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ECO 365T Wk 3 – Apply: Elasticity and Consumer Choice Homework
Review the Week 3 Elasticity and Consumer Choice Quiz in preparation for this assignment.
Complete the Week 3 Elasticity and Consumer Choice Homework in McGraw-Hill Connect®. These are randomized questions.
Note: You have only one attempt available to complete assignments. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after the due date.
Which of the following scenarios would lead to a decrease in the demand for labor at Stephanie’s earring shop?
Labor productivity increases.
The cost of capital (a substitute for labor) decreases.
The price of earrings increases.
The wage rate increases.
Which of the following scenarios would lead to an increase in the demand for mixers at Henry’s bread bakery?
The market price of mixers decreases.
The productivity of mixers decreases.
The wage rate of labor (a substitute for capital) decreases.
The market price of bread increases.
Henry bakes loaves of bread, which he sells for $4 each. He is considering purchasing additional mixers (capital) for his bakery. Each additional mixer has the productivity described below. Fill in the “Marginal Product,” “Total Revenue,” and “Marginal Revenue Product” columns. Assume this is a perfectly competitive market.
Instructions: Enter your answers as a whole number.
Henry’s Bakery and Revenues
Capital (mixers) Total Product (loaves of bread) Marginal Product (loaves of bread) Price (dollars) Total Revenue (dollars) Marginal Revenue Product (dollars)
0 0 — $4 $0 —
1 8 8 4 32 $ 32
2 20 12 4 80 48
3 28 8 4 112 32
4 34 6 4 136 24
5 38 4 4 152 16
6 40 2 4 160 8
7 41 1 4 164 4
The marginal revenue product schedule is
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upsloping.
the same whether the firm is selling in a purely competitive or imperfectly competitive market.
the firm’s resource demand schedule.
the firm’s resource supply schedule.
Marginal product is
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the output of the least skilled worker.
the amount an additional worker adds to the firm’s total output.
the amount any given worker contributes to the firm’s total revenue.
a worker’s output multiplied by the price at which each unit can be sold.
The change in a firm’s total revenue that results from hiring an additional worker is measured by the
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marginal product.
average revenue product.
marginal revenue.
marginal revenue product.
Marginal revenue product measures the
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increase in total revenue resulting from the production of one more unit of a product.
increase in total resource cost resulting from the hire of one extra unit of a resource.
amount by which the extra production of one more worker increases a firm’s total revenue.
decline in product price that a firm must accept to sell the extra output of one more worker.
If the marginal revenue product (MRP) of labor is less than the wage rate
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more labor should be employed.
the firm is making profits.
the firm is incurring losses.
less labor should be employed
A profit-maximizing firm employs resources to the point where
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MRP = MRC.
resource price equals product price.
MRC = MP.
MP = product price.
The following is a total-product schedule for a resource. Assume that the quantities of other resources the firm employs remain constant.
Units of Resource Total Product
1 24
2 42
3 54
4 64
5 72
If the firm’s product sells for a constant $2 and the price of the resource is a constant $16, the firm will employ how many units of the resource?
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2
3
4
5
Marginal resource cost is
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the increase in total resource cost associated with the production of one more unit of output.
total resource cost divided by the number of inputs employed.
the change in total revenue associated with the employment of one more unit of the resource.
the increase in total resource cost associated with the hire of one more unit of the resource.
Daphne has received job offers in six different cities across the United States. The table below shows the nominal wage she is being offered in each city and the average monthly rent for an apartment in each city.
- Calculate Daphne’s real wage in terms of how many months of rent her wage could purchase in each city and complete the “Real Wage” column in the table below.
Instructions: Enter your answers rounded to the nearest whole number.
Daphne’s Nominal and Real Wages
City Nominal Salary (dollars) Monthly Rent (dollars) Real Wage (months of rent)
Atlanta $50,000 $1,200 42 ± 1%
Austin 50,500 1,368 37 ± 1%
Chicago 65,000 1,920 34 ± 1%
Lincoln 45,000 840 54 ± 1%
Madison 48,000 1,164 41 ± 1%
New York 95,000 3,204 30 ± 1%
- In which city is the nominal wage highest? New York
- In which city is the real wage highest? Lincoln
Which of the following scenarios would result in an increase in the wage rate of solar panel installers and a decrease in the quantity of solar panel installers employed in Billy’s town?
A decrease in people’s income decreases the demand for solar panels.
A solar panel company shuts down in another town and solar panel installers try to find jobs in Billy’s town.
Wages of solar panel installers increase in another town and attract workers away from Billy’s town.
An increase in the demand for solar panels raises the price of each installation.
The marginal revenue product of an input tends to decrease as
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more of the input is used.
productivity increases.
the price of the input decreases.
the price of output increases.
Rising wages can be explained by which of the following?
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Labor demand increases more rapidly than labor supply.
Labor supply is highly sensitive to changes in labor productivity.
Labor supply increases more rapidly than labor demand.
Labor demand is stable and predictable.
Suppose two workers can harvest $46 and three workers can harvest $60 worth of apples per day. On the basis of this information we can say that the
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marginal revenue product of each of the first two workers is $23.
marginal revenue product of the third worker is $14.
marginal product of each of the first two workers is 23.
third worker should not be hired.
A characteristic of a competitive labor market is
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an overall reduction in employment due to firms having market power.
an equilibrium wage and quantity supplied.
high levels of unemployment.
labor supply changing as the wage changes.
Labor productivity and the price of the good being produced are two variables that contribute to
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the demand for the product.
the wage rate.
the marginal product.
whether or not a union forms.
As the real wage decreases, the quantity of labor demanded ______ and the quantity of labor supplied _______.
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increases; decreases
decreases; increases
increases; increases
decreases; decreases
An inclusive union
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organizes a wide range of workers in an industry to gain bargaining power.
is most effective in a purely competitive industry.
restricts supply of labor through licensing requirements.
is most concerned with increasing the demand for workers in an industry.
The supply curve for labor in a purely competitive market slopes upward because
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higher wages must be paid to bid workers away from other opportunities.
marginal resource cost rises as productivity increases.
the marginal product of labor falls as output increases.
the wage rate paid to workers falls as more are hired.
Compared to a competitive labor market, workers participating in an inclusive union will enjoy
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higher wages and more workers employed.
higher wages and fewer workers employed.
similar outcomes with respect to pay and employment.
lower pay and more workers employed.
The concept of “wages” does not include which of the following items?
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money spent by workers
direct money payments, like salaries and commissions
bonuses and royalties earned
fringe benefits, like health insurance and paid leave
Use the following graph (where L is the quantity of labor) to answer the next question.
It shows a firm that buys its inputs and sells its output in competitive markets. If the firm develops a new technology that increases labor productivity, the equilibrium level of employment for this firm is expected to be
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lower than L0.
L0.
zero.
higher than L0.
The individual firm that hires labor under competitive conditions faces a labor supply curve that
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is horizontal, because individual firms have no control over wages.
slopes upward to the right.
is vertical, because workers need a job at any wage.
slopes downward to the right.
In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal revenue product of labor equals the
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marginal cost of one extra unit of output.
price of the product.
average cost of each unit of output.
wage rate, or the price of labor.
For each of the following scenarios, determine which benefit of international trade applies: lower-priced goods, increased variety of products, or access to scarce resources.
- Today most television sets bought in the United Stated are made in China; however, this was not the case twenty years ago.
- In large grocery stores in the United States, consumers can buy noodles from Asia, soups from France, pickled herring from Scandinavia, and beer from Germany.
- The United States has become a prime location for producers of semiconductors, whose products are then exported to nations around the world. This choice to produce in the United States is largely due to the access to the high-skilled workforce that is required for this type of production.
- While many developed nations have at least one domestic car manufacturer, consumers in these nations also have access to cars produced in other nations.
- The United States has long been the world’s largest exporter of wheat. The access to vast, fertile, and highly productive soil combined with high-technology farming practices have made the United States a very cost-efficient producer of agricultural goods.
In economics, goods, services, or resources produced domestically and sold abroad are known as:
imports.
net exports.
exports.
international trade.
Domestic producers might oppose free trade agreements because
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there could be a decrease in consumer surplus.
there could be an increase in consumer surplus.
there could be a decrease in producer surplus.
there could be an increase in producer surplus.
The principal concept behind comparative advantage is that a nation should
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concentrate production on those products for which it has the lowest domestic opportunity cost.
strive to be self-sufficient in the production of essential goods and services.
maximize its volume of trade with other nations.
use tariffs and quotas to protect the production of vital products for the nation.
Use the following table for a certain product’s market in Marketopia to answer the next question.
Quantity Demanded Domestically Price Quantity Supplied Domestically
1,400 $10 2,200
1,600 9 2,000
1,800 8 1,800
2,000 7 1,600
2,200 6 1,400
2,400 5 1,200
If Marketopia is entirely closed to international trade, the equilibrium price and quantity would be
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$6 and 1,400 units.
$9 and 2,000 units.
$7 and 2,000 units.
$8 and 1,800 units.
Benefits from international trade are not based on differences in
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resource availability.
technological capabilities.
product quality and other attributes.
income levels.
Limits on the quantity or total value of specific products imported to a nation are
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import quotas.
nontariff barriers.
protective tariffs.
export subsidies.
Governments often intervene in international trade and impose quotas to
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improve the performance of multinational corporations.
shift a nation’s production possibilities frontier.
increase revenues from export subsidies.
protect domestic industries from foreign competition.
An import quota on a product reduces the quantity of the product imported and
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will not affect the price of the product to the consumers.
increases the total quantity of the product consumed.
decreases the price of the product to the consumers.
increases the price of the product to the consumers.
Tariffs
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are excise taxes on goods exported abroad.
are per-unit subsidies designed to promote exports.
may be imposed either to raise revenue or to shield domestic producers from foreign competition.
are also called import quotas.
The slopes of the production possibilities curves for two nations reflect the
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relative prices of the resources in the two nations.
average income levels in the two nations.
amounts of imports and exports of the two nations.
opportunity costs of production in the two nations.
If a nation imposes a tariff on an imported product, then that nation will experience a(n)
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decrease in quantity supplied and an increase in the price of the product.
decrease in demand and a decrease in the price of the product.
decrease in the supply of, and an increase in the quantity demanded of, the product.
increase in the quantity supplied of, and a decrease in the price of the product.
A tariff is a
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quantity limit.
tax.
price ceiling.
subsidy.
A tax imposed by the U.S. government on imported Chinese frozen shrimp would be an example of
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a voluntary restriction.
a regulatory trade restriction.
a tariff.
a quota.
A maximum limit set on the amount of a specific good that may be imported into a country over a given period of time is called a
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voluntary export restriction.
tariff.
quota.
nontariff barrier.
When a nation removes tariffs on imported products that nation will
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experience lower prices and consume lower quantities.
experience higher prices and consume lower quantities.
experience higher prices and consume higher quantities.
experience lower prices and consume higher quantities.