If there is an decrease in labor productivity,

Part II. Select the best answer to the
following questions. Each correct answer is worth one point.

1. If there is an decrease in labor
productivity, there will be a:
Leftward shift of the labor supply
Rightward shift of the labor supply
Movement up the labor demand curve.
None of the above.

2. Which of the following would decrease the
market supply for labor, ceteris paribus?
The wage paid to labor.
A decrease in the demand for labor.
The demand for final goods and
None of the above.

3. The marginal revenue product establishes:
The supply of labor
The productivity of workers.
The demand for labor.
None of the above.

4. If the MPP of an additional unit of labor
is 5 units per hour, product price is constant at $3 per unit, and the wage
rate is $15 per hour, then:
An additional unit of labor should be
An additional unit of labor should not
be employed.
The employer should lower the price to
sell more units and make more profit.
The employer is hiring just the right
amount of workers.

5. If teeth cleaning costs $120 and it takes
the dental hygienist 30 minutes per patient, the marginal revenue product of
this worker is:
$40 per hour.
$120 per hour.
$180 per hour.
$240 per hour.

6. If the interest rate is 4 percent, then
the present value of $100 to be received 2 years from now is closest to:

7. A bond:
Is a liability for the bond issuer.
Must be held until its maturity date.
Is always worth its face value.
None of the above.

8. When a corporation pays a dividend:
Both stockholders and bondholders
Corporate borrowing is increased to
pay for the dividend.
The dividend increases the investors’
total return.
None of the above.

9. Which of the following is the least liquid
Money market fund.
Certificate of deposit.
Corporate bonds.
Corporate stocks.

10. The lower the P/E ratio, ceteris paribus:
The more rare a stock is.
The more investors are willing to
spend for a dollar of earnings.
The less debt a corporation owes.
None of the above.

11. Financial advisors typically recommend
that investors:
Only buy U.S. stocks because they are
Maintain a diversified portfolio of
stocks and gold.
Always sell stocks that have suffered
price declines.
Buy bonds when interest rates are
expected to decrease in the future.

12. The interest income from a bond:
Is dependent on the risk premium of
the bond issuer.
Can only be earned by holding the bond
to maturity.
Is taxed at an investor’s capital
gains tax rate.
All of the above.

13. Employee contributions to a 401-K plan:
Can be required by employers.
Requires a matching contribution by
your employer.
Allows the employee to choose any
investment option.
Are treated as pre-tax income.

14. A Roth IRA:
Creates tax deferred income.
Penalizes early withdrawal of
Can only be used to purchase stocks or
Allows the investor’s contributions to
be tax free.

15. Compared to a Roth IRA:
The earnings in a 401-K are tax
deferred, while the earnings in a Roth IRA are taxed.
The earnings in a 401-K are tax free,
while the earnings in a Roth IRA are tax deferred.
Both the Roth IRA and the 401-K
earnings are taxed as ordinary income.
The earnings in a 401-K are tax
deferred, while the earnings in a Roth IRA are tax free.

16. If the government made all income subject
to the F.I.C.A. tax, this would:
Move the Lorenz curve further from the
line of income equality.
Have no effect on the Lorenz curve.
Raise the tax burden on all wage
None of the above.

17. When a taxpayer states that she is in the
15% tax bracket, she is referring to her:
Effective tax rate.
Nominal tax rate.
Average tax rate.
Marginal tax rate.

18. The California state sales tax is
considered regressive because it:
Imposes a lower effective tax rate on
high income taxpayers.
Taxes poor people for basic
Only taxes wage income.
None of the above.

19. Assume the marginal tax rate is 10% for
the first $20,000 of taxable income, 20% for taxable income from $20,001 to
$60,000, and 30% for taxable income above $60,000. If Mr. Smith had taxable
income of $80,000, how much tax does he owe?

20. In question 19, what is Mr. Smith’s
marginal tax rate?
12 per cent.
25 per cent.
30 per cent.
35 per cent.

21. Which of the following programs is funded
by a payroll tax?
Social Security.
Unemployment compensation benefits.
All of the above.

22. Converting the federal income tax
brackets to a flat tax would:
Tax every individual the same dollar
Not eliminate special treatment for
capital gains.
Allow the government to borrow more.
All of the above.

23. Fluctuations in stock market indices like
the S&P 500:
Represent changes in the valuations of
the stocks in that index.
Are controlled by the government to
limit spending.
Are an indicator that the economy is
headed into a recession.
All of the above.

24. Minimum wage laws:
Only pertain to full-time workers.
Do not apply to employers who hire
undocumented workers.
Prohibit workers from earning additional
income unless they do charitable work.
None of the above.

25. If an increase in labor productivity
drives wages higher:
Workers will benefit.
Business profits will automatically
Firms will demand more unskilled
All of the above.

26. A minimum wage set below the current
equilibrium wage:
Will increase the demand for labor.
Will decrease the supply of labor.
Will decrease the demand for labor.
Will have no effect on the market for

27. The present discounted value of a future
payment will increase when the:
Interest rate increases.
Future payment is moved closer to the
Risk of non-payments increases.
All of the above.

28. Suppose that the MC Software Corporation
earns a profit of $12 per share. If the prevailing interest rate is 5 percent
and the stock is currently selling for $120 per share, what is the current
price/earnings ratio?

29. Suppose that last month the price of a
company’s bond was $1200 and this month the price is $900. Annual interest
payments are $120. The current yield on these bonds is:
7.5 percent.
10.0 percent.
13.3 percent.
24.0 percent.

30. When a corporation redeems a bond, it is:
Issuing dividends to shareholders.
Lending money to the owners of the
Borrowing funds from investors.
None of the above.

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