Question 1

-In the above table, if the marginal factor cost is $20, how many workers would be hired?

Accepted Answer

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

Question 2

The additional revenue obtained by a firm when it hires an additional worker, holding other inputs constant, is

Accepted Answer

A)  the marginal physical product of labor. 
B)  the marginal revenue product of labor. 
C)  the marginal cost of labor. 
D)  equal to total revenue divided by the number of workers. 
A)  the marginal physical product of labor. 
B)  the marginal revenue product of labor. 
C)  the marginal cost of labor. 
D)  equal to total revenue divided by the number of workers.

Question 3

The demand curve for labor will shift whenever

Accepted Answer

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

Question 4

-Refer to the above table. If the price of the good produced is $10 and the wage rate is $500, then the marginal revenue product of the 5th worker is ________.

Accepted Answer

A)  $10 
B)  $50 
C)  $750 
D)  $4,750 
A)  $10 
B)  $50 
C)  $750 
D)  $4,750

Question 5

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

Question 6

A firm's marginal revenue product of labor curve is also

Accepted Answer

A)  its labor demand curve. 
B)  its marginal cost curve. 
C)  its total revenue line. 
D)  its long-run input cost function. 
A)  its labor demand curve. 
B)  its marginal cost curve. 
C)  its total revenue line. 
D)  its long-run input cost function.

Question 7

If the price of golf balls increases, what will likely happen to the demand for golf club manufacturing employees?

Accepted Answer

A)  It will increase. 
B)  It will decrease. 
C)  It will stay the same. 
D)  Nothing, the two are not related. 
A)  It will increase. 
B)  It will decrease. 
C)  It will stay the same. 
D)  Nothing, the two are not related.

Question 8

The demand curve for labor of a monopolist

Accepted Answer

A)  is horizontal even though the demand curve for labor for a competitive firm is downward sloping. 
B)  slopes down for the same reason as the demand curve for labor of a perfectly competitive firm. 
C)  slopes down because of the law of diminishing marginal product and because the monopolist must lower prices to sell additional units of the good. 
D)  slopes upward because monopolists use more capital than do perfectly competitive firms. 
A)  is horizontal even though the demand curve for labor for a competitive firm is downward sloping. 
B)  slopes down for the same reason as the demand curve for labor of a perfectly competitive firm. 
C)  slopes down because of the law of diminishing marginal product and because the monopolist must lower prices to sell additional units of the good. 
D)  slopes upward because monopolists use more capital than do perfectly competitive firms.

Question 9

If a monopolist has an output price of $10, marginal revenue equal to $4, and faces a fixed wage of $6, he or she should hire labor until the marginal revenue product is equal to

Accepted Answer

A)  $10. 
B)  $4. 
C)  $6. 
D)  $2. 
A)  $10. 
B)  $4. 
C)  $6. 
D)  $2.

Question 10

Derived demand means

Accepted Answer

A)  the labor demand curve will be upward sloping. 
B)  labor demand is derived from demand for the product it produces. 
C)  labor demand will shift about in a random fashion. 
D)  labor demand is determined by the supply of labor. 
A)  the labor demand curve will be upward sloping. 
B)  labor demand is derived from demand for the product it produces. 
C)  labor demand will shift about in a random fashion. 
D)  labor demand is determined by the supply of labor.

Question 11

If the price of a product being sold in a perfectly competitive market increases,

Accepted Answer

A)  the MRP curve shifts to the right. 
B)  the MPP curve shifts to the right. 
C)  the MFC curve shifts to the right. 
D)  the MFC curve shifts to the left. 
A)  the MRP curve shifts to the right. 
B)  the MPP curve shifts to the right. 
C)  the MFC curve shifts to the right. 
D)  the MFC curve shifts to the left.

Question 12

Suppose the market for autoworkers is initially in equilibrium, but then the demand for automobiles increases and simultaneously the automakers allow autoworkers workers less flexibility working at the plants. What happens in the market for autoworkers?

Accepted Answer

A)  The equilibrium wage rate will increase and the equilibrium quantity of labor will increase, decrease or stay the same. 
B)  The equilibrium wage rate will increase, decrease or stay the same and the equilibrium quantity of labor will increase. 
C)  The equilibrium wage rate and the equilibrium quantity of labor will both decrease. 
D)  The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase. 
A)  The equilibrium wage rate will increase and the equilibrium quantity of labor will increase, decrease or stay the same. 
B)  The equilibrium wage rate will increase, decrease or stay the same and the equilibrium quantity of labor will increase. 
C)  The equilibrium wage rate and the equilibrium quantity of labor will both decrease. 
D)  The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase.

Question 13

The demand for labor is considered a derived demand since it depends on

Accepted Answer

A)  the supply of labor. 
B)  the market for capital. 
C)  the consumer demand for the output produced. 
D)  competitive markets. 
A)  the supply of labor. 
B)  the market for capital. 
C)  the consumer demand for the output produced. 
D)  competitive markets.

Question 14

The increase in output that results when one more unit of a variable input is hired is called

Accepted Answer

A)  total physical product. 
B)  marginal physical product. 
C)  average physical product. 
D)  marginal revenue. 
A)  total physical product. 
B)  marginal physical product. 
C)  average physical product. 
D)  marginal revenue.

Question 15

An increase in the marginal factor cost of labor will

Accepted Answer

A)  lead to an increase in the quantity demanded of labor. 
B)  induce a firm to hire fewer workers. 
C)  lead to an increase in the value of an additional worker. 
D)  cause the value of the marginal product of labor to increase. 
A)  lead to an increase in the quantity demanded of labor. 
B)  induce a firm to hire fewer workers. 
C)  lead to an increase in the value of an additional worker. 
D)  cause the value of the marginal product of labor to increase.

Question 16

The marginal physical product of labor for the most recent worker hired by Ajax is 286. If Ajax were to hire an additional worker we would expect the marginal physical product of labor to

Accepted Answer

A)  remain at 286. 
B)  be below 286. 
C)  be above 286 by a small amount. 
D)  be above 286 by a large amount. 
A)  remain at 286. 
B)  be below 286. 
C)  be above 286 by a small amount. 
D)  be above 286 by a large amount.

Question 17

Derived demand is

Accepted Answer

A)  a derivative of the demand curve. 
B)  the demand for goods and services produced by companies using scarce resources. 
C)  the demand for advertising to increase the sales of the product. 
D)  the demand for the factors of production that are used to produce goods and services. 
A)  a derivative of the demand curve. 
B)  the demand for goods and services produced by companies using scarce resources. 
C)  the demand for advertising to increase the sales of the product. 
D)  the demand for the factors of production that are used to produce goods and services.

Question 18

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers? Explain. Now, suppose the automakers improve working conditions at the plants. What are the effects? Explain.

Accepted Answer

The purchase of capital that is a substi

Question 19

Explain what the profit-maximizing combination of resources is for the perfectly competitive firm.

Accepted Answer

The firm hires each input such that the

Question 20

Suppose the market price of zinc doubles. Which of the following scenarios is most likely?

Accepted Answer

A)  The demand for zinc miners will increase, raising the market wage rate. 
B)  The demand for zinc miners will decrease, reducing the market wage rate. 
C)  The demand for zinc will increase, raising the market price further. 
D)  The demand for zinc miners will decrease, reducing the market price back to its original price. 
A)  The demand for zinc miners will increase, raising the market wage rate. 
B)  The demand for zinc miners will decrease, reducing the market wage rate. 
C)  The demand for zinc will increase, raising the market price further. 
D)  The demand for zinc miners will decrease, reducing the market price back to its original price.

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

-In the above table, if the marginal factor cost is $20, how many workers would be hired?

The additional revenue obtained by a firm when it hires an additional worker, holding other inputs constant, is

The demand curve for labor will shift whenever

-Refer to the above table. If the price of the good produced is $10 and the wage rate is $500, then the marginal revenue product of the 5th worker 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

A firm's marginal revenue product of labor curve is also

If the price of golf balls increases, what will likely happen to the demand for golf club manufacturing employees?

The demand curve for labor of a monopolist

If a monopolist has an output price of $10, marginal revenue equal to $4, and faces a fixed wage of $6, he or she should hire labor until the marginal revenue product is equal to

Derived demand means

If the price of a product being sold in a perfectly competitive market increases,

Suppose the market for autoworkers is initially in equilibrium, but then the demand for automobiles increases and simultaneously the automakers allow autoworkers workers less flexibility working at the plants. What happens in the market for autoworkers?

The demand for labor is considered a derived demand since it depends on

The increase in output that results when one more unit of a variable input is hired is called

An increase in the marginal factor cost of labor will

The marginal physical product of labor for the most recent worker hired by Ajax is 286. If Ajax were to hire an additional worker we would expect the marginal physical product of labor to

Derived demand is

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers? Explain. Now, suppose the automakers improve working conditions at the plants. What are the effects? Explain.

Explain what the profit-maximizing combination of resources is for the perfectly competitive firm.

Suppose the market price of zinc doubles. Which of the following scenarios is most likely?

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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