pay your college tuition at the beginning of the academic year or the same amount at the end of the academic year. You either already have the money in an interest-bearing account or will have to borrow it. Assume the cost of your tuition is $10,000 and the interest rate over the academic year is 10 percent. When will you choose to pay?

You will pay at the end of the academic year in both cases because you can earn $1,000 in interest on $10,000 whether you borrow $10,000 now or keep the money you already have in an interest-bearing account.

Several of the new taxes imposed by the PPACA include ______.

a 3.8% increase in the capital gains tax for individuals and couples earning more than $200 and $250 thousand per year, respectively a 40% tax on employers whose insurance policy premiums exceeds $10,200 and $27,500 per year for individuals and couples, respectively a 0.9% increase in the Medicare payroll tax for individuals and couples earning more than $200 and $250 thousand per year, respectively a 2.9% excise tax imposed on medical device manufacturers a 10% tax imposed on indoor tanning

The general or average level of wages, like the general level of prices, includes

a wide range of different wage rates.

ADVANCED ANALYSIS To fund its wars against Napoleon, the British government sold consol bonds. These bonds were called "perpetuities" because they would pay £3 every year in perpetuity (forever). Instructions: Enter your answers as a whole number. a. If a citizen could purchase a consol for £25, what would the consol's annual interest rate be? What if the price were £50? What if the price were £100? b. Bonds are known as "fixed-income" securities because the future payments that they will make to investors are fixed by the bond agreement in advance. Do the interest rates of bonds and other investments that offer fixed future payments vary positively or inversely with their current prices?

a. 12% 6% 3% b. Inversely To calculate the price of a perpetuity, we use the formula: Price = (Payment/Interest rate), or to calculate the interest rate, we use the formula: Interest rate = (Payment/Price). Remember that when you are solving for a rate multiply the answer by 100 to get it out of a decimal and into a rate.

ADVANCED ANALYSIS To fund its wars against Napoleon, the British government sold consol bonds. These bonds were called "perpetuities" because they would pay £5 every year in perpetuity (forever). Instructions: Enter your answers rounded to 1 decimal place. a. If a citizen could purchase a consol for £25, what would the consol's annual interest rate be? What if the price were £50? What if the price were £100? b. Bonds are known as "fixed-income" securities because the future payments that they will make to investors are fixed by the bond agreement in advance. Do the interest rates of bonds and other investments that offer fixed future payments vary positively or inversely with their current prices?

a. 20% 10% 5% b. Inversely To calculate the price of a perpetuity, we use the formula: Price = (Payment/Interest rate), or to calculate the interest rate, we use the formula: Interest rate = (Payment/Price). Remember that when you are solving for a rate multiply the answer by 100 to get it out of a decimal and into a rate.

You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $50,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $210,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? What will your accounting profit or loss be in the high-revenue situation? b. On average, how much do you expect your revenue to be? Your accounting profit? Your economic profit? Will you quit your job and try your hand at being an entrepreneur? (Click to select) Yes No c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is levied only if a firm is earning positive accounting profits. What will your after-tax accounting profit be in the low-revenue case? In the high-revenue case? What will your average after-tax accounting profit be? What will be your average after-tax economic profit? Will you now want to quit your job and try your hand at being an entrepreneur? (Click to select) Yes No d. Other things equal, does the imposition of the 25 percent profit tax increase or decrease the supply of entrepreneurship in the economy?

a. $ $ b. $ $ $ c. $ $ $ $ d. $ -20000 Numeric ResponseEdit Unavailable. -20000 correct. What will your accounting profit or loss be in the high-revenue situation? $ 170000 Numeric ResponseEdit Unavailable. 170000 correct. b. On average, how much do you expect your revenue to be? $ 305000 Numeric ResponseEdit Unavailable. 305000 correct. Your accounting profit? $ 75000 Numeric ResponseEdit Unavailable. 75000 correct. Your economic profit? $ 15000 Numeric ResponseEdit Unavailable. 15000 correct. Will you quit your job and try your hand at being an entrepreneur? Yes Correct c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is levied only if a firm is earning positive accounting profits. What will your after-tax accounting profit be in the low-revenue case? $ -20000 Numeric ResponseEdit Unavailable. -20000 correct. In the high-revenue case? $ 170000 Numeric ResponseEdit Unavailable. 170000 correct. What will your average after-tax accounting profit be? $ 127500 Numeric ResponseEdit Unavailable. 127500 correct. What will be your average after-tax economic profit? $ 53750 Numeric ResponseEdit Unavailable. 53750 correct. Will you now want to quit your job and try your hand at being an entrepreneur? No Correct d. Other things equal, does the imposition of the 25 percent profit tax increase or decrease the supply of entrepreneurship in the economy? Decrease Correct

Suppose that the interest rate is 4 percent. Instructions: Enter your answers rounded to 2 decimal places. a. What is the future value of $100 four years from now? How much of the future value is total interest? b. By how much would total interest be greater at a 6 percent interest rate than at a 4 percent interest rate?

a. $ 116.99 $ 16.99 b. $ 9.26 b. To calculate the future value of total interest, subtract the principal (the initial amount) from the total future value. This is $16.99 (= $116.99 - $100). c. To find out how much greater total interest would be at a 6 percent interest rate than at a 4 percent interest rate, first find the future value at the 6 percent interest rate. Using the formula above, future value = $100 × (1.06)4 = $100 × 1.2625 = $126.25. Second, find the future value of total interest. This is $26.25 (= $126.25 - $100). Finally, subtract the total interest at the 4 percent rate from the total interest at the 6 percent rate. This equals $9.26 (= $26.25 - $16.99).

You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $40,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $200,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? What will your accounting profit or loss be in the high-revenue situation? b. On average, how much do you expect your revenue to be? Your accounting profit? Your economic profit? Will you quit your job and try your hand at being an entrepreneur? (Click to select) Yes No c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is levied only if a firm is earning positive accounting profits. What will your after-tax accounting profit be in the low-revenue case? In the high-revenue case? What will your average after-tax accounting profit be? What will be your average after-tax economic profit? Will you now want to quit your job and try your hand at being an entrepreneur? (Click to select) Yes No d. Other things equal, does the imposition of the 25 percent profit tax increase or decrease the supply of entrepreneurship in the economy?

a. $-20,000 $180,000 b. $300,000 $80,000 $20,000 Yes c. $-20,000 $135,000 $57,500 $-2,500 No d. decrease

Suppose that you own a 10-acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $30 per acre for seed, $80 per acre for fertilizer, and $70 per acre for equipment rentals and labor. With these inputs, the land will yield 40 bushels of wheat per acre. Instructions: Enter your answers as a whole number. a. If the price at which wheat can be sold is $5 per bushel and if farmers want to earn a normal profit of $10 per acre, what is the most that any farmer would pay to rent your 10 acres? b. What price would the farmer pay to rent your 10 acres if the price of wheat rises to $6 per bushel?

a. $100 b. $500

After a campus pub increases its output from 4 kegs of beer per day to 10 kegs of beer per day, its total resource cost increases from $180 per day to $500 per day. Instructions: Enter your answers rounded to two decimal places. a. What is the marginal resource cost per day of the additional kegs? b. Assuming the pub is using its resources in a profit-maximizing way, what is the marginal revenue product per day of the additional kegs?

a. $53.33 b. $

Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one more worker, the firm's total monthly revenue will increase from $50,000 to $58,000. If he adds one more tractor, monthly revenue will increase from $50,000 to $62,000. Each additional worker costs $4,000 per month, while an additional tractor would also cost $4,000 per month. Instructions: Enter your answers as a whole number. a. What is the marginal revenue product of labor? The marginal revenue product of capital? b. What is the ratio of the marginal revenue product of labor to the price of labor (MRPL/PL)? What is the ratio of the marginal revenue product of capital to the price of capital (MRPC/PC)? c. Is the firm using the least-costly combination of inputs? d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?

a. $8,000 $12,000 b. 2 3 c. No, because MRPC/PC > MRPL/PL d. Revenue is increased more by spending money on an additional tractor.

Suppose that the marginal product of labor for a local bakery is 120 units per day and the price of labor is $10 per day. Instructions: Enter your answers as a whole number. a. What does the least-cost rule say that the ratio of the marginal product of capital to the price of capital should be? b. Now suppose that the marginal product of labor is 120 units per day, the price of labor is $10 per day, and the price of capital is $3 per day. What does the least-cost rule say that the marginal product of capital should be?

a. 12 b. 36

LAST WORD Assume that you borrow $5,000, and you pay back the $5,000 plus $250 in interest at the end of the year. Instructions: In parts a and c, enter your answers as a whole number. In part b, round your answer to 2 decimal places. a. Assuming no inflation, what is the real interest rate?

a. 5%

Suppose that the marginal product of labor for a local bakery is 12 units per day and the price of labor is $2 per day. Instructions: Enter your answers as a whole number. a. What does the least-cost rule say that the ratio of the marginal product of capital to the price of capital should be? b. Now suppose that the marginal product of labor is 12 units per day, the price of labor is $2 per day, and the price of capital is $4 per day. What does the least-cost rule say that the marginal product of capital should be?

a. 6 b. 24

Suppose the productivity of capital and labor are as shown in the table below. The output of these resources sells in a purely competitive market for $1 per unit. Both capital and labor are hired under purely competitive conditions at $3 and $1, respectively. Instructions: Enter your answers as a whole number. a. What is the least-cost combination of labor and capital the firm should employ in producing 80 units of output? b. What is the profit-maximizing combination of labor and capital the firm should use? What is the resulting level of output? What is the economic profit? Is this the least costly way of producing the profit-maximizing output?

a. Labor = 4 Capital = 2 b. Labor = 7 Capital = 7 142 units $114 Yes, this is the least costly way.

A delivery company is considering adding another vehicle to its delivery fleet; each vehicle is rented for $100 per day. Assume that the additional vehicle would be capable of delivering 1,500 packages per day and that each package that is delivered brings in $0.10 in revenue. Also assume that adding the delivery vehicle would not affect any other costs. Instructions: Enter your answers as a whole number.

a. What is the MRP? What is the MRC? MRP = $150 MRC = $100 Should the firm add this delivery vehicle: Yes

Unlike the least-cost rule where as long as the ratios of both equations are the same and equal (ex. 20/4 = 10/2 = 5/1 = 5), when the ratio between the two equations for the profit-maximizing rule each always equal 1 (ex. 10/10 = 5/5), then the purely competitive firm has ______.

achieved profit maximization

When a firm hires most of the available supply of a certain type of labor, its decision to employ more or fewer workers ______.

affects the wage rate it pays to those workers. Reason: Workers are paid wages, not interest rates. In a monopsony market, the firm is a "wage maker" in that the wage rate it must pay varies directly with the number of workers it employs. In a monopsony market, the firm is a "wage maker" in that the wage rate it must pay varies directly with the number of workers it employs.

Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as "trunk, shake, and catch" pickers, which vigorously shake oranges from trees. If widely adopted, this will

decrease the demand for human orange pickers, implying the substitution effect is greater than the output effect.

The determinants of the elasticity of resource demand are ______.

elasticity of product demand ease of resource substitutability ratio of resource cost to total cost Reason: It is the ratio of resource cost to total cost, not marginal cost. The larger the percentage of total production costs accounted for by a resource, the greater the elasticity of demand for that resource.

Each individual firm will maximize its profits or minimize losses by hiring a specific type of labor up to the point where the marginal revenue product is ______ marginal resource cost.

equal to

The point at which the market labor demand curve and the market labor supply curve intersect determines the ______ wage rate and level of labor ______ in a purely competitive labor market.

equilibrium; employed

What is the term that describes the amount to which some current amount of money will grow as interest compounds over time?

future value Reason: Some current amount of money expressed "over time" as interest compounds is known as the future value of money. Time-value of money refers to the concept of money having both a present and future value.

Under the PPACA, individuals will shop for their own health care insurance in insurance exchanges that will be ______.

government-regulated

The cost of issuing a large loan and a small loan are about the same in dollars, but the cost is ______.

greater as a percentage of the smaller loan Reason: Consider two loans: one for $1000 and the other for $2000. If both cost $50 to fund or issue, the cost is greater as a percentage of the smaller loan because $50/$1000 equals 5%, whereas the cost of the bigger loan is $50/$2000 or 2.5%.

The interest rate on a smaller loan will be ______ the interest rate on a larger loan, assuming equal maturity and risk.

greater than

In a competitive labor market, the level of employment would be ______ and the wage rate would be ______ than in a monopsonistic labor market.

greater; higher

Plentiful capital; advanced technology; superior health, education and training of workers; and access to abundant natural resources account for ______ in advanced economies.

higher labor productivity Reason: Advanced economies tend to have higher wages than developing economies. Demand for labor is higher in advanced economies than in developing economies. Advanced economies typically demonstrate higher levels of labor productivity.

Two of the ten fastest-growing occupations in percentage terms that are related to health care include ______.

home care aides physician assistants

One of the criticisms of the minimum wage is that it is a poorly targeted measure for reducing ______.

household poverty

When unions use the "craft union model" to increase the demand for union labor, they can ______ wage rates by ______ the supply of labor.

increase; reducing

Since 1960, the percentage of the population that is 65 or older ______.

increased

The income elasticity of demand for health care is estimated to be +1 or +1.5, meaning that increased income brings with it proportionate or more-than-proportionate

increases in health care spending.

Rising prices, quantities, and costs of health care services are the result of the demand for health care ______ than the supply.

increasing more rapidly

While many economists agree that improved health care has greatly contributed to society's GDP and well-being, many economists think that health care expenditures in the United States are ______.

inefficient

While economists agree that improved health care has greatly contributed to society's GDP and well-being, many economists think that health care expenditures in the United States are inefficiently ______.

large

No current consensus exists on the employment or unemployment effects of the present level of the ______ wage.

minimum Reason: The effects of the minimum wage are uncertain. Nominal wages simply refer to wages before adjusting for inflation. The effects of the minimum wage are uncertain. Real wages simply refer to wages after adjusting for inflation.

A change in quantity of a resource demanded is represented by ______.

movement from one point to another on a fixed resource demand curve

A basic package of health care that is available in some countries to every citizen at no direct charge is called ______.

national health insurance

Access to abundant ______, such as land, minerals, and energy, is a reason for the high productivity of labor in industrially advanced economies.

natural resources Reason: Physical capital includes equipment, such as machinery and buildings, not resources, such as land or energy. Labor quality refers to the health, education, and training of workers, not access to land, minerals, or energy. Land, minerals, and energy are natural resources, not technologies.

The ______ interest rate is the rate of interest expressed in dollars of current value with no adjustment for inflation.

nominal Reason: Any real value, such as the real interest rate, is expressed as a nominal value adjusted for inflation.

A(n) ______ is the amount of money received per hour, day, or year in return for labor services performed without any adjustment for inflation.

nominal wage

One of four reasons why the supply of labor differs in various labor markets is the existence of ______ , or groups of workers with differing abilities and education or training.

noncompeting groups

Legislation that prohibits workers from practicing a given trade before meeting certain requirements is known as ______.

occupational licensing

In the figure, an increase in the wage rate from $5 to $7 will reduce the ______.

quantity demanded for labor from 5 to 4 units

Many economists believed that the large subsidies provided by the PPACA would ______ prices and ______ consumption of health care.

raise; increase

When unions are successful in raising wages, they also ______.

reduce employment in unionized firms

The fact that health insurance may provide greater incentive to insured individuals to use health care more intensely than they would if they didn't have insurance is an example of ______.

the moral hazard problem

The derived demand for resources by producers for a product will be low when ______.

the product is selling poorly Reason: When consumer demand for a good or service is high, then the demand for the resources used to produce said good or service will also be high. However, the question states that derived demand is low. Under these circumstances, demand may continue to be high as well. It is due to low consumer demand for the product that firms' derived demand for resources to produce a product is also low.

In the figure, the equilibrium interest rate of 8% shows ______.

the rate at which the quantities of loanable funds supplied and demanded are equal

In a purely competitive labor market,

the supply of labor faced by an individual firm is perfectly elastic.

Demand is the only active determinant of land rent because ______.

the supply of land is fixed

In a purely competitive labor market, market supply and market demand establish ______.

the wage rate Reason: The interest rate is the price of money, established in the money or credit market. The wage is the price of labor, established in the labor market. Reason: The question specifically states, "labor" market. The price of labor is called the wage. Reason: Consumer surplus (benefit) occurs in all markets as the quantitative difference between the price that consumers pay (equilibrium price) and the highest price they are willing to pay for a good or service.

In a purely competitive labor market, total costs equal ______. Therefore, a firm earns a(n) ______ profit.

total revenue; normal

Changes in the general economic environment, changes in the structure of the economy, and changes in government policy are three general sources of ______.

uninsurable risk

Most income earned by Americans in a typical year is derived from ______.

wages

What is the rule that guides profit-seeking firms when deciding to hire more labor or use more of a specific resource?

Add additional units of the resource when each successive unit adds more to a firm's total revenue than it adds to its total cost

The U.S. labor force has _______ significantly over recent decades.

Blank 1: grown, expanded, increased, or risen

Differing amounts of _______ capital is a source of wage differentials.

Blank 1: human or worker

Market _______ is one of four reasons why demand and supply conditions differ in various labor markets.

Blank 1: imperfections

Market ________ is one of four reasons why demand and supply conditions differ in various labor markets.

Blank 1: imperfections

There is a trade-off between the two health care reform objectives of controlling costs and making health care accessible to everyone. Greater access to the system will mean ________ health care costs.

Blank 1: rising, increasing, growing, expanding, higher, greater, more, or raised

Economic profit is the reward to residual claimants for assuming financial ________.

Blank 1: risk

A 2003 federal law established health _______ accounts.

Blank 1: savings or saving

One reason that health care industry productivity growth has been modest is because it is generally more difficult to increase productivity for private ________ than for private goods.

Blank 1: services

______ is one of four reasons given why labor supply conditions differ in various labor markets.

Compensating differences

What are piece rates?

Compensation paid according to the units of output a worker produces

Now determine the firm's demand curve for labor, assuming that it is selling in an imperfectly competitive market and that, although it can sell 17 units at $2.20 per unit, it must lower product price by 5 cents in order to sell the marginal product of each successive labor unit. Instructions: For marginal product, enter your answers as a whole number. For all other answers, round your answers to 2 decimal places. Compare this demand curve with the one derived in a competitive market. Which curve is more elastic?

Competitive market

The passage of which act established a federal minimum wage?

Fair Labor Standards Act

True or false: Average life expectancy in the United States has decreased since 1970.

False

True or false: Over recent decades, the U.S. labor force has shrunk slightly.

False

True or false: Patients routinely shop around for the lowest prices for health care services.

False

True or false: The substitution and output effects are both present when the price of an input changes, and they work and change in the same direction.

False

True or false: Unions can boost wage rates by reducing the demand for labor.

False

b. What effect will each of the following have on the elasticity or the location of the demand for resource C, which is being used to produce commodity X? (i) An increase in the demand for product X.

Increase in demand

(iii) An increase in the number of resources substitutable for C in producing X.

Increase in elasticity

What is the outcome of productivity growth in an industry?

Increased supply

The 4th of July weekend has arrived. Millions of people go to the beach for the long holiday weekend. Which of the following scenarios illustrates demand derived from this holiday?

Local communities hire extra life guards Restaurants double their meat and produce orders

The marginal revenue product (MRP) of the imperfectly competitive seller falls for two reasons, because ______.

MP diminishes and product price falls as output increases

The amount of each year's health care costs that the insured pays before the insurer begins paying is called what?

The deductible

Which of the following examples show derived demand?

The demand for piles of rock comes from the demand for limestone benches and building blocks.

Which of the following union models attempts to increase the demand for union labor by raising demand for the products union members produce and or altering the prices of related inputs?

The demand-enhancement model

Which of the following infers the direction of the change in the demand for resource labor due to a change in capital?

The direction of the change in labor demand will depend on whether labor and capital are substitutes or complements in production

What motivates firms to innovate?

The expectation of economic profit

True or false: In the "demand enhancement model," a union attempts to increase the wage rate of its members either by increasing demand for the products the union helps to produce or by altering the prices paid for inputs.

True Reason: Increased demand may cause output prices to rise, thereby potentially raising firm revenues and profits and giving unions a reason to negotiate for higher wages.

True or false: Interest rates are rationing devices.

True Reason: Interest rates are prices, and prices are rationing devices.

True or false: Most Americans workers receive their health insurance from managed-care organizations.

True Reason: Managed-care organizations are responsible for 65% of all U.S. workers' health care.

True or false: Some advances in medical technology have increased the cost of health care.

True Reason: Some technology dramatically lowers costs (as in the case of vaccines), but some increases cost (as in the case of the advanced medical scanners).

True or false: Many provisions of the Patient Protection and Affordable Care Act have been focused on reducing the incentives to overconsume health care.

True Reason: The Patient Protection and Affordable Care Act focused on reducing overconsumption of health care.

True or false: In a purely competitive labor market, market supply and market demand establish the wage rate.

True Reason: The basic laws of supply and demand apply to the wage prices of a purely competitive labor market.

True or false: The level of derived demand for a good or service used in the production of other goods and services is based upon that input's level of productivity in helping reduce the cost of producing the finished product.

True Reason: Inputs used in production that lower the cost of a product will have the effect of increasing derived demand for those productive inputs.

b. MRPL = $10; PL = $12; MRPC = $14; PC = $9.

These conditions are consistent with maximum profits for the firm: False Which resource should be used in larger and/or smaller amounts: Use less labor and more capital

d. MRPL = $22; PL = $26; MRPC = $16; PC = $19.

These conditions are consistent with maximum profits for the firm: False Which resource should be used in larger and/or smaller amounts: Use less of both

In each of the following four cases, MRPL and MRPC refer to the marginal revenue products of labor and capital, respectively, and PL and PC refer to their prices. Indicate whether each of the following is consistent with maximum profits for the firm. If not, state which resource(s) should be used in larger amounts and which resource(s) should be used in smaller amounts. a. MRPL = $8; PL = $4; MRPC = $8; PC = $4.

These conditions are consistent with maximum profits for the firm: False Which resource should be used in larger and/or smaller amounts: Use more of both

c. MRPL = $6; PL = $6; MRPC = $12; PC = $12.

These conditions are consistent with maximum profits for the firm: True Which resource should be used in larger and/or smaller amounts: Conditions are already consistent

How do firms' expenditures on economic resources affect households?

These expenditures become income for the households that supply the resources.

What are true statements about large medical bills?

They are one of the major causes of personal bankruptcy. They are often the last bills to be paid.

Which of the following describe the primary roles of entrepreneurs?

They combine resources to produce a good or service They bear the economic risk associated with production They introduce new products or new processes of production

What are true statements about doctors who are paid on a fee-for-service basis?

They may perform more X-rays or ultrasounds if they have those machines in house. They may perform more surgeries.

True/False: Interest is the price that borrowers pay to a lender so that they can purchase goods and services today rather than in the future.

True

True or false: When a monopsonist pays a higher wage to attract an additional worker it must then pay that new higher wage to all the workers it is currently employing as well.

True Reason: If the monopsonist does not pay the higher wage to all employees, the firm will experience labor problems.

A firm is producing a specific output with the least-cost combination of resources when the ______.

last dollar spent on each resource yields the same marginal product

The factors determining resource demand differ from those determining product demand. This is because

product demand depends on income and tastes, whereas resource demand is a derived demand.

The PPACA's personal mandate requires that individuals ______.

purchase health insurance for themselves and their dependents

In countries with national health insurance, private health insurance is bought by ______.

relative few people

Because a firm's entrepreneurs receive only the revenue left over after all other factors of production have been paid, they are considered ______.

residual claimants

Differences in land productivity are reflected in ______.

resource demands and economic rents

Complete the following labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market. Instructions: Enter your answers as a whole number.

see photo

When the supplier demands the types and amounts of health care that are to be consumed, it is called a case of _______.

supplier-induced demand

In a competitive resource market, a firm is a price ______.

taker

Federal tax policy toward employer-financed health insurance strengthens the demand for health care services in the form of a(n) _____.

tax subsidy

(iv) A technological improvement in the capital equipment with which resource C is combined.

Increase in demand

(v) A fall in the price of complementary resource E.

Increase in demand

A government-regulated market in which individuals will shop for their own health care insurance is referred to as an insurance _______.

Blank 1: exchange

In the table, the future value of $1,000 at 10% interest after 3 years is ______.

$1331

Given the table, the total cost for 5 units of labor and 1 unit of capital is ______, and it ______ the least-cost combination.

$52; is not

Suppose that hiring a third worker at the campus coffee shop increases output from $115 per hour to $185 per hour. What is the marginal product of labor per hour from adding that third worker? Instructions: Enter your answer as a whole number.

$70

Which of the following statements have been used to support the minimum wage?

-A higher wage may reduce labor turnover, increasing the average productivity of firm's workers. -A higher wage might prompt firms to find more productive tasks for low-paid workers, thus raising their productivity. -In a low-pay labor market with some monopsony power, the minimum wage can increase wage rates without causing significant unemployment. Reason: Union workers seek wages above the minimum wage.

Which of the following groups are considered "labor" by economists?

-Blue- and white-collar workers of all varieties -Small-business owners -Professional individuals, such as lawyers, physicians, dentists, and teachers

Which of the following are among the reasons for the high productivity of labor?

-Labor quality -Advanced technology -Access to abundant natural resources

Entrepreneurs are the residual claimants at their respective firms, which means that they:

-get paid only if there is any money left over after all the other factors of production have been paid. -must bear the financial risks of running their firms. -receive whatever accounting profits or losses their firms generate. all of the above.

c. What would the interest rate be if you are required to repay the loan in 12 equal monthly installments? Assume that you borrowed on average $2,500 for the whole year, since you would have paid back about half of the loan by the sixth month and reduced the principal by about 1/12 for every month thereafter.

10%

Since when have health care expenditures as a percentage of GDP greatly increased?

1960

Suppose that the demand for loanable funds for car loans in the Milwaukee area is $10 million per month at an interest rate of 10 percent per year, $11 million at an interest rate of 9 percent per year, $12 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $15 million, what will be the equilibrium interest rate? Instructions: Enter your answer as a whole number.

5% per year

Which of the following are criticisms of the minimum wage?

An above-equilibrium minimum wage will cause employers to hire fewer workers. It is poorly targeted to reduce household poverty. Reason: A minimum wage sets wages for less-skilled workers above equilibrium level.

Which of the following is true concerning resource productivity and demand?

An increase in the productivity of a resource will increase the demand for the resource and vice versa.

The income elasticity coefficient of demand for health care is about ______.

Blank 1: 1 or one

Unions whose members possess a particular skill such as carpentry, masonry or plumbing are known as ______ unions.

Blank 1: Craft, Exclusive, or Trade

_______ is a means for paying a relatively small known cost for protection against an uncertain and much larger cost.

Blank 1: Insurance

______ rates on money loans determine the interest incomes earned by the owners of capital goods.

Blank 1: Interest

______- is the price that is paid for the use of borrowed money.

Blank 1: Interest or interest

_______ licensing refers to pressuring federal, state and local government to pass laws that say that some group can practice their trade only if they meet certain requirements.

Blank 1: Occupational, Occupation, or Professional

Total health care spending will ______ as the price of health care rises.

Blank 1: increase or rise

(vi) A decline in the elasticity of demand for product X due to a decline in the competitiveness of product market X.

Decrease in elasticity

Which of the following explains the reason for the rapid rise in health care costs in terms of demand and supply?

Demand for health care has increased much more rapidly than supply.

Why is the supply of labor faced by an individual firm in a purely competitive labor market perfectly elastic?

Each of the many firms employs such a small fraction of the total available supply of labor that it cannot influence the wage rate.

a. What factors determine the elasticity of resource demand?

Ease of resource substitutability, elasticity of product demand, and the ratio of resource costs to total costs

What type of profit remains after all explicit and implicit costs have been subtracted from total revenue?

Economic profit

What is the term for payment received by an owner of a factor of production in excess of the opportunity cost of producing that factor?

Economic rent

What is measured by the percentage change in resource quantity divided by the percentage change in resource price?

Elasticity of resource demand

True or false: A union that raises wage rates by attempting to gain control over a firm's total labor supply and threatens to withhold labor via a strike is exhibiting the exclusive or bilateral union model.

False Reason: An inclusive union includes virtually all available workers in its membership (unskilled, semi-skilled & skilled), and can put pressure on firms to agree to wage rate demands by striking and deprive firms of their entire labor supply.

What are true statements about health care spending in the United States?

It is high. It is increasing.

Which of the following statements are true of the equipment available to workers in advanced economies in comparison to the equipment available in developing economies?

It is more plentiful. It is more technologically advanced. Reason: In general, advanced economies have a higher demand for labor than developing economies. In general, productivity is higher in advanced economies than in developing economies.

Anything that increases the rate of return on potential investments will increase the demand for which of the following?

Loanable funds

c. Next suppose that the cost of renting a vehicle falls back down to $100 per day but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation?

MRP = $75 MRC = $100 Would adding a vehicle under these circumstances increase the firm's profits: No

Which of the following equations represent the profit-maximizing combination of resources for a firm?

MRPL / PL= MRPC / PC = 10 / 10 = 5 / 5 MRPL / PL= MRPC / PC = 1 Reason: Unlike the least-cost rule where as long as the ratios of both equations are the same and equal (5 = 5), the ratio between the two equations for the profit-maximizing rule must each always equal 1 (10/10 = 5/5).

Which of the following occurs in a purely competitive labor market?

Numerous firms compete with one another to hire a specific type of labor.

The shifting of jobs to developing economies such as Mexico, India, and China is called what?

Offshoring

What are the main effects of surging health care costs on labor markets?

Outsourcing Increase in the use of part-time and temporary workers Slower wage growth

Some insurance companies require that hospitals and physicians accept discounted prices for their services as a condition for being included in the insurance plan. What are these called?

PPOs

What are reasons why productivity growth is slow in the health care industry?

Patients do not shop around for health care services. Health care is a service.

Which of the following are provisions of the PPACA?

Requiring insurers to spend at least 80% of premiums on either health care or improving health care Allowing adult children of parents with employer-provided health to remain covered by their parents' insurance through age 26 Making it illegal to charge copayments or apply deductibles to annual check-ups or preventive care

Which of the following is a policy or legislation supported by labor unions in order to reduce the supply of labor?

Restricting permanent immigration

Higher health insurance premiums to employers and higher out-of-pocket costs to workers are visible economic effects of what?

Rising health care costs

Slower wage growth, the use of part-time and temporary workers, and outsourcing are the effects of what?

Rising health care costs

b. Show this firm's labor demand curve graphically. Instructions: Use the tool provided 'Demand' to plot the labor demand curve point by point (plot 6 points total).

See photo

Suppose that marginal product quadrupled while product price fell by one-half in the table below.

See photo of original graph.

Why is the supply of physicians lower than demand?

The high cost of medical education

Which of the following determines whether firms will use borrowed funds for investment projects?

The interest rate in relation to the rate of return on the project

Why are unions hesitant to demand excessive increases in wage rates?

The number of union workers employed falls as wages rise.

(ii) An increase in the price of substitute resource D.

Uncertainty as to the outcome

Which of the following describes a strategy used by workers to avoid competing with one another in the labor market and instead to sell their services collectively?

Unionization

Which of the following statements best describes the effect of unions on monopsony labor markets?

Unions cause firms to negotiate wages.

What is the chief reason that the occupations of telephone operator and parking enforcement worker are projected to decline rapidly?

Use of computerized equipment

Which of the following have had the effect of lowering health care costs?

Vaccines Reduced hospital stays

Which groups were among the most affected by the PPACA taxes?

Wealthy earners Owners of indoor tanning salons Medical device manufacturers

Which of the following correctly summarize the coefficients of the elasticity of resource demand?

When the elasticity of resource demand is less than 1, resource demand is inelastic. When the elasticity of resource demand equals 1, resource demand is unit-elastic. When the elasticity of resource demand is greater than 1, resource demand is elastic.

When does a firm's decision to employ more or fewer workers affect the wage rate it pays those workers?

When the firm hires most of the available supply of a particular type of labor Reason: If the firm negotiates wages with unions, the number of workers it hires will not affect wage rates. When many firms hire the same type of labor, wage rates are set by market forces of supply and demand. If the firm negotiates wages with unions, the number of workers it hires will not affect wage rates.

LAST WORD To save money, some fast-food chains now have their customers place their orders at computer kiosks. Will the kiosks necessarily reduce the total number of workers employed in the fast-food industry?

Yes

When the last dollar spent on each resource yields the same marginal product ______.

a firm is producing a specific output with the least-cost combination of resources

The following figure shows that ______ will create a higher union wage along with more jobs.

an increase in labor demand

The deductible and copayment are intended to alleviate the overuse problem by creating _______.

an opportunity cost for the consumer

If an increase in the quantity of one resource used in the production process requires an increase in the quantity used of another resource and vice versa, then the resources ______.

are complementary

Based on the supplied graph, wages in a bilateral monopoly will fall ______.

at an indeterminate point between Wm and Wu

b. What will the interest rate be if the $250 of interest had been discounted at the time the loan was made?

b. 5.26%

The ______ model is a combination of the monopsony model and the inclusive unionism model.

bilateral monopoly

Adding other resources, inventing new machinery, and improving the quality of the labor force are all methods of ______.

changing productivity over the long run

Real hourly ______ is equal to wages and salaries plus employers' contributions to social insurance and private benefit plans.

compensation

Productivity growth in the health care industry has been modest because ______.

competition for patients has not been sufficiently brisk to force the industry to look for ways to reduce cost

The change in direction for labor demand will be reliant upon whether labor and capital are production ______.

complements substitutes

The total interest that accumulates over time on both the principle money deposited and accumulating interest in an interest-bearing savings account is known as ______ interest.

compound

The percentage of costs (as for health care) that an insured individual pays while the insurer pays the remainder is called a ______.

copayment

Which of the following are the two highly publicized problems related to the U.S. health care system?

costs access

Resource pricing

determines people's incomes.

Higher costs and insurance premiums reduce access to ______.

health care

The increase in the supply of physicians in the United States has not kept up with ______.

the increase in demand