1] In the production function F = AF(K. N), A is , K is , and N is A} total factor productivity; the capital stock; employment B) total factor productivity; investment; employment C) the productivity of labor; the capital stock; the labor force D} the productivity of labor; investment; the labor force Answer: A 2] Suppose the economy's production function is F = A K '1' Nb. If b '9 a, A} marginal productivity of N is higher than marginal productivity of K B) marginal productivity of N is lower than marginal productivity of K C} income share of N is greater than income share of K D} income share of N is less than income share of K Answer: C 3) The fact that the production function relating output to labor becomes atter as we move from left to right means that A} the marginal product of labor is positive. B} the marginal product of capital is positive. C) there is diminishing marginal productivity of labor. D} there is diminishing marginal productivity of capital. Answer: C 4) Suppose the economy's production function is Y = A K05 N 0-5 = A \".lK WIN. Last year, K = l, N = Id, and A = 1G0, so Y: . lfthis year we expect A to stay the same, but K and N to increase by l% each, Y is expected to increase by A} 4000, 5% B) 4000, 19% C) 400, 5% D} 400, 10% Answer: B 5) An adverse supply shock would A} shift the production function up and decrease marginal products at every level of employment. B} shift the production function down and decrease marginal products at every level of employment. C) shift the production function down and increase marginal products at every level of employment. D} shift the production function up and increase marginal products at every level of employment. Answer: B 1) The real wage is falling if A) the price level falls faster than the nominal wage. B) the price level falls more slowly than the nominal wage. C) the price level is lower than the nominal wage. D) the price level is higher than the nominal wage. Answer: B 2) Holding everything else constant, a prot maximizing rm will want to hire fewer workers if A) labor productivity increases. B) the nominal wage increases. C) the real wage increases. D) the price level increases. Answer: C 3) A country's labor supply curve shifts unambiguously to the right if A) working-age population increases, and wealth increases. B) working-age population increases, and wealth decreases. C) working-age population decreases, and wealth increases. D) working-age population decreases, and wealth decreases. Answer: B 4) Suppose the data show that last month real wages went up and employment fell. This must be the result of a dominant A) increase in labor demand B) decrease in labor demand C) increase in labor supply D) decrease in labor supply Answer: D 5) Which of the following would unambiguously decrease equilibrium employment? A) a positive productivity shock and a positive wealth shock. B) a positive productivity shock and a negative wealth shock. C) a negative productivity shock and a positive wealth shock. D) a negative productivity shock and a negative wealth shock. Answer: C