Question 1

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

Accepted Answer

A)  a monopolist has to pay higher wages in order to attract additional workers. 
B)  the monopolist substitutes more capital for labor when compared to a competitive industry. 
C)  the monopolist producer has to deal with unions and face higher wages than do competitive industries. 
D)  the monopolist produces less output than a competitive industry. 
A)  a monopolist has to pay higher wages in order to attract additional workers. 
B)  the monopolist substitutes more capital for labor when compared to a competitive industry. 
C)  the monopolist producer has to deal with unions and face higher wages than do competitive industries. 
D)  the monopolist produces less output than a competitive industry.

Question 2

When an input represents a larger proportion of a firm's total costs, then

Accepted Answer

A)  demand for the input will tends to be less elastic. 
B)  the input demand will not vary significantly with a change in input price. 
C)  the usage of the input cannot be varied in the production function. 
D)  demand for the input will tends to be more elastic. 
A)  demand for the input will tends to be less elastic. 
B)  the input demand will not vary significantly with a change in input price. 
C)  the usage of the input cannot be varied in the production function. 
D)  demand for the input will tends to be more elastic.

Question 3

The firm's demand for labor curve is its

Accepted Answer

A)  average product of labor curve. 
B)  marginal product of labor curve. 
C)  marginal revenue product of labor curve. 
D)  average revenue product of labor curve. 
A)  average product of labor curve. 
B)  marginal product of labor curve. 
C)  marginal revenue product of labor curve. 
D)  average revenue product of labor curve.

Question 4

Which of the following statements about a perfectly competitive market are true? I. The perfectly competitive industry faces an upward sloping labor supply curve.
II) The individual firm in a perfectly competitive industry faces a perfectly elastic labor supply curve.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 5

All of the following shift the labor demand curve EXCEPT changes in

Accepted Answer

A)  fringe benefits offered to employees. 
B)  the demand for the final product. 
C)  labor productivity. 
D)  prices of related factors. 
A)  fringe benefits offered to employees. 
B)  the demand for the final product. 
C)  labor productivity. 
D)  prices of related factors.

Question 6

The wage rate for widget makers is currently $25 per hour and Ajax hires 20 widget makers. If the wage rate were decreased to $20, what would happen to the marginal revenue product for labor at Ajax?

Accepted Answer

A)  It would remain the same. 
B)  It would increase since Ajax's demand for labor curve will shift. 
C)  It would increase since the price of widgets would decrease. 
D)  It would decrease since Ajax will hire more workers. 
A)  It would remain the same. 
B)  It would increase since Ajax's demand for labor curve will shift. 
C)  It would increase since the price of widgets would decrease. 
D)  It would decrease since Ajax will hire more workers.

Question 7

Show how the profit-maximizing rule for hiring resources is equivalent to the cost-minimizing rule.

Accepted Answer

The cost-minimizing rule for hiring reso

Question 8

If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is lower than the marginal physical product of capital per last dollar spent?

Accepted Answer

A)  The firm should increase both the quantity of capital and the quantity of labor. 
B)  The firm should decrease both the quantity of capital and the quantity of labor. 
C)  The firm should increase the quantity of capital and reduce the quantity of labor. 
D)  The firm should decrease the quantity of capital and increase the quantity of labor. 
A)  The firm should increase both the quantity of capital and the quantity of labor. 
B)  The firm should decrease both the quantity of capital and the quantity of labor. 
C)  The firm should increase the quantity of capital and reduce the quantity of labor. 
D)  The firm should decrease the quantity of capital and increase the quantity of labor.

Question 9

A decrease in the supply of labor could be caused by

Accepted Answer

A)  wage rates falling in another industry. 
B)  better working conditions. 
C)  more job flexibility. 
D)  increased wage rates in another industry. 
A)  wage rates falling in another industry. 
B)  better working conditions. 
C)  more job flexibility. 
D)  increased wage rates in another industry.

Question 10

Absent government interference, the wage rate for labor in a competitive market is established

Accepted Answer

A)  solely by the firm's demand for labor. 
B)  solely by the market supply of labor. 
C)  by both the demand for and supply of labor at each individual firm. 
D)  by the the market supply and market demand for labor. 
A)  solely by the firm's demand for labor. 
B)  solely by the market supply of labor. 
C)  by both the demand for and supply of labor at each individual firm. 
D)  by the the market supply and market demand for labor.

Question 11

-In the above table, what is the marginal revenue product of the 4th worker?

Accepted Answer

A)  $92 
B)  $70 
C)  $40 
D)  $8 
A)  $92 
B)  $70 
C)  $40 
D)  $8

Question 12

The supply of labor to an industry will decrease when

Accepted Answer

A)  the price of leisure falls. 
B)  the income effect dominates the substitution effect. 
C)  the demand for labor falls in the industry. 
D)  workers receive better employment opportunities in other industries. 
A)  the price of leisure falls. 
B)  the income effect dominates the substitution effect. 
C)  the demand for labor falls in the industry. 
D)  workers receive better employment opportunities in other industries.

Question 13

Which of the following statements is true about the market demand curve for labor?

Accepted Answer

A)  The market demand curve is the sum of the individual firm's demand curve. 
B)  The market demand curve will be perfectly inelastic since firms need labor. 
C)  The market demand curve shows the quantities of labor demanded by all firms in the industry at various marginal products. 
D)  The market demand curve depends upon labor productivity, the wage rate and the price of the final product. 
A)  The market demand curve is the sum of the individual firm's demand curve. 
B)  The market demand curve will be perfectly inelastic since firms need labor. 
C)  The market demand curve shows the quantities of labor demanded by all firms in the industry at various marginal products. 
D)  The market demand curve depends upon labor productivity, the wage rate and the price of the final product.

Question 14

A firm in a competitive input market can

Accepted Answer

A)  hire workers at the going wage. 
B)  hire additional workers only by raising wages. 
C)  hire additional workers at lower wages because those who are still unemployed are anxious to work. 
D)  hire additional workers only after a long search process. 
A)  hire workers at the going wage. 
B)  hire additional workers only by raising wages. 
C)  hire additional workers at lower wages because those who are still unemployed are anxious to work. 
D)  hire additional workers only after a long search process.

Question 15

-Refer to the above table. Which of the following statements is correct?

Accepted Answer

A)  The table follows economic principles because in an increasing cost industry, increases in a variable input will lead to increase in output. 
B)  The table does not follow economic principles because in an increasing cost industry, increases in a variable input will lead to decrease in output. 
C)  The table follows economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to a decrease in the marginal physical product. 
D)  The table does not follow economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to an increase in the marginal physical product. 
A)  The table follows economic principles because in an increasing cost industry, increases in a variable input will lead to increase in output. 
B)  The table does not follow economic principles because in an increasing cost industry, increases in a variable input will lead to decrease in output. 
C)  The table follows economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to a decrease in the marginal physical product. 
D)  The table does not follow economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to an increase in the marginal physical product.

Question 16

Profit maximization occurs where

Accepted Answer

A)  each factor is used up to the point where its marginal revenue product is equal to its marginal factor cost. 
B)  each factor is used up to the point where its marginal physical product is equal to its marginal factor cost. 
C)  average variable cost equals marginal cost. 
D)  average variable cost equals average total cost. 
A)  each factor is used up to the point where its marginal revenue product is equal to its marginal factor cost. 
B)  each factor is used up to the point where its marginal physical product is equal to its marginal factor cost. 
C)  average variable cost equals marginal cost. 
D)  average variable cost equals average total cost.

Question 17

An increase in the price of a product

Accepted Answer

A)  automatically increases wages. 
B)  raises the firm's demand for labor. 
C)  would probably decrease total revenues. 
D)  increases productivity. 
A)  automatically increases wages. 
B)  raises the firm's demand for labor. 
C)  would probably decrease total revenues. 
D)  increases productivity.

Question 18

If the demand for a monopolist's product increases, its

Accepted Answer

A)  marginal revenue increases, making it more profitable to hire more workers. 
B)  marginal revenue increases, making it more profitable to hire fewer workers. 
C)  marginal revenue decreases, making it more profitable to hire more workers. 
D)  marginal revenue decreases, making it more profitable to hire fewer workers. 
A)  marginal revenue increases, making it more profitable to hire more workers. 
B)  marginal revenue increases, making it more profitable to hire fewer workers. 
C)  marginal revenue decreases, making it more profitable to hire more workers. 
D)  marginal revenue decreases, making it more profitable to hire fewer workers.

Question 19

An increase in the supply of labor to an industry could be caused by

Accepted Answer

A)  higher wages. 
B)  increased productivity of labor. 
C)  an increase in job flexibility in the industry. 
D)  an increase of wages in another industry. 
A)  higher wages. 
B)  increased productivity of labor. 
C)  an increase in job flexibility in the industry. 
D)  an increase of wages in another industry.

Question 20

All of the following affect the demand elasticity for labor EXCEPT

Accepted Answer

A)  final product income elasticity. 
B)  ease of substitution of labor for other inputs. 
C)  final product price elasticity. 
D)  labor costs as a portion of total cost. 
A)  final product income elasticity. 
B)  ease of substitution of labor for other inputs. 
C)  final product price elasticity. 
D)  labor costs as a portion of total cost.

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

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

When an input represents a larger proportion of a firm's total costs, then

The firm's demand for labor curve is its

Which of the following statements about a perfectly competitive market are true? I. The perfectly competitive industry faces an upward sloping labor supply curve. II) The individual firm in a perfectly competitive industry faces a perfectly elastic labor supply curve.

All of the following shift the labor demand curve EXCEPT changes in

The wage rate for widget makers is currently $25 per hour and Ajax hires 20 widget makers. If the wage rate were decreased to $20, what would happen to the marginal revenue product for labor at Ajax?

Show how the profit-maximizing rule for hiring resources is equivalent to the cost-minimizing rule.

If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is lower than the marginal physical product of capital per last dollar spent?

A decrease in the supply of labor could be caused by

Absent government interference, the wage rate for labor in a competitive market is established

-In the above table, what is the marginal revenue product of the 4th worker?

The supply of labor to an industry will decrease when

Which of the following statements is true about the market demand curve for labor?

A firm in a competitive input market can

-Refer to the above table. Which of the following statements is correct?

Profit maximization occurs where

An increase in the price of a product

If the demand for a monopolist's product increases, its

An increase in the supply of labor to an industry could be caused by

All of the following affect the demand elasticity for labor EXCEPT

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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