economics data bank

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Factor Markets

1. What causes the labor demand
curve to shift?

(i) changes in productivity

(ii) changes in wages

(iii) changes in output prices

a. (i) and (ii) b. (ii) and (iii)
c. (i) and (iii) d. All of the above are correct.

2. If consumers demand more
genetically engineered foods, then the value of genetic engineers’

marginal product of labor will

a. rise. b. fall. c. remain
unchanged. d. rise or fall; either is possible.

3. Charles owns one of the many
bakeries in New York City. Which of the following events will lead

to a decrease in Charles’s demand
for the services of bakers?

a. Hollywood glamorization of a
new movie about a baker leads hundreds of high-school

students in New York City to
apply for a job at Dan’s.

b. The price of baked goods
falls.

c. The local bakers form a union.

d. All of the above are correct.

4. Aurora Custom Cabinets
produces and sells custom kitchen cabinets. The firm has determined that if

it hires 10 workers, it can
produce 4 sets of cabinets per day. If it hires 11 workers, it can

produce 4.2 sets of cabinets per
day. It sells each set of cabinets for $2,000, and it pays each of

its workers $200 per day.

a. For the 11th worker, the value
of the marginal product of labor is $500.

b. For the 11th worker, the
marginal revenue product is $400.

c. The firm is maximizing its
profit.

d. If the firm is employing 11
workers, then its profit would increase if it cut back to 10

workers.

5. For a competitive,
profit-maximizing firm, the demand curve for labor will shift in response to a

change in the

a. wage rate. b. quantity of
labor demanded.

c. price of the product that the
firm sells. d. All of the above are correct.

6. Suppose that eight workers can
manufacture 70 radios per day, and nine workers can manufacture

90 radios per day. If radios can
be sold for $10 each, the value of marginal product of the ninth

worker is

a. 20 radios. b. 90 radios. c.
$200. d. $900.

7. When labor is the only input a
firm uses, the marginal cost of a unit of output can be defined as

a. marginal revenue multiplied by
wage.

b. marginal product of labor
multiplied by wage.

c. wage divided by marginal
product of labor.

d. marginal product of labor
divided by wage.

8. Sally runs a hair styling
salon. Sally is a profit-maximizing owner whose firm operates in a

competitive market. The marginal
cost of a haircut is $7. What is the maximum wage that Sally

will pay her stylists?

a. less than $7 per haircut

b. $7 per haircut

c. more than $7 haircut

d. There is insufficient
information to answer this question.

9. If the wage exceeds the value
of the marginal product of labor, then hiring another worker

a. decreases the firm’s total
revenue. b. increases the firm’s profit.

c. increases the firm’s total
cost. d. All of the above are correct.

10. What does an upward-sloping
labor supply curve mean?

a. It means that workers prefer
to buy more leisure time when their incomes increase.

b. It means that workers prefer
to supply less labor when wages are high.

c. It means that an increase in
the opportunity cost of leisure leads workers to increase the

quantity of labor they supply.

d. All of the above are correct.

11. If workers respond to an
increase in the opportunity cost of leisure by taking less leisure, then their

labor supply curve is

a. horizontal. b. vertical. c.
downward sloping. d. upward sloping.

12. If workers respond to an
increase in the opportunity cost of leisure by taking more leisure, then

their labor supply curve is

a. upward sloping. b. downward
sloping. c. horizontal. d. vertical.

13. Which of the following
statements is correct? An individual worker’s labor supply curve

a. can never slope downward.

b. slopes downward if that person
responds to a higher wage by taking fewer hours of leisure

per week.

c. slopes downward if that person
responds to a higher opportunity cost of leisure by working

fewer hours per week.

d. slopes upward if that person
works the same number of hours per week, regardless of the

opportunity cost of leisure.

14. The following table shows the
number of calculators that can be assembled per week by various

numbers of workers. If the price
per calculator in a perfectly competitive product market is $20,

how many workers would the firm
employ if the weekly wage rate is $1000?

Quantity of Number of Calculators

Labor Per Week

0 0

1 60

2 160

3 240

4 280

5 300

a. 1 b. 2 c. 3 d. 4

15. An increase in the value of
the marginal product of labor has the effect of increasing the

a. demand for labor. b. wage.

c. quantity of labor employed. d.
All of the above are correct.

16. Suppose medical research
provides evidence that eating bananas provides far greater health

benefits than was previously
thought. The resulting increase in the demand for bananas

a. increases the marginal product
of banana pickers for any given number of banana pickers.

b. increases the value of the
marginal product of banana pickers for any given number of

banana pickers.

c. increases the supply of banana
pickers.

d. All of the above are correct.

17. Suppose that a rare virus,
transmitted by mosquitoes, infects all the people who live in Minnesota.

The virus is fatal to all
blondes, but everyone else is unaffected. Assuming that land and labor

are complements in a farming
production function, what would happen to the wages earned by

workers and the rents earned by
landowners?

a. Both wages and rents would
increase.

b. Both wages and rents would
decrease.

c. Wages would increase, and
rents would decrease.

d. Wages would decrease, and
rents would increase.

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