Macroeconomics,6e(Abeletal.

)
Chapter3 Productivity,Output,andEmployment

3.1HowMuchDoestheEconomyProduce?TheProductionFunction

1)Amathematicalexpressionrelatingtheamountofoutputproducedtoquantitiesofcapitalandlaborutilized
isthe
A)realinterestrate.
B)productivityrelation.
C)productionfunction.
D)marginalproduct.
Answer:C
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

2)IntheproductionfunctionY=AF(K,N),Ais________,Kis________,andNis________.
A)totalfactorproductivity;thecapitalstock;thenumberofworkersemployed
B)totalfactorproductivity;investment;thenumberofworkersemployed
C)theproductivityoflabor;thecapitalstock;thesizeofthelaborforce
D)theproductivityoflabor;investment;thesizeofthelaborforce
Answer:A
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

3)IntheproductionfunctionY=AF(K,N),totalfactorproductivityis
A)Y/A.
B)A.
C)K/N.
D)Y/N.
Answer:B
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

9)Thetwomaincharacteristicsoftheproductionfunctionare
A)itslopesdownwardfromlefttoright,andtheslopebecomesflatterastheinputincreases.
B)itslopesupwardfromlefttoright,andtheslopebecomessteeperastheinputincreases.
C)itslopesupwardfromlefttoright,andtheslopebecomesflatterastheinputincreases.
D)itslopesdownwardfromlefttoright,andtheslopebecomessteeperastheinputincreases.
Answer:C
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition


11)Themarginalproductofcapitalistheincreasein
A)capitalneededtoproduceonemoreunitofoutput.
B)outputfromaone-unitincreaseincapital.
C)laborneededtoaccompanyaone-unitincreaseincapital.
D)outputfromaone-dollarincreaseincapital.

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 Answer:B
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

13)Thefactthattheproductionfunctionrelatingoutputtocapitalbecomesflatteraswemovefromlefttoright
meansthat
A)themarginalproductoflaborispositive.
B)themarginalproductofcapitalispositive.
C)thereisdiminishingmarginalproductivityoflabor.
D)thereisdiminishingmarginalproductivityofcapital.
Answer:D
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

14)Themarginalproductoflabor
A)ismeasuredbytheslopeoftheproductionfunctionrelatingcapitaltoemployment.
B)islargerwhenthelaborsupplyisrelativelylarger.
C)issmallerwhenthelaborsupplyisrelativelysmaller.
D)decreasesasthenumberofworkersalreadyemployedincreases.
Answer:D
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

16)Anadversesupplyshockwould
A)shifttheproductionfunctionupanddecreasemarginalproductsateverylevelofemployment.
B)shifttheproductionfunctiondownanddecreasemarginalproductsateverylevelofemployment.
C)shifttheproductionfunctiondownandincreasemarginalproductsateverylevelofemployment.
D)shifttheproductionfunctionupandincreasemarginalproductsateverylevelofemployment.
Answer:B
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

17)AninventionthatspeedsuptheInternetisanexampleof
A)anincomeeffect.
B)anincreaseinlabor.
C)asubstitutioneffect.
D)asupplyshock.
Answer:D
Diff:1
Topic:Section3.1
QuestionStatus:PreviousEdition

18)AsupplyshockthatreducestotalfactorproductivitydirectlyaffectswhichtermintheproductionfunctionY
=AF(K,N)?
A)A
B)F
C)K
D)N
Answer:A
Diff:1
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 Topic:Section3.1
QuestionStatus:PreviousEdition

3.2TheDemandforLabor

1)Economistsoftentreattheeconomyscapitalstockasfixedbecause
A)laborisamoreimportantfactorofproductionthancapital,soeconomistsignorecapital.
B)ittakesalongtimefornewinvestmentandthescrappingofoldcapitaltoaffecttheoverallquantityof
capital.
C)thereisverylittlecapitalintheeconomycomparedwiththeamountoflabor.
D)unlesstheinterestratechanges,thecapitalstockdoesntchange.
Answer:B
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition


3)Anincreaseintherealwageratewillcause
A)thelabordemandcurvetoshifttotheright.
B)thelabordemandcurvetoshifttotheleft.
C)thequantityoflabordemandedtorise.
D)amovementalongthelabordemandcurve.
Answer:D
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition

4)Adecreaseintherealwagewouldresultina
A)movementalongthelabordemandcurve,causinganincreaseinthenumberofworkershiredbythe
firm.
B)shiftofthelabordemandcurve,causinganincreaseinthenumberofworkershiredbythefirm.
C)movementalongthelabordemandcurve,causingadecreaseinthenumberofworkershiredbythe
firm.
D)shiftofthelabordemandcurve,causingadecreaseinthenumberofworkershiredbythefirm.
Answer:A
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition


7)Whattwofactorsshouldyouequateindecidinghowmanyworkerstoemploy?
A)Themarginalproductoflaborandthemarginalproductofcapital
B)Themarginalproductoflaborandtherealwagerate
C)Themarginalproductoflaborandtherealinterestrate
D)Themarginalproductofcapitalandtherealwagerate
Answer:B
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition

8)Onereasonthatfirmshirelaboratthepointwherew=MPNis
A)ifw<MPN,thecost(w)ofhiringadditionalworkersexceedsthebenefits(MPN)ofhiringthem,so
theyshouldhirefewerworkers.
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 B)ifw>MPN,thecost(w)ofhiringadditionalworkersislessthanthebenefits(MPN)ofhiringthem,so
theyshouldhiremoreworkers.
C)ifw<MPN,thecost(w)ofhiringadditionalworkersequalsthebenefits(MPN)ofhiringthem,sothey
havetherightnumberofworkers.
D)ifw>MPN,thecost(w)ofhiringadditionalworkersexceedsthebenefits(MPN)ofhiringthem,so
theyshouldhirefewerworkers.
Answer:D
Diff:2
Topic:Section3.2
QuestionStatus:PreviousEdition

9)Firmshirelaboratthepointwherethe
A)nominalwagerateequalsthemarginalproductoflabor.
B)realwagerateequalsthemarginalrevenueproductoflabor.
C)nominalwagerateequalsthemarginalrevenueproductoflabor.
D)realwagerateequalsthemarginalrevenueproductofcapital.
Answer:C
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition

10)TheUpstartCompanyhasthefollowingproductionfunction.

NumberofWorkersNumberofCasesProduced
0 0
1 10
2 19
3 26
4 31
5 34

Ifthecompanyhires4workers,whichofthefollowingcouldbetherealwagerate?
A)2
B)5
C)6
D)8
Answer:B
Diff:2
Topic:Section3.2
QuestionStatus:PreviousEdition


12)Yourbosswantstoknowifyoushouldlayoffanyworkers.Youanswerthatyoushouldlayoffworkersif
the
A)marginalrevenueproductoflaborisgreaterthanthenominalwagerate.
B)marginalproductoflaborisgreaterthanorequaltotherealwagerate.
C)marginalrevenueproductoflaborisequaltothenominalwagerate.
D)marginalproductoflaborislessthantherealwagerate.
Answer:D
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition

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 15)Anadversesupplyshock,suchasareducedsupplyofrawmaterials,would
A)increasethemarginalproductoflabor.
B)decreasethemarginalproductoflabor.
C)decreasethemarginalproductofcapital,buthavenoeffectonthemarginalproductoflabor.
D)notaffectthemarginalproductoflabor.
Answer:B
Diff:1
Topic:Section3.2
QuestionStatus:PreviousEdition

3.3TheSupplyofLabor

1)Theaggregatesupplyoflaboristhe
A)totalamountoftimeapersonworksoverhisorherlifetime.
B)totalamountoftimeapersonspendsinthelaborforceoverhisorherlifetime.
C)unemploymentrate.
D)sumofthelaborsuppliedbyeveryoneintheeconomy.
Answer:D
Diff:1
Topic:Section3.3
QuestionStatus:PreviousEdition

2)Thetendencyofworkerstosupplymorelaborinresponsetoalargerrewardforworkingiscalledthe
________ofahigherrealwageonthequantityoflaborsupplied.
A)homogeneouslaborsupplyeffect
B)negativecorrelationeffect
C)incomeeffect
D)substitutioneffect
Answer:D
Diff:1
Topic:Section3.3
QuestionStatus:New

3)Theincomeeffectofahigherrealwageonthequantityoflaborsupplyisthe
A)ideathatworkersfeelpsychologicallywealthierwhenwagesarehigher,sotheyworkmore.
B)effectthatincomemustrisewhenwagesrise.
C)tendencyofworkerstosupplymorelaborinresponsetobecomingwealthier.
D)tendencyofworkerstosupplylesslaborinresponsetobecomingwealthier.
Answer:D
Diff:1
Topic:Section3.3
QuestionStatus:New

4)IfJeffswageraterises,hedecidestoworkfewerhours.Fromthis,wecaninferthat
A)forJeff,thesubstitutioneffectisgreaterthantheincomeeffect.
B)forJeff,thesubstitutioneffectisequaltotheincomeeffect.
C)forJeff,thesubstitutioneffectislessthantheincomeeffect.
D)Jeffisanitwit.
Answer:C
Diff:2
Topic:Section3.3
QuestionStatus:PreviousEdition

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5)Asaresultofthesuperbeconomicsessaythatyouwroteduringthisquarter,youwontheAdamSmithprize
of$100.Thereceiptofthesefundswouldbeanexampleof
A)thesubstitutioneffectbeingstrongerthantheincomeeffect.
B)theincomeeffectbeingstrongerthanthesubstitutioneffect.
C)apureincomeeffect.
D)apuresubstitutioneffect.
Answer:C
Diff:2
Topic:Section3.3
QuestionStatus:PreviousEdition

6)Apersonismorelikelytoincreaselaborsupplyinresponsetoanincreaseintherealwage,the________is
theincomeeffectandthe________isthesubstitutioneffect.
A)larger;larger
B)larger;smaller
C)smaller;larger
D)smaller;smaller
Answer:C
Diff:2
Topic:Section3.3
QuestionStatus:PreviousEdition

7)Apermanentincreaseintherealwageratehasa________incomeeffectonlaborsupplythanatemporary
increaseintherealwage,solaborsupplyis________withapermanentwageincreasethanforatemporary
wageincrease.
A)larger;more
B)larger;less
C)smaller;more
D)smaller;less
Answer:B
Diff:2
Topic:Section3.3
QuestionStatus:PreviousEdition


3.4LaborMarketEquilibrium

5)AtremendousfloodalongtheMississippiRiverdestroysthousandsoffactories,reducingthenationscapital
stockby5%.Whathappenstocurrentemploymentandtherealwagerate?
A)Bothemploymentandtherealwageratewouldincrease.
B)Bothemploymentandtherealwageratewoulddecrease.
C)Employmentwouldincreaseandtherealwagewoulddecrease.
D)Employmentwoulddecreaseandtherealwagewouldincrease.
Answer:B
Diff:2
Topic:Section3.4
QuestionStatus:PreviousEdition

6)Asharpincreaseinstockpricesmakespeoplemuchwealthier.Ifthemaineffectofthisincreasedwealthis
feltonlaborsupply,whathappenstocurrentemploymentandtherealwagerate?
A)Bothemploymentandtherealwageratewouldincrease.
B)Bothemploymentandtherealwageratewoulddecrease.
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 C)Employmentwouldincreaseandtherealwagewoulddecrease.
D)Employmentwoulddecreaseandtherealwagewouldincrease.
Answer:D
Diff:2
Topic:Section3.4
QuestionStatus:PreviousEdition

7)Anadverseoil-priceshockreduceslabordemand.Whathappenstocurrentemploymentandtherealwage
rate?
A)Bothemploymentandtherealwageratewouldincrease.
B)Bothemploymentandtherealwageratewoulddecrease.
C)Employmentwouldincreaseandtherealwagewoulddecrease.
D)Employmentwoulddecreaseandtherealwagewouldincrease.
Answer:B
Diff:2
Topic:Section3.4
QuestionStatus:PreviousEdition



9)Thegovernmentannouncesataxincreaseonworkerswagestotakeeffectinthefuture.Whathappensto
currentemploymentandtherealwagerate?
A)Bothemploymentandtherealwageratewouldincrease.
B)Bothemploymentandtherealwageratewoulddecrease.
C)Employmentwouldincreaseandtherealwagewoulddecrease.
D)Employmentwoulddecreaseandtherealwagewouldincrease.
Answer:C
Diff:2
Topic:Section3.4
QuestionStatus:New

10)Theequilibriumlevelofemployment,achievedafterthecompleteadjustmentofwagesandprices,isknown
asthe
A)zero-unemploymentlevelofemployment.
B)naturalstate.
C)invisiblehandshake.
D)full-employmentlevelofemployment.
Answer:D
Diff:1
Topic:Section3.4
QuestionStatus:PreviousEdition


3.5Unemployment

3)The________isthenumberofunemployeddividedbythelaborforceandthe________isthenumberof
employeddividedbytheadultpopulation.
A)unemploymentrate;employmentrate
B)unemploymentrate;employmentratio
C)unemploymentratio;participationrate
D)discouragedworkerratio;employmentrate
Answer:B
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 Diff:1
Topic:Section3.5
QuestionStatus:PreviousEdition


10)Frictionalunemploymentariseswhen
A)unskilledorlow-skilledworkersfinditdifficulttoobtaindesirable,
long-termjobs.
B)labormustbereallocatedfromindustriesthatareshrinkingtoareasthataregrowing.
C)workersmustsearchforsuitablejobsandfirmsmustsearchforsuitableworkers.
D)outputandemploymentarebelowfull-employmentlevels.
Answer:C
Diff:1
Topic:Section3.5
QuestionStatus:PreviousEdition

11)Cyclicalunemploymentariseswhen
A)unskilledorlow-skilledworkersfinditdifficulttoobtaindesirable,
long-termjobs.
B)labormustbereallocatedfromindustriesthatareshrinkingtoareasthataregrowing.
C)workersmustsearchforsuitablejobsandfirmsmustsearchforsuitableworkers.
D)outputandemploymentarebelowfull-employmentlevels.
Answer:D
Diff:1
Topic:Section3.5
QuestionStatus:PreviousEdition

12)Cyclicalunemploymentiscausedby
A)peopleenteringthelaborforcetosearchforjobs.
B)technologicalprogress,whichcausessomeindustriestoexpandemploymentandotherstoreduce
employment.
C)reducinginternationaltradebarriers,whichcausessomeindustriestoexpandemploymentandothers
toreduceemployment.
D)businesscyclefluctuations
Answer:D
Diff:1
Topic:Section3.5
QuestionStatus:New

3.6RelatingOutputandUnemployment:OkunsLaw

1)AccordingtoOkunslaw,anincreaseintheunemploymentratewillcause________inthelevelof
employmentand________inthelevelofoutput.
A)anincrease;anincrease
B)anincrease;adecrease
C)adecrease;anincrease
D)adecrease;adecrease
Answer:D
Diff:1
Topic:Section3.6
QuestionStatus:PreviousEdition