True / False
1. A firm’s demand for labor is derived from its decision to supply a good in another market.
a.
True
b.
False
2. In 2015, the total income of all U.S. residents was approximately $16 billion.
a.
True
b.
False
3. In 2015, the total income of all U.S. residents was approximately $16 trillion.
a.
True
b.
False
4. Land, labor, and capital are examples of factors of production.
a.
True
b.
False
5. Stock dividends and interest payments are examples of factors of production.
a.
True
b.
False
6. The quantity available of one factor of production can affect the marginal product of other factors.
a.
True
b.
False
7. If the marginal productivity of the sixth worker hired is less than the marginal productivity of the fifth worker hired,
then the addition of the sixth worker causes total output to decline.
a.
True
b.
False
8. Let L represent the quantity of labor, and let Q represent the quantity of output. Suppose a certain production function
includes the points (L = 7, Q = 27), (L = 8, Q = 35), and
(L = 9, Q = 45). Based on these three points, this production function exhibits diminishing marginal product.
a.
True
b.
False
9. If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will
decrease to offset the higher price.
a.
True
b.
False
10. Daryn is raking leaves to earn money for his university’s economics club. In the first hour, he rakes 8 bags of leaves.
In the second hour, he rakes 6 bags of leaves. If he earns $8 per hour, the value of the marginal product of the second hour
of labor is $48.
a.
True
b.
False
11. Daryn is raking leaves to earn money for his university’s economics club. In the first hour, he rakes 8 bags of leaves.
In the second hour, he rakes 6 bags of leaves. If he earns $8 per hour, the value of the marginal product of the second hour
of labor is $16.
a.
True
b.
False
12. In a competitive market for labor, the equilibrium wage always equals the value of the marginal product.
a.
True
b.
False
13. In order to calculate the value of the marginal product of labor, a manager must know the marginal product of labor
and the wage rate of the worker.
a.
True
b.
False
14. The value of the marginal product of labor can be calculated as the price of the final good minus the marginal product
of labor.
a.
True
b.
False
15. The value of the marginal product of capital can be calculated as the market price of the good multiplied by the
marginal product of capital.
a.
True
b.
False
16. For competitive firms, the curve that represents the value of marginal product of labor is the same as the demand for
labor curve.
a.
True
b.
False
17. A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the price of the final
good.
a.
True
b.
False
18. A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the marginal product
of labor.
a.
True
b.
False
19. When a competitive firm hires labor up to the point at which the value of the marginal product of labor equals the
wage, it also produces up to the point at which the price of output equals average variable cost.
a.
True
b.
False
20. The demand for computer programmers is inseparably tied to the supply of computer software.
a.
True
b.
False
21. If Firm X is a competitive firm in the market for labor, it has little influence over the wage it pays its employees.
a.
True
b.
False
22. The idea that rational employers think at the margin is central to understanding how many units of labor they choose
to employ.
a.
True
b.
False
23. Technological advances can cause the labor demand curve to shift.
a.
True
b.
False
24. In the United States, technological advances help explain persistently rising employment in the face of rising wages.
a.
True
b.
False
25. Labor-saving technological advances increase the marginal productivity of labor.
a.
True
b.
False
26. Labor-augmenting technological advances increase the marginal productivity of labor.
a.
True
b.
False
27. An increase in the output price will increase the firm’s demand for labor, all else equal.
a.
True
b.
False
28. Labor-saving technological advances decrease the marginal productivity of labor.
a.
True
b.
False
29. Labor-augmenting technological advances decrease the marginal productivity of labor.
a.
True
b.
False
30. An increase in a product’s price will shift the labor demand curve for workers who produce that product to the left.
a.
True
b.
False
31. From 1960 to 2015, inflation-adjusted wages increased by 165 percent in the U.S., and yet firms more than doubled
the amount of labor they employed.
a.
True
b.
False
32. An increase in the wages paid to high-school student who detassle corn will increase the labor supply of high-school
students who weed soybean fields, all else equal.
a.
True
b.
False
33. The labor-supply curve is affected by the trade-off between labor and leisure.
a.
True
b.
False
34. The opportunity cost of leisure is impossible to measure because we cannot measure leisure time in dollars.
a.
True
b.
False
35. The labor supply curve reflects how workers’ decisions about the labor-leisure tradeoff respond to changes in the
opportunity cost of leisure.
a.
True
b.
False
36. Ellen receives a raise at her current part-time job from $8 to $10 per hour. If her labor supply curve is upward sloping,
she will work fewer hours after receiving the pay raise.
a.
True
b.
False
37. Jessica receives a raise at her current part-time job from $9 to $11 per hour. If her labor supply curve is backward
sloping, she will work fewer hours after receiving the pay raise.
a.
True
b.
False
38. Labor supply curves are always upward sloping.
a.
True
b.
False
39. When an individual’s income goes up, that individual may choose to supply less labor, resulting in a backward-sloping
labor supply curve.
a.
True
b.
False
40. The supply of labor in any one market depends on the opportunities available in other markets.
a.
True
b.
False
41. Movements of workers from country to country can cause shifts in the labor supply curves for both countries.
a.
True
b.
False
42. If the demand for labor in a particular industry increases, the equilibrium wage in that industry will also increase.
a.
True
b.
False
43. An increase in immigration will lower the equilibrium wage, all else held constant.
a.
True
b.
False
44. As the number of concrete workers in the United States falls, the wage paid to the remaining concrete workers will
necessarily fall as well.
a.
True
b.
False
45. If men’s preferences for work change such that more men want to be stay-at-home fathers, the wages paid to men who
remain in the workplace would rise, all else equal.
a.
True
b.
False
46. Oil field workers’ wages are directly tied to the world price of oil.
a.
True
b.
False
47. Changes in supply and demand in the labor market will cause changes in wages.
a.
True
b.
False
48. In general, less productive workers are paid less than more productive workers.
a.
True
b.
False
49. If the demand for labor decreases and the supply of labor is unchanged, then the opportunity cost of leisure will
decrease.
a.
True
b.
False
50. Profit maximization by firms ensures that the equilibrium wage always equals the value of the marginal product of
capital.
a.
True
b.
False
51. Increases in productivity are not responsible for increased standards of living in the United States.
a.
True
b.
False
52. Average productivity can be measured as total output divided by total units of labor.
a.
True
b.
False
53. For a snow-removal business, the capital stock would include inputs such as snow blowers and shovels.
a.
True
b.
False
54. When a firm decides to retain its earnings instead of paying dividends, the stockholders necessarily suffer.
a.
True
b.
False
55. Capital owners are compensated according to the value of the marginal product of that capital.
a.
True
b.
False
56. If the output price of a product rises, the demand for capital will increase, raising the rental price of capital.
a.
True
b.
False
57. Suppose the supply of capital decreases. As a result, the quantity of capital used in production and the rental price of
capital will both fall.
a.
True
b.
False
58. The rental price of capital is the price a person pays to own the capital indefinitely.
a.
True
b.
False
59. Capital income does not include income paid to households for the use of their capital.
a.
True
b.
False
60. Firms pay out a portion of their earnings in the form of interest and dividends, and those payments are a portion of the
economy’s capital income.
a.
True
b.
False
61. The marginal product of land depends on the quantity of land that is available.
a.
True
b.
False
62. Suppose an influenza pandemic were to significantly decrease the population of a country. We would predict a
decrease in the marginal product of land in that country.
a.
True
b.
False
63. For profit-maximizing, competitive firms, the demand curve for each factor of production equals the value of the
marginal product of that factor.
a.
True
b.
False
64. An event that changes the supply of any factor of production can alter the earnings of all the factors.
a.
True
b.
False
65. A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the price of the final
good multiplied by the marginal product of the last worker hired.
a.
True
b.
False
66. Suppose Cassie’s Candles is a profit-maximizing competitive firm. Cassie sells hand-made candles for $10 each. She
will pay an hourly wage of $20 so long as the marginal productivity of a worker equals or exceeds two candles per hour.
a.
True
b.
False
67. Suppose that the “Millennial” generation values leisure more than past generations. We can expect a decrease in the
labor supply as the Millennials enter their prime working ages.
a.
True
b.
False
68. Suppose that the “Millennial” generation values leisure more than past generations. We can expect a decrease in the
labor supply as the Millennials enter their prime working ages and a corresponding decrease in wages.
a.
True
b.
False
69. Suppose that the “Millennial” generation values leisure more than past generations. We can expect a decrease in the
labor supply as the Millennials enter their prime working ages and a corresponding increase in wages.
a.
True
b.
False
70. U.S. immigrants are less likely to be working than immigrants in other developed countries.
a.
True
b.
False
71. The U.S. economy has been very successful in absorbing immigrants and putting them to work.
a.
True
b.
False
72. Growth in real wage rates is closely tied to growth in labor productivity.
a.
True
b.
False
73. A monopsony firm in a labor market hires fewer workers than would a competitive firm.
a.
True
b.
False
74. The value of the marginal product of capital can be calculated as the marginal product of capital multiplied by the cost
of the capital input.
a.
True
b.
False
75. The marginal product of land depends only on the quantity of land available.
a.
True
b.
False