question
If a price searcher is producing at a level of output such that its marginal cost is $16 and its marginal revenue is $9, the firm should
a. increase output in order to reduce per-unit costs.
b. decrease the price of its product and expand output.
c. increase price and reduce its rate of output.
d. reduce both price and output.
a. increase output in order to reduce per-unit costs.
b. decrease the price of its product and expand output.
c. increase price and reduce its rate of output.
d. reduce both price and output.
answer
c.
question
As new firms enter a competitive price-searcher market, profits of existing firms
a. rise and product diversity in the market increases.
b. rise and product diversity in the market decreases.
c. decline and product diversity in the market increases.
d. decline and product diversity in the market decreases
a. rise and product diversity in the market increases.
b. rise and product diversity in the market decreases.
c. decline and product diversity in the market increases.
d. decline and product diversity in the market decreases
answer
c.
question
The free entry and exit of firms in a competitive price-searcher market guarantees that
a. both economic profits and economic losses can persist in the long run.
b. both economic profits and economic losses disappear in the long run.
c. economic profits, but not economic losses, can persist in the long run.
d. economic losses, but not economic profits, can persist in the long run.
a. both economic profits and economic losses can persist in the long run.
b. both economic profits and economic losses disappear in the long run.
c. economic profits, but not economic losses, can persist in the long run.
d. economic losses, but not economic profits, can persist in the long run.
answer
b.
question
If marginal cost exceeds marginal revenue, a profit-maximizing firm should
a. expand output until marginal cost equals marginal revenue.
b. expand output until marginal revenue equals price.
c. reduce output until marginal cost equals marginal revenue.
d. reduce output until price equals average total cost.
a. expand output until marginal cost equals marginal revenue.
b. expand output until marginal revenue equals price.
c. reduce output until marginal cost equals marginal revenue.
d. reduce output until price equals average total cost.
answer
c.
question
In the short run, a price searcher wishing to maximize profits or minimize losses should produce the output that
a. equates marginal cost with marginal revenue.
b. equates marginal cost with price.
c. corresponds to the lowest point on the average variable cost curve.
d. corresponds to the lowest point on the average total cost curve.
a. equates marginal cost with marginal revenue.
b. equates marginal cost with price.
c. corresponds to the lowest point on the average variable cost curve.
d. corresponds to the lowest point on the average total cost curve.
answer
a.
question
When profits exist in a competitive price-searcher market,
a. rival firms will be attracted into the market.
b. high barriers to entry will prevent rival firms from entering the market.
c. product differentiation will prevent new firms from making a profit.
d. the profits will persist because the firms face a downward-sloping demand curve.
a. rival firms will be attracted into the market.
b. high barriers to entry will prevent rival firms from entering the market.
c. product differentiation will prevent new firms from making a profit.
d. the profits will persist because the firms face a downward-sloping demand curve.
answer
a.
question
If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?
a. An increase in demand for each firm and lower prices.
b. A decrease in demand for each firm and lower prices.
c. An increase in demand for each firm and higher prices.
d. A decrease in demand for each firm and higher prices.
a. An increase in demand for each firm and lower prices.
b. A decrease in demand for each firm and lower prices.
c. An increase in demand for each firm and higher prices.
d. A decrease in demand for each firm and higher prices.
answer
b.
question
If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?
a. Government regulations.
b. Low costs of entry into and exit from the market.
c. Substantial economies of scale that provide a competitive advantage to large firms in such markets.
d. The threat of a government takeover of the firms in these markets.
a. Government regulations.
b. Low costs of entry into and exit from the market.
c. Substantial economies of scale that provide a competitive advantage to large firms in such markets.
d. The threat of a government takeover of the firms in these markets.
answer
b.
question
Even though firms in competitive price-searcher markets do not produce at minimum ATC, competitive price-searcher markets may still be consistent with economic efficiency because
a. strict government regulations force the firms in these markets to keep their costs low.
b. they provide consumers with a greater diversity of products.
c. they encourage more advertising in both price-searcher and price-taker markets.
d. special legal protections for price searchers make it possible for them to more efficiently use resources.
a. strict government regulations force the firms in these markets to keep their costs low.
b. they provide consumers with a greater diversity of products.
c. they encourage more advertising in both price-searcher and price-taker markets.
d. special legal protections for price searchers make it possible for them to more efficiently use resources.
answer
b.
question
A price-discriminating firm charges the lowest price to the group that
a. has the most elastic demand.
b. purchases the largest quantity.
c. engages in the most arbitrage.
d. is least responsive to price changes
a. has the most elastic demand.
b. purchases the largest quantity.
c. engages in the most arbitrage.
d. is least responsive to price changes
answer
a.
question
Which of the following about price discrimination is true?
a. A price-discriminating seller will charge consumers with an elastic demand a lower price than consumers with an inelastic demand.
b. A firm must face a horizontal demand curve for its product in order to engage in effective price discrimination in a market.
c. Price discrimination always harms consumers and helps sellers in the short run but in the long run, consumers benefit at the expense of sellers.
d. A seller must have a monopoly in order to gain from price discrimination.
a. A price-discriminating seller will charge consumers with an elastic demand a lower price than consumers with an inelastic demand.
b. A firm must face a horizontal demand curve for its product in order to engage in effective price discrimination in a market.
c. Price discrimination always harms consumers and helps sellers in the short run but in the long run, consumers benefit at the expense of sellers.
d. A seller must have a monopoly in order to gain from price discrimination.
answer
a.
question
A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers. What is the most likely explanation for this failure?
a. There was nothing to prevent the students from reselling the fruit juice to other consumers.
b. The two groups of consumers have different demand elasticities for fruit juice.
c. The cost of producing the product is relatively high.
d. Market demand for fruit juice is inelastic.
a. There was nothing to prevent the students from reselling the fruit juice to other consumers.
b. The two groups of consumers have different demand elasticities for fruit juice.
c. The cost of producing the product is relatively high.
d. Market demand for fruit juice is inelastic.
answer
a.
question
When an entrepreneur introduces a new improved product that is highly valued relative to cost
a. consumers will be worse off.
b. the demand for the products that are good substitutes for the new product will increase.
c. some of the existing products will become obsolete and businesses producing those products will fail.
d. total employment will decline if there are business failures.
a. consumers will be worse off.
b. the demand for the products that are good substitutes for the new product will increase.
c. some of the existing products will become obsolete and businesses producing those products will fail.
d. total employment will decline if there are business failures.
answer
c.
question
Which of the following is true of entrepreneurship?
a. Entrepreneurial discovery is an important source of economic growth and higher living standards.
b. The role of the entrepreneur is not very important and that is why it is generally not included in economic models.
c. The role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so.
d. Economic models are able to capture fully the important role of the entrepreneur in the market process.
a. Entrepreneurial discovery is an important source of economic growth and higher living standards.
b. The role of the entrepreneur is not very important and that is why it is generally not included in economic models.
c. The role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so.
d. Economic models are able to capture fully the important role of the entrepreneur in the market process.
answer
a.
question
In order to be successful in a competitive market economy, an entrepreneur must
a. provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere.
b. supply consumers with goods and services valued less highly than the resources necessary to produce them.
c. take resources from other producers, thus reallocating wealth but not creating new wealth.
d. gain government grants and subsidies.
a. provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere.
b. supply consumers with goods and services valued less highly than the resources necessary to produce them.
c. take resources from other producers, thus reallocating wealth but not creating new wealth.
d. gain government grants and subsidies.
answer
a.
question
One of the effects of patents is to
a. reduce incentives for innovation.
b. give firms incentives to worry less about minimizing production costs.
c. temporarily provide the patent owner with monopoly power.
d. reduce the degree of monopoly power in the short run.
a. reduce incentives for innovation.
b. give firms incentives to worry less about minimizing production costs.
c. temporarily provide the patent owner with monopoly power.
d. reduce the degree of monopoly power in the short run.
answer
c.
question
Which of the following constitutes a barrier limiting the entry of potential competitors into a market?
a. Diseconomies of scale.
b. An elastic market demand for the product produced by the industry.
c. Control over an essential resource.
d. A perfectly elastic demand curve.
a. Diseconomies of scale.
b. An elastic market demand for the product produced by the industry.
c. Control over an essential resource.
d. A perfectly elastic demand curve.
answer
c.
question
New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that
a. cab fares will be lower.
b. cab fares will be higher.
c. the cost of operating a taxicab will be lower.
d. subway fares will decrease.
a. cab fares will be lower.
b. cab fares will be higher.
c. the cost of operating a taxicab will be lower.
d. subway fares will decrease.
answer
b.
question
A monopolist will earn economic profits as long as price exceeds
a. marginal revenue.
b. average fixed cost.
c. average variable cost.
d. average total cost
a. marginal revenue.
b. average fixed cost.
c. average variable cost.
d. average total cost
answer
d.
question
The key element in preserving a monopoly is
a. government subsidy of critical enterprises.
b. keeping potential rivals out of the market.
c. guaranteeing availability of substitute products.
d. increased advertising expenditure.
a. government subsidy of critical enterprises.
b. keeping potential rivals out of the market.
c. guaranteeing availability of substitute products.
d. increased advertising expenditure.
answer
b.
question
A profit-maximizing monopolist will continue expanding output as long as
a. marginal revenue exceeds marginal cost.
b. marginal revenue is positive.
c. the cost of producing an additional unit exceeds the marginal revenue derived from the unit.
d. economic profit is more than zero.
a. marginal revenue exceeds marginal cost.
b. marginal revenue is positive.
c. the cost of producing an additional unit exceeds the marginal revenue derived from the unit.
d. economic profit is more than zero.
answer
a.
question
A profit-maximizing monopolist that produces in the short run will
a. produce the level of output where marginal revenue exceeds marginal cost by the largest amount.
b. increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.
c. produce the level of output where average total cost is at a minimum.
d. increase price as long as the average revenue exceeds the average total cost.
e. produce the level of output where average revenue exceeds average total cost by the largest amount.
a. produce the level of output where marginal revenue exceeds marginal cost by the largest amount.
b. increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.
c. produce the level of output where average total cost is at a minimum.
d. increase price as long as the average revenue exceeds the average total cost.
e. produce the level of output where average revenue exceeds average total cost by the largest amount.
answer
b.
question
Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, which of the following would be expected?
a. An increase in market output and an increase in the price of the product.
b. An increase in market output and an decrease in the price of the product.
c. A decrease in market output and an increase in the price of the product.
d. A decrease in market output and a decrease in the price of the product.
a. An increase in market output and an increase in the price of the product.
b. An increase in market output and an decrease in the price of the product.
c. A decrease in market output and an increase in the price of the product.
d. A decrease in market output and a decrease in the price of the product.
answer
c.
question
In markets characterized by oligopoly,
a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
b. collusive agreements will always prevail.
c. collective profits are always lower with cartel arrangements than they are without cartel arrangements.
d. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.
a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
b. collusive agreements will always prevail.
c. collective profits are always lower with cartel arrangements than they are without cartel arrangements.
d. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.
answer
a.
question
The difficulty in analyzing oligopolistic behavior arises from the
a. degree of government regulation of the market structure.
b. interdependent nature of oligopolistic decisions.
c. large number of firms in the industry.
d. market power of consumers.
a. degree of government regulation of the market structure.
b. interdependent nature of oligopolistic decisions.
c. large number of firms in the industry.
d. market power of consumers.
answer
b.
question
If zinc suppliers are successful in forming an international zinc cartel, they will
a. lower output and raise prices, which discourages the entry of new firms into the industry.
b. lower output, raise prices, and have a need to prevent the entry of new firms into the industry.
c. raise output and raise prices, which discourages the entry of new firms into the industry.
d. raise output, raise prices, and have a need to prevent the entry of new firms into the industry.
a. lower output and raise prices, which discourages the entry of new firms into the industry.
b. lower output, raise prices, and have a need to prevent the entry of new firms into the industry.
c. raise output and raise prices, which discourages the entry of new firms into the industry.
d. raise output, raise prices, and have a need to prevent the entry of new firms into the industry.
answer
b.
question
Cartels are difficult to maintain because
a. antitrust laws are difficult to enforce.
b. cartel agreements are conducive to monopoly outcomes.
c. there is always tension between cooperation and self-interest in a cartel.
d. firms pay little attention to the decision made by other firms.
a. antitrust laws are difficult to enforce.
b. cartel agreements are conducive to monopoly outcomes.
c. there is always tension between cooperation and self-interest in a cartel.
d. firms pay little attention to the decision made by other firms.
answer
c.
question
Breaking a monopoly firm into several rival firms will be unlikely to improve economic efficiency when economies of scale are important because
a. several smaller firms will have higher per-unit costs than a single larger firm.
b. a single firm will have higher per-unit costs than several smaller firms.
c. it is harder to regulate many smaller firms than it is one large firm.
d. consumers will find it harder to choose among the products of many alternative sellers.
a. several smaller firms will have higher per-unit costs than a single larger firm.
b. a single firm will have higher per-unit costs than several smaller firms.
c. it is harder to regulate many smaller firms than it is one large firm.
d. consumers will find it harder to choose among the products of many alternative sellers.
answer
a.
question
What problem does the government have that makes price regulation less than an ideal solution?
a. There is no effective way to enforce price regulation.
b. The government cannot tell what price a firm is charging.
c. Regulators frequently will not have the information they need to set prices.
d. Regulation often will lead to lower costs.
a. There is no effective way to enforce price regulation.
b. The government cannot tell what price a firm is charging.
c. Regulators frequently will not have the information they need to set prices.
d. Regulation often will lead to lower costs.
answer
c.
question
When economies of scale are important, imposing competition by splitting a monopolistic firm into many rival units will
a. lead to an increase in the per-unit cost of production in the industry.
b. not affect per-unit costs but will affect demand conditions.
c. generally increase the social efficiency of production.
d. cause the industry demand curve to increase (shift to the right).
a. lead to an increase in the per-unit cost of production in the industry.
b. not affect per-unit costs but will affect demand conditions.
c. generally increase the social efficiency of production.
d. cause the industry demand curve to increase (shift to the right).
answer
a.
question
An increase in the price of a resource would cause
a. producers to substitute other inputs for the resource.
b. consumers to increase consumption of the goods that increase in price as the result of the higher resource price.
c. an increase in the demand for products that use the resource intensely.
d. a reduction in the price of goods produced with the resource.
a. producers to substitute other inputs for the resource.
b. consumers to increase consumption of the goods that increase in price as the result of the higher resource price.
c. an increase in the demand for products that use the resource intensely.
d. a reduction in the price of goods produced with the resource.
answer
a.
question
Which of the following scenarios would serve to decrease the demand for unskilled labor in our country?
a. Increased productivity gains among the unskilled laborers.
b. Increased demand for goods produced by unskilled labor.
c. Increased international trade with countries where unskilled labor is more plentiful.
d. Increased supply of migrant workers.
a. Increased productivity gains among the unskilled laborers.
b. Increased demand for goods produced by unskilled labor.
c. Increased international trade with countries where unskilled labor is more plentiful.
d. Increased supply of migrant workers.
answer
c.
question
Which of the following best illustrates the concept of "derived demand"?
a. A decrease in the price of glass causes the demand for plastic to decrease.
b. An increase in the demand for bread leads to an increase in the demand for flour.
c. A decrease in the price of air travel leads to an increase in the quantity demanded of air travel.
d. An increase in the demand for peanut butter leads to an increase in the demand for jelly.
a. A decrease in the price of glass causes the demand for plastic to decrease.
b. An increase in the demand for bread leads to an increase in the demand for flour.
c. A decrease in the price of air travel leads to an increase in the quantity demanded of air travel.
d. An increase in the demand for peanut butter leads to an increase in the demand for jelly.
answer
b.
question
If the demand for a consumer good increases, the demand for resources required to make the good will
a. remain the same, but the quantity demanded will increase.
b. decrease if the demand for the consumer good is inelastic, otherwise the demand will increase.
c. stay the same, but the quantity demanded will decrease.
d. increase.
a. remain the same, but the quantity demanded will increase.
b. decrease if the demand for the consumer good is inelastic, otherwise the demand will increase.
c. stay the same, but the quantity demanded will decrease.
d. increase.
answer
d.
question
As the price of a resource decreases,
a. demand for that resource increases.
b. the quantity demanded of that resource decreases.
c. the supply of that resource increases.
d. producers are more willing and able to hire that resource.
e. producers are less willing and able to hire that resource.
a. demand for that resource increases.
b. the quantity demanded of that resource decreases.
c. the supply of that resource increases.
d. producers are more willing and able to hire that resource.
e. producers are less willing and able to hire that resource.
answer
d.
question
The rule for the optimal use of any input states that
a. when MRP is less than price, profit will increase when more of that b. when MRP is greater than resource price, profit will increase when more of that resource is utilized.
c. when MRP equals price, profit will increase when less of that resource is utilized.
d. when MRP is greater than resource price, profit will increase when less of that resource is utilized.
e. resources should be used only if MRP exceeds product price.
a. when MRP is less than price, profit will increase when more of that b. when MRP is greater than resource price, profit will increase when more of that resource is utilized.
c. when MRP equals price, profit will increase when less of that resource is utilized.
d. when MRP is greater than resource price, profit will increase when less of that resource is utilized.
e. resources should be used only if MRP exceeds product price.
answer
b.
question
Suppose a company sells its product for $5.00. It's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. The company should hire the additional worker only if the wage rate is
a. $5.00 or less per hour.
b. $1.00 or more per hour.
c. $25.00 or less per hour.
d. none of the above
a. $5.00 or less per hour.
b. $1.00 or more per hour.
c. $25.00 or less per hour.
d. none of the above
answer
c.
question
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.
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.
answer
d.
question
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.
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.
answer
b.
question
Suppose a change in technology increases the marginal product of labor. The result is
a. a downward movement along the demand for labor curve.
b. a rightward shift in the demand for labor curve.
c. a leftward shift in the demand for labor curve.
d. an upward movement along the demand for labor curve.
a. a downward movement along the demand for labor curve.
b. a rightward shift in the demand for labor curve.
c. a leftward shift in the demand for labor curve.
d. an upward movement along the demand for labor curve.
answer
b.
question
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.
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.
answer
d.
question
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.
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.
answer
a.
question
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
a. decrease; decrease
b. decrease; increase
c. increase; decrease
d. increase; increase
answer
d.
question
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.
a. relatively high.
b. relatively low.
c. determined solely by factors that affect demand.
d. determined outside the domain of economic theory.
answer
a.
question
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.
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.
answer
a.
question
Economic studies have generally found that professional sports players have salaries that
a. greatly exceed their marginal contribution to a team's revenue stream.
b. are approximately equal to their marginal revenue products.
c. are about one-half of what they contribute to a team's profitability.
d. are less than one-tenth of their marginal revenue products.
a. greatly exceed their marginal contribution to a team's revenue stream.
b. are approximately equal to their marginal revenue products.
c. are about one-half of what they contribute to a team's profitability.
d. are less than one-tenth of their marginal revenue products.
answer
b.
question
Two workers are employed in the same job by the same firm; however, they are paid different wage rates. This could be explained by differences in
a. the income effect
b. the price of the firm's output
c. their marginal products due to differences in ability
d. working conditions
e. risk
a. the income effect
b. the price of the firm's output
c. their marginal products due to differences in ability
d. working conditions
e. risk
answer
c.
question
Millionaires tend to be older than the general population because
a. older workers generally have more education than younger workers.
b. many achieve millionaire status by saving from a relatively modest income, and this will take a lengthy period of time.
c. the earnings of most people peak during the retirement phase of life.
d. older people have less to do, and therefore, they have more time to come up with innovative ideas.
a. older workers generally have more education than younger workers.
b. many achieve millionaire status by saving from a relatively modest income, and this will take a lengthy period of time.
c. the earnings of most people peak during the retirement phase of life.
d. older people have less to do, and therefore, they have more time to come up with innovative ideas.
answer
b.
question
If carpentry positions A and B required identical skill levels, other things constant, which one of the following would most likely increase the wage rate of position A relative to position B?
a. The work place of position A is in the intense heat of the sun, whereas the work place of B is air-conditioned.
b. Position A is a safe office job; position B requires the employee to operate a dangerous saw.
c. Position A offers steady employment, whereas employees holding position B are often laid off.
d. Position A offers more sick leave and more paid holidays.
a. The work place of position A is in the intense heat of the sun, whereas the work place of B is air-conditioned.
b. Position A is a safe office job; position B requires the employee to operate a dangerous saw.
c. Position A offers steady employment, whereas employees holding position B are often laid off.
d. Position A offers more sick leave and more paid holidays.
answer
a.
question
Other things the same, the wages in an occupation are likely to be higher the more
a. dangerous the job.
b. prestigious the work environment of the occupation.
c. desirable the location of the job.
d. pleasant the working conditions.
a. dangerous the job.
b. prestigious the work environment of the occupation.
c. desirable the location of the job.
d. pleasant the working conditions.
answer
a.
question
Low-skill workers earn a lower wage than more experienced, higher skilled workers because the
a. low-skill workers lack the intelligence necessary to do any other form of work.
b. low-skill workers were never given the opportunity to invest in human capital.
c. supply of low-skill workers is large relative to the demand for workers in this skill category.
d. low-skill workers are too lazy to search for other employment opportunities.
a. low-skill workers lack the intelligence necessary to do any other form of work.
b. low-skill workers were never given the opportunity to invest in human capital.
c. supply of low-skill workers is large relative to the demand for workers in this skill category.
d. low-skill workers are too lazy to search for other employment opportunities.
answer
c.
question
An individual who possesses a specialized skill that is difficult to execute will
a. necessarily receive wages considerably higher than those who lack this skill.
b. receive a wage determined by the number of other persons possessing this skill.
c. receive a high wage only when this skill is in great demand relative to its supply.
d. receive a wage rate that is lower than similarly productive individuals who lack this skill.
a. necessarily receive wages considerably higher than those who lack this skill.
b. receive a wage determined by the number of other persons possessing this skill.
c. receive a high wage only when this skill is in great demand relative to its supply.
d. receive a wage rate that is lower than similarly productive individuals who lack this skill.
answer
c.
question
When earnings differentials are adjusted for such factors as age, education, and marital status, the
a. differential between the earnings of white males and those of minority males increases.
b. differential between the earnings of white males and those of minority males decreases.
c. corrected earnings of minority males are equal to those of similar white men.
d. corrected earnings of minority males are greater than those of similar white men.
a. differential between the earnings of white males and those of minority males increases.
b. differential between the earnings of white males and those of minority males decreases.
c. corrected earnings of minority males are equal to those of similar white men.
d. corrected earnings of minority males are greater than those of similar white men.
answer
b.
question
The fact that wage differentials continue to exist across different groups of workers leads economists to believe that
a. discrimination by customers is the most common type of economic discrimination.
b. differences in human capital and job characteristics must be important in explaining the differences in wages.
c. firms apparently are not profit maximizers.
d. the market has failed to properly allocate wages to different workers.
a. discrimination by customers is the most common type of economic discrimination.
b. differences in human capital and job characteristics must be important in explaining the differences in wages.
c. firms apparently are not profit maximizers.
d. the market has failed to properly allocate wages to different workers.
answer
b.
question
Economic theory suggests that college graduates receive higher wages than those with only a high school education because
a. college graduates are more productive.
b. college graduates must be paid higher wages because their educational costs were higher.
c. college graduates have formed stronger unions.
d. the supply of high school graduates is small relative to the demand for their labor.
a. college graduates are more productive.
b. college graduates must be paid higher wages because their educational costs were higher.
c. college graduates have formed stronger unions.
d. the supply of high school graduates is small relative to the demand for their labor.
answer
a.
question
Which of the following best explains why productive workers can command high wages?
a. The bargaining power of labor unions.
b. The presence of minimum wage legislation.
c. Wage and price controls that reflect the political power of labor organizations.
d. Competition among employers for productive workers.
a. The bargaining power of labor unions.
b. The presence of minimum wage legislation.
c. Wage and price controls that reflect the political power of labor organizations.
d. Competition among employers for productive workers.
answer
d.
question
Economic theory suggests that the standard of living of American workers would fall if the
a. knowledge and skills of workers improved, reducing the need for workers.
b. United States had more natural resources.
c. United States turned to more automated methods of production.
d. productivity of American workers declined.
a. knowledge and skills of workers improved, reducing the need for workers.
b. United States had more natural resources.
c. United States turned to more automated methods of production.
d. productivity of American workers declined.
answer
d.
question
The link between high productivity and high earnings is vitally important because
a. it provides individuals with a strong incentive to develop skills and engage in activities that others value highly.
b. high productivity (a large output per hour worked) is the key to high living standards.
c. it brings the self-interest of individuals into harmony with economic progress.
d. all of the above are true.
a. it provides individuals with a strong incentive to develop skills and engage in activities that others value highly.
b. high productivity (a large output per hour worked) is the key to high living standards.
c. it brings the self-interest of individuals into harmony with economic progress.
d. all of the above are true.
answer
d.
question
In a market economy, which of the following is most important if one is going to achieve high earnings?
a. Willingness to do hard physical work.
b. Providing goods and/or services that others value highly.
c. Performing an important social function, like teaching.
d. Having a membership in a labor union
a. Willingness to do hard physical work.
b. Providing goods and/or services that others value highly.
c. Performing an important social function, like teaching.
d. Having a membership in a labor union
answer
b.
question
Wages in the United States are higher than wages in China primarily because
a. worker productivity is higher in the United States.
b. in the United States, less capital is required per employee.
c. China has more natural resources that employees can work with.
d. the United States has more people and, therefore, a larger number of skilled workers.
a. worker productivity is higher in the United States.
b. in the United States, less capital is required per employee.
c. China has more natural resources that employees can work with.
d. the United States has more people and, therefore, a larger number of skilled workers.
answer
a.
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