Multiple Choice Answers

1) When economists say that a good is non-rival in consumption, they mean that:
A) no one wants the good.
B) everyone wants the good.
C) the good is widely available.
D) more than one person can enjoy the good at the same time.

2) If you see a movie at a theater, the movie is:
A) a private good but nonrival in consumption.
B) a private good and rival in consumption.
C) a public good but nonexcludable.
D) a public good and nonrival.

3) When people try to benefit from a public good without paying for it we call it the:
A) free-rider problem.
B) duopolists’ dilemma.
C) public goods problem.
D) taxation problem.

4) In the market in Figure 15.1.
A) social benefits are greater than private benefits.
B) the quantity provided by the market is greater than efficient.
C) when left alone, the market produces the socially optimum quantity.
D) all of the above.

5) In the market in Figure 15.1.
A) social benefits are greater than private benefits.
B) the quantity provided by the market is inefficient.
C) the market produces less than the social optimum quantity.
D) all of the above.

6) The market in Figure 15.1 the government in theory can get the socially optimum output by:
A) subsidizing the consumption of the good the right amount.
B) taxing the production of the good the right amount.
C) restricting the production of the good to less than what the market produces.
D) all of the above.

7) The demand for labor is called a “derived demand” because it is:
A) derived from the demand for the products it is used to produce.
B) affected by the demand for consumer products workers produce.
C) affected by the price of consumer products workers produce.
D) all of the above

8) The marginal product of labor is the:
A) change in labor necessary to produce an additional unit of output.
B) cost of additional labor necessary to produce an additional unit of output.
C) change in output resulting from adding an additional unit of labor.
D) change in revenue resulting from adding an additional unit of labor.

9) Refer to Table 17.2. The marginal product of the fifth unit of labor is:
A) 50.
B) 40.
C) 30.
D) 20.

10) Refer to Table 17.2. If the price of output is $10 per unit, the marginal revenue product of the sixth unit of labor is:
A) $20.
B) $200.
C) $50.
D) $500.

11) Refer to Table 17.2. If the price of output is $2 per unit and the wage rate is $40, how many workers should be hired?
A) six workers
B) five workers
C) four workers
D) three workers

12) Figure 17.2 depicts a firm’s marginal revenue product curve. If the wage rate is $15, how many workers does the firm demand?
A) four workers
B) five workers
C) six workers
D) seven workers

13) Figure 17.2 depicts a firm’s marginal revenue product curve.  If the output price is $5, what is the marginal product of the third worker?
A) four units of output
B) five units of output
C) six units of output
D) seven units of output

14) Figure 17.2 depicts a firm’s marginal revenue product curve. If the marginal product of the second worker is 10 units of output, what is the price of output?
A) $3
B) $4
C) $5
D) $6

15) The relationship between the wage and the quantity of labor that a given worker is willing to provide is called:
A) individual labor demand.
B) market labor demand.
C) individual labor supply.
D) market labor supply.

16) When the wage falls:
A) all workers will work more hours.
B) all workers will work fewer hours.
C) some workers will work more hours and some workers will work fewer hours, but on average, hours worked will fall.
D) some workers will work more hours and some workers will work fewer hours, but we don’t know whether average hours will increase or decrease.

17) A decrease in the demand for musicians ________ the number of musicians employed, and ________ the wages paid to musicians.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

18) Consider a labor market in equilibrium. If both demand curve and supply curve of labor shift to the right, then the wage rate in the market will ________.
A) increase
B) decrease
C) remain unchanged
D) either increase or decrease or remain unchanged

19) Explain what will happen to the demand for labor, the equilibrium wage, and the equilibrium
quantity of labor if a technological innovation makes workers more productive.

20) Name two factors that will increase the demand for labor, and two factors that will increase the supply of labor.