Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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Which of the following violates the assumption of perfect competition?
a. | Firms pay workers according to their marginal product. | b. | Firms maximize
profits. | c. | Workers can bargain with firms regarding the wage they are paid. | d. | Workers maximize
their utility. |
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2.
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If the output market is perfectly competitive, then
a. | workers are paid a real wage equal to their marginal product. | b. | firms are unable to
individually affect the price of the good they produce. | c. | workers are unable
to influence the wage they are paid. | d. | firms face decreasing marginal costs of
production. |
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3.
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In perfectly competitive labour markets, workers are paid
a. | a nominal wage equal to their marginal product. | b. | a real wage equal to
their marginal product times the price of the firm's output. | c. | a real wage equal to
the price of the firm's output. | d. | a real wage equal to their marginal
product. |
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4.
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The labour supply curve slopes upward if
a. | the substitution effect is larger than the wealth effect. | b. | the substitution
effect is smaller than the wealth effect. | c. | workers supply labour until the substitution
effect equals the wealth effect. | d. | workers supply labour until the substitution
effect equals zero. |
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5.
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An increase in the representative household's wealth, other things
remaining unchanged,
a. | shifts the labor supply curve to the left. | b. | shifts the labor
supply curve to the right. | c. | cannot affect the labor supply
curve. | d. | shifts the labor demand curve to the left. |
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6.
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If money supply increases, households will willingly hold the extra money
balances if,
a. | output demand decreases. | b. | prices increase to bring down real balances to
previous level. | c. | the propensity to hold money balances falls. | d. | the real wage falls
sufficiently. |
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7.
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In the classical theory of aggregate demand, a decrease in the propensity to
hold money balances will
a. | shift the aggregate demand curve down. | b. | shift the aggregate demand curve
up. | c. | not affect the aggregate demand curve. | d. | will increase the money
supply. |
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8.
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The aggregate supply curve in the classical model is vertical because
a. | the labour market is always in equilibrium. | b. | the money market is
always in equilibrium. | c. | the supply of output is not affected by the
total stock of money in the economy. | d. | labour supply is always fixed in the short
run. |
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9.
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In the complete classical model, a rightward shift of the labor supply curve
will
a. | decrease the price level and increase the nominal wage. | b. | decrease the nominal
wage and increase the price level. | c. | decrease both the price level and the nominal
wage. | d. | increase both the price level and the nominal wage. |
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10.
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In the classical model with search costs, if prices and nominal wages are fully
flexible, the aggregate supply curve of output is
a. | horizontal. | b. | vertical. | c. | upward
sloping. | d. | upward sloping in the short-run, but vertical in the
long-run. |
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