Tests № 7-9, 13, 15, 18, 22, 25, 33-34, 41, 48-49, 54-55, 57-58, 64-65, 67, 78, 96, 99-100

Multiple-choice tests

TEST BANK TO COPE WITH INTRODUCTORY MICROECONOMICS:

Unit 9 (Factor markets):

Tests № 7-9, 13, 15, 18, 22, 25, 33-34, 41, 48-49, 54-55, 57-58, 64-65, 67, 78, 96, 99-100

Which of the following best explains why the demand curve for a factor of production such as labor slopes downward?

(A) The law of diminishing returns

(B) The law of comparative advantage

(C) Economies of scale

(D) The superior bargaining position of workers compared to employers

(E) The poor bargaining position of workers compared to employers

As a manufacturer of an input into another production process, the demand for your out­put will be more elastic

(A) The more inelastic the demand for your customer's output.

(B) The less important your output is to the manufacture of your customer's output.

(C) The shorter the time frame.

(D) The greater the number of substitutes available to your customer for your output.

(E) None of the above.

Which of the following factors will shift the demand curve for labor to the right?

(A) the demand for the product of labor declines

(B) the price of substitute input falls

(C) the productivity of labor increases

(D) the minimum wage increases

(E) none of the above.

A change in which of the following will NOT cause a shift in the demand curve for a factor of production?

(A) Demand for the goods produced by the factor

(B) Prices of the goods produced by the factor

(C) Prices of substitute factors

(D) Supply of the factor

(E) Supply of substitute factors

A shift in a firm's demand schedule for a factor of production could result from a change in any of the following EXCEPT the

(A) demand for the firm's product

(B) price of the factor

(C) productivity of the factor

(D) price of a substitute factor

(E) productivity of a substitute factor

The law of diminishing returns to a variable factor explains which of the following?

I. Why marginal cost rises

II. Why average variable cost rises

III. Why average fixed cost rises

(A) I only

(B) II only

(C) I and II only

(D) II and III only

(E) I, II and III

The Law of Diminishing Returns

(A) applies only in the long-run.

(B) describes the phenomenon of a decreasing marginal product.

(C) applies when there are negative returns to scale.

(D) applies if all inputs are variable.

(E) describes the behavior of a production function when all inputs’ ratios are fixed.

If output is a linear-homogeneous function of labor and capital and if each factor is paid the value of its marginal product, which of the following must be true?

(A) The payments to labor and capital equal the value of the output.

(B) Labor receives the largest share of income.

(C) Profits equal the marginal product of labor.

(D) The marginal products of labor and capital are linear-homogeneous functions of labor and capital.

(E) The law of variable proportions does not hold.

Suppose that the production function of Firm A for the production of X is Q=L^0.75K^0.25, where Q is the rate of output of X, L is the rate of labor input, and K is the rate of input of capital services. If L is increased by 8 per cent and K is increased by 4 per cent, Q will increase by

(A) 4%

(B) 5%

(C) 6%

(D) 7%

(E) 8%

A production analyst reports that the marginal product of a production worker in a firm exceeds that of a clerk. If markets for both types of workers are competitive and if the firm is minimizing the cost of producing its particular level of output, it can be concluded that

(A) the firm should employ more production workers

(B) production workers are more educated

(C) clerks are less essential to the operations of the business

(D) clerks are paid more than production workers

(E) clerks are paid less than production workers

As the wage rate increases due to a decrease in labor supply,

(A) the value of the marginal product will fall.

(B) the value of the marginal product will rise.

(C) a shortage of labor will result.

(D) a surplus of labor will result.

(E) none of the above.

The graph above shows the marginal revenue product curve and supply curve of labor for a firm. The introduction of new management techniques dramatically increases worker productivity. Which of the following changes is most likely to occur?

(A) The supply curve will shift to the left, increasing the wage rate.

(B) The supply curve will shift to the right, increasing employment.

(C) The marginal revenue product curve will shift to the right, increasing the wage rate.

(D) The marginal revenue product curve will shift to the left, reducing employment.

(E) Neither the marginal revenue product curve nor the supply curve will shift, but the wage will increase and employment will fall.

Assume that the government imposes a minimum wage in labor markets where the equilibrium wage had been below the new minimum. Which of the following will be expected effect on employment and total wage payments?

Employment Total Wage Payments

(A) Decrease Increase

(B) Decrease Decrease

(C) Decrease Might either increase or decrease

(D) Increase Increase

(E) Increase Might either increase or decrease

A technological improvement which makes workers more productive at collecting apples will cause:

(A) A fall in wages of apple picking workers which would lead to a reduction (shift inside) in labour supply;

(B) An increase in supply of apple picking workers and thus an increase in their employment;

(C) An increase in the marginal revenue product of apple picking workers, and thus an increase in their wage;

(D) A decline in demand for workers as machines replace manual labour, and, therefore, a fall in the number of apple picking workers hired;

(E) A fall in the marginal revenue product of apple picking workers, and thus an fall in their wage.

In the labor market, when wages increase, the

(A) substitution effect encourages more work, but the income effect discourages work.

(B) income and substitution effects both encourage more work.

(C) income and substitution effects both discourage work.

(D) income effect encourages more work, but the substitution effect discourages work.

(E) income and substitution effects are irrelevant.

A backward-bending labor supply curve would mean that:

(A) workers are behaving irrationally.

(B) the income effect dominates the substitution effect.

(C) the substitution effect dominates the income effect.

(D) both income and substitution effects are quite weak.

(E) none of the above.

Leisure is:

(A) a normal good.

(B) an inferior good.

(C) a Giffen good.

(D) not an economic good.

(E) a complement for hours of work.

Which of the following is not a form of discrimination?

(A) employers' preferences for employees with certain characteristics;

(B) customers who prefer to deal only with certain racial or ethnic groups;

(C) government mandates that some jobs are not available to people with certain characteristics;

(D) lower demand for the labor of certain groups with lower value of marginal product;

(E) all of the above are forms of discrimination.

Which of the following statements can explain inequality in the distribution of income?

I. Individuals have different skills because of differences in the quality and quantity of education they have received.

II. Individuals differ in their willingness to take risks.

III. Some individuals face discrimination in wage rates or hiring.

(A) I only

(B) II only

(C) III only

(D) I and III only

(E) I, II, and III

Which of the following would provide evidence favoring human-capital theory over the signaling theory regarding the effect of education on earnings?

(A) High school dropouts earn less than high school graduates.

(B) College graduates earn more than high school graduates.

(C) Earnings are higher for students who stayed in school longer because of compulsory attendance laws.

(D) Technical school graduates earn more than workers who did not attend technical school.

(E) All of the above demonstrate that human-capital theory is correct.

For a firm hiring labor in a perfectly competitive labor market, if the marginal revenue product of labor is greater than the wage rate, the profit-maximizing firm will

(A) decrease its employment of both labor and capital

(B) not change its employment of either labor or capital

(C) employ more capital

(D) hire more labor

(E) lay off workers

(A) the two factors are perfect substitutes.

(B) the production of 2 widgets requires 6Y and 4X.

(C) the marginal rate of substitution of these factors is elastic.

(D) the optimal place for the firm to operate is at point C.

(E) These factors cannot be substituted for one another.

You have spent $1000 building a hot dog stand based on estimates of sales of $2000. The hot dog stand is nearly completed but now you estimate total sales to be only $800. You can complete the hot dog stand for another $300. Should you complete the hot dog stand?

(A) Yes.

(B) No.

(C) There is not enough information to answer this question.

(D) only if your friend helps you

(E) only if you could resell it in the future

Referring to the previous question, your decision rule should be to complete the hot dog stand as long as the cost to complete the stand is less than

(A) $100

(B) $300

(C) $500

(D) $800

(E) none of the above.