ECO100Y1 Study Guide - Midterm Guide: Negative Income Tax, Coase Theorem, Output Gap

A change in demand for a given factor of production will not occurif:
Answer
A. the productivity of that factor increases.
B. there is a decrease in the price of a substitute factor.
C. the price of that factor falls.
D. the productivity of that factor decreases.

Question 2

In terms of contribution to total income, the single most importantfactor of production is:
Answer
A. labor.
B. entrepreneurship.
C. natural resources.
D. capital.

Question 3

The trade off between work and leisure underlying the supply oflabor involves the substitution effect and the:
Answer
A. complementary effect.
B. elasticity effect.
C. production effect.
D. income effect.

Question 4

(Exhibit: Marginal Revenue Product and Demand) If the product priceis $4 per unit and the price of the factor of production is $80 perunit, the profit-maximizing quantity of the factor is _______unit(s).
Answer
A. 1
B. 5
C. 7
D. 3

Question 5

In perfect competition:
Answer
A. MFCL is greater than the price of labor.
B. the supply curve of labor to the firm is a horizontalline.
C. MRPL equals the price of the good.
D. MFCL is less than the price of labor.

Question 6

An increase in the participation rate of women in the U.S. laborforce:
Answer
A. has shifted the supply curve of labor to the right.
B. has increased the demand for labor.
C. resulted in a faster increase in wages.
D. has shifted the supply of labor to the left.

Question 7

A firm's demand curve for labor is:
Answer
A. the downward-sloping portion of its marginal revenue productcurve.
B. the upward-sloping portion of its marginal revenue productcurve.
C. horizontal for the firm in perfect competition.
D. the downward-sloping portion of its marginal productcurve.

Question 8

Since the 1970s, wage rates in the United States have _______ more_______ than they did in the previous two decades.
Answer
A. decreased; slowly
B. decreased; rapidly
C. increased; rapidly
D. increased; slowly

Question 9

Which of the following statements is true?
Answer
A. If the MFCL = MRPL the firm should hire more labor.
B. If MFCL < MRPL the firm should hire more labor.
C. If MFCL > 0, the firm should shut down.
D. If the MFCL > MRPL the firm should hire more labor.

Question 10

A leftward shift in the labor supply curve would result if:
Answer
A. people have less nonlabor income.
B. transit costs to and from work decline.
C. the population increases.
D. people value leisure more highly.

Question 11

A firm is in equilibrium when the marginal factor cost is:
Answer
A. equal to the marginal revenue product.
B. less than the price of the factor.
C. equal to the average product.
D. greater than the average product.

Question 12

A leftward shift in the labor supply curve would result if:
Answer
A. transit costs to and from work increase.
B. people value leisure less highly.
C. the population increases.
D. people have less nonlabor income.

Question 13

(Exhibit: Wage Determination in Perfect Competition) Which of thefollowing statements is true?
Answer
A. The firm will hire L1 units of labor, as shown in Panel(a).
B. The individual firm is a wage setter.
C. The firm's MFC of labor is equal to the price of the firm'soutput.
D. Total employment is equal to L1, as shown in Panel (a).

Question 14

(Exhibit: Marginal Revenue Product and Demand) If the product priceis $2 per unit and the price of the factor of production is $20 perunit, the profit-maximizing quantity of the factor is _______units.
Answer
A. 6
B. 4
C. 8
D. 2

Question 15

(Exhibit: Marginal Revenue Product and Demand) Assume that theproduct price is $2 per unit, the price of the factor of productionis $40 per unit, and 8 units are being hired. Profit can bemaximized by hiring _______ unit(s).
Answer
A. 2 more
B. 1 more
C. 3 fewer
D. 1 fewer

Question 16

(Exhibit: Demand and Supply of Bricklayers in a PerfectlyCompetitive Labor Market) If the price for "bricks laid in thewall" by a bricklayer is $.10 a brick, the marginal product of thesecond bricklayer is _______ bricks.
Answer
A. 1,200
B. 1,400
C. 1,300
D. 1,500

Question 17

In a perfectly competitive labor market, each firm can hire:
Answer
A. larger quantities of labor at going market wages perworker.
B. all the labor it wants, but only by outbidding itscompetitors.
C. larger quantities of labor at rising wages per worker.
D. only a fixed amount of labor at the going wage.

Question 18

(Exhibit: Demand and Supply of Bricklayers in a PerfectlyCompetitive Labor Market) If the equilibrium wage in the market forbricklayers is $100 a day, but a minimum wage for bricklayers of$130 a day is set by the government:
Answer
A. 3 workers who otherwise would have been employed are nowunemployed.
B. the firm will shut down.
C. 6 workers will now be hired by the firm.
D. all bricklayers are better off.

Question 19

A factor demand curve will shift because of:
Answer
A. the proportion of the factor's cost relative to totalcost.
B. changes in technology.
C. the slope of the MP curve.
D. the elasticity of demand for the final product.

Question 20

Which of the following statements is true?
Answer
A. MFC = change in total cost/ change in the quantity of afactor.
B. MFC = the change in the quantity of a factor times the change inthe price of the factor.
C. MRPL = MC of the output.
D. MRPL = MPL x (P), where P is the price of labor.

Assume that the product price is $2 per unit, the price of thefactor of production is $40 per unit, and 8 units are being hired.Profit can be maximized by hiring _______ unit(s).
Answer
A. 2 more
B. 1 more
C. 1 fewer
D. 3 fewer

If a firm is using a factor of production from a perfectlycompetitive market such that MFC > MRP, then profit:
Answer
A. can be increased by decreasing the factor price.
B. is maximized.
C. can be increased by using more of the factor.
D. can be increased by using less of the factor.

The amount a factor adds to a firm's total cost per period iscalled:
Answer
A. marginal factor cost.
B. marginal fixed cost.
C. marginal cost.
D. MFR .

Which of the following statements is true?
Answer
A. Marginal product is the change in total revenue divided by a oneunit change in a factor.
B. Marginal factor cost is equal to average total cost.
C. Marginal revenue product is marginal product times marginalrevenue.
D. Marginal revenue is the change in total output divided by thechange in output

Given an increase in the demand for labor, the more the supply oflabor rises:
Answer
A. the fewer the number of workers employed.
B. the greater the increase in wages.
C. the greater the increase in workers employed at the originalwage rate.
D. the less the increase in wages and the greater the number ofworkers employed.

Which of the following statements is true?
Answer
A. The market demand curve for labor is found by adding the supplycurves for labor of individual firms.
B. The market demand for labor will change as a result of a changein the use of a complementary factor or a substitute factor.
C. The market demand curve for labor is vertical at theprofit-maximizing wage.
D. A firm's demand for labor is the upward-sloping portion of theMRP curve for labor.

If marginal product is _______ , marginal revenue product must be_______ .
Answer
A. rising; falling
B. rising; zero
C. falling; rising
D. falling; falling

If a firm is using a factor of production from a perfectlycompetitive market such that MFC < MRP, then profit:
Answer
A. can be increased by using more of the factor.
B. can be increased by increasing the factor price.
C. is maximized.
D. can be increased by using less of the factor.

Which of the following statements is true?
Answer
A. Leisure is a normal good.
B. The demand for leisure is perfectly inelastic.
C. All other things unchanged, an increase in income will decreasethe demand for leisure.
D. Leisure is an inferior good.