1.The opportunity cost of working is the amount of leisure time that must be given up in order to work. True False

2.A decreasing marginal utility of income contributes to the upward slope of an individual's supply curve. True False

3.The substitution effect of wages explains shifts in the labor supply curve. True False

4.If Amber is willing to work additional hours if her wage rate increases, the substitution effect must outweigh the income effect.

5.TrueFalse

6.If the income effect dominates the substitution effect, the labor supply curve will be backward-bending. True False

7.The market supply of labor represents the sum of all individual labor supply decisions. True False

8.Institutional constraints, such as immigration policies, affect the shape and location of the labor supply curve. True False

9.The demand for labor is derived from the demand for the goods and services labor can produce. True False

10.The marginal physical product of a factor is equal to the additional revenue generated from employing one additional unit of the factor.

11.TrueFalse

12.The marginal revenue product sets an upper limit to the wage rate an employer will pay. True False

13.The law of diminishing returns means that marginal costs will eventually rise as a firm produces more. True False

14.If the MPP is declining, ceteris paribus, the MRP must decline. True False

15.A profit-maximizing firm should continue to hire workers until the MRP has declined to the level of the market wage rate in a competitive labor market.

16.TrueFalse

17.For wages to be higher without sacrificing jobs, productivity must decrease. True False

18.If the wage rate drops, an employer will be willing to hire more workers, ceteris paribus. True False

19.The intersection of the labor market supply and market demand curves establishes the minimum wage. True False

20.When the minimum wage is set below the market equilibrium wage, it does not affect the market. True False

1.The willingness of firms to hire labor is represented by the market labor demand curve. True False

2.The market labor supply curve is downward-sloping. True False

3.The equilibrium wage rate is the rate at which the quantity of labor demanded equals the quantity supplied. True False

4.A primary objective of unions is to raise the wages of union members. True False

5.Unlike most monopolies, unions do not attempt to use their market power to raise the equilibrium wage above its competitive level.

6.TrueFalse

7.A craft union is a labor organization that represents people with a particular skill. True False

8.Unions do not need to worry about the effects of greater employment numbers on the wage rate. True False

9.The distinction between market wages and marginal wages must be made because of the downward slope of the labor demand curve.

10.TrueFalse

11.Monopolists in the labor market equate the marginal wage with the marginal revenue product to find the desired level of employment for a union.

12.TrueFalse

13.A union should calculate the marginal wage to determine how additional labor will change the average wage. True False

14.The desired level of union employment occurs where the market wage curve intersects the labor supply curve. True False

15.A union will try to increase employment for its members as long as the marginal wage is positive. True False

16.A union never wants to accept a negative marginal wage. True False

17.In a monopoly labor market, the optimal union wage can be read off the marginal revenue product curve. True False

18.Unions cannot exert market power without exerting control over the market supply curve for labor. True False

19.Union shops never face competition from substitute labor. True False

20.From the 1930s until today, unions have experienced particularly fast growth in the United States. True False

1.One reason why present dollars are worth more than future dollars is because income-earning investment opportunities exist.

2.TrueFalse

3.The present discounted value of a future payment will decrease when interest rates decrease. True False

4.The longer one has to wait for a future payment, the greater the present value it has. True False

5.If interest rates are high, the future payoff for every dollar saved is low. True False

6.The possibility of nonpayment is taken into account in the calculation of the present discounted value. True False

7.When the interest rate rises, the demand for loanable funds falls and the supply of loanable funds rises. True False

8.The lower the cost of funds, the greater the amount of loanable funds demanded. True False

9.The demand for loanable funds increases when the expected rate of return increases. True False

10.A major problem of owning a corporation is unlimited liability. True False

11.A corporation can elect to divide corporate profits into either dividends or retained earnings. True False

12.The total monetary returns associated with stock ownership result from dividends and capital gains. True False

13.Profits used by a corporation for investment or unforeseen contingencies are known as retained earnings. True False

14.An initial public offering occurs when a stock is first sold to the general public. True False

15.A corporation can use an initial public offering of stock to borrow money that it must pay back. True False

16.Stock prices will increase, ceteris paribus, when the prevailing interest rate increases. True False

17.A price/earnings ratio is the price of a stock divided by the earnings per share. True False

18.When the risk factor associated with a stock increases, the expected rate of return increases. True False

19.External shocks to the stock market have little impact on stock prices since investors consider only the long run. True False

20.When a corporation issues a bond, it is borrowing funds. True False