Question 1

What are the short-run economic effects when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?

Accepted Answer

A)  The demand curve for labor in the U.S. decreases, and the demand curve in the foreign country will increase. 
B)  The demand curve for labor in the U.S. increases, and the demand curve in the foreign country will decrease. 
C)  The demand curve for labor in the U.S. decreases, and the demand curve in the foreign country will decrease. 
D)  The demand curve for labor in the U.S. increases, and the demand curve in the foreign country will increase. 
A)  The demand curve for labor in the U.S. decreases, and the demand curve in the foreign country will increase. 
B)  The demand curve for labor in the U.S. increases, and the demand curve in the foreign country will decrease. 
C)  The demand curve for labor in the U.S. decreases, and the demand curve in the foreign country will decrease. 
D)  The demand curve for labor in the U.S. increases, and the demand curve in the foreign country will increase.

Question 2

A profit maximizing firm will hire additional workers until

Accepted Answer

A)  the additional cost associated with hiring the last worker equals the average wage rate of the workers. 
B)  the additional cost associated with hiring the last worker equals the additional revenue generated by that worker. 
C)  the extra revenue generated by the last worker hired equals zero. 
D)  the extra cost associated with hiring the last worker equals the price of the good produced. 
A)  the additional cost associated with hiring the last worker equals the average wage rate of the workers. 
B)  the additional cost associated with hiring the last worker equals the additional revenue generated by that worker. 
C)  the extra revenue generated by the last worker hired equals zero. 
D)  the extra cost associated with hiring the last worker equals the price of the good produced.

Question 3

The change in total output due to the change in one variable input, while holding all other inputs constant, is the

Accepted Answer

A)  marginal revenue product. 
B)  derived demand for labor. 
C)  marginal physical product. 
D)  market demand curve for labor. 
A)  marginal revenue product. 
B)  derived demand for labor. 
C)  marginal physical product. 
D)  market demand curve for labor.

Question 4

-In the above figure, the line labeled "MRPL" also represents the firm's

Accepted Answer

A)  supply curve. 
B)  marginal physical product curve. 
C)  total physical product curve. 
D)  demand curve. 
A)  supply curve. 
B)  marginal physical product curve. 
C)  total physical product curve. 
D)  demand curve.

Question 5

The MRP of labor will shift to the left 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 6

-According to the above table, if the price of the good produced is $5 and the wage rate is $400, then the marginal revenue product of the 7th worker is

Accepted Answer

A)  $300. 
B)  $60. 
C)  $12. 
D)  $400. 
A)  $300. 
B)  $60. 
C)  $12. 
D)  $400.

Question 7

In a perfectly competitive labor market, the least-cost combination rule for resource use

Accepted Answer

A)  requires that resources be used in combinations such that marginal products are equal. 
B)  requires that the marginal physical product per dollar spent for each resource is equalized. 
C)  assures the firm an economic profit. 
D)  assures the firm a normal profit. 
A)  requires that resources be used in combinations such that marginal products are equal. 
B)  requires that the marginal physical product per dollar spent for each resource is equalized. 
C)  assures the firm an economic profit. 
D)  assures the firm a normal profit.

Question 8

Marginal revenue product is

Accepted Answer

A)  marginal physical product times marginal factor cost. 
B)  marginal physical product times marginal revenue. 
C)  average physical product times marginal revenue. 
D)  marginal physical product times the wage rate. 
A)  marginal physical product times marginal factor cost. 
B)  marginal physical product times marginal revenue. 
C)  average physical product times marginal revenue. 
D)  marginal physical product times the wage rate.

Question 9

All of the following make the demand for labor more elastic EXCEPT

Accepted Answer

A)  greater elasticity of demand for the final product. 
B)  the longer the time period under consideration. 
C)  the smaller the proportion of total costs accounted for by labor. 
D)  the easier it is to substitute another input for labor. 
A)  greater elasticity of demand for the final product. 
B)  the longer the time period under consideration. 
C)  the smaller the proportion of total costs accounted for by labor. 
D)  the easier it is to substitute another input for labor.

Question 10

If a firm wants to maximize profits it should

Accepted Answer

A)  hire each factor of production up to the point at which the marginal physical product per last dollar spent is equalized. 
B)  hire each factor of production up to the point at which the marginal revenue product per last dollar spent is equalized. 
C)  hire each factor of production up to the point at which the marginal factor cost per last dollar spent is equalized. 
D)  hire the same number of units of all inputs. 
A)  hire each factor of production up to the point at which the marginal physical product per last dollar spent is equalized. 
B)  hire each factor of production up to the point at which the marginal revenue product per last dollar spent is equalized. 
C)  hire each factor of production up to the point at which the marginal factor cost per last dollar spent is equalized. 
D)  hire the same number of units of all inputs.

Question 11

When the marginal productivity of labor decreases, the demand curve for labor in a perfectly competitive market

Accepted Answer

A)  does not change. 
B)  becomes flatter. 
C)  shifts to the right. 
D)  shifts to the left. 
A)  does not change. 
B)  becomes flatter. 
C)  shifts to the right. 
D)  shifts to the left.

Question 12

-Refer to the above table. If the price of the product is $1.50, and the marginal factor cost of an additional unit of an input is $135, how many units of labor should be hired?

Accepted Answer

A)  11 
B)  12 
C)  13 
D)  14 
A)  11 
B)  12 
C)  13 
D)  14

Question 13

Outsourcing is

Accepted Answer

A)  only beneficial to a few select countries. 
B)  another way for residents of different nations to conduct trade with one another. 
C)  not beneficial to any country. 
D)  not beneficial to the consumers who purchase outsourced goods. 
A)  only beneficial to a few select countries. 
B)  another way for residents of different nations to conduct trade with one another. 
C)  not beneficial to any country. 
D)  not beneficial to the consumers who purchase outsourced goods.

Question 14

Suppose there are 1000 firms in a market and all are identical. Firm A will hire 20 workers when the wage rate is $10, 25 workers when the wage rate is $9, and 30 workers when the wage rate is $8. The equilibrium wage rate for a number of years has been $9. If the wage rate falls to $8, we know that

Accepted Answer

A)  the quantity demanded for the market will increase to 30,000 workers. 
B)  the quantity demanded for the market will increase to more than 30,000 workers. 
C)  the quantity demanded for the market will increase to less than 30,000 workers. 
D)  the quantity demanded for the market will increase, but we can't tell which of the above answers is correct. 
A)  the quantity demanded for the market will increase to 30,000 workers. 
B)  the quantity demanded for the market will increase to more than 30,000 workers. 
C)  the quantity demanded for the market will increase to less than 30,000 workers. 
D)  the quantity demanded for the market will increase, but we can't tell which of the above answers is correct.

Question 15

The supply of labor to the individual firm in a perfectly competitive market is

Accepted Answer

A)  perfectly inelastic at the current equilibrium employment level. 
B)  perfectly elastic at the current market clearing wage rate. 
C)  downward sloping. 
D)  equal to the marginal revenue of output. 
A)  perfectly inelastic at the current equilibrium employment level. 
B)  perfectly elastic at the current market clearing wage rate. 
C)  downward sloping. 
D)  equal to the marginal revenue of output.

Question 16

Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should

Accepted Answer

A)  use relatively more capital. 
B)  use relatively less capital. 
C)  increase all inputs proportionately. 
D)  decrease all inputs proportionately. 
A)  use relatively more capital. 
B)  use relatively less capital. 
C)  increase all inputs proportionately. 
D)  decrease all inputs proportionately.

Question 17

The demand curve for labor is the

Accepted Answer

A)  marginal factor cost curve for labor. 
B)  marginal physical product curve for labor. 
C)  marginal physical product curve for labor times the wage rate. 
D)  marginal revenue product curve for labor. 
A)  marginal factor cost curve for labor. 
B)  marginal physical product curve for labor. 
C)  marginal physical product curve for labor times the wage rate. 
D)  marginal revenue product curve for labor.

Question 18

When U.S. computer companies hire workers in India to staff their customer service call centers, they are engaging in

Accepted Answer

A)  predatory pricing. 
B)  unfair trade practices. 
C)  outsourcing. 
D)  labor engagement. 
A)  predatory pricing. 
B)  unfair trade practices. 
C)  outsourcing. 
D)  labor engagement.

Question 19

-Refer to the above table. If the price of the good produced is $9, the marginal revenue product of the 13th worker is

Accepted Answer

A)  $810 
B)  $360 
C)  $6840 
D)  $630 
A)  $810 
B)  $360 
C)  $6840 
D)  $630

Question 20

Suppose a new technology allows firms to substitute mechanical tomato pickers for farm laborers. As a result, the demand curve for farm laborers will

Accepted Answer

A)  become less elastic. 
B)  become more elastic. 
C)  shift to the right. 
D)  not be affected. 
A)  become less elastic. 
B)  become more elastic. 
C)  shift to the right. 
D)  not be affected.

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

What are the short-run economic effects when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?

A profit maximizing firm will hire additional workers until

The change in total output due to the change in one variable input, while holding all other inputs constant, is the

-In the above figure, the line labeled "MRPL" also represents the firm's

The MRP of labor will shift to the left if

-According to the above table, if the price of the good produced is $5 and the wage rate is $400, then the marginal revenue product of the 7th worker is

In a perfectly competitive labor market, the least-cost combination rule for resource use

Marginal revenue product is

All of the following make the demand for labor more elastic EXCEPT

If a firm wants to maximize profits it should

When the marginal productivity of labor decreases, the demand curve for labor in a perfectly competitive market

-Refer to the above table. If the price of the product is $1.50, and the marginal factor cost of an additional unit of an input is $135, how many units of labor should be hired?

Outsourcing is

The supply of labor to the individual firm in a perfectly competitive market is

Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should

The demand curve for labor is the

When U.S. computer companies hire workers in India to staff their customer service call centers, they are engaging in

-Refer to the above table. If the price of the good produced is $9, the marginal revenue product of the 13th worker is

Suppose a new technology allows firms to substitute mechanical tomato pickers for farm laborers. As a result, the demand curve for farm laborers will

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

Filters

-In the above figure, the line labeled "MRP_L" also represents the firm's