Deck 1: Introduction

Question 1

Which of the following is not a positive statement?

A) The federal minimum wage was recently increased to $7.25.
B) Ceteris paribus,an increase in wages increases the quantity of workers supplied.
C) Minimum wage laws are not Pareto efficient.
D) An increase in the minimum wage hurts the profits of small businesses.
E) A decrease in the labor force due to the swine flu will cause the equilibrium wage to increase.

Answer 1

D

Question 2

Which statement about economic models is not true?

A) Analytical models consist of a clear set of assumptions and conclusions that are drawn from them.
B) Economic models simplify reality because the economic reality is too complicated.
C) Economic models consist of exogenous variables which are the response to changes in endogenous variables.
D) Models are used in both theoretical and empirical work.
E) Economic models must be coherent to be effective.

Answer 2

C

Question 3

Given the information just provided,which of the following statements is true?

A) If wages increased by $1,there would be an excess demand of 7 workers.
B) If wages increased by $1,there would be an excess supply of 5 workers.
C) If wages decreased by $1,there would be an excess demand of 5 workers.
D) If wages decreased by $1,there would be an excess supply of 7 workers.
E) none of the above

Answer 3

B

Question 4

If one small restaurant decreases its demand for cooks,then

A) the wages of cooks will increase,and employment of cooks will decrease.
B) the wages of cooks will decrease,and employment of cooks will increase.
C) the wages of cooks will remain the same,and employment of cooks will decrease.
D) the wages of cooks will remain the same,and employment of cooks will increase.
E) the wages of cooks will remain the same,and employment of cooks will remain the same.

Question 5

What is the equilibrium level of employment?

A) 7
B) 8
C) 9
D) 10
E) 11

Question 6

Which of the following would cause a movement along the labor supply curve for the steel market?

A) The federal government imposes a minimum wage law.
B) The hourly wage in the iron market increases.
C) Hundreds of immigrants enter the area.
D) A smallpox outbreak results in thousands of deaths.
E) Medical malpractice lawsuits cause doctors to have to pay more for insurance,thus decreasing their wage.

Question 7

If the price of labor increases,the labor will.

A) demand for,increase or decrease
B) demand for,increase
C) quantity demanded of,decrease
D) quantity demanded of,increase
E) quantity demanded of,increase or decrease

Question 8

When the price of capital decreases,if the demand for labor then capital and labor are gross.

A) increases,substitutes
B) increases,complements
C) remains the same,substitutes
D) remains the same,complements
E) decreases,complements

Question 9

After 9/11 there was an increase in the number of people who became police officers and firemen.What does this imply about the labor market?

A) The quantity of labor supplied increased,and wages will increase.
B) The quantity of labor supplied increased,and wages will decrease.
C) The labor supply increased,and wages will increase.
D) The labor supply increased,and wages will decrease.
E) The labor supply increased,and wages will not change.

Question 10

When wages increase,the scale effect implies employment will,while the substitution effect implies employment will.

A) decrease,increase
B) decrease,remain the same
C) remain the same,increase
D) increase,increase
E) decrease,decrease

Question 11

Suppose the labor supply curve shifts upward.Which of the following could have caused the shift?

A) The wage in an alternative industry increased.
B) The price of capital increased,and capital and labor are gross complements.
C) The price of capital decreased,and capital and labor are gross complements.
D) A hurricane caused thousands of people to leave New Orleans,decreasing the size of the labor force in the area.
E) none of the above

Question 12

An endogenous variable

A) is the independent variable in an economic model.
B) is assumed to be determined by factors outside the scope of the model.
C) is the impulse that causes a change in the exogenous variable.
D) is the response to a change in the exogenous variable.
E) is the rental rate of capital in the labor demand equation.

Question 13

Suppose the labor demand curve shifts downward.Which of the following could have caused the shift?

A) The wage in an alternative industry decreases.
B) The price of capital increased,and capital and labor are gross complements.
C) The price of capital decreased,and capital and labor are gross complements.
D) A hurricane causes thousands of people to leave New Orleans,decreasing the size of the labor force in the area.
E) none of the above

Question 14

An economic model examines how a(n)affects a(n).

A) independent variable,dependent variable
B) endogenous variable,independent variable
C) exogenous variable,independent variable
D) endogenous variable,dependent variable
E) endogenous variable,exogenous variable

Question 15

Normative economics is

A) the prescriptive part of economics.
B) the branch of economics that describes and objectively explains economic phenomena.
C) the scientific branch of economics.
D) used to shed light on positive debates.
E) both A and D

Question 16

What is the equilibrium wage?

A) 1
B) 2
C) 3
D) 4
E) 5

Question 17

Which of the following is an exogenous variable in the standard model of labor supply?

A) the wage in an alternative industry
B) the wage in that industry
C) the population size
D) the rental price of capital
E) both A and C.

Question 18

Which of the following is not a true statement about the demand for labor?

A) Wages and the number of workers demanded are endogenous variables.
B) The amount of the good demanded and the rental rate of capital are exogenous variables.
C) Higher wages decrease the quantity of labor demanded by employers.
D) A decrease in the demand for a good decreases the demand for labor.
E) If the rental rate of capital increases,demand for labor will always decrease.

Question 19

If the price of capital decreases,the labor will.

A) demand for,increase or decrease
B) demand for,increase
C) quantity demanded of,decrease
D) quantity demanded of,increase
E) quantity demanded of,increase or decrease

Question 20

A mathematical model

A) contains only exogenous variables.
B) treats endogenous variables as given.
C) seeks to explain exogenous variables.
D) does not clearly define the assumptions of the model.
E) reaches conclusions using logically sound methods.

Question 21

If wages are below the wage level that causes supply to equal demand,then there is

A) excess supply for labor.
B) excess demand for labor.
C) a market equilibrium.
D) unemployment.
E) inflation.

Question 22

Which of the following is not true about New Institutional Economics?

A) It is made up of agents who use rational choice.
B) It examines how individuals within the household behave.
C) It considers how workers who are already employed make their decisions regarding how much or how hard to work.
D) It is a combination of law,economics,and organization.
E) It assumes agents have a limited ability to calculate the consequences of their actions.

Question 23

The marginal concept is important in economics because

A) it provides a convenient means of locating an optimal choice.
B) it assumes individuals operate using limited rationality.
C) it allows for economists to predict how an agent will respond to a change in their environment.
D) A and C only
E) all of the above

Question 24

Which is not a pillar of the neoclassical approach?

A) Pareto efficiency
B) positive economics
C) methodological individualism
D) equilibrium
E) rational choice

Question 25

Workers in an industry are probably overpaid if

A) firms want to hire more workers but cannot ?0??7?nd people willing to work.
B) firms need to layoff workers because it cannot afford to cover costs.
C) firms are hiring the optimal amount of workers and there is no excess supply of labor in the market.
D) firms are unable to keep their most skilled workers.
E) no new workers are interested in working in that industry.

Question 26

If an economy has reached the general equilibrium then

A) the actions leading to it are not grounded in rational behavior.
B) one group is operating in isolation of all other groups.
C) all interconnected groups are included and their decision process is modeled.
D) the outcome is not necessarily feasible.
E) there is a transaction possible that would be a Pareto improvement.

Question 27

Pareto efficiency implies

A) everyone in the economy is equally well off.
B) there are no trades that would make someone be?0??0?er off without making someone else worse off.
C) there are still trades that would make one party be?0??0?er off without making someone else worse off.
D) transactions are still taking place in the economy.
E) there is always only one outcome that is efficient.

Question 28

Suppose an agent values the future but cannot accurately predict it.What is this called?

A) rational choice
B) Pareto efficiency
C) marginal revenue
D) bounded rationality
E) new institutional economics

Question 29

When a rational choice model is applied,the individual

A) is never selfish,spiteful,or altruistic.
B) has behavior that is not consistent over time.
C) is always selfish,spiteful,or altruistic.
D) maximizes his wellbeing subject to a constraint.
E) maximizes his utility but is not constrained.

Question 30

Which of the following is consistent with a Pareto improvement?

A) a federal restriction on the hours an individual can work
B) there is an increase in the sales tax levied on particular goods
C) a trade that would make one party be?0??0?er off,and the other equally well off
D) a trade that would make one party be?0??0?er off,and the other party worse off
E) one party having incomplete information about the market

Question 31

If the price of capital increases and the substitution effect dominates,then labor and capital are and demand for labor will.

A) gross substitutes,increase
B) gross substitutes,decrease
C) gross substitutes,increase or decrease
D) gross complements,increase
E) gross complements,decrease

Question 32

If one party can gain from a transaction,without harming any other party,

A) then the transaction must be a Pareto improvement.
B) then the transaction is not a Pareto improvement.
C) the government must intervene to make the transaction occur.
D) the transaction will be forced on one of the parties.
E) then the current economy is at the Pareto efficient outcome.