Micro Practice test 4 by misterh

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									Micro Practice Test 4 1. Economists use the term imperfect competition to describe: A) all industries which produce standardized products. B) any industry in which there is no nonprice competition. C) a pure monopoly only. D) those markets which are not purely competitive.

2. In which of the following industry structures is the entry of new firms the most difficult? A) pure monopoly B) oligopoly C) monopolistic competition D) pure competition

3. An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of: A) monopolistic competition B) oligopoly C) pure monopoly D) pure competition

4. Which of the following statements applies to a purely competitive producer? A) It will not advertise its product. B) In long-run equilibrium it will earn an economic profit. C) Its product will have a brand name. D) Its product is slightly different from those of its competitors.

5. Under monopolistic competition entry to the industry is: A) completely free of barriers. B) more difficult than under pure competition but not nearly as difficult as under pure monopoly. C) more difficult than under pure monopoly. D) blocked.

6. Monopolistic competition resembles pure competition because: A) both industries emphasize nonprice competition. B) in both instances firms will operate at the minimum point on their long-run average total cost curves. C) both industries entail the production of differentiated products. D) barriers to entry are either weak or nonexistent.

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7. Which of the following is not a basic characteristic of monopolistic competition? A) the use of trademarks and brand names B) recognized mutual interdependence C) product differentiation D) a relatively large number of sellers

8. Which of the following is not characteristic of monopolistic competition? A) relatively large numbers of sellers B) product differentiation C) production at minimum ATC in the long-run D) relatively easy entry to the industry

9. A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from: A) the likelihood of collusion. B) high entry barriers. C) product differentiation. D) mutual interdependence in decision making.

10. A significant difference between a monopolistically competitive firm and a purely competitive firm is that the: A) former does not seek to maximize profits. B) latter recognizes that price must be reduced to sell more output. C) former sells similar, although not identical, products. D) former's demand curve is perfectly inelastic.

11. A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from: A) a relatively large number of firms and the monopolistic element from product differentiation. B) product differentiation and the monopolistic element from high entry barriers. C) a perfectly elastic demand curve and the monopolistic element from low entry barriers. D) a highly inelastic demand curve and the monopolistic element from advertising and product promotion.

12. Monopolistically competitive and purely competitive industries are similar in that: A) both are assured of short-run economic profits. B) both produce differentiated products. C) the demand curves facing individual firms are perfectly elastic in both industries. D) there are few, if any, barriers to entry.

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13. A monopolistically competitive firm has a: A) highly elastic demand curve. B) highly inelastic demand curve. C) perfectly inelastic demand curve. D) perfectly elastic demand curve.

14. The demand curve of a monopolistically competitive producer is: A) less elastic than that of either a pure monopolist or a pure competitor. B) less elastic than that of a pure monopolist, but more elastic than that of a pure competitor. C) more elastic than that of a pure monopolist, but less elastic than that of a pure competitor. D) more elastic than that of either a pure monopolist or a pure competitor.

15. A monopolistically competitive firm's marginal revenue curve: A) is downsloping and coincides with the demand curve. B) coincides with the demand curve and is parallel to the horizontal axis. C) is downsloping and lies below the demand curve. D) does not exist because the firm is a "price maker."

16. In comparing the demand curve of a pure monopolist with that of a monopolistically competitive firm, we would expect the monopolistic competitor to have a: A) perfectly elastic demand curve and the monopolist to have a perfectly inelastic demand curve. B) generally more elastic demand curve. C) generally less elastic demand curve. D) demand curve whose elasticity coefficient is 1 at all possible prices.

17. In short-run equilibrium, the price charged by the monopolistically competitive firm: A) must be less than ATC. B) must be more than ATC. C) may be either equal to ATC, less than ATC, or more than ATC. D) must be equal to ATC.

18. In long-run equilibrium, the price charged by the monopolistically competitive firm: A) must be less than ATC. B) must be more than ATC. C) may be either equal to ATC, less than ATC, or more than ATC. D) will be equal to ATC.

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19. The monopolistically competitive seller maximizes profit by producing at the point where: A) total revenue is at a maximum. B) average costs are at a minimum. C) marginal revenue equals marginal cost. D) price equals marginal revenue.

Use the following to answer questions 20-21:

20. The monopolistically competitive firm shown in the above figure: A) is in long-run equilibrium. B) might realize an economic profit or a loss, depending on its choice of output level. C) cannot operate profitably, at least in the short run. D) can realize an economic profit.

21. If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above: A) new firms will enter the industry. B) some firms will exit the industry. C) all firms will exit the industry. D) no firms will exit the industry.

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Use the following to answer questions 22-24:

22. Refer to the above diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by: A) diagram a only. B) diagram b only. C) diagram c only. D) both diagrams a and c.

23. Refer to the above diagrams, which pertain to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by: A) diagram a only. B) diagram b only. C) diagram c only. D) both diagrams b and c.

24. Refer to the above diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by: A) diagram a only. B) diagram b only. C) diagram c only. D) both diagrams b and c.

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Use the following to answer questions 25-26:

25. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be: A) above A. B) EF. C) A. D) B.

26. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium output will be: A) greater than E. B) E. C) D. D) C.

Use the following to answer questions 27-28:

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27. In long-run equilibrium, the firm shown in the diagram above will: A) earn a normal profit. B) go bankrupt. C) incur a loss. D) realize an economic profit.

28. In long-run equilibrium, production for the firm shown in the diagram above is: A) greater than would occur under pure competition. B) less efficient than in a purely competitive market. C) more efficient than in a purely competitive market. D) optimally efficient.

29. Which of the following statements is correct? A) Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run. B) Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run. C) In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits. D) Monopolistically competitive firms earn zero economic profits in both the short run and the long run.

30. A significant benefit of monopolistic competition compared with pure competition is: A) less likelihood of X-inefficiency. B) improved resource allocation. C) greater product variety. D) stronger incentives to achieve economies of scale.

31. In long-run equilibrium a monopolistically competitive producer achieves: A) neither productive efficiency nor allocative efficiency. B) both productive efficiency and allocative efficiency. C) productive efficiency, but not allocative efficiency. D) allocative efficiency, but not productive efficiency.

32. In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed? A) pure competition, oligopoly, pure monopoly, monopolistic competition B) oligopoly, pure competition, monopolistic competition, pure monopoly C) monopolistic competition, pure competition, pure monopoly, oligopoly D) pure competition, monopolistic competition, oligopoly, pure monopoly

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33. The term oligopoly indicates: A) a one-firm industry. B) many producers of a differentiated product. C) a few firms producing either a differentiated or a homogeneous product. D) an industry whose four-firm concentration ratio is low.

34. Which of the following is a unique feature of oligopoly? A) mutual interdependence B) advertising expenditures C) product differentiation D) nonprice competition

35. If the four-firm concentration ratio for industry X is 80: A) the four largest firms account for 80 percent of total sales. B) each of the four largest firms accounts for 20 percent of total sales. C) the four largest firms account for 20 percent of total sales. D) the industry is monopolistically competitive.

36. An industry having a four-firm concentration ratio of 85 percent: A) approximates pure competition. B) is monopolistically competitive. C) is a pure monopoly. D) is an oligopoly.

37. If an industry evolves from monopolistic competition to oligopoly, we would expect: A) the four-firm concentration ratio to decrease. B) the four-firm concentration ratio to increase. C) the four-firm concentration ratio to remain the same. D) barriers to entry to weaken.

38. Game theory is best suited to analyze the pricing behavior of: A) pure monopolists. B) pure competitors. C) monopolistic competitors. D) oligopolists.

39. Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its: A) demand curve as being of unit elasticity throughout. B) supply curve as kinked, being steeper below the going price than above. C) demand curve as kinked, being steeper below the going price than above. D) demand curve as kinked, being steeper above the going price than below.

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40. The kinked-demand curve of an oligopolist is based on the assumption that: A) competitors will follow a price cut but ignore a price increase. B) competitors will match both price cuts and price increases. C) competitors will ignore a price cut but follow a price increase. D) there is no product differentiation.

41. The kinked-demand curve describes a situation in which an oligopolist will be: A) interested in maintaining the going price unless there is a rather large change in costs. B) anxious to either increase or lower price. C) anxious to increase price but not to lower price. D) anxious to lower price but not to increase price.

42. If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will: A) increase total revenue by increasing price, but lower total revenue by decreasing price. B) decrease total revenue by either increasing or decreasing price. C) increase total revenue by either increasing or decreasing price. D) increase total revenue by decreasing price, but lower total revenue by increasing price.

43. The kinked-demand curve model of oligopoly is useful in explaining: A) the way that collusion works. B) why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost. C) why oligopolistic prices might change only infrequently. D) the process by which oligopolists merge with one another.

44. The kinked-demand curve model helps to explain price rigidity because: A) there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price. B) demand is inelastic above and elastic below the going price. C) the model assumes firms are engaging in some form of collusion. D) the associated marginal revenue curve is perfectly elastic at the going price.

45. According to the kinked-demand curve model, an oligopolistic firm will produce where: A) average total cost is minimized. B) price equals marginal cost. C) marginal revenue equals marginal cost. D) the demand curve intersects the average total cost curve.

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46. A kink may exist in an oligopolist's demand curve because: A) products are differentiated. B) an abrupt change in price elasticity occurs. C) the firm will ignore price cuts by rivals, but will match their price increases. D) there is a gap in marginal costs.

47. Oligopolistic firms engage in collusion to: A) minimize unit costs of production. B) realize allocative efficiency, that is, the P = MC level of output. C) earn greater profits. D) increase production.

48. If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of: A) a purely competitive producer. B) a pure monopoly. C) a monopolistically competitive producer. D) an industry with a low four-firm concentration ratio.

49. In the United States cartels are: A) quite common in industries that produce nondurable goods. B) in violation of the antitrust laws. C) concentrated in monopolistically competitive industries. D) encouraged by government policy so firms can achieve economies of scale.

50. One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases? A) a rather large number of firms producing a differentiated product B) a very few firms producing a differentiated product C) a rather large number of firms producing a homogeneous product D) a very few firms producing a homogeneous product

51. Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called: A) mutual interdependence. B) pricing the demand curve. C) limit pricing. D) price leadership.

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52. If the several oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of: A) bilateral monopoly. B) pure monopoly. C) monopolistic competition. D) pure competition.

53. A break-down in price leadership leading to successive rounds of price cuts is known as: A) limit pricing. B) a price war. C) tacit pricing D) price discrimination

54. We would expect a cartel to achieve: A) both allocative efficiency and productive efficiency. B) allocative efficiency, but not productive efficiency. C) productive efficiency, but not allocative efficiency. D) neither allocative efficiency nor productive efficiency.

55. Suppose that an industry is characterized by a few firms and price leadership. We would expect that: A) price would equal marginal cost. B) price would equal average total cost. C) price would exceed both marginal cost and average total cost. D) marginal revenue would exceed marginal cost.

56. Product differentiation is present in: A) purely competitive markets only. B) monopolistically competitive markets only. C) oligopolistic markets only. D) both monopolistically competitive and oligopolistic markets.

57. An industry comprised of a very large number of sellers that are producing a homogeneous or standardized product is called: A) monopolistic competition B) oligopoly C) pure monopoly D) pure competition

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58. An industry producing a homogeneous product whose four-firm concentration ratio is 76 percent is an example of: A) monopolistic competition B) oligopoly C) pure monopoly D) pure competition

59. In which of the following market models do individual firms exert no control over product price? A) oligopoly B) pure monopoly C) monopolistic competition D) pure competition

Use the following to answer questions 60-65:

60. The purely competitive market model is portrayed in the above figures by: A) Figure A. B) Figure B. C) both Figures B and D. D) Figure C.

61. Refer to the above figures. Both allocative and productive efficiency are being realized in: A) all four figures. B) Figures B and D. C) Figure D only. D) Figure B only.

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62. Refer to the above figures. Collusion is most likely to occur in the industry(ies) represented by: A) Figure A. B) Figure B. C) Figure C. D) both Figures B and D.

63. Refer to the above figures. Government regulation of price and service is most likely to occur in: A) Figure A only. B) Figure D only. C) both Figures A and C. D) both Figures A and D.

64. Refer to the above figures. Long-run economic profits are most likely to occur in: A) Figures A and B. B) Figure B only. C) Figure D. D) Figures A and C.

65. Refer to the above figures. Industry entry is likely to be most difficult in: A) Figure A. B) Figure B. C) Figure C. D) Figure D.

66. Resource pricing is important because: A) resource prices are a major determinant of money incomes. B) resource prices allocate scarce resources among alternative uses. C) resource prices, along with resource productivity, are important to firms in minimizing their costs. D) of all of the above reasons.

67. Which of the following statements best illustrates the concept of derived demand? A) As income goes up the demand for farm products will increase by a smaller relative amount. B) A decline in the price of margarine will reduce the demand for butter. C) A decline in the demand for shoes will cause the demand for leather to decline. D) When the price of gasoline goes up, the demand for motor oil will decline.

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68. When economists say that the demand for labor is a derived demand, they mean that it is: A) dependent on government expenditures for public goods and services. B) related to the demand for the product or service labor is producing. C) based on the desire of businesses to exploit labor by paying below equilibrium wage rates. D) based on the assumption that workers are trying to maximize their money incomes.

69. The demand for airline pilots results from the demand for air travel. This fact is an example of: A) resource substitutability. B) rising marginal resource cost. C) elasticity of resource demand. D) the derived demand for labor.

70. We say that the demand for labor is a derived demand because: A) labor is a necessary input in the production of every good or service. B) we demand the product that labor helps produce rather than labor service per se. C) the forces of supply and demand do not apply directly to labor markets. D) labor is hired using the MRP = MRC rule.

71. The demand for a resource depends primarily on: A) the supply of that resource. B) the demand for the product or service that it helps produce. C) the price of that input. D) the elasticity of supply of substitute inputs.

72. The MRP curve for labor: A) intersects the firm's labor demand curve from above. B) is the firm's labor demand curve. C) lies below the firm's labor demand curve. D) lies above the firm's labor demand curve.

73. Marginal product is: A) the output of the least skilled worker. B) the amount an additional worker adds to the firm's total output. C) a worker's output multiplied by the price at which each unit can be sold. D) the amount any given worker contributes to the firm's total revenue.

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74. Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is: A) $6. B) $12. C) $36. D) $72.

75. A competitive employer should hire additional labor as long as: A) the MRP exceeds the wage rate. B) the wage rate is less than MP. C) average product exceeds MP. D) MC exceeds MR.

76. A firm will find it profitable to hire workers up to the point at which their: A) marginal resource cost equals their wage rate. B) wage rate equals product price. C) MP is equal to their MRP. D) marginal resource cost is equal to their MRP.

77. Which of the following will not shift the demand curve for labor? A) the use of a larger stock of capital with the labor force B) a change in the wage rate C) an increase in the price of the product which labor is helping to produce D) the adoption of a more efficient method of combining labor and capital in the production process

78. The demand curve for labor would shift leftward as the result of: A) an increase in the price of the product labor is producing. B) a decrease in the productivity of labor. C) an increase in the price of labor. D) a decrease in the price of capital, provided the output effect exceeds the substitution effect.

79. The real wage will rise if the nominal wage: A) falls more rapidly than the general price level. B) increases at the same rate as labor productivity. C) increases more rapidly than the general price level. D) falls more rapidly than the general price level.

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80. Marginal revenue product (MRP) of labor refers to the: A) increase in total revenue resulting from the sale of an additional unit of output. B) amount by which a firm's total resource cost increases when it employs one more unit of labor. C) increase in total revenue resulting from the hire of one more unit of labor. D) price at which additional units of labor can be employed in a monopsonized labor market.

81. Marginal resource cost refers to the: A) increase in total revenue resulting from the sale of the extra output of one more worker. B) price at which additional units of a resource can be hired in an imperfectly competitive resource market. C) increase in total cost resulting from the production of one more unit of output. D) amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

82. If a firm is hiring a certain type of labor under purely competitive conditions: A) its labor demand curve will be perfectly elastic at the market-determined wage rate. B) the labor supply curve will lie above the marginal labor cost curve. C) the labor supply and marginal labor (resource) cost curves will coincide and be upsloping. D) the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic.

83. A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until: A) marginal revenue product is zero. B) marginal revenue product exceeds marginal resource (labor) cost by the greatest amount. C) marginal resource cost is zero. D) marginal revenue product equals marginal resource (labor) cost.

84. A profit-maximizing firm will: A) expand employment if marginal revenue product exceeds marginal resource cost. B) reduce employment if marginal revenue product exceeds marginal resource cost. C) expand employment if marginal revenue product equals marginal resource cost. D) reduce employment if marginal revenue product equals marginal resource cost.

85. A profit-maximizing firm will: A) expand employment if marginal revenue product equals marginal resource cost. B) reduce employment if marginal revenue product equals marginal resource cost. C) reduce employment if marginal revenue product is less than marginal resource cost. D) expand employment if marginal revenue product is less than marginal resource cost.
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86. A firm hiring labor in a perfectly competitive labor market faces a: A) downward sloping labor supply curve and upward sloping labor demand curve. B) upward sloping labor supply curve and downward sloping labor demand curve. C) upward sloping labor supply curve and horizontal labor demand curve. D) horizontal labor supply curve and downward sloping labor demand curve.

87. Which of the following describes a purely competitive labor market? A) MRP = Wage Rate. B) MRP > Wage Rate. C) Wage Rate > MRC. D) Wage Rate < MRC.

88. Which of the following describes a purely competitive labor market? A) MRP < Wage Rate. B) MRP > Wage Rate. C) Wage Rate = MRC. D) Wage Rate < MRC.

Use the following to answer questions 89-92:

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

90. Refer to the above diagrams. The firm: A) has a principal-agent problem. B) has a constant marginal resource cost of $5. C) has a marginal resource cost that exceeds the wage rate for each worker. D) will fail to maximize profits if it hires 5 workers.

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91. Refer to the above diagrams. The firm's total wage cost: A) is 0abc. B) is 0wbc. C) is wab. D) cannot be determined.

92. Refer to the above diagrams. The firm's total revenue: A) is 0abc. B) is 0wbc. C) is wab. D) cannot be determined.

93. The individual firm in a purely competitive labor market faces: A) a perfectly elastic labor supply curve and a downsloping labor demand curve. B) a perfectly elastic labor demand curve and an upsloping labor supply curve. C) labor demand and labor supply curves both of which are perfectly elastic. D) a downsloping labor demand curve and an upsloping labor supply curve.

94. The economic term for a sole employer in a nonunion community is: A) monopsonist. B) monopolist. C) bilateral competitor. D) bilateral monopolist.

95. A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is: A) $9. B) $10. C) $15. D) $21.

96. Suppose the MRP of a firm's twelfth worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm: A) is hiring labor in a competitive labor market at a wage rate of $16. B) is hiring labor in a monopsonistic labor market. C) will find it profitable to hire fewer workers. D) will find it profitable to hire more workers.

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97. Which of the following is most likely to be an example of monopsony? A) the market for fast-food workers in a large summer resort town B) the market for card dealers in Las Vegas. C) the market for major league baseball umpires. D) the market for retail sales clerks in a major city.

98. A monopsonist's wage cost in hiring an additional worker is the: A) worker's wage rate. B) worker's wage rate plus the wage increases paid to all workers already employed. C) worker's wage rate adjusted for the lower price that must be charged for the extra output. D) marginal wage cost less the wage rate.

99. A monopsonistic employer: A) has a perfectly elastic labor supply curve. B) is necessarily a monopolist in the product market. C) confronts a marginal resource (labor) cost that is greater than the wage rate. D) confronts a marginal resource (labor) cost that is less than the wage rate.

100. Other things equal, the monopsonistic employer will pay a: A) lower wage rate and hire fewer workers than will a purely competitive employer. B) higher wage rate but hire fewer workers than will a purely competitive employer. C) lower wage rate but hire a larger number of workers than will a purely competitive employer. D) higher wage rate and hire a larger number of workers than will a purely competitive employer.

101. A monopsonist pays a wage rate that is: A) less than the MRP of labor. B) equal to the firm's marginal resource (labor) cost. C) equal to the MRP of labor. D) greater than the MRP of labor.

102. If an employer is a monopsonist: A) its MRC curve will lie below its labor demand curve. B) its labor supply and MRC curves will coincide and be perfectly elastic. C) it must also be a monopolist in the product market. D) its labor supply curve will be upsloping and the MRC curve will lie above it.

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Use the following to answer questions 103-105:

103. Refer to the above diagram. The MRC curve lies above the labor supply curve because: A) any number of workers can be hired at the going equilibrium wage rate. B) the firm must lower product price to increase its sales. C) the higher wage needed to attract additional workers must also be paid to the workers already employed. D) there is an inverse relationship between wage rate and the amount of labor employed.

104. Refer to the above diagram. An industrial (inclusive) union could increase employment in this labor market: A) by negotiating any wage rate between W1 and W4. B) by negotiating a wage rate greater than W4. C) only if it accepted a wage rate below W1. D) only if it could shift the labor demand curve rightward.

105. Refer to the above diagram. An industrial union could maximize employment by negotiating a wage rate of: A) W4. B) W3. C) W2. D) W1. 106. A craft union attempts to increase wage rates by: A) equating the MRP and the MRC curves. B) shifting the labor supply curve to the left. C) shifting the labor supply curve to the right. D) shifting the MRP curve to the right.

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107. Occupational licensing has much the same effect as: A) inclusive unionism. B) exclusive unionism. C) bilateral monopoly. D) monopsony.

108. Occupational licensing can best be understood in terms of: A) the inclusive unionism model. B) the exclusive unionism model. C) the bilateral monopoly model. D) the monopsony model.

109. If an exclusive union is successful in restricting the supply of labor, the: A) wage rate will rise. B) the quantity of labor demanded will rise: C) the number of job opportunities in the firm or industry will increase. D) the demand for labor curve will shift leftward.

110. Critics of minimum-wage legislation argue that it: A) keeps inefficient producers in business. B) reduces employment. C) undermines incentives to work. D) is deflationary.

111. Many economists are critical of the minimum wage because they believe that it: A) hurts the efforts of labor unions. B) reduces the number of available job opportunities. C) conflicts with policies designed to equalize the distribution of income. D) causes labor shortages in affected markets.

112. Compensating differences in wages: A) compensate workers for differences in their human capital. B) are wage differences that compensate for differences in the desirability of jobs. C) describe the tendency for the wages of all occupations to adjust to the median level. D) do not exist if jobs have different nonmonetary characteristics.

113. Compensating differences in wages pay workers for: A) differences in worker training and skills. B) differences in the nonmonetary characteristics of jobs. C) geographic immobilities. D) discrimination in hiring and firing.

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114. The principal-agent problem arises primarily because: A) principals and agents share a common interest, leading to free-rider problems. B) principals and agents are in an adversarial role, sharing no common interests. C) principals pursue some of their own objectives that may conflict with the objectives of the agents. D) agents pursue some of their own objectives that may conflict with the objectives of the principals.

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Answer Key
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. D A A A B D B C C C A D A C C B C D C C B C B A C C A B C C A D C A A D B D C A A B C A C B C B
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49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98.

B D C B B D C D D B D B D C A D A D C B D B B B B C A D B B C C D D D A C D A C C B B A A A C D C B
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99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114.

C A A D C A C B B B A B B B B D

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