Question 1

The firm's demand curve for labor is

Accepted Answer

A)  the marginal revenue product curve for labor. 
B)  the demand curve for the good produced divided by the price of the good. 
C)  the marginal physical product curve for labor divided by the price of the good. 
D)  the marginal physical product curve for labor multiplied by the price of labor. 
A)  the marginal revenue product curve for labor. 
B)  the demand curve for the good produced divided by the price of the good. 
C)  the marginal physical product curve for labor divided by the price of the good. 
D)  the marginal physical product curve for labor multiplied by the price of labor.

Question 2

The equilibrium wage rate in an industry is determined by

Accepted Answer

A)  finding where the market supply curve indicates that the substitution effect and income effect of a wage increase are offsetting. 
B)  the intersection of the market demand curve for labor and the market supply curve for labor. 
C)  the strength of the substitution effect relative to the elasticity of demand for labor. 
D)  whether workers or management are better at negotiating. 
A)  finding where the market supply curve indicates that the substitution effect and income effect of a wage increase are offsetting. 
B)  the intersection of the market demand curve for labor and the market supply curve for labor. 
C)  the strength of the substitution effect relative to the elasticity of demand for labor. 
D)  whether workers or management are better at negotiating.

Question 3

If a firm wants to maximize profits, it should hire workers up to the point at which

Accepted Answer

A)  total factor cost = total revenue. 
B)  marginal factor cost = marginal revenue product. 
C)  marginal utility = marginal cost. 
D)  total social benefit = total social costs. 
A)  total factor cost = total revenue. 
B)  marginal factor cost = marginal revenue product. 
C)  marginal utility = marginal cost. 
D)  total social benefit = total social costs.

Question 4

-Refer to the above table. If the price of the good produced is $8, the marginal revenue product of the 12th worker is

Accepted Answer

A)  $720 
B)  $800 
C)  $5520 
D)  $560 
A)  $720 
B)  $800 
C)  $5520 
D)  $560

Question 5

Which of the following will NOT shift the MRP curve for labor?

Accepted Answer

A)  a change in the productivity of labor 
B)  a change in the price of the product being sold 
C)  a change in the wage rate in the market 
D)  a change in the demand for the product being produced 
A)  a change in the productivity of labor 
B)  a change in the price of the product being sold 
C)  a change in the wage rate in the market 
D)  a change in the demand for the product being produced

Question 6

Cost minimization suggests that two inputs should be employed to the point where

Accepted Answer

A)  the marginal cost of each input is identical. 
B)  the marginal revenue product of each input is identical. 
C)  the marginal physical product per dollar spent on each input is identical. 
D)  the extra contribution to physical output of the inputs is identical. 
A)  the marginal cost of each input is identical. 
B)  the marginal revenue product of each input is identical. 
C)  the marginal physical product per dollar spent on each input is identical. 
D)  the extra contribution to physical output of the inputs is identical.

Question 7

Compared to the perfectly competitive firm , the monopolist's input demand curve is

Accepted Answer

A)  more elastic. 
B)  more inelastic. 
C)  due to a constant per-unit price of the product. 
D)  marginal factor cost. 
A)  more elastic. 
B)  more inelastic. 
C)  due to a constant per-unit price of the product. 
D)  marginal factor cost.

Question 8

Marginal factor cost is

Accepted Answer

A)  the change in the value of output from using an additional unit of the factor. 
B)  the cost of an additional unit of output. 
C)  the total value of factor cost divided by the one cost that is being held constant. 
D)  the cost of using an additional unit of an input. 
A)  the change in the value of output from using an additional unit of the factor. 
B)  the cost of an additional unit of output. 
C)  the total value of factor cost divided by the one cost that is being held constant. 
D)  the cost of using an additional unit of an input.

Question 9

-Refer to the above table. Suppose the marginal revenue product of the 7th worker is $1100. This implies that

Accepted Answer

A)  the price of the good is $1. 
B)  the price of the good is $8. 
C)  the price of the good is $20. 
D)  we cannot tell what the price of the good is without more information. 
A)  the price of the good is $1. 
B)  the price of the good is $8. 
C)  the price of the good is $20. 
D)  we cannot tell what the price of the good is without more information.

Question 10

If the demand for hamburgers increases, it is likely that the demand for fast-food employees will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  increase at first but then fall rapidly. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  increase at first but then fall rapidly.

Question 11

-According to the above table, if the wage rate is $400 a week and the price of the good produced is $5, the perfectly competitive firm should hire

Accepted Answer

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

Question 12

The demand curve for labor slopes down because

Accepted Answer

A)  firms value less efficient workers less than they value more efficient workers. 
B)  firms must lower prices to sell the additional units of its product that the extra workers produce. 
C)  of the law of diminishing marginal product. 
D)  of profit maximizing behavior. 
A)  firms value less efficient workers less than they value more efficient workers. 
B)  firms must lower prices to sell the additional units of its product that the extra workers produce. 
C)  of the law of diminishing marginal product. 
D)  of profit maximizing behavior.

Question 13

Outsourcing is

Accepted Answer

A)  one of the factors that shifts the supply of labor curve. 
B)  when a firm employs labor outside the country in which the firm is located. 
C)  when the change in the price of a complementary input causes the demand for labor curve to shift in the opposite direction. 
D)  the cost of using an additional unit of an input. 
A)  one of the factors that shifts the supply of labor curve. 
B)  when a firm employs labor outside the country in which the firm is located. 
C)  when the change in the price of a complementary input causes the demand for labor curve to shift in the opposite direction. 
D)  the cost of using an additional unit of an input.

Question 14

When firms in a U.S. industry outsource some of their production,

Accepted Answer

A)  both U.S. labor demand and U.S. wages in the industry fall 
B)  U.S. labor demand falls, but U.S. wages are not affected. 
C)  U.S. labor demand remains unchanged, but U.S. wages fall. 
D)  U.S. labor demand falls, but U.S. wages increase. 
A)  both U.S. labor demand and U.S. wages in the industry fall 
B)  U.S. labor demand falls, but U.S. wages are not affected. 
C)  U.S. labor demand remains unchanged, but U.S. wages fall. 
D)  U.S. labor demand falls, but U.S. wages increase.

Question 15

"A firm should continue to hire more workers as long as wages are low." Do you agree or disagree? Why?

Accepted Answer

Disagree. The firm should hire workers u

Question 16

A perfectly competitive firm is hiring variable resources M and N. It will minimize total costs

Accepted Answer

A)    /   =   /   . 
B)    ∗   =   ∗   . 
C)    /   =   /   . 
D)    /   =   /   . 
A)    /   =   /   . 
B)    ∗   =   ∗   . 
C)    /   =   /   . 
D)    /   =   /   .

Question 17

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 higher 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 18

For a firm in a perfectly competitive labor market,

Accepted Answer

A)  W > MFC. 
B)  W  MRP. 
D)  W = MFC. 
A)  W > MFC. 
B)  W  MRP. 
D)  W = MFC.

Question 19

The demand for an input will be more inelastic when

Accepted Answer

A)  the demand for the product being produced is elastic. 
B)  the cost of the input is a relatively large percentage of total production costs. 
C)  the time period being considered is relatively long. 
D)  it is difficult to substitute other inputs for this input. 
A)  the demand for the product being produced is elastic. 
B)  the cost of the input is a relatively large percentage of total production costs. 
C)  the time period being considered is relatively long. 
D)  it is difficult to substitute other inputs for this input.

Question 20

The practice of outsourcing has been given a boost by

Accepted Answer

A)  advances in telecommunications and computer networking. 
B)  support from organized labor. 
C)  firms that are becoming more risk-averse. 
D)  sharp increases in the cost of overseas labor. 
A)  advances in telecommunications and computer networking. 
B)  support from organized labor. 
C)  firms that are becoming more risk-averse. 
D)  sharp increases in the cost of overseas labor.

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

The firm's demand curve for labor is

The equilibrium wage rate in an industry is determined by

If a firm wants to maximize profits, it should hire workers up to the point at which

-Refer to the above table. If the price of the good produced is $8, the marginal revenue product of the 12th worker is

Which of the following will NOT shift the MRP curve for labor?

Cost minimization suggests that two inputs should be employed to the point where

Compared to the perfectly competitive firm , the monopolist's input demand curve is

Marginal factor cost is

-Refer to the above table. Suppose the marginal revenue product of the 7th worker is $1100. This implies that

If the demand for hamburgers increases, it is likely that the demand for fast-food employees will

-According to the above table, if the wage rate is $400 a week and the price of the good produced is $5, the perfectly competitive firm should hire

The demand curve for labor slopes down because

Outsourcing is

When firms in a U.S. industry outsource some of their production,

"A firm should continue to hire more workers as long as wages are low." Do you agree or disagree? Why?

A perfectly competitive firm is hiring variable resources M and N. It will minimize total costs

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 higher than the marginal physical product of capital per last dollar spent?

For a firm in a perfectly competitive labor market,

The demand for an input will be more inelastic when

The practice of outsourcing has been given a boost by

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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