Prncpls of Econ:Microeconomics final exam

1. A competitive employer should hire additional labor as long as: (Points : 2)

       the MRP exceeds the wage rate.

       the wage rate is less than MP.

       average product exceeds MP.

       MC exceeds MR.

2. In the United States, the rate of unionization is: (Points : 2)

       higher in mining than in government.

       lower in transportation than agriculture.

       higher in transportation than in retail trade.

       lower in government than in finance, insurance, and real estate.

3. A deficit on the current account: (Points : 2)

       normally causes a surplus on the capital and financial account.

       normally causes a deficit on the capital and financial account.

       has no relationship to the capital and financial account.

       means that a nation is making international transfers.

4. The Gini ratio of income inequality ranges between: (Points : 2)

       0 and 10,000.

       1 and 10.

       1 and +1.

       0 and 1.

5. Labor market discrimination creates a: (Points : 2)

       redistribution of a larger domestic output.

       larger domestic output but no redistribution.

       smaller domestic output but no redistribution.

       redistribution of a smaller domestic output.

6. Featherbedding refers to: (Points : 2)

       a situation in which a union forces an employer to hire union workers in preference to nonunion workers.

       the requirement that unneeded workers be retained on a job.

       the refusal by one union to handle or transport goods produced by workers in another union.

       disputes among two or more unions as to which will perform certain jobs.

7. A doubling of Social Security benefits is likely to: (Points : 2)

       decrease the demand for loanable funds and increase the equilibrium interest rate.

       increase the supply of loanable funds and decrease the equilibrium interest rate.

       decrease the supply of loanable funds and increase the equilibrium interest rate.

       increase the real interest rate but not the nominal interest rate.

8. Independent unions: (Points : 2)

       have greater combined membership than the AFL-CIO.

       are not affiliated with the AFL-CIO.

       include the United Autoworkers and Carpenters Union.

       have about the same combined membership as the AFL-CIO.

9. The earnings of highly educated workers: (Points : 2)

       rise more slowly than those of less-educated workers.

       rise more rapidly than those of less-educated workers.

       rise at about the same rate as those of less-educated workers.

       stagnate earlier than do those of less-educated workers.

10. Collective bargaining agreements usually cover: (Points : 2)

       wages and hours.

       union status.

       seniority and job opportunities.

       all of these.

11. One of the problems involved in government attempting to set fixed fees for doctors is that: (Points : 2)

       a surplus of health care services will result.

       doctors might react by increasing the quantity of health care provided.

       such fees are usually set above the equilibrium level.

       doctors’ fees have not risen as rapidly as the general price level.

12. The total fertility rate: (Points : 2)

       measures the average number of children that a woman is expected to have during her lifetime.

       measures the average number of children that each couple is expected to have during their lifetime.

       equals the rate of population change over time.

       rises as income rises.

13. A nation’s capital and financial account: (Points : 2)

       contains inpayment items, but not outpayment items.

       includes service exports and service imports.

       includes both inpayments and outpayments.

       includes net investment income and net transfers.

14. Discrimination in the form of access barriers to productivity-increasing opportunities such as education and training is called: (Points : 2)

       wage discrimination.

       human-capital discrimination.

       employment discrimination.

       occupational discrimination.

15. The principal-agent problem arises in labor markets because: (Points : 2)

       a firm may realize excessively large profits.

       workers may provide less-than-expected work effort.

       compensating wage differences do not pay for differences in the nonmonetary aspects of jobs.

       human capital investments vary among workers.

16. The user cost of extracting a non-renewable resource is: (Points : 2)

       the sum of the dollar expenditures incurred to extract the resource.

       the cost of not being able to extract it in the future if it is extracted and sold in the present.

       the selling price of the resource to the companies using it to produce goods and services.

       directly proportional to how much of the non-renewable resource remains.

17. The marginal productivity theory of income distribution suggests that : (Points : 2)

       government should subsidize the most productive workers through a system of transfer payments.

       each individual should receive income based on his contribution to total output.

       resource owners should receive income based on the idea of “from each according to his ability, to each according to his wants.”

       resource owners should receive income based upon their needs.

18. The equality-efficiency tradeoff suggests that: (Points : 2)

       welfare programs stimulate incentives to work.

       inefficiencies result when income is transferred from rich to poor.

       noncash transfers are superior to cash transfers.

       economic growth is the best means of reducing poverty.

19. Export supply curves are __________________; import demand curves are ___________________. (Points : 2)

       horizontal; vertical

       vertical; horizontal

       downsloping; upsloping

       upsloping; downsloping

20. The idea of efficiency wages is that: (Points : 2)

       the wages of each type of labor must be proportionate to their marginal products.

       the wages of each type of labor must be equal to their marginal products.

       firms might get greater work effort by paying above-equilibrium wage rates.

       workers are more diligent when paid below-equilibrium wages.

21. The availability of health insurance tends to: (Points : 2)

       decrease the demand for health care and cause an underallocation of resources to the health care industry.

       increase the quantity of health care demanded and cause an underallocation of resources to the health care industry.

       increase the quantity of health care demanded and cause an overallocation of resources to the health care industry.

       decrease the quantity of health care demanded and cause an overallocation of resources to the health care industry.

22. Capitalist income (corporate profits, interest, and rent) has: (Points : 2)

       declined sharply since 1900 because of the growing strength of labor unions.

       remained approximately constant in this century.

       increased significantly because of rising rents.

       fallen in this century because of the declining importance of corporations.

23. The incentive function of prices: (Points : 2)

       indicates that price increases bring forth more of a resource.

       is the idea that competitive markets will always clear.

       applies to all resources.

       only applies to land.

24. Housing subsidies for low-income households: (Points : 2)

       represent a cash transfer.

       are a part of the U.S. social insurance programs.

       represent a noncash transfer.

       conflict with the leaky-bucket analogy.

25. Other things equal, the monopsonistic employer will pay a: (Points : 2)

       lower wage rate and hire fewer workers than will a purely competitive employer.

       higher wage rate but hire fewer workers than will a purely competitive employer.

       lower wage rate but hire a larger number of workers than will a purely competitive employer.

       higher wage rate and hire a larger number of workers than will a purely competitive employer.

26. If a U.S. importer can purchase 10,000 pounds for $20,000, the rate of exchange is: (Points : 2)

       $1 = 2 pounds in the United States.

       $2 = 1 pound in the United States.

       $1 = 2 pounds in Great Britain.

       $.5 = 1 pound in Great Britain.

27. The fact that people prefer present consumption to future consumption results in: (Points : 2)

       a downsloping demand for loanable funds curve.

       an upsloping supply of loanable funds curve.

       a downsloping supply of loanable funds curve.

       an upsloping demand for loanable funds curve.

28.   

The individual firm in a purely competitive labor market faces: (Points : 2)

       a perfectly elastic labor supply curve and a downsloping labor demand curve.

       a perfectly elastic labor demand curve and an upsloping labor supply curve.

       labor demand and labor supply curves both of which are perfectly elastic.

       a downsloping labor demand curve and an upsloping labor supply curve.

29. The crowding of women and minorities into a restricted number of occupations: (Points : 2)

       has no impact on the size of the domestic output or its distribution in the long run.

       will increase the size of the domestic output and make its distribution more equal.

       will decrease the size of the domestic output and make its distribution less equal.

       will increase the size of the domestic output, but make its distribution less equal.

30. Henry George advocated a single tax on: (Points : 2)

       real capital.

       entrepreneurial profits.

       land.

       labor income.

31. Employers will hire more units of a resource if: (Points : 2)

       the price of the resource increases.

       the productivity of the resource increases.

       the price of the good being produced declines.

       the price of a complementary resource rises.

32. Supporters of offshoring claim that its benefits include: (Points : 2)

       increased demand for workers in complementary jobs.

       keeping U.S. firms profitable by lowering production costs.

       reduced prices for consumers.

       all of these.

33. Defensive medicine refers to the idea that: (Points : 2)

       it is more cost-efficient to prevent illnesses than to cure them.

       physicians may require unnecessary testing as a means of protecting themselves against malpractice suits.

       doctors know much more about diagnosing and treating illnesses than do health care consumers.

       physicians do not advertise their services or fees.

34. The managerial-opposition hypothesis suggests that: (Points : 2)

       employers are less opposed to unions now than they were two or three decades ago.

       employers are more reluctant to hire minorities and women than they were two or three decades ago.

       employers are increasingly resistant to unions because they impose higher wage costs on firms.

       unions increase worker turnover and thereby increase productivity.

35. Supporters of farm subsidies have: (Points : 2)

       argued that farmers are comparatively poor and therefore should receive public help.

       contended that the family farm is an American “way of life” and should be protected.

       argued that farmers are at a disadvantage because they buy inputs in monopolized markets and sell their output in competitive markets.

       made all of these arguments.

36. The structural-change hypothesis suggests that: (Points : 2)

       the structure of industry has changed so as to encourage union growth.

       in the past two decades management has more aggressively opposed unionization.

       labor market discrimination has decreased because of the changing composition of the labor force.

       changes in the structure of industry have contributed to the decline of union membership.

37. An example of a social insurance program is ____________, whereas an example of public assistance program is _______. (Points : 2)

       Temporary Assistance for Needy Households; unemployment compensation

       Supplemental Security Income; unemployment compensation

       Social Security; food stamps

       Medicaid; Medicare

38. The parity ratio: (Points : 2)

       compares worker productivity in the farm and nonfarm sectors.

       is the ratio of per capita farm income to per capita nonfarm income.

       is the ratio of prices received by farmers to prices paid by farmers.

       is the ratio of prices paid by farmers to prices received by farmers.

39. By reducing labor turnover, unions may increase productivity because a lower turnover rate: (Points : 2)

       results in a less-experienced work force.

       increases the incentive for firms to provide training to their workers.

       allows firms to employ a greater number of younger, more energetic workers.

       increases the incentive for firms to substitute labor for capital in the production process.

40. In the market for superstars: (Points : 2)

       earnings reflect pricing power rather than marginal revenue product.

       small differences in talent get magnified into huge differences in pay.

       entry and exit rarely occur.

       product demand is typically highly elastic.

41. A major implication of asymmetric information is that: (Points : 2)

       health care suppliers may reduce the supply of health care.

       health care suppliers may increase the demand for health care.

       collusion between health care suppliers and purchasers may accelerate the rise in costs.

       resources may be underallocated to the health care industry.

42. As it relates to international trade, dumping: (Points : 2)

       is a form of price discrimination illegal under U.S. antitrust laws.

       is the practice of selling goods in a foreign market at less than cost.

       constitutes a general case for permanent tariffs.

       is defined as selling more goods than allowed by an import quota.

43. An excise tax on an imported good that helps shield domestic producers of the good is called a: (Points : 2)

       protective tariff.

       import quota.

       revenue tariff.

       voluntary export restriction.

44. The lifetime distribution of income is more equal than the annual distribution. This statement is: (Points : 2)

       true, because the rich have gotten richer and the poor have gotten poorer.

       true, because there is considerable income mobility over time.

       false, because people tend to stay in the same income quintile over extended periods of time.

       false, because the rich have gotten richer and the poor have gotten poorer.

45. Renewable resources: (Points : 2)

       can never be exhausted permanently.

       can be exhausted if harvest rates exceed replenishment rates for an extended period.

       can be exhausted if replenishment rates exceed harvest rates for an extended period.

       will tend to be over-harvested when they are private property.

46. The demand for airline pilots results from the demand for air travel. This fact is an example of: (Points : 2)

       resource substitutability.

       rising marginal resource cost.

       elasticity of resource demand.

       the derived demand for labor.

47. “Farm products” are generally produced in more ___________ markets, while “food products” tend to be sold in markets that are more ____________. (Points : 2)

       monopolistic; competitive

       competitive; oligopolistic

       oligopolistic; competitive

       oligopolistic; monopolistic

48. Voluntary migration of skilled craftworkers from low-paying to high-paying nations is most likely to be opposed by: (Points : 2)

       business groups in the high-paying nations.

       craft workers who stay in the low-paying nations.

       industrial unions in the high-paying nations.

       craft unions in the high-paying nations.

49. Statistical discrimination: (Points : 2)

       can persist in the long run if differences in average characteristics among groups continue.

       will tend to diminish in the long run, because nondiscriminating firms will drive out discriminating firms.

       requires that employers have discrimination coefficients greater than zero.

       is also known as occupational segregation.

50. In the real world, specialization is rarely complete because: (Points : 2)

       nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.

       production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin.

       one nation’s imports are necessarily another nation’s exports.

       international law prohibits monopolies.

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