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Multiple Choice Questions-Microeconomics

2. Critics of the minimum wage argue that as an antipoverty device it is "poorly targeted." By this they mean that:
a. the minimum wage only applies to a small percentage of the labor force.
b. many who benefit from the minimum wage are not poor.
c. the government has been unable to enforce the minimum wage.
d. the average level of wages in the economy is considerably higher than the minimum wage.

7. A change in the price of an input will usually:
a. shift a firm's cost curves.
b. cause the firm to alter the combination of inputs it employs.
c. induce the firm to change its level of output.
d. do all of the above.

8. If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the:
a. marginal revenue product of each worker is $25.
b. marginal revenue product of the first worker is $20.
c. marginal revenue product of the second worker is $20.
d. data given do not permit the determination of the marginal revenue product of either worker.
e. lower wage rate but hire a larger number of workers than will a purely competitive employer.
f. higher wage rate and hire a larger number of workers than will a purely competitive employer

14. Other things equal, we would expect the labor demand curve of a monopolistic seller to:
a. decline more rapidly than that of a purely competitive seller.
b. decline less rapidly than that of a purely competitive seller.
c. decline at the same rate as that of a purely competitive seller.
d. be more elastic than that of a purely competitive seller.

18. more units of a resource if:
a. the price of the resource increases.
b. the productivity of the resource increases.
c. the price of the good being produced declines.
d. the price of a complementary resource rises.

19. Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they do this is to:
a. restrict the supply of construction workers.
b. increase the elasticity of demand for construction workers.
c. increase the demand for construction workers.
d. increase the price of substitute inputs.

27. If MPa/Pa = MPb/Pb and MRPa/Pa = MRPb/Pb>1, this firm is:
a. producing its output with the least costly combination of resources, but is not producing the profit-maximizing output.
b. maximizing profits, but failing to minimize costs.
c. neither maximizing profits nor minimizing costs.
d. combining resources a and b so as to minimize costs and maximize profits.

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2. Critics of the minimum wage argue that as an antipoverty device it is "poorly targeted." By this they mean that: (1 point)
a.
the minimum wage only applies to a small percentage of the labor force.
b.
many who benefit from the minimum wage are not poor.
c.
the government has been unable to enforce the minimum wage.
d.
the average level of wages in the economy is considerably higher than the minimum wage.
Answer:
b. many who benefit from the minimum wage are not poor.

Some critics of minimum wage policy argue that it is poorly targeted. By this they mean that it fails to reach low-income, or poor, families. This would imply that many who benefit from the minimum wage are not poor.

7. A change in the price of an input will usually: (1 point)
a.
shift a firm's cost curves.
b.
cause the firm to alter the combination of inputs it employs.
c.
induce the firm to change its level of output.
d.
do all of the above.

Answer: d) do all of the above.
A change in the price of an input shifts a firm's cost curves. A rise in price shifts the curves upwards; a fall in price shifts the curves downwards. Thus a is correct.
A change in the cost curve will induce the firm to change its level of output. Thus c is correct.
The marginal rate of substitution between two factors of production is equal to the ratios of their marginal products ie MPa/ MPb
For cost minimization MPa/Pa = MPb/Pb

or MPa/ MPb = Pa /Pb

i.e. price ratio = Marginal product ratio
If the price of one input changes with other things remaining the same then it will cause the firm to alter ...

Solution Summary

The solution discusses multiple choice questions on minimum wage, cost curve, marginal revenue, labor demand curve, monopolistic seller, lobbying, maximizing profits etc.

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