Question 1

Walter's Wheat Farm sells its output and hires its labour in perfectly competitive markets. In the short run, Walter can vary only one input, labour. When Walter is producing in short run equilibrium, all of the following conditions, except one, will necessarily be satisfied. Which is the exception?

Accepted Answer

A)   The value of marginal product of labour equals the wage rate.
B)   The marginal cost curve crosses the marginal revenue curve from below.
C)   Marginal revenue equals the price of the firm's output.
D)   The firm's total revenue will decrease if more labour is hired.E) C) and D)
F) None of the above

Question 2

In equilibrium, when a competitive firm hires labour up to the point at which the value of the marginal product of labour equals the wage, it also produces up to the point at which the price equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following explanations of wage differentials is not likely to be true?

Accepted Answer

A)   Men have more human capital than women.
B)   Employers in competitive markets are bigots.
C)   Men have more job experience than women.
D)   Minimum wage legislation maintains differences in pay between jobs.E) None of the above
F) A) and B)

Question 4

A recent study of the determinants of wages for administrative staff at a university found that years of schooling, years of experience, age and job characteristics only explained about one half of the difference in wages. Describe other factors that may be important in explaining wages differences for administrative staff.

Accepted Answer

Other factors may include job ...

Question 5

Which of the following statements regarding discrimination is true?

Accepted Answer

A)   The existence of a wage differential among groups is strong evidence of discrimination in the labour market.
B)   Discrimination can only persist in a competitive labour market if customers are willing to pay to maintain the discriminatory practice or the government requires discrimination.
C)   Bigoted employers are the main source of a persistent discriminatory wage differential in a competitive market.
D)   Discrimination cannot exist in a competitive labour market.E) All of the above
F) B) and D)

Question 6

Which of the following could result in women being paid less than men?

Accepted Answer

A)   Women obtaining less human capital because they don't plan to work continuously to the age of retirement.
B)   Women entering and leaving the labour force to care for children.
C)   Customers preferring to deal with men.
D)   Women preferring to work in pleasant clean safe work places.
E)   All of these answers.F) A) and B)
G) A) and C)

Question 7

If two jobs require the same amount of skills and experience, the job that pays the most is most likely to be the one that is

Accepted Answer

A)   unpleasant.
B)   discriminatory.
C)   safe.
D)   fun.
E)   easy.F) C) and E)
G) All of the above

Question 8

In a competitive market, which of the following is least likely to be the source of a persistent discriminatory wage differential?

Accepted Answer

A)   All of these answers could be the source of a persistent discriminatory wage differential.
B)   The customer.
C)   The government.
D)   The employer.E) A) and B)
F) A) and D)

Question 9

Describe the difference between a diminishing marginal product of labour and a negative marginal product of labour. Why would a profit-maximising firm always choose to operate where the marginal product of labour is decreasing (but not negative)?

Accepted Answer

Diminishing marginal product of labour m...

Question 10

A decrease in the supply of farm tractors will cause all but which of the following?

Accepted Answer

A)   An increase in the rental rate for tractors
B)   A decrease in the rental rate of farmland
C)   An increase in the value of the marginal product of tractors
D)   An increase in the wage of farm workersE) All of the above
F) C) and D)

Question 11

If both input and output markets are competitive, and firms are profit maximising, then in equilibrium each factor of production earns

Accepted Answer

A)   an amount equal to the price of output times total output.
B)   the amount allocated by the political process.
C)   an equal share of output.
D)   the value of its marginal product.E) None of the above
F) B) and D)

Question 12

Using the theory of wage determination, explain why wages in developing countries, where levels of capital are small, are typically quite low.

Accepted Answer

Wages are determined by the value of wor...

Question 13

A wage differential among groups may not by itself be evidence of discrimination in the labour market because different groups have

Accepted Answer

A)   different preferences for the type of work they are willing to do.
B)   different levels of job experience.
C)   All of these answers are correct.
D)   different levels of education.E) None of the above
F) B) and D)

Question 14

An increase in the supply of capital decreases the value of the marginal product of capital, reduces the rental rate of capital, and decreases the value of the marginal product of labour, which reduces the wage of labour.

Accepted Answer

A) True 
 B)False

Question 15

If a person who works in a coal mine gets paid more than a person with a similar background and skills who works in a safer job, then

Accepted Answer

A)   coal miners must have greater human capital than others.
B)   we have observed a compensating differential.
C)   coal miners must be more attractive than other workers.
D)   we have evidence of discrimination against workers outside the coal mine.E) B) and C)
F) A) and B)

Question 16

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximising competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

Accepted Answer

A firm values the contribution of a work...

Question 17

Explain the theory that education acts as a signalling device. How does this contrast with the theory of education as an investment in human capital?

Accepted Answer

The theory of signalling suggests that t...

Question 18

All of the following would tend to increase a worker's wage except

Accepted Answer

A)   working the night shift.
B)   working harder.
C)   more education.
D)   having a greater amount of natural ability.
E)   doing a job that is fun.F) A) and D)
G) B) and D)

Exam 17: The Economics of Factor Markets

Using the theory of wage determination, explain why wages in developing countries, where levels of capital are small, are typically quite low.

Correct Answer
verified
Wages are determined by the value of wor...
View Answer

Describe the difference between a diminishing marginal product of labour and a negative marginal product of labour. Why would a profit-maximising firm always choose to operate where the marginal product of labour is decreasing (but not negative)?

Correct Answer
verified
Diminishing marginal product of labour m...
View Answer

Which of the following explanations of wage differentials is not likely to be true?

Correct Answer
verified

In equilibrium, when a competitive firm hires labour up to the point at which the value of the marginal product of labour equals the wage, it also produces up to the point at which the price equals marginal cost.

Correct Answer
verified

A decrease in the supply of farm tractors will cause all but which of the following?

Correct Answer
verified

If both input and output markets are competitive, and firms are profit maximising, then in equilibrium each factor of production earns

Correct Answer
verified

All of the following would tend to increase a worker's wage except

Correct Answer
verified

Walter's Wheat Farm sells its output and hires its labour in perfectly competitive markets. In the short run, Walter can vary only one input, labour. When Walter is producing in short run equilibrium, all of the following conditions, except one, will necessarily be satisfied. Which is the exception?

Correct Answer
verified

An increase in the supply of capital decreases the value of the marginal product of capital, reduces the rental rate of capital, and decreases the value of the marginal product of labour, which reduces the wage of labour.

Correct Answer
verified

If two jobs require the same amount of skills and experience, the job that pays the most is most likely to be the one that is

Correct Answer
verified

Explain the theory that education acts as a signalling device. How does this contrast with the theory of education as an investment in human capital?

Correct Answer
verified
The theory of signalling suggests that t...
View Answer

Correct Answer
verified
Other factors may include job ...
View Answer

Which of the following statements regarding discrimination is true?

Correct Answer
verified

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximising competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

Correct Answer
verified
A firm values the contribution of a work...
View Answer

If a person who works in a coal mine gets paid more than a person with a similar background and skills who works in a safer job, then

Correct Answer
verified

Which of the following could result in women being paid less than men?

Correct Answer
verified

A wage differential among groups may not by itself be evidence of discrimination in the labour market because different groups have

Correct Answer
verified

In a competitive market, which of the following is least likely to be the source of a persistent discriminatory wage differential?

Correct Answer
verified

Exam 17: The Economics of Factor Markets

Using the theory of wage determination, explain why wages in developing countries, where levels of capital are small, are typically quite low.

Correct AnswerverifiedWages are determined by the value of wor...View AnswerShow Answer

Describe the difference between a diminishing marginal product of labour and a negative marginal product of labour. Why would a profit-maximising firm always choose to operate where the marginal product of labour is decreasing (but not negative)?

Correct AnswerverifiedDiminishing marginal product of labour m...View AnswerShow Answer

Which of the following explanations of wage differentials is not likely to be true?

Correct AnswerverifiedShow Answer

In equilibrium, when a competitive firm hires labour up to the point at which the value of the marginal product of labour equals the wage, it also produces up to the point at which the price equals marginal cost.

Correct AnswerverifiedShow Answer

A decrease in the supply of farm tractors will cause all but which of the following?

Correct AnswerverifiedShow Answer

If both input and output markets are competitive, and firms are profit maximising, then in equilibrium each factor of production earns

Correct AnswerverifiedShow Answer

All of the following would tend to increase a worker's wage except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the supply of capital decreases the value of the marginal product of capital, reduces the rental rate of capital, and decreases the value of the marginal product of labour, which reduces the wage of labour.

Correct AnswerverifiedShow Answer

If two jobs require the same amount of skills and experience, the job that pays the most is most likely to be the one that is

Correct AnswerverifiedShow Answer

Explain the theory that education acts as a signalling device. How does this contrast with the theory of education as an investment in human capital?

Correct AnswerverifiedThe theory of signalling suggests that t...View AnswerShow Answer

Correct AnswerverifiedOther factors may include job ...View AnswerShow Answer

Which of the following statements regarding discrimination is true?

Correct AnswerverifiedShow Answer

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximising competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

Correct AnswerverifiedA firm values the contribution of a work...View AnswerShow Answer

If a person who works in a coal mine gets paid more than a person with a similar background and skills who works in a safer job, then

Correct AnswerverifiedShow Answer

Which of the following could result in women being paid less than men?

Correct AnswerverifiedShow Answer

A wage differential among groups may not by itself be evidence of discrimination in the labour market because different groups have

Correct AnswerverifiedShow Answer

In a competitive market, which of the following is least likely to be the source of a persistent discriminatory wage differential?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Wages are determined by the value of wor...
View Answer

Correct Answer
verified
Diminishing marginal product of labour m...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The theory of signalling suggests that t...
View Answer

Correct Answer
verified
Other factors may include job ...
View Answer

Correct Answer
verified

Correct Answer
verified
A firm values the contribution of a work...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified