Question 1

In a perfectly competitive labor market, the wage rate paid by the individual firm is

Accepted Answer

A)  the equilibrium market wage rate. 
B)  dependent on the demand for the product. 
C)  below the equilibrium market wage rate. 
D)  a function of the tax system. 
A)  the equilibrium market wage rate. 
B)  dependent on the demand for the product. 
C)  below the equilibrium market wage rate. 
D)  a function of the tax system.

Question 2

The individual firm operating in a perfectly competitive labor market

Accepted Answer

A)  can hire more labor only by offering a higher wage. 
B)  faces an inelastic demand for labor. 
C)  will pay less to the additional labor employed. 
D)  can buy all the labor it wants at the going market wage rate. 
A)  can hire more labor only by offering a higher wage. 
B)  faces an inelastic demand for labor. 
C)  will pay less to the additional labor employed. 
D)  can buy all the labor it wants at the going market wage rate.

Question 3

Which of the following is an example of outsourcing?

Accepted Answer

A)  A U.S. firm moves a manufacturing plant from the U.S. to Thailand where the firm can hire cheaper labor. 
B)  A German firm hires an accountant in the U.S. to manage its payrolls. 
C)  All the above are examples of outsourcing. 
D)  None of the above is an example of outsourcing. 
A)  A U.S. firm moves a manufacturing plant from the U.S. to Thailand where the firm can hire cheaper labor. 
B)  A German firm hires an accountant in the U.S. to manage its payrolls. 
C)  All the above are examples of outsourcing. 
D)  None of the above is an example of outsourcing.

Question 4

If the supply of labor to a firm is perfectly elastic at the going wage rate established by the forces of supply and demand then

Accepted Answer

A)  the firm is price taker. 
B)  the firm can only hire additional units of labor by driving the wage rate up. 
C)  the wage rate has been decreasing. 
D)  full employment exists in the labor market. 
A)  the firm is price taker. 
B)  the firm can only hire additional units of labor by driving the wage rate up. 
C)  the wage rate has been decreasing. 
D)  full employment exists in the labor market.

Question 5

The profit maximizing combination of resources

Accepted Answer

A)  usually involves more of each input hired than the cost minimizing combination of resources. 
B)  usually involves less of each input hired than the cost minimizing combination of resources. 
C)  usually involves hiring more of some resources and less of other resources than the cost minimizing combination of resources. 
D)  is also the cost minimizing combination of resources. 
A)  usually involves more of each input hired than the cost minimizing combination of resources. 
B)  usually involves less of each input hired than the cost minimizing combination of resources. 
C)  usually involves hiring more of some resources and less of other resources than the cost minimizing combination of resources. 
D)  is also the cost minimizing combination of resources.

Question 6

The additional cost associated with hiring one additional unit of some factor input, such as labor, is referred to as

Accepted Answer

A)  marginal physical product of labor. 
B)  marginal revenue cost. 
C)  marginal factor cost. 
D)  marginal revenue product. 
A)  marginal physical product of labor. 
B)  marginal revenue cost. 
C)  marginal factor cost. 
D)  marginal revenue product.

Question 7

-Refer to the above table. Suppose the price of the good sold is $3 and the marginal factor cost of labor is $300, how many units of labor will the firm hire?

Accepted Answer

A)  4. 
B)  5. 
C)  6. 
D)  3. 
A)  4. 
B)  5. 
C)  6. 
D)  3.

Question 8

The MRP of labor will shift to the right if

Accepted Answer

A)  labor productivity increases. 
B)  labor productivity decreases. 
C)  wages increase. 
D)  wages decrease. 
A)  labor productivity increases. 
B)  labor productivity decreases. 
C)  wages increase. 
D)  wages decrease.

Question 9

The cost-minimizing rule is that a firm should utilize inputs such that the marginal physical product of an input divided by the price of the input is the same for all inputs. This is also the profit-maximizing rule because

Accepted Answer

A)  we obtain the profit-maximizing rule by multiplying each ratio by the marginal revenue produced. 
B)  we obtain the profit-maximizing rule by multiplying each ratio by the product price, which is the same for each input. 
C)  the profit-maximizing rule is just the inverse of the cost-minimizing rule. 
D)  they are exactly the same. 
A)  we obtain the profit-maximizing rule by multiplying each ratio by the marginal revenue produced. 
B)  we obtain the profit-maximizing rule by multiplying each ratio by the product price, which is the same for each input. 
C)  the profit-maximizing rule is just the inverse of the cost-minimizing rule. 
D)  they are exactly the same.

Question 10

The more inelastic the consumer demand for the final product, the

Accepted Answer

A)  greater will be the economic profit in a competitive market. 
B)  greater the impact on employment from a change in the wage rate. 
C)  more inelastic the demand for labor producing the product. 
D)  more responsive the output demand to a change in the price of labor. 
A)  greater will be the economic profit in a competitive market. 
B)  greater the impact on employment from a change in the wage rate. 
C)  more inelastic the demand for labor producing the product. 
D)  more responsive the output demand to a change in the price of labor.

Question 11

Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate and the equilibrium quantity of labor both increased. What happened in the market for pizza makers?

Accepted Answer

A)  The demand for pizza makers increased. 
B)  The demand for pizza makers decreased. 
C)  The supply for pizza makers increased. 
D)  The supply for pizza makers decreased. 
A)  The demand for pizza makers increased. 
B)  The demand for pizza makers decreased. 
C)  The supply for pizza makers increased. 
D)  The supply for pizza makers decreased.

Question 12

The marginal revenue product gives

Accepted Answer

A)  the change in total product for an additional unit of a variable input. 
B)  the amount that other inputs must increase by when labor increase by one unit. 
C)  the additions to total cost when an additional unit of a variable input is hired. 
D)  the additional revenue obtained when an additional unit of a variable input is hired. 
A)  the change in total product for an additional unit of a variable input. 
B)  the amount that other inputs must increase by when labor increase by one unit. 
C)  the additions to total cost when an additional unit of a variable input is hired. 
D)  the additional revenue obtained when an additional unit of a variable input is hired.

Question 13

The marginal revenue product is

Accepted Answer

A)  the change in total output resulting from a one-unit change in variable output. 
B)  the change in marginal output resulting from a one-unit change in variable input. 
C)  the change in total revenue resulting from a one-unit change in variable input. 
D)  the change in marginal revenue resulting from a one-unit change in variable input. 
A)  the change in total output resulting from a one-unit change in variable output. 
B)  the change in marginal output resulting from a one-unit change in variable input. 
C)  the change in total revenue resulting from a one-unit change in variable input. 
D)  the change in marginal revenue resulting from a one-unit change in variable input.

Question 14

If MFC >   , the firm should

Accepted Answer

A)  hire more workers. 
B)  lower wages. 
C)  get rid of some capital. 
D)  reduce the number of workers. 
A)  hire more workers. 
B)  lower wages. 
C)  get rid of some capital. 
D)  reduce the number of workers.

Question 15

The marginal physical product of labor is

Accepted Answer

A)  the output of the firm divided by the number of workers. 
B)  the change in total revenues resulting from the addition of one more worker, while increasing one other factor of production. 
C)  the change in output resulting from the addition of one more worker, holding other factors of production constant. 
D)  the change in output resulting from the addition of one more worker, adjusting the level of the capital stock accordingly. 
A)  the output of the firm divided by the number of workers. 
B)  the change in total revenues resulting from the addition of one more worker, while increasing one other factor of production. 
C)  the change in output resulting from the addition of one more worker, holding other factors of production constant. 
D)  the change in output resulting from the addition of one more worker, adjusting the level of the capital stock accordingly.

Question 16

If workers in an industry become less productive, we would expect the

Accepted Answer

A)  supply of workers to increase. 
B)  supply of workers to decrease. 
C)  demand for workers to decrease. 
D)  demand for workers to increase. 
A)  supply of workers to increase. 
B)  supply of workers to decrease. 
C)  demand for workers to decrease. 
D)  demand for workers to increase.

Question 17

-Refer to the above table. For each level of employment of labor shown

Accepted Answer

A)  marginal product declines. 
B)  marginal product holds constant. 
C)  marginal product rises. 
D)  marginal product falls for all employees beyond the 10th unit of labor. 
A)  marginal product declines. 
B)  marginal product holds constant. 
C)  marginal product rises. 
D)  marginal product falls for all employees beyond the 10th unit of labor.

Question 18

The marginal revenue product of labor declines as the number of workers increases because

Accepted Answer

A)  firms hire the most efficient workers first and the least efficient workers last. 
B)  firms must lower prices for the final product when they want to sell more units. 
C)  of the law of diminishing marginal product. 
D)  of diseconomies of scale. 
A)  firms hire the most efficient workers first and the least efficient workers last. 
B)  firms must lower prices for the final product when they want to sell more units. 
C)  of the law of diminishing marginal product. 
D)  of diseconomies of scale.

Question 19

A fall in the price of the final product produced by a firm will cause

Accepted Answer

A)  a decline in the price of an input used to produce the good. 
B)  a movement down the demand curve for an input used to produce the final product. 
C)  a reduction in demand for an input used to produce the final product. 
D)  a reduction in the supply of an input used to produce the final product. 
A)  a decline in the price of an input used to produce the good. 
B)  a movement down the demand curve for an input used to produce the final product. 
C)  a reduction in demand for an input used to produce the final product. 
D)  a reduction in the supply of an input used to produce the final product.

Question 20

-In the above table, what is the marginal revenue product of the 2nd worker?

Accepted Answer

A)  $99 
B)  $70 
C)  $110 
D)  $9 
A)  $99 
B)  $70 
C)  $110 
D)  $9

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

In a perfectly competitive labor market, the wage rate paid by the individual firm is

The individual firm operating in a perfectly competitive labor market

Which of the following is an example of outsourcing?

If the supply of labor to a firm is perfectly elastic at the going wage rate established by the forces of supply and demand then

The profit maximizing combination of resources

The additional cost associated with hiring one additional unit of some factor input, such as labor, is referred to as

-Refer to the above table. Suppose the price of the good sold is $3 and the marginal factor cost of labor is $300, how many units of labor will the firm hire?

The MRP of labor will shift to the right if

The cost-minimizing rule is that a firm should utilize inputs such that the marginal physical product of an input divided by the price of the input is the same for all inputs. This is also the profit-maximizing rule because

The more inelastic the consumer demand for the final product, the

Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate and the equilibrium quantity of labor both increased. What happened in the market for pizza makers?

The marginal revenue product gives

The marginal revenue product is

If MFC > , the firm should

The marginal physical product of labor is

If workers in an industry become less productive, we would expect the

-Refer to the above table. For each level of employment of labor shown

The marginal revenue product of labor declines as the number of workers increases because

A fall in the price of the final product produced by a firm will cause

-In the above table, what is the marginal revenue product of the 2nd worker?

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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