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Section A Demand and supply in factor market 1. If the wage rate decreases, what would most likely happen? 2. Discuss two main factors that determine household savings. 3. What determines the amount of labour that households plan to supply? Blammo Inc. produces greeting cards in a perfectly competitive market. The table below shows the total number of greeting cards produced using different amounts of labor. The market price for a greeting card is $4. Calculate the marginal revenue product of the fifth worker? Units of labor Total produced Marginal Product 0 0 1 100 100 2 220 120 3 300 80 4 360 60 5 400 40 6 400 0 5. The table below sets out the conditions faced by a firm in the labour market. Number of Workers (per hour) Total Product (per hour) 0 O 1 12 2 22 30 4 36 5 40 42 ") If the firm can sell its output for a price of $5 per unit, and purchase as much labour as it needs for $30 per hour, how much labour will it hire and how much output will it produce? bj If the firm's total fixed cost is $60, how much profit or loss will the firm make? ") Suppose the firm's competitors in the labour market move away and the firm becomes a monopsony. The firm finds that it has to offer $10 per hour to attract the first worker, and an additional $7.50 per hour to each extra worker thereafter. That is, it has to offer $17.50 per hour to attract two workers, $32.50 per hour to attract four w and what will its profits be? (The firm's fixed cost " as above.) In) Which situation do pen to the industry in which the firm operates art (c)7 How do you know? Section B Economic Inequality and Redistribution Use the following diagram to answer the question I and 2. 3) An income distribution becomes more unequal as the A. Lorenz curve moves toward the diagonal Percent of income B. Gini coefficient approaches zero C. Lorenz curve moves toward the bottom right corner of the diagram D. Gini coefficient approaches 0.5 4) When the Gini coefficient increases, (a) A. income inequality increases b) B. income equality increases (d C. the slope of the Lorenz curve decreases D. the slope of the Lorenz curve increases 5) Comparing income distributions between countries is because each includes Percent of families different systems of taxes and cash payments by governments to individuals. () Refer to the diagram. The curves (a) through (d) shown in the diagram are known as: A. complicated A, income curves, B. irrelevant B. gini curves. C. lorenz curves C. impossible D. level curves D. straightforward 2) Refer to the diagram above. Suppose the economy's income distribution is represented 6) Why are income distributions so much more unequal in the less-developed world than in A. In line a. by line b. An increase in income inequality would be represented by a movement the industrialized world? B. up and to the right along line b C. to line c. 7) Explain the features of the labour market that contribute to economic inequality. D. down and to the left along line b