QUESTION 1: An increase in demand caused by a strong national advertising campaign would

A. Raise price and raise quantity demanded
B. Lower price and raise quantity demanded
C. Lower price and lower quantity demanded
D. Raise price and lower quantity demanded

QUESTION 2: The key principle of economics that states that the cost of something is equal to what is sacrificed to get it, is known as the

A. Marginal principle
B. Principle of diminishing returns
C. Principle of opportunity cost
D. Real / nominal principle

QUESTION 3: A market characterized by a few large sellers serving the entire market and acting strategically is

A. Perfect competition
B. Monopolistic competition
C. Oligopoly
D. Monopoly

QUESTION 4: Determining their product has a price elasticity of 2, a company could

A. Increase revenue by increasing price
B. Increase revenue by reducing price
C. Not change revenue by changing price
D. Change revenue by some means other than changing price

QUESTION 5: According to the substitution effect of labor supply, when the wage rate goes up:

A. it becomes more costly to consume leisure, so people will work more.
B. it becomes less costly to consume leisure, so people will work more.
C. the opportunity cost of enjoying leisure goes down.
D. firms will hire more workers since people are more willing to work.

QUESTION 6: If the price of output increases the labor ________ curve shifts to the ________.

A. demand; left
B. demand; right
C. supply; left
D. supply; right

QUESTION 7: Which of the following is partially responsible for the male-female wage gap in the United States?

A. Women have, on average, less education than their male counterparts.
B. Women have, on average, less work experience than their male counterparts.
C. Women have been denied access to many occupations, leading to increased supply in a few occupations.
D. All of the above are correct.

QUESTION 8: College students who increase their human capital by acquiring the skills required for certain occupations typically earn higher incomes than high school graduates. This is called:

A. the learning effect of a college education.
B. the signaling effect of a college education.
C. the discriminatory effect of a college education.
D. none of the above

QUESTION 9: A craft union is an organized group of workers that:

A. work in various industries with a variety of skills.
B. work in a particular industry with a variety of skills.
C. work in various industries with similar skills.
D. work in a particular industry with similar skills.

QUESTION 10: Labor unions act to affect labor markets by

A. collectively negotiating wages.
B. controlling the supply of labor.
C. acting as a single demander of labor.
D. Both A and B.

QUESTION 11: The Wagner Act:

A. guaranteed workers the right to join unions.
B. gave government power to stop strikes that endanger the national health or safety.
C. allowed states to pass right-to-work laws.
D. union members the right to fair elections of union officials.

QUESTION 12: The basic trade-off that unions make when negotiating wages is the trade-off between

A. higher wages and fewer jobs.
B. higher wages and safer working conditions.
C. shorter hours and fewer jobs.
D. higher wages and shorter hours.

QUESTION 13: A market with a single buyer is called:

A. a monopsony.
B. a monopoly.
C. efficient.
D. competitive.

QUESTION 14: Labor markets are characterized by asymmetric information because

A. workers know whether they are hard working or lazy, but potential employers cannot determine the worker's type.
B. employers know whether the job is dangerous or safe, but potential employees cannot determine the safety of the workplace.
C. the marginal benefit of each worker is greater than the marginal cost of hiring that worker.
D. employees do not know their own marginal benefit from working.

QUESTION 15: According to the theory of efficiency wages, if a firm catches a worker shirking and fires that worker, the worker will

A. accept a job with a wage equal to his or her opportunity cost.
B. find a job that pays the same wage as the job from which he or she was fired.
C. accept a job that pays less than his or her opportunity cost.
D. go on unemployment, because being fired is a sign of low productivity.

QUESTION 16: An efficiency wage is a wage that

A. equates marginal cost with marginal revenue.
B. is paid only to workers if they are efficient.
C. is the lowest possible wage to attract workers to a job.
D. is higher than average in the labor market.

QUESTION 17: ________ are costs that require a monetary payment.

A. Implicit costs
B. Explicit costs
C. Accounting costs
D. B and C are correct.

QUESTION 18: A firm that has market power has the ability:

A. to affect the price of its own product.
B. to conduct illegal activities without fear of prosecution.
C. to command consumer to buy any quantity from them.
D. to drive its competition out of the market.

QUESTION 19: The demand for labor is:

A. derived from the demand for the products it is used to produce.
B. determined by the demand for consumer products.
C. determined by the price of consumer products.
D. all of the above

QUESTION 20: In a market economy, what specifies the terms of exchange, facilitating exchange between strangers?

A. contracts
B. insurance
C. patents
D. accounting rules

QUESTION 21: Economists say that labor demand is a derived demand because:

A. it does not come from competitive markets.
B. it depends on the demand for products that workers produce.
C. it is derived from nature.
D. it is derived from production.

QUESTION 22: A firm's short-run demand curve for labor is:

A. upward sloping.
B. the marginal revenue product curve.
C. the downward-sloping portion of the marginal cost curve.
D. the marginal cost divided by price.

QUESTION 23: In a competitive labor market,

A. the firm can hire all the labor it wants at the going market wage rate.
B. the market wage rate is the marginal revenue product of labor.
C. firms will hire as long as the marginal revenue product of labor is less than or equal to the market wage.
D. all of the above

QUESTION 24: The tendency of firms to substitute away from a factor whose relative price has risen andtoward a factor whose relative price has fallen is called the:

A. input-substitution effect.
B. derived demand effect.
C. diminishing returns effect.
D. output effect.

QUESTION 25: A small supply of workers in a particular occupation could be due to:

A. artificial barriers to entry.
B. few people with the required skills.
C. high training costs.
D. all of the above