These multiple choice questions are from the exam bank. If you believe one or more answers are not correct, then speak with the instructor. He is human and makes mistakes.
Lesson 12 - The Resource Market
1. The demand for airline pilots results from the demand for air travel. This fact is an example of:
A. resource substitutability.
2. The demand for a resource depends primarily on:
A. the supply of that resource.
3. The MRP curve for labor:
A. intersects the firm's labor demand curve from above.
4. Marginal product is:
A. the output of the least skilled worker.
5. Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information we can say that:
A. profits will be increased by hiring additional workers.
6. The MRP curve is the resource demand curve for:
A. neither the purely competitive nor the imperfectly competitive seller.
7. If two resources are highly substitutable for one another:
A. a decrease in the price of one will increase unit costs of production.
8. Elasticity of resource demand is measured by the:
A. absolute change in resource quantity demanded divided by the absolute change in resource price.
9. The labor demand curve of a purely competitive seller:
A. slopes downward because the elasticity of demand is always less than unity.
10. Marginal resource cost is:
A. the increase in total resource cost associated with the production of one more unit of output.
11. Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as:
A. Overhead expenditures.
12. An unexpected decrease in the demand for accountants will lead to a(n):
A. Increase in the earnings of accountants.
13. If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect:
A. Economics majors to receive a greater return on their human capital investment.
14. If a construction boom leads to an increase in the price of lumber, how will the higher prices influence the wood furniture market?
A. The demand for wood furniture will decline and furniture prices will fall.
15. If the firm has a MP = 5 and a MR = $5, how much revenue will one more unit of labor contribute if this firm hires another employee?
A. The MRP = $1.
Lesson 13 - The Labor Market
1. Increases in the productivity of labor result partly from:
A. the law of diminishing returns.
2. The real wage will rise if the nominal wage:
A. falls more rapidly than the general price level.
3. The economic term for a sole employer in a nonunion community is:
4. Which of the following is most likely to be an example of monopsony?
A. the market for fast-food workers in a large summer resort town.
5. Other things equal, the monopsonistic employer will pay a:
A. lower wage rate and hire fewer workers than will a purely competitive employer.
6. A monopsonist pays a wage rate that is:
A. less than the MRP of labor.
7. In a labor market characterized by bilateral monopoly the wage rate will:
A. be logically indeterminate.
8. Wage differentials can arise from:
A. both the demand-side and supply-side of labor markets.
9. Compensating differences in wages:
A. compensate workers for differences in their human capital.
10. Data on education and earnings reveal:
A. negative age-earnings profiles for male workers.
11. The principal-agent problem arises in labor markets because:
A. a firm may realize excessively large profits.
12. Which one of the following best exemplifies the principal-agent problem in the employer-employee relationship?
A. A worker takes 20 minute coffee-breaks although the employer allots only 15 minutes for this purpose.
13. Author Joe Writer receives $2 per book sold. This payment is a(n):
A. piece rate.
14. A firm might choose to pay its employees a wage higher than that which would clear the market because:
A. the higher wage raises the opportunity cost of shirking.
15. Benefits mandated by the government are most likely paid for by:
A. The government through direct subsidies.
Lesson 14 - Market Failure and Government Intervention
1. Unlike a private good, a public good:
A. has no opportunity costs.
2. Which of the following is an example of a public good?
A. a weather warning system
3. The market system does not produce public goods because:
A. there is no need or demand for such goods.
4. Because of the free-rider problem:
A. the market demand for a public good is overstated.
5. A demand curve for a public good is determined by:
A. summing vertically the individual demand curves for the public good.
6. A positive externality or spillover benefit occurs when:
A. product differentiation increases the variety of products available to consumers.
7. The Coase theorem:
A. applies only to circumstances in which externalities are extensive and bargaining costs are high.
8. The tendency for society to overuse and therefore abuse common resources is called the:
A. law of conservation of matter and energy.
9. The Clean Air Act of 1990:
A. places taxes on utilities emitting sulfur dioxide, the major cause of acid rain.
10. As it applies to insurance, the adverse selection problem is the tendency for:
A. those most likely to collect on insurance to buy it.
11. As it applies to insurance, the moral hazard problem is the tendency for:
A. those most likely to collect on insurance to buy it.
12. Professional buyers of antiques often have more information about the value of antique objects than do the sellers. This illustrates:
A. the Coase theorem.
13. Alex, Kara, and Lucian are the only three people in a community and Alex is willing to pay $20 for the 5th unit of a public good; Kara, $15, and Lucian, $25. Government should produce the 5th unit of the public good if the marginal cost is less than:
14. If the marginal benefit for government to build a new highway is $5 million, but the new highway would cost $10 million, what should government do?
A. government should build the highway.
15. What is global warming?
A. The earth is becoming warmer, because of the buildup of greenhouse gases in the atmosphere.