2. Consider the labor market for accountants. As more people earn accounting deg

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2. Consider the labor market for accountants. As more people earn accounting degrees, we should expect to see: A. the labor supply curve increase. B. the labor demand curve increase. C. the quantity of labor to move up along a stable labor supply curve. D. the quantity of labor to move up along a stable labor demand curve. 3. An increase in wealth will cause the labor supply curve to: A. shift leftward if leisure is a normal good. B. be downward-sloping if the substitution effect dominates the income effect. C. be upward-sloping if leisure is an inferior good. D. be backward-bending if the income effect outweighs the substitution effect of a change in wealth, and leisure is a normal good. 4. The more work a person does, all other things unchanged, then the: A. greater his or her free time. B. greater his or her nonmarket use of time. C. less income he or she has. D. less leisure he or she has. 5. The price of an extra hour of leisure is: A. $1. B. the hourly wage rate. C. the same as the price of money. D. the total utility of labor. 6. The ________ effect of a ________ wage causes individuals to substitute ________. A. substitution; higher; labor in place of leisure B. income; higher; labor in place of leisure C. substitution; lower; labor in place of leisure D. complementary; constant; leisure in place of labor 7. The opportunity cost of an extra hour of leisure is: A. $1. B. the hourly wage rate. C. the same as the price of money. D. the VMPL. 8. A leftward shift in the labor supply curve would result in which of the following? A. people value leisure more highly B. people have less wealth C. opportunities for women and minorities increase D. the population increases Reference: Ref 35-01 Reference: Ref 35-01 11. The wage rate is $20 per hour and the last worker hired by the firm increased output by 100 units. Computers rent for $50 per hour and the last computer rented by the firm increased output by 200 units. If the firm is producing the desired level of output, what should the firm do to minimize costs? A. Hire more workers and rent more computers because the marginal revenue products of both workers and computers are greater than their respective prices. B. Keep the same number of workers and computers because the marginal revenue products of both workers are positive. C. Lay off workers and rent more computers because computers produce more output per dollar of additional expenditure. D. Hire more workers and reduce the number of computers rented because the marginal product per dollar spent is higher for workers. 12. Suppose a firm is producing the profit-maximizing level of output and the MP of capital and labor are 10 and 20, respectively. If the wage is $10 and the rental rate for capital is $25, which of the following is true? To minimize costs the firm should A. Use more capital. B. Hire more labor and use less capital. C. Hire less labor and use more capital. D. Hire less labor. 13. According to the cost-minimization rule, the firm must hire labor and capital to the point where: A. The marginal product is equal to zero for each input. B. The marginal product per dollar is equal for both inputs. C. The marginal revenue product is equal for each input. D. The total product is equal for each input. 14. A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring labor and decrease hiring of capital? A. Demand for the product being produced increases by 5%. B. The price of capital and labor both increase by 5%. C. The productivity of labor increases by 5%. D. The price of capital decreases by 5%. 15. A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring of both labor and capital? A. Demand for the product being produced decreases by 5%. B. The price of capital and labor both decrease by 5%. C. The productivity of labor increases by 5%. D. The price of labor increases 5%. 16. In order to minimize costs, firms should hire factors so that the _______________ for each factor is the same A. marginal product B. marginal product per dollar C. marginal cost D. marginal revenue product 17. The cost minimizing rule states that firms will adjust their hiring of inputs until the ____ is equal for all inputs. A. marginal revenue B. factor cost C. marginal cost D. marginal product per dollar 18. If the marginal product per dollar spent is higher for capital than it is for labor, the firm should ____ its use of capital. When it does this, the marginal product of capital will ____ until the condition of the cost minimizing rule is met. A. maintain; fall B. increase; fall C. increase; rise D. decrease; fall 19. If alternative combinations of capital and labor can be used to produce the optimal level of output, a firm will select the input combination with the lowest cost in order to maximize profits. Answer TrueFalsetrue/false 20. For firms to maximize their profit, they need to produce their output using the least costly combination of inputs.true/false Suppose the government decides to increase the child tax credit, which increases the after-tax income of families with children. How would this decision affect the amount of labor supplied by parents of children (assuming that leisure is a normal good)? A. Since the income and substitution effects move in the same direction, the amount of labor supplied will increase. B. Since the income effect will dominate the substitution effect, the amount of labor supplied will decrease. C. We don't know what will happen to the quantity of labor supplied, since we don't know if the income effect or substitution effect will dominate. D. The labor supply curve will shift right, so the quantity of labor will also increase.

Explanation / Answer

1.B , 2. C , 3. B

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