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Intermediate Quiz
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1
The argument that technological change creates jobs assumes that:
A)The factor substitution effect outweighs the factor output effect
B)The factor output effect outweighs the factor substitution effect
C)The real wage rate increases more quickly than the nominal wage rate
D)The level of human capital in the economy is increasing
2
The world’s supply of oil is:
A)Perfectly inelastic at all prices
B)Elastic at prices up to a certain level after which becomes perfectly inelastic
C)Perfectly elastic
D)Inelastic at prices up to a certain level after which becomes perfectly elastic
3
What is the most likely consequence if a monopsonist hires more labour?
A)A decrease in the wage rate
B)An increase in the wage rate
C)A wage rate that neither increases nor decreases
D)A rise in the marginal product of labour
4
Which of the following would be most advantageous to a trade union or professional association?
A)The supply of labour is restricted.
B)The demand for labour is decreased.
C)The supply of labour increases by more than the demand increases.
D)The demand for labour increases by more than the supply increases.
5
All of the following statements, except one, are correct concerning the labour market for high-profile professional athletes. Which is the exception?
A)The supply is inelastic.
B)The wage rate is demand driven.
C)There is an element of economic rent in their pay.
D)There are no transfer earnings involved in their pay.
6
What do most economists think is the socially optimum extraction rate of a natural resource, such as oil?
A)One that equals the MRP of the resource
B)A rate that ensures that the price of oil increases at the same rate as the interest rate
C)One that is less than the rate of discovery of new sources
D)One that is less than 2 percent of known reserves so as to guarantee at least 50 years’ supply at all times
7
If the MPK/PK is greater than the MPL/PL, which of the following is correct?
A)The firm should substitute labour for capital.
B)The firm should substitute capital for labour.
C)The firm should raise the wage rate of its labour.
D)The firm should decrease its output.
8
Graphically, which of the following would cause a shift to the right in the demand curve for a factor?
A)A decrease in the price of that factor
B)An increase in the price of a substitute factor
C)A decrease in the price of the product produced by the factor
D)An increase in the marginal product of a substitute factor
9
If most people’s desire for leisure increases, which one of the following statements is correct?
A)The wage rate would fall, and the quantity of products produced would rise.
B)Both the wage rate and the quantity of products produced would fall.
C)The wage rate would fall, and the demand for labour would increase.
D)The wage rate would rise, and the quantity of products produced would fall.
E)Both the wage rate and the quantity of products produced would rise.





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