AP Econ Practice Prob Mod 70 and 73

Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. An important assumption that underlies the marginal productivity theory of income distribution is that:
a. product markets are monopolistically competitive.
b. factor markets are perfectly competitive.
c. the relevant value of the marginal product is not the equilibrium value.
d. the firm does not own any land or physical capital.
e. the firm has wage-setting ability in the factor markets.
____ 2. n the factor market for land! one will find equilibrium rental prices will be ________ the value of marginal
product of land.
a. less than
b. twice as high as
c. slightly greater than
d. unrelated to
e. equal to
____ ". #hich of the following e$plains actual wage differentials in labor markets%
. differences in talent
. different amounts of human capital
. compensating differentials
a. only.
b. only.
c. only.
d. and only.
e. ! ! and .
____ &. An efficiency wage describes a wage rate that is:
a. equal to the marginal factor cost of the most efficient worker at the firm.
b. efficient because it is e$actly equal to the wage rate implied by the marginal productivity
theory.
c. determined by collective bargaining between unions and management.
d. equal to the VMPL ad'usted so as to make the structure of compensation more equitable.
e. above the equilibrium wage and is paid in order to provide workers with an incentive to
perform efficiently.
____ (. #hich of the following does not partially e$plain wage differentials%
a. different amounts of human capital
b. compensating differentials
c. differences in talent
d. differences in physical capital
e. perfectly competitive labor markets
____ ). A nurse willing to work the midnight to * A.+. shift may earn more than she would earn if she worked *
A.+. to & ,.+. because of:
a. discrimination.
b. market power.
c. differences in human capital.
d. efficiency wages.
e. compensating differentials.
____ -. A small college employs two economists. .ob has been employed by the college for 1( years and /asrin has
been employed for one year. .ob0s salary is significantly higher than /asrin0s! despite the fact that they both
have doctoral degrees in economics. 1ach professor averages one publication per year and both are e$cellent
teachers. 2iven this information! the wage difference is best e$plained by:
a. compensating differentials.
b. efficiency wages.
c. discrimination.
d. differences in talent.
e. differences in human capital.
AP Econ Practice Prob Mod 70 and 73
Answer Section
MULTIPLE CHICE
1. A/3: 4 ,53: 1 67: + .17: +odule -89"&
+3:: 7act-4ased
2. A/3: 1 ,53: 1 67: + .17: +odule -89"&
+3:: Analytical 5hinking
". A/3: 1 ,53: 1 67: 1 .17: +odule -"9"-
+3:: 7act-4ased
&. A/3: 1 ,53: 1 67: + .17: +odule -"9"-
+3:: 6efinitional
(. A/3: 6 ,53: 1 67: + .17: +odule -"9"-
+3:: :oncept-4ased
). A/3: 1 ,53: 1 67: + .17: +odule -"9"-
+3:: :oncept-4ased
-. A/3: 1 ,53: 1 67: + .17: +odule -"9"-
+3:: :ritical 5hinking