Quiz 5

Question 1

During the short run, when capital stock and technology are fixed, it is usual to suppose that:

1. the marginal product of labour is constant
2. the marginal product of labour is positive and rising
3. the marginal product of labour is zero
4. the marginal product of labour is negative and falling
5. the marginal product of labour is positive and declining

Answer 1

5. the marginal product of labour is positive and declining

Question 2

When full employment equilibrium prevails in the aggregate labour market is is usual to suppose that unemployment will be positive in part because:

1. real wages are normally above their equilibrium level
2. in a dynamic economy there are always some people moving between jobs
3. real wages are sticky in a downward direction
4. interest rates can never be zero
5. none of the above

Answer 2

2. in a dynamic economy there are always some people moving between jobs

Question 3

From the analysis of the labour market, we would expect an increase in the capital stock to be associated with:

1. a fall in the level of employment
2. an increase in structural unemployment
3. an increase in voluntary unemployment
4. an increase in the marginal product of labour
5. all of the above

Answer 3

4. an increase in the marginal product of labour

Question 4

In a competitive labour market we would expect firms to hire labour up to the point where:

1. the marginal revenue product of labour is equal to the prevailing wage rate
2. the marginal revenue product of labour exceeds the prevailing wage rate by the extent if the profit margin
3. the marginal revenue product of labour exceeds the prevailing wage rate by the greatest sustainable amount
4. the marginal revenue product of labour is zero
5. the marginal revenue product of labour begins to fall as employment rises

Answer 4

1. the marginal revenue product of labour is equal to the prevailing wage rate

Question 5

The analysis of monopoly power suggests that a perfectly discriminating monopolist (a monopoly exercising first degree price discrimination) will produce an output level which is:

1. below the competitive output level
2. designed to deter the entry of new competitors
3. greater than the competitive output level
4. below the profit-maximising output level
5. the same as the competitive output level

Answer 5

5. the same as the competitive output level

Question 6

The aggregate production function suggests that the potential sources of output growth for an economy are:

1. increased labour supply
2. capital accumulation
3. technological progress
4. all of the above
5. none of the above

Answer 6

4. all of the above

Question 7

The long run is usually defined as a period during which:

1. the capital stock is fixed, but the labour input is variable
2. the capital stock and technology are fixed, but the labour input is variable
3. the capital stock, technology and the labour input are all fixed
4. the ratio of capital to labour is fixed
5. none of the above

Answer 7

5. none of the above

Question 8

In the analysis of public policy decisions, the compensation principle suggests that a policy change should be regarded as leading to an improvement in welfare if:

1. the poorer sections of society are made better off by the change
2. at least one person can be made better off by that change
3. the gainers from the change can compensate the losers to accept the change and still be left better off
4. the majority of people are made off better by that change
5. all of the above

Answer 8

3. the gainers from the change can compensate the losers to accept the change and still be left better off

Question 9

If all negative externality is present in a market, the competitive equilibrium is such that:

1. marginal private cost is greater than marginal private benefit
2. marginal social cost is equal to the market price
3. marginal private benefit is greater than marginal social cost
4. marginal social cost is greater than marginal private benefit
5. none of the above

Answer 9

4. marginal social cost is greater than marginal private benefit

Question 10

A comparison of long-run equilibrium under perfect competition and monopolistic competition suggests that:

1. the perfectly competitive firms operate at P the minimum of ATC
2. The monopolistically competitive firms operate at P > the minimum of ATC
3. all of the above

Answer 10

4. The monopolistically competitive firms operate at P > the minimum of ATC