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100 Questions
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  • 1. 
    Perfect competition is defined as market structure in which:
    • A. 

      A: there are many small sellers.

    • B. 

      B: the product is homogenous.

    • C. 

      C: it is very easy for firms to enter or exit the market.

    • D. 

      D: all of these.

  • 2. 
    Perfect competition is a market structure in which there is:
    • A. 

      A: a contest among firms to provide good service after the sale.

    • B. 

      B: competition in product quality.

    • C. 

      C: rivalry in product design.

    • D. 

      D: none of these.

  • 3. 
    Which of the following is true of a perfectly competitive firm?
    • A. 

      A: The firm is a price maker.

    • B. 

      B: If the firm wishes to maximize profits it will produce an output level in which total revenue equals total cost.

    • C. 

      C: The firm will not earn an economics profit in the long run.

    • D. 

      D: The firm's short-run supply curve is its MC curve below its AVE curve.

  • 4. 
    A firm in a price-taker market:
    • A. 

      A: must take the price that is determined in the market.

    • B. 

      B: must reduce its price if it wants to sell larger quantity.

    • C. 

      C: must be large relative to the total market.

    • D. 

      D: can exert a major influence on the market price.

  • 5. 
    A firm that is a price taker can:
    • A. 

      A: substantially change the market price of its product by changing its level of production.

    • B. 

      B: sell all of its output at the market price.

    • C. 

      C: sell some of its output at a price higher than the market price.

    • D. 

      D: decide what price to charge for its product.

  • 6. 
    Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?
    • A. 

      A: The short-run average total costs of firms that are price takers will be constant.

    • B. 

      B: If a price taker increased its price, consumers would buy from other suppliers.

    • C. 

      C: Firms in a price-taker market will have to advertise in order to increase sales.

    • D. 

      D: There are no good substitutes for the product supplied by a firm that is a price taker.

  • 7. 
    Because a competitive firm is a price taker, it faces a demand curve that is:
    • A. 

      A: perfectly inelastic.

    • B. 

      B: relatively inelastic.

    • C. 

      C: relatively elastic.

    • D. 

      D: perfectly elastic.

  • 8. 
    Under perfect competition, a firm is a price taker because:
    • A. 

      A: setting a price higher than the going price results in profits.

    • B. 

      B: each firm's product is perceived as different.

    • C. 

      C: each firm has a significant market share.

    • D. 

      D: setting a price higher than the going price results in zero sales.

  • 9. 
    A perfectly competitive firm in the short-run can earn:
    • A. 

      A: positive economic profits.

    • B. 

      B: negative economic profits.

    • C. 

      C: zero economic profits.

    • D. 

      D: all of these are possible.

  • 10. 
    A perfectly competitive firm maximizes profits or minimizes losses in the short-run by producing at the output level at which:
    • A. 

      A: marginal revenue equals marginal cost.

    • B. 

      B: total revenue equals total cost.

    • C. 

      C: total revenue is at a maximum.

    • D. 

      D: none of these.

  • 11. 
    In the short run, if a perfectly competitive firm is producing at a price below average total cost, its economic profit is:
    • A. 

      A: positive.

    • B. 

      B: zero.

    • C. 

      C: negative.

    • D. 

      D: normal.

  • 12. 
    In the short run, if a perfectly competitive firm is producing at a price above average total cost, its exonomic profit must be:
    • A. 

      A: positive.

    • B. 

      B: zero.

    • C. 

      C: negative.

    • D. 

      D: normal.

  • 13. 
    A competivie firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:
    • A. 

      A: marginal cost.

    • B. 

      B: average cost.

    • C. 

      C: average variable cost.

    • D. 

      D: average fixed cost.

  • 14. 
    The point of maximum profit for a business firm is where:
    • A. 

      A: P = AC.

    • B. 

      B: TR = TC.

    • C. 

      C: MR = AR.

    • D. 

      D: MR = MC.

    • E. 

      E: TR = MR.

  • 15. 
    Marginal revenue is the change in:
    • A. 

      A: total profit brought about by selling one more unit of output.

    • B. 

      B: Price brought about by selling one more unit of output.

    • C. 

      C: Total revenue brought about by selling one more unit of output.

    • D. 

      D: output brought about by a $1 change in product price.

    • E. 

      E: Average revenue brought about by selling one more unit of output.

  • 16. 
    In Exibit 8-11, the profit-maximizing output level at the price of $8 is:
    • A. 

      0

    • B. 

      4

    • C. 

      7

    • D. 

      8

    • E. 

      10

  • 17. 
    As shown in Exhibit 8-12, suppose the firm's price is OB. The firm's total economic profit at this price is equal to the area of:
    • A. 

      CJID

    • B. 

      BFHD

    • C. 

      AEXD

    • D. 

      CGHD

    • E. 

      Zero

  • 18. 
    Which of the following statements is true?
    • A. 

      To maximize profits, a firm must maximize total revenue.

    • B. 

      In long-run equilibrium, a competitive firm produces at the point of minimum average total cost.

    • C. 

      In the short-run, a perfectly competitie firm produces where total cost is minimum.

    • D. 

      In the short-run, a perfectly competitive firm will close down whenever price is less than average total cost.

  • 19. 
    In long-run equilibrium, the typical perfectly competitive firm will:
    • A. 

      Earn zero economic profit

    • B. 

      Change plant size in the long run

    • C. 

      Change output in the short run

    • D. 

      Do any of these.

  • 20. 
    In long-run equilibrium for a perfectly competitive firm, price equals which of the following?
    • A. 

      Economics of real cost

    • B. 

      Maximum total revenue

    • C. 

      Diseconomies of scale cost.

    • D. 

      Minimum point on the long-run average cost curve.

  • 21. 
    A monolpy is:
    • A. 

      A seller of a highly advertised and differentiated product in a market with lower barriers to entry in the long run.

    • B. 

      The only seller of a good for which there are no good substitutes in a market with high barriers to entry.

    • C. 

      The only buyer of a unique raw material.

    • D. 

      The producer of a product subsidized by the government.

  • 22. 
    A monopolist faces a downward-sloping demand curve because:
    • A. 

      The demand for its product is inelastic.

    • B. 

      The industry demand curve is horizontal.

    • C. 

      Resource prices increase as the monopolist expands output.

    • D. 

      The entire market demand curve is the monopolist's demand curve.

  • 23. 
    Which of the following firms best fits the definition of a monopoly?
    • A. 

      General Motors

    • B. 

      Exxon Mobile

    • C. 

      Local electic utility

    • D. 

      AT&T

  • 24. 
    A natural monolpy is a market where:
    • A. 

      A single firm has control over a vital natural resource.

    • B. 

      Many smaller firms can produce the entire market output at the same per-unit cost as could one large firm.

    • C. 

      A single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.

    • D. 

      Many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.

  • 25. 
    Which of the following is true under natural monopoly?
    • A. 

      The marginal cost curve will be above the average cost curve

    • B. 

      The monopolist will set price equal to marginal cost and will earn economic profits.

    • C. 

      Economies of scale exist.

    • D. 

      Output is produced under conditions of constant cost.

  • 26. 
    The demand curve any monopolist uses in making output decisions is:
    • A. 

      The same as the demand curve facing a perfectly competitive firm.

    • B. 

      Vertical, because there are no close substitutes for its product.

    • C. 

      Horizontal, because there are no close substitutes for its product.

    • D. 

      The same as the market demand curve.

    • E. 

      Perfectly inelastic.

  • 27. 
    For a monopolist:
    • A. 

      Price equals average total cost.

    • B. 

      Price is above marginal revenue.

    • C. 

      Marginal revenue equals zero.

    • D. 

      Marginal cost equals zero.

    • E. 

      Average total cost equals marginal cost.

  • 28. 
    Graphically, the marginal revenue curve of a monopolist:
    • A. 

      Will sometimes lie below the demand curve of the monopolist.

    • B. 

      Will always lie below the demand curve of the monopolist.

    • C. 

      Is the same as the demand curve of the monolpolist.

    • D. 

      Wll equal -1 when the elasticity of demand is unitary.

  • 29. 
    Which of the following best explains why the monopolist's marginal revenue is less than the selling price?
    • A. 

      To sell more units, the monopolist must reduce price on all units sold.

    • B. 

      As the monopolist expands output, the average total cost will decline.

    • C. 

      The monopolist charges each consumer the highest possible price.

    • D. 

      When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

  • 30. 
    A monopolist will maximize profits by:
    • A. 

      Setting his price as high as possible.

    • B. 

      Setting his price at the level that will maximize per-unit profits.

    • C. 

      Producing the output where marginal revenue equals marginal cost.

    • D. 

      Producing the output where price equals marginal cost.

  • 31. 
    Which of the following statements best describes the price, output, and price conditions of monopoly?
    • A. 

      Price will equal marginal cost at the profit-maximizing level of output and profits will be positive in the long-run.

    • B. 

      Price will always equal average variable cost in the short-run and either profits or losses may result in the long run.

    • C. 

      In the long-run, positive economic profit will be earned.

    • D. 

      All of these are true.

  • 32. 
    A monopoly:
    • A. 

      Faces the market demand curve which is downward sloping.

    • B. 

      Has a marginal revenue curve which slopes downward and lies below its demand curve.

    • C. 

      Will maximize profits by producing an output level where MR = MC.

    • D. 

      All of these.

  • 33. 
    In Exhibit 9-3, how much vaccine should GeneTech produce to maximize its profits?
    • A. 

      300 doses per hour.

    • B. 

      400 doses per hour.

    • C. 

      Between 400 and 500 doses per hour.

    • D. 

      500 doses per hour.

  • 34. 
    As shown in Exhibit 9-3, in order to maximize profits, what price should GeneTech charge for its vaccines?
    • A. 

      $20 per dose.

    • B. 

      $25 per dose.

    • C. 

      $35 per dose.

    • D. 

      $50 per dose.

  • 35. 
    Although a monopoly can charge any price it wishes, it chooses:
    • A. 

      The highest price.

    • B. 

      Price equal to marginal cost.

    • C. 

      The price that maximizes profit.

    • D. 

      Competitive prices.

    • E. 

      A fair price.

  • 36. 
    The goal of any monopolist is to maximize:
    • A. 

      Economic profits.

    • B. 

      Normal profits.

    • C. 

      Price.

    • D. 

      Consumer welfare.

    • E. 

      Output.

  • 37. 
    Which of the following statements best describes the price, output, and profit conditions of monopoly?
    • A. 

      Price will equal marginal cost at the profit-maximizing level of output and profits will be positive in the long run.

    • B. 

      Price will always equal average variable cost in the short-run and either profits or losses may result in the long run.

    • C. 

      In the long run, positive economic profits will be eliminated.

    • D. 

      None of these.

  • 38. 
    Which of the following is ture about a monopoly?
    • A. 

      A monopoly charges a higher price and produces a lower output level than if the market were competitive.

    • B. 

      A monopoly is guaranteed an economic profit.

    • C. 

      A monopoly charges the highest possible price.

    • D. 

      A monopoly will shut down whenever losses are incurred.

    • E. 

      All of these.

  • 39. 
    Monopolists are criticized because they are inefficient. What is meant by this statment?
    • A. 

      Monopolists charge too high a price.

    • B. 

      Monopolists don't innovate enough to control pollution.

    • C. 

      Monopolists produce a large quanitity of waste.

    • D. 

      Monopolists usually don't produce at the minimum of the ATC

    • E. 

      Monopolists could use their resources better elsewhere.

  • 40. 
    The monopolist, unlike the perfectly competitive firm, can continue to earn an economic profit in the long run because of:
    • A. 

      Collusive agreements with competitors.

    • B. 

      Price leadership.

    • C. 

      Cartels.

    • D. 

      A dominant firm.

    • E. 

      Extremely high barriers to entry.

  • 41. 
    Which of the following is characteristic of a monopolistisally competitive firm?
    • A. 

      The firm faces an upward-sloping demand curve.

    • B. 

      The firm faces an inelastic demand curve.

    • C. 

      The firm faces a horizontal demand curve.

    • D. 

      The firm produces a differentiated product.

  • 42. 
    A profit-maximizing monopolixtically competitive firm will expand output to the point where:
    • A. 

      Total revenue equals total cost.

    • B. 

      Marginal revenue equals marginal cost.

    • C. 

      Price equals average total cost.

    • D. 

      Price equals marginal cost.

  • 43. 
    The monopolistic competition market structure is characterized by:
    • A. 

      Few firms and similar products.

    • B. 

      Many firms and differentiated products.

    • C. 

      Many firms and a homogeneous product.

    • D. 

      Few firms and a homogeneous product.

  • 44. 
    Firms in a monopolistically competitive industry produce:
    • A. 

      Homogeneous goods and services.

    • B. 

      Differentiated products.

    • C. 

      Competitive goods only

    • D. 

      Consumption goods only.

  • 45. 
    Which of the following is the best example of a monopolisticaly competitive market?
    • A. 

      Wheat.

    • B. 

      Automobiles.

    • C. 

      Diamonds.

    • D. 

      Retail sales.

  • 46. 
    In the long run, both monopolistic competition and perfect competition result in:
    • A. 

      A wide variety of brand-name choices for consumers.

    • B. 

      An efficient allocation of resources.

    • C. 

      Zero economic profit for firms.

    • D. 

      Excess capacity

  • 47. 
    In the long run, monopolisticaly competitive firms have:
    • A. 

      Excess capacity.

    • B. 

      Positive profits.

    • C. 

      Minimal average costs.

    • D. 

      Homogeneous production.

  • 48. 
    The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:
    • A. 

      Produce the ouput level at which price equals long-run marginal cost.

    • B. 

      Operate at minimum long-run average cost.

    • C. 

      Overutilize its insufficient capcity.

    • D. 

      Produce the outpul level at which price equals long-run average cost.

  • 49. 
    A monopolistic competitive firm is inefficient because the firm:
    • A. 

      Earns positive economic profit in the long run.

    • B. 

      Is producing at an output corresponding to the condition that marginal cost equals price.

    • C. 

      Is not maximizing its profit.

    • D. 

      Produces an output where average total cost is not minimum.

  • 50. 
    Which of the following statements best describes firms under monopolistic competition?
    • A. 

      There is little price or quality competition.

    • B. 

      The firms compete, using quality, location, advertising, and price.

    • C. 

      Firms do not compete using advertising.

    • D. 

      There is little competition between firms.

  • 51. 
    In the long run, a monopolistic competitive firm will operate at a price which:
    • A. 

      Is higher than minimum long-run average cost.

    • B. 

      Equals minimum long-run average cost.

    • C. 

      Equals marginal cost.

    • D. 

      None of these.

  • 52. 
    Compared to monopoly, the market results with monopolistic competition are usually expected to be:
    • A. 

      Worse because consumers ge fewer choices.

    • B. 

      Worse because consumers pay a higher price.

    • C. 

      The same.

    • D. 

      Better because consumer get less output.

    • E. 

      Better because consumers pay a lower price.

  • 53. 
    When a perfectly competitive firm or a monopolisticaly competitive firm is making zero economic profit,
    • A. 

      No firms will want to enter or exit.

    • B. 

      Some firms will want to leave.

    • C. 

      Some firms will want to enter.

    • D. 

      Market demand shifts to the left.

    • E. 

      The price of the output will rise in the long run.

  • 54. 
    Supporters of advertising claim that it:
    • A. 

      Increases the variety of products.

    • B. 

      Attacks established bran loyalties.

    • C. 

      Allows new firms to compete.

    • D. 

      All of these.

  • 55. 
    Critics of advertising argue that it:
    • A. 

      Lowers price by increasing competition.

    • B. 

      Results in more variety of products.

    • C. 

      Establishes bran loyalty, which promotes comptetion.

    • D. 

      Serves as a barrier to entry for new firms.

  • 56. 
    Product differentiation:
    • A. 

      Refers to the attempt of firms to make their products look like those of the other firms in the industry.

    • B. 

      Refers to teh attempt of firms to make real or aparent differences in essentially substitutable product look different in the minds of the customers.

    • C. 

      Refers to the advantage big firms have in research and development.

    • D. 

      Is a common characteristic of a perfectly competitive market structure.

    • E. 

      Is only employed in a monopoly market structure.

  • 57. 
    As presented in Exhibit 10-3, the long-run profit-maimizing output for the monopolistic competitive firm is:
    • A. 

      Zero units per week.

    • B. 

      200 units per week.

    • C. 

      400 units per week.

    • D. 

      600 units per week.

    • E. 

      800 units per week.

  • 58. 
    To maximize long-run profits, the monopolistically competitive firm shown in Exhibit 10-3 will charge a price per unit of:
    • A. 

      Zero

    • B. 

      $10

    • C. 

      $20

    • D. 

      $30

    • E. 

      $40

  • 59. 
    As represented in Exhibit 10-3, the maximum long-run economic profit earned by this monopolistic competitive firm is:
    • A. 

      Zero.

    • B. 

      $10 per week.

    • C. 

      $4,000 per week.

    • D. 

      $40,000 per week.

  • 60. 
    If all firms in a monopolistic competitve industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:
    • A. 

      A number of new firms will enter the industry.

    • B. 

      Some firms will leave the industry.

    • C. 

      Firms in the industry earn zero economic profits.

    • D. 

      All firms will leave the industry.

  • 61. 
    A market situation where a small number of sellers dominate the entire industry is called:
    • A. 

      Monopolistic competition.

    • B. 

      Monopsony.

    • C. 

      Monopoly.

    • D. 

      Oligopoly.

  • 62. 
    An oligopoly is a market structure in which:
    • A. 

      One firm has 100 percent of a market.

    • B. 

      There are many small firms.

    • C. 

      There are many firms with no control over price.

    • D. 

      There are few firms selling either a homongeneous or differentiated product.

  • 63. 
    Excluding foreign competition, which of the following is an oligopoly in the United Sates?
    • A. 

      The computer industry.

    • B. 

      The automible industry.

    • C. 

      The steel industry.

    • D. 

      All of these are oligopolies.

  • 64. 
    In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?
    • A. 

      Monopoly

    • B. 

      Oligopoly

    • C. 

      Perfect competition.

    • D. 

      Cartel.

  • 65. 
    A characteristic of an oligopoly is:
    • A. 

      Mutual interdependence in pricing decisions

    • B. 

      Independent pricing decisions.

    • C. 

      Lack of control over prices

    • D. 

      None of these.

  • 66. 
    A major characteristic of the theory of oligopoly is that:
    • A. 

      There are no real-world examples.

    • B. 

      The reactions of each firm depends on how the fim believes rival will react.

    • C. 

      In reality dew oligopolies survive more than 10 years.

    • D. 

      None of these.

  • 67. 
    When Pepsi is considering a price hike, it needs to consider how Coke may react.  This situation is called:
    • A. 

      Mutual interdependence

    • B. 

      Price leadership

    • C. 

      Collusion.

    • D. 

      Monopolistic competition.

  • 68. 
    Nonprice competition, price leadership, and cartels are models in the ____ market structure(s).
    • A. 

      Perfectly competitive

    • B. 

      Monopolistically competitive.

    • C. 

      Oligopoly

    • D. 

      Monopoly

    • E. 

      Perfectly competitive and monopolisitically competitive.

  • 69. 
    The kinked demand curve:
    • A. 

      Apples when competitors match price decreases but not price increases.

    • B. 

      Could apply to market demand in any market structure.

    • C. 

      Applies when competitors match price increases but not price decreases.

    • D. 

      Applies to the price leadership model.

    • E. 

      Applies when competitiors act independently.

  • 70. 
    In a price leadership oligopoly model,
    • A. 

      A cartel of leading firms determines price and industry output.

    • B. 

      The industry in consortium with the government determines price and output.

    • C. 

      One firm is the price leader and all other firms follow.

    • D. 

      The firms abandon a profit-maximizing goal.

    • E. 

      Firms do not operate where MR = MC.

  • 71. 
    Which of the following market structures describes an industry in which a group of firms formally agree to control prices and output of a product?
    • A. 

      Perfect competition.

    • B. 

      Monopoly.

    • C. 

      Oligopoly.

    • D. 

      Cartel.

    • E. 

      Monopolistic competition.

  • 72. 
    In order to make oil profits as large as possible, OPEC meets to set oil production quotas for its members, OPEC is best classified as a:
    • A. 

      Monopoly.

    • B. 

      Cartel.

    • C. 

      Kinked demand industry.

    • D. 

      Price-leadership industry.

  • 73. 
    A cartel:
    • A. 

      Is a group of firms formally agreeing to control the price and the output of a product.

    • B. 

      Has as its primary goal to reap monopoly profits by replacing competition with cooperation.

    • C. 

      Is illegal in the United States, but not in other nations.

    • D. 

      All of these

  • 74. 
    Game theory is an expecially useful model for analysis in the following types of markets:
    • A. 

      Perfect competition.

    • B. 

      Monopolistic competition.

    • C. 

      Oligopoly.

    • D. 

      Monopoly.

  • 75. 
    Game theory is a model for describing oligopoly price decisions among firms that are:
    • A. 

      Interdependent.

    • B. 

      Independent.

    • C. 

      Regulated.

    • D. 

      Merging.

  • 76. 
    The marginal revenue product of a resource:
    • A. 

      Is defined as the marginal product of the resource multiplied by the resource price.

    • B. 

      Simply means that a firm should add to its capital stock as long as competition requires it.

    • C. 

      Equals the extra output produced by an additional unti of the resource mulitplied by the price of that output.

    • D. 

      Equals the average product of the resource multiplied by the cost of hiring an additional (marginal) unit of the resource.

  • 77. 
    Which of the following is the most accurate definition of a worker's "marginal revenue product"?
    • A. 

      The change in teh firm's profits as the result of hiring an additional worker.

    • B. 

      The change in teh firm's total revenue as the result of hiring an additional worker.

    • C. 

      The change in teh firm's output as the result of hiring an additional worker.

    • D. 

      The change in teh firm's cost as the result of hiring an additional worker.

  • 78. 
    Firms should hire additional units of a resource as long as the:
    • A. 

      Marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced.

    • B. 

      Marginal product of the resource is less than the price of the resource.

    • C. 

      Price of the outpur produced is positive.

    • D. 

      Marginal revenue product of the resource exceeds the cost of an additonal unit of the resource.

  • 79. 
    Refer to Exhibit 11-1.  What is the marinal revenue product of the fifth unit of labor?
    • A. 

      $6

    • B. 

      $36

    • C. 

      $54

    • D. 

      $324

  • 80. 
    • A. 

      4

    • B. 

      5

    • C. 

      6

    • D. 

      7

  • 81. 
    Marginal revenue product is defined as the extra:
    • A. 

      Output a frim would receive after hiring one more unit of resource.

    • B. 

      Cost of hiring one more unit of resource.

    • C. 

      Revenue earned by selling one more unit of product.

    • D. 

      Revenue earned by hiring one more unit of resource.

    • E. 

      Output received by spending one more dollar on resources.

  • 82. 
    The demand for a factor of production depends on the:
    • A. 

      Supply of the factor.

    • B. 

      Supply of other factors of production.

    • C. 

      Demand for other factors of production.

    • D. 

      Demand for the products that it helps to produce.

  • 83. 
    A firm's demand for labor depends on, in part, the demand for the firm's product.  To summarize this idea, economist say that the demand for labor is:
    • A. 

      Derived demand.

    • B. 

      Marginal demand.

    • C. 

      Secondary demand.

    • D. 

      Monopsonisitic demand.

  • 84. 
    Which of the following statements concerning the supply of labor is true?
    • A. 

      The wage rate has no effect on the supply of labor.

    • B. 

      The labor supply curve is downward sloping.

    • C. 

      The supply of labor is determined by the prevailing wage rate.

    • D. 

      The typical labor supply curve is upward sloping.

  • 85. 
    A union may atttempt to obtain stricter certification requirements or longer apprenticeships.  These changes would raise workers' wages because they:
    • A. 

      Create unnecessary unemployment.

    • B. 

      Shift in labor supply curve leftward.

    • C. 

      Decrease the marginal product of labor.

    • D. 

      Reduce management's use of featherbedding.

  • 86. 
    • A. 

      The change in total revenue that results from employing an additional worker.

    • B. 

      The market wage rate.

    • C. 

      Its marginal revenue product curve.

    • D. 

      The demand curve for labor.

    • E. 

      The marginal product of labor.

  • 87. 
    Which of the following is the best example of an investment in human capital?
    • A. 

      On-the-job training received by an apprentice electrician.

    • B. 

      An increase in the number of hours worked per week by a worker in a unskilled laboring job.

    • C. 

      The purchase of company stock by a worker.

    • D. 

      Payments into a retirement pension plan by a skilled laborer.

  • 88. 
    One reason the supply of carpenters is geater than the supply of physicians is because:
    • A. 

      Carpenter demand less income.

    • B. 

      Physicaians do not belong to a union.

    • C. 

      Of differnces in human capital.

    • D. 

      Carpenters belong to unions.

  • 89. 
    Which of the following would be a human captial investment?
    • A. 

      On-the-job training programs.

    • B. 

      Health care programs.

    • C. 

      Formal education.

    • D. 

      All of these.

  • 90. 
    A worker's accumulated investment in education, training, experience, and health is called:
    • A. 

      Derived labor demand.

    • B. 

      Collective entrepreneurship.

    • C. 

      Seniority.

    • D. 

      Human capital.

  • 91. 
    In Exhibit 11-4, assume that both input and output markets are perfectly competitive. If one additional server increased the number of meals sold by four per day and each meal sells for $10, each additional food server will be paid:
    • A. 

      $16 per day.

    • B. 

      $32 per day.

    • C. 

      $36 per day.

    • D. 

      $40 per day.

    • E. 

      None of these.

  • 92. 
    In Exhibit 11-4, the equilibrium wage and the number of food servers employed per day, respectively, are:
    • A. 

      $2.00 and 5,000

    • B. 

      $4.00 and 10,000

    • C. 

      $6.00 and 15,000

    • D. 

      $8.00 and 20,000

  • 93. 
    In Exhibit 11-4, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour.  The minimum wage rate creates a(n):
    • A. 

      New labor market equilibrium.

    • B. 

      Excess demand for labor of 10 thousand food servers.

    • C. 

      Excess supply of labor of food servers.

    • D. 

      Situation of full employment for food servers.

  • 94. 
    If the equilibrium wage rate in Exhibit 11-4 increased, the cause could be that:
    • A. 

      The supply of labor increased.

    • B. 

      The demand for labor decreased.

    • C. 

      Either the demand for labor increased or the supply of labor decreased.

    • D. 

      None of these.

  • 95. 
    A technological advance that increases the productivity of teachers can be expected to have what effects on the equilibrium labor market for teachers?
    • A. 

      Wages will rise, and quanitity of labor will fall.

    • B. 

      Wages will rise, and quanitity of labor will rise.

    • C. 

      Wages will fall, and quanitity of labor will fall.

    • D. 

      Wages will fall, and quanitity of labor will rise.

    • E. 

      Wages and quantity of labor will remain the same.

  • 96. 
    The optimal hiring rule is to employ labor up to the point where:
    • A. 

      Wage = MFC

    • B. 

      Wage = MP

    • C. 

      Wage = MR

    • D. 

      Wage = MRP

    • E. 

      Wage = TWC

  • 97. 
    An increase in demand for French fries will cause equilibrium wage rates:
    • A. 

      And quantities of potato workers hired to rise.

    • B. 

      And quantities of potato workers hired to fall.

    • C. 

      To rise and quantities of potato workers hired to fall.

    • D. 

      To fall and quantities of potato workers hired to rise.

    • E. 

      And quantities of potato workers hired to stay the same.

  • 98. 
    Which of the following can shift the labor demand curve to the right?
    • A. 

      Decrease in product price.

    • B. 

      Increase in wages.

    • C. 

      Decrease in wages.

    • D. 

      Decrease in the MP.

    • E. 

      Increase in productivity.

  • 99. 
    Compared to a competitive input market, a monosonist will hire:
    • A. 

      More and pay a higher input price.

    • B. 

      Less but pay a higher input price.

    • C. 

      More by pay a lower input price.

    • D. 

      Less and pay a lower input price.

  • 100. 
    A monopsony is a:
    • A. 

      Large number of buyers.

    • B. 

      Larger seller.

    • C. 

      Single seller.

    • D. 

      Single buyer.