1. Ed's bakery can sell as many loaves of bread
as it wishes for a
price of $2 per loaf. To
keep calculations simple, let us assume
that Ed's only costs are
hired labor. If Ed hires 1 worker, he
can produce 200 loaves of
bread per day. If hires 2 workers, he
can produce 350 loaves of
bread per day. If he hires 3 workers,
he can produce 450 loaves
of bread per day. If he hires 4
workers, he can produce
480 loaves of bread per day. If he hires
5 workers, he can produce
500 loaves of bread per day, and if he
hires 6 workers, he can
produce 510 loaves of bread per day. If
he hires 7 or more workers,
he can still produce only 410 loaves
of bread per day. If Ed
increases his work crew from 4 workers to
5 workers, his daily revenue
will increase by:
(a) $100
(b) $40
(c) $60
(d) $20
(e) $120
2. If each worker that Ed hires must be paid
a daily wage of $65,
how many workers should
he hire per day to maximize his profits?
(a) 3
(b) 2
(c) 4
(d) 5
(e) 1
3. Ed's demand function for labor looks like
a stairway with
horizontal line segments
one unit long at heights of:
(a) $200, $350, $450, $480,
$500, and $510
(b) $400, $700,$900, $960,
$1,000, and $1,020
(c) $400, $300, $200, $60,
$40, and $20
(d) $400, $350, $300, $240,
$200, and $170
(e) $200, $175, $150, $120,
$100, and $85
4. Dyspepsia, Minnesota has 7 greasy-spoon
restaurants. Each
restaurant can hire either
one or two workers. The only costs
that restaurants have are
labor and materials. Restaurants can
hire either 0, 1, or 2 workers.
A restaurant that hires no
workers will have no costs.
After paying for its materials and
before it pays its wages,
a restaurant that hires one worker will
have a net revenue of $125
per day and a firm that hires two
workers will have a net
revenue of $175 per day. What is the
highest daily wage rate
at which a restaurant would be willing to
hire two workers?
(a) $87.50
(b) $175
(c) $125
(d) $50
(e) $25
5. In Dyspepsia, the total number of workers
that greasy-spoon
restaurants will be willing
to hire is
(a) 14 if the daily wage
rate per worker is below $87.50, 7 if
the daily wage rate per worker is between $87.50 and $125 and
0 if the daily wage rate per worker is above $125.
(b) 14 if the daily wage
rate per worker is below $50, 7 if the
daily wage rate per worker is between $50 and $125, and 0 if
the daily wage rate per worker is above $125.
(c) 7 if the daily wage
rate per worker is below $87.50, 14 if
the daily wage rate per worker is between $87.50 and $125 and
0 if the daily wage rate per worker is above $125.
(d) 7 if the daily wage
rate per worker is below 62.50 and 0 if
the daily wage rate per worker is above 62.50
(e) 14 if the daily wage
rate per worker is below 87.50 and 0 if
the daily wage rate per worker is above 87.50
6. The supply function for barley is described
by the equation Q=P/3
where P is the price of
barley and Q is the amount that will be
supplied at price P.
The demand function is described by the
equation Q=112-9P where
P is the price of barley and Q is the
amount that will be demanded.
What is the competitive equilibrium
PRICE of barley?
(a) P=19
(b) P=24
(c) P=12
(d) P=9
(e) P=27
7. Consumers of barley are trying to
persuade Congress that the
competitive equilibrium
price of barley is too high and that
Congress should pass a law
making it illegal to buy or sell
barley at a price higher
than 9. If this law were passed, at the
legal maximum price,
(a) supply of barley would
exceed demand by 28 units.
(b) demand for barley would
exceed supply by 28 units.
(c) supply would equal demand
at the legal maximum price.
(d) there would be both
excess demand and excess supply.
(e) demand for barley and
supply of barley would both fall by 28
units.
1. B
2. A
3. C
4. D
5. B
6. C
7. B