Deck 4: Labor and Financial Markets

Question 1

When consumers and businesses have greater confidence that they will be able to repay in the future, _______.

A) the quantity demanded of financial capital at any given interest rate will remain unchanged.
B) the quantity demanded of financial capital at any given interest rate will shift to the left.
C) the quantity demanded of financial capital at any given interest rate will shift to the right.
D) the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

Answer 1

the quantity demanded of financial capital at any given interest rate will shift to the right.

Question 2

As the _______ complement for high-skill labor becomes cheaper, the demand curve for high- skill labor will shift to the right.

A) technology
B) low-skill labor
C) market
D) lower wage

Answer 2

technology

Question 3

Which of the following will not result in a rightward shift of the market supply curve for labor?

A) a decrease in non-wage income
B) an increase in the working-age population
C) an increase in labor productivity
D) an increase in immigration

Answer 3

an increase in labor productivity

Question 4

The "law of supply" functions in labor markets; that is, a higher _______ for labor leads to a higher quantity of labor supplied.

A) price
B) demand
C) supply
D) quantity

Question 5

If the demand for software engineers_______slower than does supply, then wages of software engineers will _______.

A) increases; remain constant
B) increases, rise
C) increases; fall
D) decreases; fall

Question 6

As the _______ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

A) high-skill labor
B) lower wage
C) technology
D) market

Question 7

Improvements in the productivity of labor will tend to:

A) decrease wages.
B) decrease the supply of labor.
C) increase wages.
D) increase the supply of labor.

Question 8

Which of the following will not result in a leftward shift of the market demand curve for labor?

A) a decrease in labor productivity
B) a decrease in demand for the firm's product
C) an increase in the wage rate
D) a decrease in the firm's product price

Question 9

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages _______.

A) will stay the same
B) will decrease
C) will increase
D) may increase, decrease or stay the same depending on the relative slopes.

Question 10

Since Baltimore passed the first _______ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s.

A) living wage law
B) price ceiling
C) price floor
D) minimum wage

Question 11

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine:

A) the equilibrium price will fall and the equilibrium quantity will fall.
B) both the equilibrium price and quantity will rise.
C) the equilibrium price will rise and the equilibrium quantity will decrease.
D) the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.

Question 12

Which of the following results in a rightward shift of the market demand curve for labor?

A) a decrease in labor productivity
B) a decrease in the firm's product price
C) an increase in the wage rate
D) an increase in demand for the firm's product

Question 13

In contrast to goods and services markets, _______ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

A) minimum wages
B) price floors
C) price ceilings
D) living wage laws

Question 14

Other things being equal, a _______ supply of workers tends to _______ real wages.

A) smaller; not change
B) larger; increase
C) smaller; decrease
D) larger; decrease

Question 15

The labor _______ curve (s) will shift _______ if there is an increase in productivity or an increase in the demand for the final product.

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

Question 16

A straightforward example of a _______ , often used for simplicity, is the interest rate.

A) price ceiling
B) financial investment
C) rate of return
D) price floor

Question 17

The United States has approximately _______ credit card holders.

A) 1.8 million
B) 18 million
C) 80 million
D) 180 million

Question 18

In the United States, a typical credit card interest rate ranges from _______ per year.

A) .2% to .8%
B) 2% to 8%
C) 12% to 18%
D) 22% to 28%

Question 19

Many states do have _______, which impose an upper limit on the interest rate that lenders can charge.

A) price ceiling laws
B) usury laws
C) price floor laws
D) minimum interest rate

Question 20

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _______.

A) the recession
B) new technologies
C) the rise of global markets
D) inflation

Question 21

How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?

A) They increase the supply of apples.
B) They increase the quantity of apples supplied.
C) They decrease the supply of apples.
D) They decrease the quantity of apples supplied.

Question 22

The supply curve of textbooks which are produced using paper made from trees) will shift to the left in response to:

A) a decline in college tuition.
B) a sharp increase in the demand for and construction of wood-frame homes.
C) an increase in the supply of lumberjacks.
D) an end to government regulations that limit timber harvesting in national forests.

Question 23

Table 5-1
Refer to Table 5-1. If D2 and S2 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are _______ and _______, respectively.

A) $12; 12
B) $10; 12
C) $8; 15
D) $6; 18

Question 24

Explain the nature of individual and business decisions which drive the demand and supply of financial capital. Specifically, what kinds of factors will shift demand and supply of financial capital?

Question 25

Several types of economic events can cause a shift in labor demand, so that a higher or lower quantity of labor is hired at every salary or wage. List three of these events.

Question 26

Several types of economic events can cause a shift in labor demand, so that a higher or lower quantity of labor is hired at every salary or wage. List three of these events.

Question 27

Table 5-1
Refer to Table 5-1. Suppose that D2 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D2 to D1, then:

A) equilibrium price increases from $6 to $8.
B) equilibrium quantity increases from 13 to 18
C) equilibrium quantity decreases from 15 to 13.
D) equilibrium price decreases from $6 to $4.

Question 28

Table 5-1
Refer to Table 5-1. Suppose that D1 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D1 to D2, then:

A) equilibrium price decreases from $6 to $4.
B) equilibrium quantity decreases from 15 to 13.
C) equilibrium quantity increases from 13 to 18.
D) equilibrium price increases from $6 to $8

Question 29

The imposition of a price ceiling on a market often results in:

A) an increase in investment in the industry.
B) a surplus
C) a shortage
D) a decrease in discrimination on the part of sellers.

Question 30

Table 5-1
Refer to Table 5-1. If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are _______ and _______, respectively.

A) $4; 11
B) $4; 16
C) $6; 13
D) $8; 15

Question 31

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:

A) shift to the right, increasing the price of the drug.
B) shift to the left, increasing the price of the drug.
C) shift to the right, decreasing the price of the drug
D) shift to the left, decreasing the price of the drug.

Question 32

Explain why U.S. minimum wage laws have historically had only a small impact on employment.

Question 33

Are markets always in equilibrium?

A) No, they never "settle down" into a stable price and quantity.
B) No, but if there is no outside interference, they tend to move toward equilibrium.
C) Yes, because very few things tend to alter supply and demand.
D) Yes, they are always at the equilibrium point, or very close to it.

Question 34

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?

A) Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.
B) Low income workers will be better able to survive the recession at the new, higher wage rate.
C) More people will be hired at the higher wage rate offsetting the effects of the recession.
D) The higher wage will increase the supply of labor offsetting the effects of the recession.

Question 35

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?

A) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel.
B) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
C) There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
D) The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

Question 36

Whenever there is a shortage at a particular price, the quantity sold at that price will equal:

A) the quantity demanded at that price.
B) the quantity supplied minus the quantity demanded.
C) the quantity supplied at that price.
D) quantity demanded plus quantity supplied)/2.

Question 37

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

A) quantity demanded plus quantity supplied)/2.
B) the quantity supplied at that price.
C) the quantity supplied minus the quantity demanded.
D) the quantity demanded at that price.

Question 38

Table 5-1
Refer to Table 5-1. If D2 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are _______ and _______, respectively.

A) $8; 15
B) $10; 17
C) $12; 9
D) $12; 10

Question 39

As the text suggests, the demand and supply model predicts that the new computer and communications technologies will raise the pay of high-skill labor but reduce the pay of low-skill labor. Explain how this works using the four-step process.

Question 40

In 2010, Americans had about _______ outstanding in credit card debts not paid on time.

A) $900 billion
B) $90 billion
C) $900 million
D) $90 million

Question 41

The demand and supply model can explain the existing levels of prices, wages, and rates of return. Demand and supply can also be used to explain how economic events will cause changes in prices, wages, and rates of return. There are only four possibilities: what are they?

Question 42

Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?