Name: 
 

Chapter 18 Practice Questions



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

Most of the total income earned in the U.S. economy is ultimately paid to households in the form of
a.
profit.
b.
rent.
c.
interest.
d.
wages.
 
 
Use the following information to answer the following questions.

Scenario 18-1
Gertrude Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crewmembers for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
 

2. 

Refer to Scenario 18-1. If the price of fresh Pacific salmon were to decrease significantly, it is most likely that Gertrude would
a.
reduce her demand for crewmembers.
b.
try to increase her catch to make up for lost revenue.
c.
become a seller in at least one factor market.
d.
hire more crewmembers.
 

3. 

The marginal product of labor is defined as the change in
a.
output per additional unit of revenue.
b.
output per additional unit of labor.
c.
revenue per additional unit of labor.
d.
revenue per additional unit of output.
 

4. 

A competitive firm will hire workers up to the point at which the value of the marginal product of labor equals the
a.
average total cost.
b.
average variable cost.
c.
wage.
d.
price per unit of output.
 

5. 

Which of the following events would bring about a change in the value of the marginal product of labor?
a.
technological progress
b.
a change in the marginal product of labor
c.
a change in the price of the product that the firm sells
d.
All of the above are correct.
 

6. 

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following?
a.
work and wage
b.
work and leisure
c.
wage and productivity
d.
technology and wage
 

7. 

What happens to the labor supply curves in both countries when Mexican workers leave Mexico and move to the United States?
a.
Labor supply decreases in Mexico and decreases in the United States.
b.
Labor supply increases in the United States and increases in Mexico.
c.
Labor supply increases in the United States and decreases in Mexico.
d.
Labor supply increases in Mexico and decreases in United States.
 

8. 

The accumulation of machinery and buildings used in the production of new goods and services is referred to as
a.
production factors.
b.
output factors.
c.
capital.
d.
equity.
 

9. 

The owners of capital resources are compensated according to the
a.
purchase price of the capital stock.
b.
marginal product of capital.
c.
value of the marginal product of capital.
d.
absolute level of production of final goods and services.
 

10. 

The Black Death in fourteenth-century Europe resulted in
a.
a lower marginal product of land.
b.
a lower marginal product of labor of surviving workers.
c.
economic hardship for surviving peasants.
d.
economic prosperity for surviving landowners.
 



 
Check Your Work     Reset Help