a.
4
b.
5
c.
6
d.
7
90. Jayden runs a company that sells its product for $250 each. When he employs 10 workers, they can
sell 60 products per week, while only 54 products are sold when 9 workers are employed. What is the
weekly marginal revenue product of the tenth worker?
a.
$250
b.
$1,250
c.
$1,500
d.
$15,000
91. Use the table to answer the following question.
Number of
Marginal Physical
Product
Workers
Product
Price
1
55
5
2
49
5
3
43
5
4
37
5
5
31
5
6
25
5
If the market wage rate is $150 per worker, how many workers should be employed if the firm wants
to maximize profit?
a.
3
b.
4
c.
5
d.
6
92. The following figure indicates the reductions in total losses due to theft if a jewelry store hires
additional security guards.
Number
Dollar Value of
of Guards
Thefts Prevented
1
150
2
240
3
310
4
360
5
400
6
430
If the security guards can be hired for $45 per day, how many guards should the shop hire?
a.
2
b.
3
c.
4
d.
5
e.
6
93. Assume that skilled labor costs twice as much as unskilled labor, a profit-maximizing firm will
a.
always hire more skilled labor because it is more productive.
b.
always hire more unskilled labor because it is cheaper.
c.
hire until it equalizes the two marginal products.
d.
hire until the marginal product of unskilled labor is one-half that of skilled labor.
e.
hire until the marginal product of unskilled labor is two times that of skilled labor.
94. A profit-maximizing farmer will apply additional units of fertilizer until the marginal revenue product
(MRP) of fertilizer is half the MRP of skilled labor when a unit of fertilizer
a.
costs twice as much as a unit of skilled labor.
b.
costs half as much as a unit of skilled labor.
c.
is half as productive, on average, as a unit of skilled labor.
d.
is twice as productive, on average, as a unit of skilled labor.
95. Suppose a U.S. automotive manufacturer was considering moving to Mexico to take advantage of the
lower wage rates for unskilled Mexican labor. The typical Mexican worker could produce 20 cars per
day, while the firm’s typical U.S. worker can produce 50 cars per day. If the firm currently pays its
U.S. workers an hourly wage of $25, economic theory suggests that the firm should
a.
move to Mexico if the Mexican hourly wage is less than $25.
b.
move to Mexico if the Mexican hourly wage is $15.
c.
move to Mexico if the Mexican hourly wage is $12.
d.
only move to Mexico if the Mexican hourly wage is less than $10.
96. What happens to labor supply in the pear-picking market when the wage paid to apple pickers
increases?
a.
The labor supply will stay unchanged until the wages paid to pear pickers change.
b.
The labor supply will decrease.
c.
The labor supply will increase.
d.
The labor supply may fall or rise, depending on the price of pears.
97. The labor supply curve reflects how
a.
workers’ decisions about the labor-leisure tradeoff respond to a change in the wage.
b.
workers’ decisions about the opportunity cost of labor respond to a change in the quantity
of labor supplied.
c.
firms’ decisions about the labor-leisure tradeoff respond to the quantity of labor demanded.
d.
firms’ decisions about how the quantity of labor they hire respond to changes in their
opportunities to earn profits.
98. Unions often attempt to obtain stricter certification requirements and/or longer apprenticeships. These
changes will tend to raise union workers’ wages because they
a.
create unnecessary unemployment.
b.
shift the labor supply curve leftward.
c.
decrease the marginal product of labor.
d.
increase the demand for the product.
99. Generally, the supply of a resource in the short run will be
a.
more elastic than in the long run.
b.
less elastic than in the long run.
c.
equally elastic as the supply of the resource in the long run.
d.
directly related to the elasticity of demand for the product that the resource helps produce.
100. The supply of a resource, such as oil, is likely to be
a.
equally elastic in both the short and long run.
b.
more elastic in the long run than in the short run.
c.
more elastic in the short run than in the long run.
d.
determined by the demand for the resource.
101. The supply curve of a human resource will be more elastic the
a.
easier it is to obtain the skill and knowledge necessary to provide the resource.
b.
more elastic the demand for the product.
c.
more inelastic the demand for the product.
d.
higher the skill level necessary to perform the job.
102. The supply of human capital to a particular use is
a.
perfectly inelastic in the short run.
b.
perfectly elastic in the long run.
c.
more inelastic in the short run since it takes time for persons to acquire a particular skill.
d.
more elastic in the short run since individuals who already possess the particular skill can
be attracted into the labor force in the short run.
103. The supply of both physical and human resources in the long run is determined primarily by
a.
the presence or absence of economies of scale.
b.
investment choices and resource depreciation.
c.
sunk costs; what happens in the present cannot change the future.
d.
the law of diminishing marginal returns.
104. An increase in the demand for a resource
a.
will cause the price of that resource to fall.
b.
may be the result of a decrease in the demand for products utilizing this resource.
c.
will cause the price of the resource to fall by a smaller amount in the short run than in the
long run.
d.
will increase the price of the resource and, thereby, increase the incentive of potential
suppliers to provide the resource in the future.
105. The supply curve of truck drivers is upward sloping and demand curve is downward sloping. A
reduction in the price of hauling freight by truck relative to the price of hauling freight by rail will
____ the equilibrium wage of truck drivers and ____ the number of drivers employed.
a.
decrease; decrease
b.
decrease; increase
c.
increase; decrease
d.
increase; increase
106. Consider the labor market for nurses, which initially is in equilibrium. Suppose the output price for
nursing services increases. Holding all else equal, what effect will this have on the labor market for
nurses?
a.
The equilibrium wage will increase, and the equilibrium quantity of nurses will increase.
b.
The equilibrium wage will increase, and the equilibrium quantity of nurses will decrease.
c.
The equilibrium wage will decrease, and the equilibrium quantity of nurses will increase.
d.
The equilibrium wage will decrease, and the equilibrium quantity of nurses will decrease.
107. Suppose that workers immigrate to Minnesota from Canada. Which of the following correctly
describes what would happen in the market for labor in Minnesota?
a.
The equilibrium wage would increase, as would the quantity of labor. With more workers,
the added output from an extra worker is larger.
b.
The equilibrium wage would decrease, as would the quantity of labor. With fewer
workers, the added output from an extra worker is smaller.
c.
The equilibrium wage would decrease, and the quantity of labor would increase. With
more workers, the added output from an extra worker is smaller.
d.
The equilibrium wage would decrease, and the quantity of labor would increase. With
more workers, the added output from an extra worker is larger.
108. When the supply of workers is plentiful, one would predict that market wages would be
a.
determined solely by factors that affect supply.
b.
determined solely by factors that affect demand.
c.
low, other things equal.
d.
high, other things equal.
109. Other things equal, when the supply of workers is scarce, one would predict that market wages would
be
a.
relatively high.
b.
relatively low.
c.
determined solely by factors that affect demand.
d.
determined outside the domain of economic theory.
110. When a resource price is below equilibrium,
a.
excess supply will be present.
b.
excess demand will be present.
c.
the supply of the resource will be inelastic.
d.
the demand for the resource will be inelastic.
111. If there is a shortage of nurses, it is expected that
a.
wages for nurses will go up as hospitals try to fill these positions.
b.
wages for nurses will go down because of the increased competition between hospitals.
c.
the return on the human capital investment of current nursing majors will decline.
d.
wages for nurses currently practicing will increase, but new nurses will experience lower
wages in the future.
112. An unanticipated decline in the demand for legal services will
a.
increase both the wages of lawyers and the rate of return they can expect to derive from
their legal education.
b.
lead to a shortage in the market for legal services.
c.
reduce the wages of lawyers but not the quantity of legal services supplied.
d.
reduce the wages of lawyers and the rate of return on a legal education..
113. An unexpected decrease in the demand for accountants will lead to
a.
an increase in the earnings of accountants.
b.
an increase in the incentive of students to prepare for a career in accounting.
c.
a reduction in the future supply of accountants.
d.
an increase in the employment opportunities of accountants.
114. An unexpected increase in the demand for accountants will lead to
a.
an increase in their earnings and an expansion in the future supply of accountants.
b.
a decrease in the incentive of students to prepare for a career in accounting.
c.
a reduction in the current earnings of accountants, followed by a reduction in the future
supply of accountants.
d.
a reduction in the employment of accountants but not their wage rates.
115. Which of the following is most likely to result from an increase in the demand for computer
technicians?
a.
an increase in the wages of computer technicians, which will attract additional technicians
in the long run
b.
an increase in the employment of computer technicians, which will depress current wage
rates but eventually lead to higher wage rates for technicians
c.
a decline in the number of persons preparing themselves for careers as computer
technicians
d.
lower wage rates and a shortage of computer technicians
116. Other things constant, if the demand for computer scientists rises,
a.
the wages of computer scientists will tend to fall.
b.
employment of computer scientists will tend to rise.
c.
there will be a surplus of computer scientists.
d.
there will be a shortage of computer scientists.
117. If the demand for computer scientists increases relative to their supply,
a.
the wages of computer scientists will decline.
b.
a computer science major will be more attractive to college students.
c.
the employment of computer scientists will fall.
d.
there will be a surplus of computer scientists.
118. Prices in resource markets
a.
provide users with information concerning the relative scarcity of resources.
b.
encourage the use of a resource now if its price is expected to rise in the future.
c.
provide suppliers with little incentive to develop more of those resources that are intensely
demanded by users.
d.
have little impact on productive decisions unless they are closely regulated by the
government.
119. Suppose a new oxygen-enrichment process will cut in half the energy required to smelt copper. The
firm selling licenses for this patented process will experience a greater demand for its product when
a.
the price of copper falls and smelters become more desperate to economize.
b.
energy prices are expected to fall.
c.
energy prices are expected to rise.
d.
the price of steel, a substitute for copper, declines.
120. If the price of crude oil fell significantly, which of the following would be most likely to happen?
a.
The price of air travel would increase.
b.
The demand for large cars would increase.
c.
The price of gasoline would increase.
d.
The wages of workers in the automobile industry would fall.
121. If a construction boom leads to an increase in the price of lumber, how will the higher lumber prices
influence the wood furniture market?
a.
The demand for wood furniture will decline, and furniture prices will fall.
b.
There will be a shortage of wood furniture.
c.
There will be a surplus of wood furniture.
d.
The supply of wood furniture will decline, and furniture prices will increase.
122. A decrease in resource prices will increase the incentive of
a.
users to purchase the resource.
b.
suppliers to provide more of the resource.
c.
firms to find and develop substitutes for the resource.
d.
consumers to look for alternatives that do not contain the resource.
123. A decrease in the price of a resource would cause
a.
producers to substitute other inputs for the resource.
b.
the cost of products made from the resource to fall.
c.
producers to use more of the resource.
d.
none of the above.
e.
both b and c above.
124. If an advance in computer technology reduces the need for businesses to hire accountants, students
majoring in accounting should expect
a.
a lower rate of return on their human capital investment.
b.
an increase in their employment prospects.
c.
a higher wage rate than they were expecting when they selected their major.
d.
an increase in the demand for accountants.
125. 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.
b.
a decrease in the employment opportunities for economics majors.
c.
lower wages for economics majors.
d.
fewer students to major in economics.
Use the figure to answer the following question(s).
Figure 12-1
126. If Figure 12-1 indicated the short-run and long-run supply curves for a resource, which of the
following would probably be the long-run supply curve of the resource?
a.
Q2
b.
Q3
c.
Sb
d.
Sa
127. If one short-run supply curve in Figure 12-1 was for truck drivers and the other was for nuclear
physicists (also short-run), which one would probably be the supply curve for physicists?
a.
Q2
b.
Q3
c.
Sb
d.
Sa
Use the figure to answer the following question(s).
Figure 12-2
128. The demand D1 and short-run supply SSR of accountants is indicated in Figure 12-2. Which of the
following would most likely shift the demand for accountants from D1 to D2?
a.
an increase in the number of accounting majors in college
b.
enacting legislation that increases the complexity of personal and business tax returns
c.
high wages for accountants
d.
a reduction in the wages of bookkeepers, a substitute resource for accountants
129. If an unanticipated increase in demand in Figure 12-2 shifts the demand for accountants from D1 to D2,
how will the higher level of demand influence the wages of accountants in the short run and the long
run?
a.
In the short run, wages will increase to W2, but the wage increase will be smaller in the
long run.
b.
In the short run, wages will be less than W2, but in the long run, they will rise to W2.
c.
In the short run, wages will increase to W2, and in the long run, they will be even higher
than W2.
d.
Employment will increase, but the higher level of demand will not alter the wages of
accountants.
Figure 12-3
130. Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market.
The original equilibrium is at point A. If a labor union subsequently establishes a union shop and
negotiates an hourly wage of $20, then there will be an excess
a.
supply of 3,000 workers.
b.
demand of 7,000 workers.
c.
supply of 4,000 workers.
d.
supply of 7,000 workers.
131. Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market.
The original equilibrium is at point A. If a labor union subsequently establishes a union shop and
negotiates an hourly wage of $20, then the employment level
a.
increases from 6,000 to 10,000.
b.
increases from 3,000 to 10,000.
c.
decreases from 10,000 to 3,000.
d.
decreases from 6,000 to 3,000.
The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
132. Refer to Figure 12-4. As the number of workers increases,
a.
total output increases, but at a decreasing rate.
b.
marginal product increases, but at a decreasing rate.
c.
marginal product increases at an increasing rate.
d.
total output decreases.
133. Refer to Figure 12-4. With regard to cookie production, the figure implies
a.
diminishing marginal product of workers.
b.
diminishing marginal cost of cookie production.
c.
decreasing cost of cookie production.
d.
increasing marginal product of workers.
134. Which of the following is an example of an investment in human capital?
a.
a law student who works as a waiter in the summer
b.
on-the-job training received by an apprentice welder
c.
payments into a retirement pension plan by a skilled laborer
d.
all of the above are correct.
135. Economists refer to expenditures on training, education, and skill development designed to increase
the productivity of an individual as
a.
overhead expenditures.
b.
investments in human capital.
c.
non-exhaustive expenditures.
d.
social capital.
136. Profit-maximizing firms will expand their employment of each variable resource until
a.
the Marginal Revenue Product (MRP) of the resource is just equal to the price of the
resource.
b.
other firms realize they can’t compete.
c.
the MRP of the resource is below the cost of the resource.
d.
the MRP of the resource is above the cost of the resource.
137. The marginal product of labor is the
a.
value marginal product of labor multiplied by the price of the good produced.
b.
total output of labor divided by the quantity of labor used.
c.
additional output resulting from employing one additional unit of labor.
d.
same as the marginal revenue product of labor in price-taker markets.
138. Relative to a mobile factor of production, economic theory suggests that the price elasticity of supply
for a highly immobile factor of production (for example, land) will be
a.
more elastic.
b.
less elastic.
c.
of unitary elasticity.
d.
this is a trick question; the price elasticity of supply for factors of production is not
affected by factor mobility.
139. If the price of cotton increases
a.
consumers will buy more cotton clothes.
b.
consumers will increase their purchases of clothing made of other materials.
c.
clothing producers will stop making cotton clothes.
d.
clothing producers will not be able to adjust their output.
140. In the short run, the supply of a resource will generally be
a.
less elastic than in the long run.
b.
more elastic than in the long run.
c.
equally elastic as the supply of the resource in the long run.
d.
inversely related to the elasticity of demand for the product that the resource helps
produce.
141. If the United Auto Workers’ Union obtained a 15 percent increase in the wages of its workers,
employment in the auto industry would most likely fall if
a.
the demand for American-made automobiles was highly inelastic.
b.
American consumers considered foreign automobiles a poor substitute for American-made
automobiles.
c.
the demand for American-made automobiles was highly elastic.
d.
the demand for American-made automobiles was increasing.
142. The derived demand curve for a resource is downward sloping because
a.
the demand for products that utilize the resource is directly related to the price of the
resource.
b.
the marginal productivity of resources will decline as their price increases.
c.
as the price of a resource rises, other resources will be less desirable than the higher priced
resource.
d.
other resources will be substituted for a resource that increases in price.
143. Ceteris paribus, a decrease in the demand for automobiles will
a.
increase the price of automobiles.
b.
increase the quantity supplied of automobiles.
c.
decrease the demand for automobile workers.
d.
increase the demand for automobile workers.
144. Harold Brown runs a company that sells encyclopedia sets for $250. The following schedule indicates
the number of sets per week that are sold as employment increases.
Number of employees
4
5
6
7
8
9
Total Sets Sold
25
32
38
43
47
50
If Brown’s costs increase by $1,300 per week as additional workers are employed, how many workers
should be employed in order to maximize profit?
a.
five
b.
six
c.
seven
d.
eight
145. If skilled labor costs three times as much as unskilled labor, a profit-maximizing firm will vary the
quantity of each type of labor used until the
a.
amount of unskilled labor used is three times the quantity of skilled labor used.
b.
amount of unskilled labor used is one-third the quantity of skilled labor used.
c.
marginal product of skilled labor is one-third that of unskilled labor.
d.
marginal product of skilled labor is three times as great as that of unskilled labor.
146. Which of the following labor resources will likely have the most elastic supply schedule in the short
run?
a.
nuclear physicists
b.
surgeons
c.
retail cashiers
d.
graduate-level math professors
147. When the price of a resource is set below equilibrium,
a.
excess demand for the resource will occur.
b.
excess supply of the resource will result.
c.
the supply of the resource will be inelastic.
d.
the demand for the resource will be inelastic.
ESSAY
148. The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only
increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and
output increased by twelve units. Since the hammer increased the marginal product more than Bob did,
and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why
or why not?
149. A new government study reveals that daily consumption of peanut butter increases life expectancy by
10 years. What will this do to the input markets for peanuts and peanut butter factory workers?
Assuming bologna is a substitute for peanut butter, what will happen in the market for bologna factory
workers?
150. The Alpha Car Wash is known for the quality way in which every car is hand cleaned. The Beta Car
Wash uses machines, so consumers are generally willing to pay a higher price for Alpha’s services.
The Auto Washers union at Alpha has just succeeded in obtaining a substantial wage increase. What
will likely happen as a result?
151. Developments in the computer software industry have made it extremely easy for firms to keep their
books, conduct their own audits, and fill out the various tax forms. If accountants are an input in the
accounting services industry, what will likely happen in the market for accountants? Is there a
difference between the short run and the long run?
152. Cattle manure is an input often used in making fertilizer. Suppose a technique is discovered that can
transform cattle manure into quality gasoline. What would happen in the fertilizer industry?
ANS:
153. Assume the average salary for a college philosophy professor is $50,000. Suppose businesses decide
they need in-house instructors to teach ethics to employees, and they begin hiring philosophy
professors at a salary of $75,000. What are the short-term and long-term effects of this supposition?
154. Why is it more expensive to acquire a new house in an urban area than in a rural area if the costs of
labor and building materials are the same?
155. Why is a college graduate more likely to get a job in management than is someone with only a high
school diploma, even when the job has nothing to do with a specific type of education?
156. There is an Italian soccer player who makes more than $10 million a year. Why?
