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A favourable supply shock, such as a fall in the price of oil, would


A) cause firms to demand less labour at any given real wage.
B) cause the labour demand curve to shift to the left.
C) increase the marginal product of labour.
D) decrease the real wage.

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Which of the following statements is true?


A) The marginal product of capital is positive as long as the production function's slope is positive.
B) The marginal product of capital is positive as long as the production function's slope is zero.
C) The marginal product of capital is negative as long as the production function's slope is positive.
D) The marginal product of capital is negative as long as the production function's slope is zero.

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The less permanent an employee perceives an increase in her real wages to be,


A) the smaller the income effect is and the more likely it is that the quantity of labour supplied will be increased.
B) the smaller the income effect is and the more likely it is that the quantity of labour supplied will be reduced.
C) the smaller the substitution effect is and the more likely it is that the quantity of labour supplied will be increased.
D) the smaller the substitution effect is and the more likely it is that the quantity of labour supplied will be reduced.

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Suppose the banking industry were to fail, leaving the federal government (through its deposit guarantee programs) to pay for trillions of dollars in losses: they do so by imposing a tax of 50% on all individuals' wealth. What happens to current employment and the real wage rate?


A) Both employment and the real wage rate would increase.
B) Both employment and the real wage rate would decrease.
C) Employment would increase and the real wage would decrease.
D) Employment would decrease and the real wage would increase.

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Suppose a firm's hourly marginal product of labour is given by MPN = A(200 - N). a. If A = .2 and the real wage is $10 per hour, how much labour will the firm want to hire? b. Suppose the real wage rate rises to $20 per hour. How much labour will the firm want to hire? c. With the real wage rate at $10 per hour, how much labour will the firm want to hire if A rises to .5?

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a. The firm will hire labour such that w...

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An adverse supply shock, such as a reduced supply of raw materials, would


A) increase the marginal product of labour.
B) decrease the marginal product of labour.
C) decrease the marginal product of capital, but have no effect on the marginal product of labour.
D) not affect the marginal product of labour.

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A decrease in the real wage would result in a


A) movement along the labour demand curve, causing an increase in the number of workers hired by the firm.
B) shift of the labour demand curve, causing an increase in the number of workers hired by the firm.
C) movement along the labour demand curve, causing a decrease in the number of workers hired by the firm.
D) shift of the labour demand curve, causing a decrease in the number of workers hired by the firm.

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Suppose the economy's production function is Y = AK0.3N0.7. When K = 1000, N = 50, and A = 15, what is Y?


A) 1842
B) 6106
C) 750,000
D) 123

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How would each of the following events affect Cheryl Shirker's supply of labour? a. Cheryl's firm announces a reorganization plan in which she will get a big promotion and raise in six months. b. Cheryl's speculative investment in plutonium futures pays off big, netting her a profit of $300 thousand. c. Cheryl's father, who had planned to leave her a large bequest, must spend all his wealth on medical bills after a prolonged illness.

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a. The higher future real wage...

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An increase in the real wage would result in a


A) movement along the labour demand curve, causing an increase in the number of workers hired by the firm.
B) shift of the labour demand curve, causing an increase in the number of workers hired by the firm.
C) movement along the labour demand curve, causing a decrease in the number of workers hired by the firm.
D) shift of the labour demand curve, causing a decrease in the number of workers hired by the firm.

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What is the employment ratio (in percentage terms) if there are 17 million people employed, 2.5 million people unemployed, and 3.5 million not in the labour force?


A) 74%
B) 83%
C) 87%
D) 100%

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Parliament has just passed a law allowing more immigration of young workers into Canada. How would you expect this to affect the nation's labour supply curve?


A) The labour supply curve would shift to the right.
B) The labour supply curve would shift to the left.
C) The labour supply curve would be unaffected.
D) The labour demand curve would shift to the right.

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An individual's labour supply curve might shift to the right because


A) an increase in the future real wage leads to a decrease in the amount of labour supplied.
B) a decrease in wealth leads to an increase in the amount of labour supplied.
C) a decrease in the future real wage leads to a decrease in the amount of labour supplied.
D) an increase in wealth leads to a decrease in the amount of labour supplied.

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A profit-maximizing firm would hire more employees if


A) marginal product of labour exceeds real wage.
B) marginal product of labour is less than real wage.
C) marginal revenue product of labour is less than real wage.
D) marginal revenue product of labour is less than nominal wage.

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Take an economy where in 2001 real GDP is 4861.4, the capital stock is 13,806.2 and employment is 118.4 (in millions of workers). In 2002 the numbers were: real GDP 4986.3, capital stock 14,040.8, employment 119.2. Suppose the production function in both years is Y = AK0.25N0.75. a. Calculate total factor productivity for 2001 and 2002. b. How much did total factor productivity grow from 2001 to 2002? c. Calculate the percent increase in real output between 2001 and 2002. d. Suppose tax incentives had raised the capital stock in 2002, making it 10% higher, at 15,444.9. If employment didn't change, what would have been the percent increase in real output between 2001 and 2002? e. Instead of the increase in the capital stock in part d, suppose employment was 10% higher in 2002, making it 131.1. With the capital stock fixed at 14,040.8, what would have been the increase in real output between 2001 and 2002?

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a. 2001: 12.49
2002: 12.70
b. ...

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Your boss has told you that because of a decrease in the demand for the designer baby food your firm produces, he will have to cut everyone's salary next year to avoid layoffs. In response to this news you would


A) increase your labour supply because the income effect would be equal to the substitution effect.
B) decrease your labour supply because the substitution effect would be stronger than the income effect.
C) increase your labour supply because there would be an income effect, but no substitution effect.
D) decrease your labour supply because there would be a substitution effect, but no income effect.

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The supply of labour depends primarily on


A) the marginal productivity of workers in the economy.
B) the quantity of capital that workers can work with.
C) the amount of human capital that workers can supply on the job.
D) the trade-off between labour income and leisure.

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The recent rise in oil price most likely will not cause recession in Canada, because


A) Canadian economy has shifted away from energy-intensive industries into knowledge-based industries.
B) in response to the earlier oil price shocks, Canadian firms have become significantly more energy efficient.
C) Canada, as a producer of oil, may benefit from the oil price shock.
D) all of the above.

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Under certain circumstances, the production function Y = AF(K.N) can be rewritten as Y = ANF(K/N) . In this case, suppose that both K and N double. What happens to output?


A) It remains unchanged.
B) It is reduced by one half.
C) It is increased by a factor of 4.
D) It doubles.

Correct Answer

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An individual's labour supply curve slopes upward because


A) an increase in the future real wage leads to an increase in the amount of labour supplied.
B) an increase in the current real wage leads to a decrease in the amount of labour supplied.
C) an increase in the future real wage leads to a decrease in the amount of labour supplied.
D) an increase in the current real wage leads to an increase in the amount of labour supplied.

Correct Answer

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