Factor Markets: Labor, Capital, and Interest Rates

Question 1

Which of the following is a factor that could reduce the supply of labor in a particular market?

Accepted Answer

A decrease in the size of the working-age population.

Answer

An increase in the prevailing wage rate.

Answer

An improvement in working conditions.

Answer

A rise in the number of job openings.

Question 2

What is the primary purpose of labor unions in the labor market?

Accepted Answer

Negotiate improved wages and working conditions

Answer

Minimize competition among workers

Answer

Restrict the supply of labor

Answer

Impede technological advancements

Question 3

What is the main function of the supply curve for capital?

Accepted Answer

Demonstrates the relationship between the quantity of capital supplied and the interest rate

Answer

Determines the equilibrium price of capital

Answer

Illustrates the elasticity of the capital market

Answer

Predicts future patterns of investment

Question 4

What is the primary objective of minimum wage legislation?

Accepted Answer

Protect low-wage workers from exploitation

Answer

Increase the labor supply

Answer

Reduce unemployment

Answer

Eliminate wage discrimination

Question 5

In labor markets with imperfect competition, how do labor unions influence the inflexibility of wages?

Accepted Answer

By negotiating wages for their members that are potentially higher than market equilibrium levels.

Answer

By decreasing the labor supply, resulting in higher wages.

Answer

By setting minimum wages that employers are required to pay.

Question 6

Which of the following is **NOT** a factor of production?

Accepted Answer

Profit

Answer

Capital

Answer

Entrepreneurship

Answer

Labor

Question 7

The demand for labor is ultimately derived from the demand for what?

Accepted Answer

Final goods and services

Answer

Capital

Answer

Land

Question 8

The equilibrium wage rate in a competitive labor market is determined by:

Accepted Answer

The intersection of the supply and demand curves for labor

Answer

Government intervention

Answer

The cost of living

Question 9

Which of the following is a recognized potential benefit of labor unions?

Accepted Answer

Increased wages and benefits for workers

Answer

Increased income inequality

Answer

Reduced job security

Answer

Lower productivity

Question 10

Discrimination in factor markets can lead to:

Accepted Answer

Reduced economic efficiency and lower wages for certain groups

Answer

Increased productivity

Answer

Greater economic growth

Question 11

The concept of human capital refers to:

Accepted Answer

The skills, knowledge, and abilities embodied in workers

Answer

The financial capital invested in a country

Answer

The physical capital owned by a country

Answer

The natural resources available to a country

Question 12

Which of the following is a key feature of a perfectly competitive capital market?

Accepted Answer

No barriers to entry or exit

Answer

Significant information asymmetries

Answer

Government regulation of interest rates

Answer

High levels of concentration

Question 13

The real interest rate is calculated as:

Accepted Answer

The nominal interest rate minus the inflation rate

Answer

The nominal interest rate plus the inflation rate

Answer

The nominal interest rate divided by the inflation rate

Answer

The inflation rate minus the nominal interest rate

Question 14

Which of the following factors is likely to increase the demand for capital?

Accepted Answer

Technological advancements

Answer

A decrease in the marginal productivity of capital

Answer

An increase in the interest rate

Answer

A decrease in the supply of capital

Question 15

Which factor does NOT influence the demand for labor in a factor market?

Accepted Answer

Interest rates

Answer

Wage rates

Answer

Product demand

Answer

Technological advancements

Question 16

A decrease in capital supply will lead to what outcome in the factor market?

Accepted Answer

An increase in interest rates

Answer

No change in interest rates

Answer

A decrease in wages

Answer

A decrease in interest rates

Question 17

Which of the following is a primary function of labor unions in factor markets?

Accepted Answer

Negotiating wages and work conditions on behalf of workers

Answer

Setting interest rates

Answer

Investing in capital

Answer

Providing unemployment insurance

Question 18

What is the term used to describe discrimination in which workers are paid differently for the same work based on their personal characteristics?

Accepted Answer

Wage discrimination

Answer

Occupational discrimination

Answer

Educational discrimination

Answer

Hiring discrimination

Question 19

Which of the following is a potential benefit of implementing a high minimum wage?

Accepted Answer

Reduced income inequality

Answer

Lower economic growth

Answer

Increased unemployment

Answer

Reduced productivity

Question 20

What impact does a union typically have on wages?

Accepted Answer

Raises wages above their competitive level

Answer

Has no impact on wages

Answer

Lowers wages below their competitive level

Question 21

Which of the following is a main determinant of market interest rates?

Accepted Answer

Inflation expectations

Answer

Wage rates

Answer

Product demand

Answer

Government spending

Question 22

What is the overall purpose of government intervention in factor markets?

Accepted Answer

To regulate and intervene as necessary to ensure efficient market outcomes

Answer

To set fixed wages and interest rates

Answer

To become the sole provider of jobs and capital

Question 23

Which of the following is NOT a primary determinant of the equilibrium wage rate in a labor market?

Accepted Answer

The number of college graduates, as this factor influences the overall supply of labor but not the equilibrium wage directly

Answer

The supply and demand for labor, as these forces determine the intersection point of the labor market

Answer

The productivity of labor, which affects the marginal revenue product of labor and thus the demand for labor

Answer

Government regulations, such as minimum wage laws or labor union policies, which can influence the wage rate

Question 24

What is the primary function of labor unions in factor markets?

Accepted Answer

To represent the interests of workers in collective bargaining with employers, negotiating for better wages, benefits, and working conditions

Answer

To set wages and working conditions unilaterally, a power typically reserved for employers in non-unionized settings

Answer

To protect workers from discrimination, a separate issue addressed through anti-discrimination laws and policies

Question 25

Which of the following is NOT a potential consequence of discrimination in factor markets?

Accepted Answer

None of the above

Answer

Increased efficiency and productivity, as discrimination limits opportunities for qualified individuals and fosters resentment

Answer

Protection of minority groups, as discrimination typically involves the unfair treatment of certain groups

Answer

Lower labor costs for employers, as they may pay lower wages to discriminated groups

Question 26

In a perfectly competitive labor market, the equilibrium wage is likely to be:

Accepted Answer

Equal to the marginal revenue product of labor, reflecting the value of the additional output produced by each worker

Answer

Higher than the marginal revenue product of labor, suggesting a surplus of labor or minimum wage laws

Answer

Set by the government, which may intervene to establish a minimum wage or other labor market regulations

Answer

Lower than the marginal revenue product of labor, due to imperfect information or bargaining power imbalances

Question 27

What is the opportunity cost of using labor in production?

Accepted Answer

The value of the goods and services that could have been produced if the same labor resources were allocated to an alternative use, highlighting the trade-offs in resource allocation

Answer

The wages paid to workers, which is a direct cost associated with labor but not the opportunity cost

Question 28

What is the primary benefit of raising the minimum wage?

Accepted Answer

Reduces income inequality by increasing the wages of low-paid workers, narrowing the gap between high and low earners

Answer

Promotes economic growth, which is not a primary benefit of minimum wage increases as they may have limited impact on overall economic growth

Answer

Increases aggregate demand, which is a potential indirect effect of minimum wage increases but not a primary benefit

Answer

Eliminates poverty, which is an ambitious goal that cannot be solely achieved by raising the minimum wage

Question 29

In a factor market, the equilibrium wage rate is primarily determined by:

Accepted Answer

The interaction of the demand for and supply of labor

Answer

Union agreements

Answer

Government regulations

Question 30

What is the concept of 'Marginal Product of Labor'?

Accepted Answer

The additional output generated by employing one more unit of labor

Answer

The total output produced by all workers

Answer

The average output produced per worker

Question 31

How do labor unions primarily influence wages?

Accepted Answer

Through collective bargaining with employers

Answer

By increasing the supply of labor

Answer

By setting minimum wages

Answer

By decreasing labor demand

Question 32

Which factor is likely to reduce the supply of capital?

Accepted Answer

High interest rates

Answer

Innovative technology

Answer

Economic expansion

Answer

Government subsidies

Question 33

What distinguishes real interest rates from nominal interest rates?

Accepted Answer

Real interest rates account for inflation, while nominal interest rates do not

Answer

Nominal interest rates are consistently higher than real interest rates

Answer

Real interest rates are consistently higher than nominal interest rates

Question 34

How can discrimination impact factor markets?

Accepted Answer

By limiting opportunities for certain groups of workers or investors

Answer

By promoting competition in the market

Answer

By stimulating economic growth

Question 35

Which government policy can be employed to increase the supply of labor?

Accepted Answer

Investment in education and training programs

Answer

Restricting immigration

Answer

Imposing a higher minimum wage

Answer

Increasing taxes on workers

Question 36

How does technological progress generally affect the demand for labor and capital?

Accepted Answer

It can simultaneously increase the demand for both labor and capital

Answer

It always leads to a decrease in the demand for both labor and capital

Answer

It only increases the demand for labor

Question 37

If the demand for a product increases, what is the likely effect on the demand for labor in that industry?

Accepted Answer

Demand for labor will increase.

Answer

Demand for labor will remain unchanged.

Answer

The effect on demand for labor is unpredictable.

Answer

Demand for labor will decrease.

Question 38

A company is considering investing in new equipment. Which of the following factors would most heavily influence their decision?

Accepted Answer

The expected rate of return on the investment compared to the cost of capital.

Answer

The company's current cash flow.

Answer

The current price of the equipment.

Answer

The availability of skilled labor to operate the equipment.

Question 39

What is the primary reason for wage differentials across different occupations?

Accepted Answer

Differences in the skills, education, and training required for each occupation.

Answer

Random chance and luck.

Answer

The size of the company employing workers.

Answer

The location of the job.

Question 40

Which of the following is NOT a factor that can directly affect the supply of labor?

Accepted Answer

The price of consumer goods.

Answer

Changes in labor force participation rates.

Answer

Population growth.

Answer

Government policies on immigration.

Question 41

A minimum wage law is an example of:

Accepted Answer

A price floor in the labor market.

Answer

A price ceiling in the labor market.

Answer

A market equilibrium.

Answer

A government subsidy.

Question 42

How does a labor union typically attempt to increase wages for its members?

Accepted Answer

Through collective bargaining with employers.

Answer

By encouraging workers to move to industries with higher wages.

Answer

By reducing the supply of labor in the market.

Answer

By lobbying for government subsidies.

Question 43

What is the primary function of the financial markets in relation to factor markets?

Accepted Answer

To facilitate the flow of capital from savers to borrowers.

Answer

To provide loans to individuals.

Answer

To create new jobs.

Answer

To regulate the price of labor.

Question 44

If the government imposes a tax on capital, what is the likely effect on the supply of capital?

Accepted Answer

The supply of capital will decrease.

Answer

The effect on the supply of capital is unpredictable.

Answer

The supply of capital will remain unchanged.

Answer

The supply of capital will increase.

Question 45

How does discrimination in the labor market affect the efficiency of resource allocation?

Accepted Answer

It leads to a less efficient allocation of resources because qualified individuals are prevented from working in their most productive roles.

Answer

It leads to a more efficient allocation of resources because it reduces competition.

Answer

It has no effect on resource allocation.

Question 46

Which of the following is an example of a factor market?

Accepted Answer

The market for skilled labor.

Answer

The market for automobiles.

Answer

The market for clothing.

Answer

The market for food.