Economics Part II Test

30 Questions
Economics Quizzes & Trivia

Economics Part II Test

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Questions and Answers
  • 1. 
    Resource pricing is important because: 
    • A. 

      Resource prices are a major determinant of money incomes.

    • B. 

      Resource prices allocate scarce resources among alternative uses.

    • C. 

      Resource prices, along with resource productivity, are important to firms in minimizing their costs

    • D. 

      All of these reasons.

  • 2. 
    The demand for airline pilots results from the demand for air travel. This fact is an example of: 
    • A. 

      Resource substitutability.

    • B. 

      Rising marginal resource cost.

    • C. 

      Elasticity of resource demand.

    • D. 

      The derived demand for labor.

  • 3. 
    Marginal revenue product measures the: 
    • A. 

      Amount by which the extra production of one more worker increases a firm's total revenue.

    • B. 

      Decline in product price that a firm must accept to sell the extra output of one more worker.

    • C. 

      Increase in total resource cost resulting from the hire of one extra unit of a resource.

    • D. 

      Increase in total revenue resulting from the production of one more unit of a product.

  • 4. 
    The MRP curve for labor: 
    • A. 

      Intersects the firm's labor demand curve from above.

    • B. 

      Is the firm's labor demand curve

    • C. 

      Lies below the firm's labor demand curve.

    • D. 

      Lies above the firm's labor demand curve.

  • 5. 
    A competitive employer should hire additional labor as long as: 
    • A. 

      The MRP exceeds the wage rate.

    • B. 

      The wage rate is less than MP.

    • C. 

      Average product exceeds MP.

    • D. 

      MC exceeds MR.

  • 6. 
    Assume the Apex Manufacturing Company is purely competitive in both the hiring of labor and in the sale of its product. Apex's labor demand curve would be: 
    • A. 

      Vertical at the current level of employment.

    • B. 

      Horizontal at the "going" wage rate.

    • C. 

      Upward sloping.

    • D. 

      Downward sloping

  • 7. 
    • A. 

      2 Units

    • B. 

      3 Units

    • C. 

      4 Units

    • D. 

      5 Units

  • 8. 
    Assuming a firm is selling its output in a purely competitive market, its resource demand curve can be determined by: 
    • A. 

      Multiplying total product by product price.

    • B. 

      Multiplying marginal product by product price.

    • C. 

      Dividing total revenue by marginal product.

    • D. 

      Comparing marginal product with various possible input prices.

  • 9. 
    Answer the next question(s) on the basis of the data contained in the following table. Assume that the firm is hiring labor in a purely competitive market.Units of Labor         Total Product         Product Price0                            0                            2.201                            15                          2.002                            28                          1.803                            39                          1.604                            48                          1.405                            55                          1.206                            60                          1.10
    • A. 

      5

    • B. 

      4

    • C. 

      3

    • D. 

      2

  • 10. 
    Other things equal, the resource demand curve of an imperfectly competitive seller will: 
    • A. 

      . lie below its marginal revenue product curve.

    • B. 

      Be subject to increasing marginal productivity.

    • C. 

      Be less elastic than that of a purely competitive seller.

    • D. 

      Be more elastic than that of a purely competitive seller

  • 11. 
    The change in a firm's total revenue that results from hiring an additional worker is measured by: 
    • A. 

      . marginal product.

    • B. 

      Marginal revenue

    • C. 

      Marginal revenue product.

    • D. 

      Average revenue product.

  • 12. 
    • A. 

      24

    • B. 

      8

    • C. 

      5

    • D. 

      1

  • 13. 
    A firm is hiring the profit-maximizing amount of an input when: 
    • A. 

      AVC = MC.

    • B. 

      MP = MRC.

    • C. 

      MRC = MR.

    • D. 

      MRP = MRC

  • 14. 
    Which of the following will not cause a shift in the demand for resource X? 
    • A. 

      A decline in the price of resource X

    • B. 

      An increase in the price of the product resource X is producing

    • C. 

      A decrease in the price of substitute resource Y

    • D. 

      An increase in the productivity of resource X

  • 15. 
    A change in the price of an input will usually: 
    • A. 

      Shift a firm's cost curves.

    • B. 

      Cause the firm to alter the combination of inputs it employs.

    • C. 

      Induce the firm to change its level of output.

    • D. 

      Do all of these.

  • 16. 
    If the nominal wages of carpenters rose by 5 percent in 2008 and the price level increased by 3 percent, then the real wages of carpenters: 
    • A. 

      Decreased by 2 percent.

    • B. 

      Increased by 2 percent.

    • C. 

      Increased by 3 percent.

    • D. 

      Increased by 8 percent.

  • 17. 
    Which of the following is correct
    • A. 

      The nominal wage may fall, but the real wage can never decline.

    • B. 

      The real wage may fall, but the nominal wage can never decline.

    • C. 

      Both the nominal and the real wage must always rise.

    • D. 

      The nominal and the real wage may both fall

  • 18. 
    Marginal revenue product (MRP) of labor refers to the: 
    • A. 

      Increase in total revenue resulting from the sale of an additional unit of output.

    • B. 

      Amount by which a firm's total resource cost increases when it employs one more unit of labor.

    • C. 

      Increase in total revenue resulting from the hire of one more unit of labor.

    • D. 

      Price at which additional units of labor can be employed in a monopsonized labor market.

  • 19. 
    A profit-maximizing firm will: 
    • A. 

      Expand employment if marginal revenue product exceeds marginal resource cost.

    • B. 

      Reduce employment if marginal revenue product exceeds marginal resource cost.

    • C. 

      Expand employment if marginal revenue product equals marginal resource cost.

    • D. 

      Reduce employment if marginal revenue product equals marginal resource cost.

  • 20. 
    Unit of Labor        Wage Rate       MRC         MRP1                               8                 8               122                               8                 8               103                               8                 8                84                               8                 8                65                               8                 8                4
    • A. 

      2 units of labor.

    • B. 

      3 units of labor.

    • C. 

      4 units of labor.

    • D. 

      5 units of labor.

  • 21. 
    The individual firm in a purely competitive labor market faces: 
    • A. 

      A perfectly elastic labor supply curve and a downsloping labor demand curve.

    • B. 

      A perfectly elastic labor demand curve and an upsloping labor supply curve.

    • C. 

      Labor demand and labor supply curves both of which are perfectly elastic.

    • D. 

      A downsloping labor demand curve and an upsloping labor supply curve.

  • 22. 
    Qty of Labor               Total Product             Total Revenue1                                       4                                162                                       8                                323                                      11                               444                                      13                               52 5                                      14                               56
    • A. 

      $2

    • B. 

      $3

    • C. 

      $4

    • D. 

      $16

  • 23. 
    The economic term for a sole employer in a nonunion community is: 
    • A. 

      Monopsonist.

    • B. 

      Monopolist.

    • C. 

      Bilateral competitor.

    • D. 

      Bilateral monopolist.

  • 24. 
    A monopsonist's wage cost in hiring an additional worker is the: 
    • A. 

      Worker's wage rate.

    • B. 

      Worker's wage rate plus the wage increases paid to all workers already employed.

    • C. 

      Worker's wage rate adjusted for the lower price that must be charged for the extra output.

    • D. 

      Marginal wage cost less the wage rate.

  • 25. 
    The United Mine Workers is a good illustration of: 
    • A. 

      How unions have increased wages but reduced job opportunities by shifting the supply-of-labor curve to the left.

    • B. 

      How unions have raised wages and increased job opportunities by increasing the demand for labor.

    • C. 

      Inclusive unionism.

    • D. 

      Exclusive unionism.

  • 26. 
    A craft union attempts to increase wage rates by: 
    • A. 

      Equating the MRP and the MRC curves.

    • B. 

      Shifting the labor supply curve to the left

    • C. 

      Shifting the labor supply curve to the right.

    • D. 

      Shifting the MRP curve to the right.

  • 27. 
    Occupational licensing can best be understood in terms of: 
    • A. 

      The inclusive unionism model.

    • B. 

      The exclusive unionism model.

    • C. 

      The bilateral monopoly model.

    • D. 

      The monopsony model.

  • 28. 
    In a labor market characterized by bilateral monopoly the wage rate will: 
    • A. 

      Be logically indeterminate.

    • B. 

      Be established at the level desired by the union.

    • C. 

      Be established at the level desired by the employer.

    • D. 

      Always be established at the competitive level.

  • 29. 
    Critics of minimum-wage legislation argue that it: 
    • A. 

      Keeps inefficient producers in business.

    • B. 

      Reduces employment.

    • C. 

      Undermines incentives to work.

    • D. 

      Is deflationary.

  • 30. 
    Wage differentials can arise from: 
    • A. 

      Both the demand-side and supply-side of labor markets.

    • B. 

      The demand-side of labor markets only.

    • C. 

      The supply-side of labor markets only.

    • D. 

      Neither the demand-side or supply-side of labor markets.