Question 1

An industry's equilibrium wage rate is established

Accepted Answer

A)  by the industry supply curve for labor alone. 
B)  by the slope of the industry demand curve for labor alone. 
C)  by the Labor Department and based on the cost of living in the area. 
D)  by the intersection of the industry supply and demand curves for labor. 
A)  by the industry supply curve for labor alone. 
B)  by the slope of the industry demand curve for labor alone. 
C)  by the Labor Department and based on the cost of living in the area. 
D)  by the intersection of the industry supply and demand curves for labor.

Question 2

The profit-maximizing combination of resources in a perfectly competitive situation occurs at the point at which

Accepted Answer

A)  MRP of labor = price of labor (wage rate). 
B)  MRP of land = price of land (rental rate per unit). 
C)  MRP of capital = price of capital (cost per unit of service). 
D)  All of the above are correct. 
A)  MRP of labor = price of labor (wage rate). 
B)  MRP of land = price of land (rental rate per unit). 
C)  MRP of capital = price of capital (cost per unit of service). 
D)  All of the above are correct.

Question 3

Which of the following statements is true about the market and individual firm's supply curve for labor?

Accepted Answer

A)  The market supply curve is perfectly elastic and the individual firm's supply curve is perfectly inelastic. 
B)  The market supply curve is perfectly inelastic and the individual firm's supply curve is perfectly elastic. 
C)  The market supply curve is more elastic than the firm's supply curve. 
D)  The market supply curve is more inelastic than the firm's supply curve. 
A)  The market supply curve is perfectly elastic and the individual firm's supply curve is perfectly inelastic. 
B)  The market supply curve is perfectly inelastic and the individual firm's supply curve is perfectly elastic. 
C)  The market supply curve is more elastic than the firm's supply curve. 
D)  The market supply curve is more inelastic than the firm's supply curve.

Question 4

The demand curve for labor will shift whenever

Accepted Answer

A)  the demand for the final product changes. 
B)  the wage rate changes. 
C)  the supply curve of labor shifts. 
D)  the marginal factor cost changes. 
A)  the demand for the final product changes. 
B)  the wage rate changes. 
C)  the supply curve of labor shifts. 
D)  the marginal factor cost changes.

Question 5

A firm should hire workers up to the point where

Accepted Answer

A)  MP = P. 
B)  MFC = P. 
C)  MFC = MRP. 
D)  MP = MRP. 
A)  MP = P. 
B)  MFC = P. 
C)  MFC = MRP. 
D)  MP = MRP.

Question 6

An increase in demand for DVD machines occurs. Which of the following statements is true for individual firms that produce DVD machines?

Accepted Answer

A)  The price of DVD machines will decrease leading to an increase in the demand for labor by the firm. 
B)  The price of DVD machines will increase leading to an increase in the demand for labor by the firm. 
C)  The price of DVD machines will increase leading to a decrease in demand by customers leading to a decrease in the demand for labor by the firm. 
D)  A change in demand at the industry level does not influence an individual firm's demand curve for labor. 
A)  The price of DVD machines will decrease leading to an increase in the demand for labor by the firm. 
B)  The price of DVD machines will increase leading to an increase in the demand for labor by the firm. 
C)  The price of DVD machines will increase leading to a decrease in demand by customers leading to a decrease in the demand for labor by the firm. 
D)  A change in demand at the industry level does not influence an individual firm's demand curve for labor.

Question 7

A short-run increase in the price of a firm's output will typically

Accepted Answer

A)  lead to a movement along the firm's demand for labor curve. 
B)  lead to more employment in the competitive firm. 
C)  not impact the hiring of labor. 
D)  make the demand for labor more inelastic. 
A)  lead to a movement along the firm's demand for labor curve. 
B)  lead to more employment in the competitive firm. 
C)  not impact the hiring of labor. 
D)  make the demand for labor more inelastic.

Question 8

Which of the following will lead to an outward shift in the firm's short-run demand for labor?

Accepted Answer

A)  An increase in the price of output 
B)  Less capital per unit of labor 
C)  A decline in labor productivity 
D)  A reduction in average consumer income 
A)  An increase in the price of output 
B)  Less capital per unit of labor 
C)  A decline in labor productivity 
D)  A reduction in average consumer income

Question 9

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Accepted Answer

A)  A decrease in labor productivity. 
B)  A decrease in the price of robots that are used to solder parts of the car together. 
C)  An increase in the demand for automobiles. 
D)  A decrease in the price of automobiles. 
A)  A decrease in labor productivity. 
B)  A decrease in the price of robots that are used to solder parts of the car together. 
C)  An increase in the demand for automobiles. 
D)  A decrease in the price of automobiles.

Question 10

Explain the implications of outsourcing for employment and wages in the domestic and foreign labor markets.

Accepted Answer

If domestic firms out source their jobs

Question 11

For a firm in a perfectly competitive labor market, the supply curve of labor is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  elastic. 
B)  inelastic. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 12

Outsourcing is being practiced by

Accepted Answer

A)  U.S. firms that want to keep jobs at home in the United States. 
B)  overseas firms hiring in the U.S. labor market and by U.S. firms hiring in foreign labor markets with lower wages. 
C)  U.S. firms only. 
D)  governments but private firms are not allowed to outsource work. 
A)  U.S. firms that want to keep jobs at home in the United States. 
B)  overseas firms hiring in the U.S. labor market and by U.S. firms hiring in foreign labor markets with lower wages. 
C)  U.S. firms only. 
D)  governments but private firms are not allowed to outsource work.

Question 13

A firm purchases more capital equipment. We would expect to observe

Accepted Answer

A)  a decrease in the supply curve of labor to this firm. 
B)  an increase in the supply of labor for this firm. 
C)  an increase in the demand for labor by this firm. 
D)  an increase in the wage rate paid for labor by this firm. 
A)  a decrease in the supply curve of labor to this firm. 
B)  an increase in the supply of labor for this firm. 
C)  an increase in the demand for labor by this firm. 
D)  an increase in the wage rate paid for labor by this firm.

Question 14

If a firm is a perfectly competitive purchaser of factor inputs and the wage rate is $5, the marginal factor cost for labor is

Accepted Answer

A)  greater than $5. 
B)  less than $5. 
C)  $5. 
D)  indeterminate. 
A)  greater than $5. 
B)  less than $5. 
C)  $5. 
D)  indeterminate.

Question 15

What can cause the demand curve for labor to shift? Explain.

Accepted Answer

The demand curve for labor is the margin

Question 16

The price elasticity of demand for labor will be greater, the

Accepted Answer

A)  greater is the price elasticity of demand for the final product. 
B)  more difficult it is to employ substitute inputs in production. 
C)  smaller is the proportion of wage costs in the total cost of production. 
D)  shorter is the time period under examination. 
A)  greater is the price elasticity of demand for the final product. 
B)  more difficult it is to employ substitute inputs in production. 
C)  smaller is the proportion of wage costs in the total cost of production. 
D)  shorter is the time period under examination.

Question 17

When MFC = MRP, a firm in a competitive market will

Accepted Answer

A)  stop hiring. 
B)  hire more workers. 
C)  earn additional profits. 
D)  layoff workers. 
A)  stop hiring. 
B)  hire more workers. 
C)  earn additional profits. 
D)  layoff workers.

Question 18

What is the marginal revenue product of labor (MRP)? What shape does the MRP curve have? Why?

Accepted Answer

Marginal revenue product of labor is the

Question 19

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

Accepted Answer

A)  marginal revenue product of labor. 
B)  marginal factor cost of labor. 
C)  price of the extra output produced. 
D)  average physical product of labor. 
A)  marginal revenue product of labor. 
B)  marginal factor cost of labor. 
C)  price of the extra output produced. 
D)  average physical product of labor.

Question 20

Which of the following will cause a shift in the demand curve of labor?

Accepted Answer

A)  An increase or decrease in the productivity of labor. 
B)  An increase or decrease in the demand for the product labor produces. 
C)  A decline in the price of a complementary input . 
D)  all of the above 
A)  An increase or decrease in the productivity of labor. 
B)  An increase or decrease in the demand for the product labor produces. 
C)  A decline in the price of a complementary input . 
D)  all of the above

Exam 28: The Labor Market: Demand, Supply and Outsourcing

An industry's equilibrium wage rate is established

The profit-maximizing combination of resources in a perfectly competitive situation occurs at the point at which

Which of the following statements is true about the market and individual firm's supply curve for labor?

The demand curve for labor will shift whenever

A firm should hire workers up to the point where

An increase in demand for DVD machines occurs. Which of the following statements is true for individual firms that produce DVD machines?

A short-run increase in the price of a firm's output will typically

Which of the following will lead to an outward shift in the firm's short-run demand for labor?

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Explain the implications of outsourcing for employment and wages in the domestic and foreign labor markets.

For a firm in a perfectly competitive labor market, the supply curve of labor is

Outsourcing is being practiced by

A firm purchases more capital equipment. We would expect to observe

If a firm is a perfectly competitive purchaser of factor inputs and the wage rate is $5, the marginal factor cost for labor is

What can cause the demand curve for labor to shift? Explain.

The price elasticity of demand for labor will be greater, the

When MFC = MRP, a firm in a competitive market will

What is the marginal revenue product of labor (MRP)? What shape does the MRP curve have? Why?

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

Which of the following will cause a shift in the demand curve of labor?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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