practice Flashcards
The table below shows some data for the labour market in the country of Maulani.
Wage Rate Quantity Demanded 1 Quantity Supplied Quantity Demanded 2 $10 300 240 330 12 280 250 310 14 260 260 290 16 240 270 270 18 220 280 250 20 200 300 230
a) Given Quantity Demand 1 and assuming that the Krinkles is operating in a perfectly competitive labour market, what will it have to pay for labour?
b) If, instead, Krinkles was a monopsonist, would it hire more or less labour, and would the wage rate be higher or lower?
Now assume that the quantity of labour demanded increases as shown in the last column on the left.
c) Given the same conditions as in a) above, what is your answer to a) now?
a) $14
b) It would hire less labour at a lower wage.
c) $16
All of the following statements, except one, concerning the concept of economic rent are correct. Which is the exception?
Multiple Choice
The more inelastic the supply of a factor, the more economic rent that factor earns.
A factor that has a perfectly inelastic supply will earn no transfer earnings.
It is possible for a factor to receive both economic rent and transfer earnings.
If we assume that land has only one use, such as agriculture, then all of its return is economic rent.
The higher the transfer earnings of a factor, the higher its economic rent will be.
The higher the transfer earnings of a factor, the higher its economic rent will be.
“A higher wage rate will induce workers to work more.” Evaluate this statement.
An increase in the wage rate will increase the population participation in the labour force because employment is now more attractive. But, on the other hand, as a worker’s income rises, there is a point where leisure will become more valuable. An increase in the wage rate allows a worker to receive the same amount of wage with less work.
Graphically, what is necessary for economic rent to exist?
Multiple Choice A perfectly inelastic demand curve. An elastic demand curve. A perfectly elastic supply curve. An inelastic supply curve. Correct Both a perfectly elastic supply and demand curve.
An inelastic supply curve.
If the MPK/PK is greater than the MPL/PL, which of the following is correct?
Multiple Choice
The firm should substitute labour for capital.
The firm should substitute capital for labour. Correct
The firm should raise the wage rate of its labour.
The firm should decrease its output.
The firm should substitute capital for labour.
What is meant by the term transfer earnings?
Multiple Choice
The necessary payments a factor of production must earn in order for it to remain in its present use. Correct
Costs that are actually paid out in money.
One-way transactions where payments are made, but no goods or services flow back in return.
The amount of money a firm receives from its sales.
The necessary payments a factor of production must earn in order for it to remain in its present use.
All of the following are renewable natural resources except:
Multiple Choice Water. Oil. Correct Wild fish. Trees.
oil
What is the term for the wage rate expressed as a dollar and cents figure?
Multiple Choice The nominal wage. Correct The minimum wage. The real wage. The normal wage.
The nominal wage
At what point will a competitive firm stop hiring additional labour?
Multiple Choice
When its total product is maximized.
When the marginal product of labour is maximized.
When the marginal revenue product of labour is maximized.
When the marginal revenue product of labour is just equal to the wage rate.
When the marginal revenue product of labour is just equal to the wage rate.
When is the marginal revenue product of a factor at a maximum?
Multiple Choice
When its marginal product is at a maximum. Correct
When the firm’s total product is at a maximum.
When its marginal product is at a minimum.
When both its marginal product and the firm’s total product are at a maximum.
When average product is at its maximum.
When its marginal product is at a maximum.
uppose that the current price of oil is $60 a barrel and the present interest rate is 3%. Further, suppose that the interest rate remains unchanged and no new discoveries of oil are made. If the economist for the National Petroleum company believes that the rate of oil extraction is exactly right, what should be the price for a barrel of oil one year from now?
Multiple Choice $60 $61.8 Correct $63 $65.5
61.8
conomic research has established that individuals with more formal education enjoy, on average, higher earnings throughout their lives. Approximately how much higher is the annual income of those with a post-secondary education compared with those who have elementary school education only?
Multiple Choice 50% higher. Twice as high. Correct Four times as high. Eight times as high.
Twice as high.
Define product differentiation.
The attempt by a firm to distinguish its product from that of its competitors
Which of the following statements is correct about oligopoly firms?
Multiple Choice
They typically achieve economic capacity.
They may or may not charge a price higher than marginal cost.
They maximize profits by equating marginal revenue and marginal cost. Correct
They operate in an intensely competitive atmosphere in which the market dictates price.
They produce an output that puts them graphically on the rising portion of the AC curve.
They maximize profits by equating marginal revenue and marginal cost.
All of the following, except one, are examples of product differentiation. Which is the exception?
Multiple Choice The use of a logo. Advertising. Establishing a brand name. The use of marketing boards. Correct Product development.
The use of marketing boards.
n the long run:
Multiple Choice
Perfectly competitive firms may make economic profits.
A monopoly may make economic profits. Correct
Monopolistically competitive firms will make economic profits.
No firms will make normal profit.
A monopoly may make economic profits.
ow are a typical monopolistically competitive firm and a typical perfectly competitive firm alike?
Multiple Choice
Both face perfectly elastic demand.
Both experience zero economic profits in the long run. Correct
Both achieve allocative efficiency only.
Both achieve productive efficiency only.
Both achieve allocative and productive efficiency.
Both experience zero economic profits in the long run.
ll of the following, except one, are benefits of product differentiation. Which is the exception?
Multiple Choice
There is a wide variety of products for consumers to choose from.
There are a large number of sellers from which consumers can choose.
Goods are produced at the minimum average cost. Correct
Consumers benefit in terms of the locations and hours of operation of sellers.
Goods are produced at the minimum average cost.
What is the term for an industry which is dominated by a few large firms?
Multiple Choice Monopoly. Oligopoly. Correct Monopolistic competition. Perfect competition.
Oligopoly
Graphically, what will be the effect of entry by new firms into a monopolistically-competitive industry?
Multiple Choice
It will shift each firm’s demand curve to the right.
It will shift each existing firm’s demand curve to the left. Correct
It will shift the market’s supply curve to the left.
It will shift the market’s demand curve to the right.
It will shift each existing firm’s demand curve to the left.
hich of the following variants of oligopoly theory assume that there is no collusion between firms?
Multiple Choice
The price leadership variant only.
Both the price leadership and the kinked-demand curve variant. Correct
The price leadership, kinked-demand curve and cartel variants.
The kinked-demand curve variant only.
Both the price leadership and the kinked-demand curve variant.
Each spring, Firm A brings out the new model of its product and announces the price. Rival firms B, C and D soon follow with their new models and announce prices similar to A’s. What is this an example of?
Multiple Choice Mark-up pricing. A cartel. Collusion. Price leadership. Correct A kinked-demand curve.
Price leadership.
