1.

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Resource pricing

determines peoples incomes.

2.
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The demand for a resource is a derived demand. This is because

if there were no demand for output, there would be no demand for input.

3.
In 2009 General Motors (GM) announced that it would reduce employment by 21,000 workers. What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? This decision indicates that for those 21,000 workers
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the MRC was greater than the MRP.

4.
In 2009 General Motors (GM) announced that it would reduce employment by 21,000 workers. What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? GM didnt reduce employment by more than 21,000 workers because
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it wanted to set the labor level where MRC equaled MRP to maximize profit.

5.
In each of the following four cases, MRP L and MRP C refer to the marginal revenue products of labor and capital, respectively, and P L and P C refer to their prices. Indicate in each case whether the conditions are consistent with maximum profits for the firm. If not, state which resource(s) should be used in larger amounts and which resource(s) should be used in smaller amounts. a. MRPL = $8; PL = $4; MRPC = $8; PC = $4 These conditions are consistent with maximum profits for the firm. False Which resource should be used in larger and/or smaller amounts? Use more of both b. MRPL = $10; PL = $12; MRPC = $14; PC = $9 These conditions are consistent with maximum profits for the firm. False Which resource should be used in larger and/or smaller amounts? Use less labor and more capital c. MRPL = $6; PL = $6; MRPC = $12; PC = $12 These conditions are consistent with maximum profits for the firm. True Which resource should be used in larger and/or smaller amounts? Conditions are already consistent d. MRPL = $22; PL = $26; MRPC = $16; PC = $19 These conditions are consistent with maximum profits for the firm. False Which resource should be used in larger and/or smaller amounts? Use less of both
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6.
Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as trunk, shake, and catch pickers, which vigorously shake oranges from trees. If widely adopted, this will
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decrease the demand for human orange pickers, implying the substitution effect is greater than the output effect.

7.

Refer to the above graph. Other things equal, an increase in labor productivity would cause a: move from a to b on D1. shift from D2 to D3.

shift from D3 to D2. move from b to a on D1.

8.

Refer to the above graph. Other things equal, an increase in the price of substitute resource would cause a: shift from D2 to D3 assuming the substitution effect exceeds the output effect. move from a to b on D1. move from b to a on D1. shift from D3 to D2 assuming the substitution effect exceeds the output effect.

9.
Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore: capital is very highly substitutable for labor. the output effect is greater than the substitution effect. the income effect is greater than the output effect. the substitution effect is greater than the output effect.

10.
A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the: output effect.

substitution effect. idea of derived demand. law of diminishing returns.

11.
award:

10 out of 10.00 points

The marginal productivity theory of income distribution suggests that: 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.

12.
The fact that monopoly and monopsony exist in resource markets means that: the marginal productivity theory of income distribution is valid. resource prices do not always measure contributions to output. the resulting income distribution is ethically correct. income shares do not exhaust the total output.

13.
Real wages in the United States in the long run: show no discernible relationship to output per worker. have increased at about the same rate as increases in output per worker. have increased slower than increases in output per worker. have increased faster than increases in output per worker

14.
The productivity and real wages of workers in industrially advanced economies have risen historically partly because: workers have acquired less education and training over time.

workers have been able to use larger quantities of capital equipment. over time the capital equipment used by workers has deteriorated in quality. the supply of labor has increased.

15.

Refer to the above diagrams. The firm: is a monopsonist in the hiring of labor. must be selling its product in an imperfectly competitive market. is a "wage taker." must pay a higher marginal resource cost for each successive worker.

16.
Other things equal, the monopsonistic employer will pay a: 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.

17.
award:

10 out of 10.00 points

As compared to a purely competitive labor market, in a nonunionized monopsonistic labor market wages: and employment will both be lower. will be higher, but employment will be lower. will be lower, but employment will be higher. and employment will both be higher.

18.
award:

10 out of 10.00 points

Refer to the above diagram. Assuming no union or relevant minimum wage, the firm represented will hire: Q2 workers and pay a W4 wage rate. Q2 workers and pay a W1 wage rate. Q3 workers and pay a W2 wage rate. Q4 workers and pay a W1 wage rate.

19.
award:

10 out of 10.00 points

If an exclusive union is successful in restricting the supply of labor, the: wage rate will rise.

quantity of labor demanded will rise. number of job opportunities in the firm or industry will increase. demand for labor curve will shift leftward.

20.
award:

10 out of 10.00 points

If all workers are homogeneous, all jobs are equally attractive to workers, and labor markets are perfectly competitive: compensating differences would cause wage differentials. noncompeting groups of workers would result in wage differentials. all workers would receive the same wage rate. worker mobility would occur such that wage differentials would widen.

21.
award:

10 out of 10.00 points

According to age-earnings data, lower educated workers have similar earnings at age 65 as higher educated workers. investments in education result in higher earnings. high earnings are due to motivation and innate ability, rather than education. there is no clear relationship between education and worker productivity.

22.
Which of the following involves the creation of human capital? the XYZ Corporation upgrades the machinery on its assembly line Jones receives apprenticeship training as a carpenter Smith buys 30 shares of common stock a retired person decides to reenter the labor force

23.
Which of the following is a market imperfection that might explain persistent wage differentials within an occupation? movement of labor from lower-wage to higher-wage jobs readily available information about job opportunities and pay principal-agent problems discrimination

24.
award:

10 out of 10.00 points

The principal-agent problem arises in labor markets because: 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.

25.
award:

10 out of 10.00 points

Jack and Jill have identical skills and training but Jill earns higher wages in her job. Which of the following reasons would best explain why Jill earns more than Jack? Jack has a chronic illness and would lose health care coverage if he changed jobs. Jill suffers from gender discrimination in the workplace. Jack has better access to information about available jobs in his field. Jill is reluctant to move to a new city because she wants to live near family.

26.
award:

10 out of 10.00 points

The principal-agent problem arises primarily because: principals and agents share a common interest, leading to free-rider problems.

principals and agents are in an adversarial role, sharing no common interests. principals pursue some of their own objectives that may conflict with the objectives of the agents. agents pursue some of their own objectives that may conflict with the objectives of the principals.

27.
award:

10 out of 10.00 points

The idea of efficiency wages is that: 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.

28.
award:

10 out of 10.00 points

One of the potential negative side-effects of pay in the form of sales commissions is: a greater incentive for sales people to engage in unethical or fraudulent sales practices that may eventually cause legal problems for the firm. increased volatility of sales revenue for the firm. the potential that pay levels may get so high that they will increase a firm's marginal wage cost more than its marginal revenue product. an increased likelihood of shirking by workers.