Question 1

A firm will hire a unit of input up to the point where

Accepted Answer

A)  the marginal cost of the input equals the marginal cost of output. 
B)  the marginal revenue product of the input is equal to the marginal factor cost of the input. 
C)  the price of the input is equal to the price of output. 
D)  the marginal physical product of the input is equal to the price of output. 
A)  the marginal cost of the input equals the marginal cost of output. 
B)  the marginal revenue product of the input is equal to the marginal factor cost of the input. 
C)  the price of the input is equal to the price of output. 
D)  the marginal physical product of the input is equal to the price of output.

Question 2

Suppose there are four industries. Labor costs are 80 percent of total costs in industry A, 60 percent in B, 45 percent in C, and 10 percent in D. In which of these industries will a 10 percent increase in the price of labor reduce quantity demanded of labor by the largest proportion?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 3

If a firm wants to maximize profits it should

Accepted Answer

A)  hire lots of capital and very little labor since labor needs to be trained. 
B)  hire unskilled labor rather than skilled labor since unskilled labor is cheaper. 
C)  equate the marginal physical product for each input to the price of the input. 
D)  equate the marginal revenue product for each input to the price of the input. 
A)  hire lots of capital and very little labor since labor needs to be trained. 
B)  hire unskilled labor rather than skilled labor since unskilled labor is cheaper. 
C)  equate the marginal physical product for each input to the price of the input. 
D)  equate the marginal revenue product for each input to the price of the input.

Question 4

Which will NOT affect the elasticity of demand for labor?

Accepted Answer

A)  the labor intensity of the production process 
B)  the elasticity of supply for labor 
C)  the elasticity of demand for the good 
D)  the substitutability of capital for labor 
A)  the labor intensity of the production process 
B)  the elasticity of supply for labor 
C)  the elasticity of demand for the good 
D)  the substitutability of capital for labor

Question 5

A firm's employment of labor outside the country in which the firm is located

Accepted Answer

A)  is outsourcing. 
B)  shifts the supply of labor in the original country. 
C)  is the marginal revenue product. 
D)  shifts the supply of labor in the other country. 
A)  is outsourcing. 
B)  shifts the supply of labor in the original country. 
C)  is the marginal revenue product. 
D)  shifts the supply of labor in the other country.

Question 6

Which of the following will lead to a decrease in the firm's short-run demand for labor?

Accepted Answer

A)  An increase in the price of the final product 
B)  An increase in price of the final product's substitute good 
C)  A decline in labor productivity 
D)  An increase in the number of buyers for the final product 
A)  An increase in the price of the final product 
B)  An increase in price of the final product's substitute good 
C)  A decline in labor productivity 
D)  An increase in the number of buyers for the final product

Question 7

The price elasticity of demand for labor will be smaller, the

Accepted Answer

A)  greater is the price elasticity of demand for the final product. 
B)  easier it is to employ substitute inputs in production. 
C)  smaller is the proportion of wage costs in the total cost of production. 
D)  longer is the time period under examination. 
A)  greater is the price elasticity of demand for the final product. 
B)  easier it is to employ substitute inputs in production. 
C)  smaller is the proportion of wage costs in the total cost of production. 
D)  longer is the time period under examination.

Question 8

In a perfectly competitive labor market, the industry demand curve is ________ and the industry supply curve is ________.

Accepted Answer

A)  perfectly elastic; upward sloping 
B)  downward sloping; upward sloping 
C)  upward sloping; downward sloping 
D)  vertical; perfectly elastic 
A)  perfectly elastic; upward sloping 
B)  downward sloping; upward sloping 
C)  upward sloping; downward sloping 
D)  vertical; perfectly elastic

Question 9

Which of the following will not cause the supply of labor curve to shift in the economics professor industry?

Accepted Answer

A)  A decrease in the wage rate for Ph.D. economists in the banking industry. 
B)  A decrease in the number of courses a professor must teach. 
C)  Universities have discovered a way to make professors more productive. 
D)  University professors are going to be required to spend more time in their offices. 
A)  A decrease in the wage rate for Ph.D. economists in the banking industry. 
B)  A decrease in the number of courses a professor must teach. 
C)  Universities have discovered a way to make professors more productive. 
D)  University professors are going to be required to spend more time in their offices.

Question 10

For a perfectly competitive firm, the value of the marginal product of labor falls as more workers are hired because of the diminishing

Accepted Answer

A)  output price. 
B)  marginal physical product of labor. 
C)  price of labor. 
D)  marginal cost of production. 
A)  output price. 
B)  marginal physical product of labor. 
C)  price of labor. 
D)  marginal cost of production.

Question 11

In constructing the monopolist's input demand curve, which of the statements is FALSE?

Accepted Answer

A)  The demand curve has a negative slope due to the law of diminishing marginal product. 
B)  Marginal revenue is always positive. 
C)  A monopoly restricts output and hires fewer units of labor than a perfectly competitive firm. 
D)  The supply curve a monopoly faces is horizontal because the monopoly is a price taker. 
A)  The demand curve has a negative slope due to the law of diminishing marginal product. 
B)  Marginal revenue is always positive. 
C)  A monopoly restricts output and hires fewer units of labor than a perfectly competitive firm. 
D)  The supply curve a monopoly faces is horizontal because the monopoly is a price taker.

Question 12

-Refer to the above table. Suppose the firm hires 5 workers and the price of the good sold is $3. The marginal factor cost of labor must be

Accepted Answer

A)  $3. 
B)  $100. 
C)  $300. 
D)  $900. 
A)  $3. 
B)  $100. 
C)  $300. 
D)  $900.

Question 13

-Refer to the above table. What does the marginal revenue product equal when 28 workers are hired a week?

Accepted Answer

A)  $1040 
B)  $900 
C)  $210 
D)  $7.50 
A)  $1040 
B)  $900 
C)  $210 
D)  $7.50

Question 14

Which of the following would cause the price elasticity of demand for a variable input to be greater?

Accepted Answer

A)  The smaller the price elasticity of demand for the final product 
B)  The longer the time period being considered 
C)  The smaller the proportion of total costs accounted for by the variable input 
D)  The harder it is for a variable input to be substituted for by other inputs 
A)  The smaller the price elasticity of demand for the final product 
B)  The longer the time period being considered 
C)  The smaller the proportion of total costs accounted for by the variable input 
D)  The harder it is for a variable input to be substituted for by other inputs

Question 15

Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week. If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210 computers are produced per week. Given this information, the marginal product of the third worker is

Accepted Answer

A)  210 computers per week. 
B)  70 computers per week. 
C)  60 computers per week. 
D)  50 computers per week. 
A)  210 computers per week. 
B)  70 computers per week. 
C)  60 computers per week. 
D)  50 computers per week.

Question 16

If a firm hires 215 workers it will produce 3,016 units of output. If it hires 216 workers it will produce 3,128 units of output. The marginal physical product of labor equals

Accepted Answer

A)  1 
B)  112 
C)  216 
D)  3,128 
A)  1 
B)  112 
C)  216 
D)  3,128

Question 17

-In the above table, if this is a perfectly competitive firm and the market price of the product is $10, what is the marginal revenue product of worker 4?

Accepted Answer

A)  $210 
B)  $100 
C)  $411 
D)  $120 
A)  $210 
B)  $100 
C)  $411 
D)  $120

Question 18

In the employment of any resource, a firm should

Accepted Answer

A)  equate marginal revenue product with the cost of the additional resource. 
B)  hire each input unit that adds more to revenue than it adds to costs. 
C)  hire each input unit provided its marginal physical product is greater than zero. 
D)  A and B are both correct. 
A)  equate marginal revenue product with the cost of the additional resource. 
B)  hire each input unit that adds more to revenue than it adds to costs. 
C)  hire each input unit provided its marginal physical product is greater than zero. 
D)  A and B are both correct.

Question 19

A decrease in demand for a product, holding other things constant, will

Accepted Answer

A)  increase the marginal revenue product of labor. 
B)  decrease the marginal revenue product of labor. 
C)  not change the marginal revenue product of labor. 
D)  have an undetermined effect upon the marginal revenue product of labor. 
A)  increase the marginal revenue product of labor. 
B)  decrease the marginal revenue product of labor. 
C)  not change the marginal revenue product of labor. 
D)  have an undetermined effect upon the marginal revenue product of labor.

Question 20

If the marginal revenue product of the last worker hired exceeds the marginal factor cost of the worker, the firm would be better served if it

Accepted Answer

A)  hires additional workers. 
B)  maintains its current level of workers already hired. 
C)  lays off the last worker hired. 
D)  None of the above is a good option for a profit-seeking firm. 
A)  hires additional workers. 
B)  maintains its current level of workers already hired. 
C)  lays off the last worker hired. 
D)  None of the above is a good option for a profit-seeking firm.

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

A firm will hire a unit of input up to the point where

Suppose there are four industries. Labor costs are 80 percent of total costs in industry A, 60 percent in B, 45 percent in C, and 10 percent in D. In which of these industries will a 10 percent increase in the price of labor reduce quantity demanded of labor by the largest proportion?

If a firm wants to maximize profits it should

Which will NOT affect the elasticity of demand for labor?

A firm's employment of labor outside the country in which the firm is located

Which of the following will lead to a decrease in the firm's short-run demand for labor?

The price elasticity of demand for labor will be smaller, the

In a perfectly competitive labor market, the industry demand curve is ________ and the industry supply curve is ________.

Which of the following will not cause the supply of labor curve to shift in the economics professor industry?

For a perfectly competitive firm, the value of the marginal product of labor falls as more workers are hired because of the diminishing

In constructing the monopolist's input demand curve, which of the statements is FALSE?

-Refer to the above table. Suppose the firm hires 5 workers and the price of the good sold is $3. The marginal factor cost of labor must be

-Refer to the above table. What does the marginal revenue product equal when 28 workers are hired a week?

Which of the following would cause the price elasticity of demand for a variable input to be greater?

Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week. If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210 computers are produced per week. Given this information, the marginal product of the third worker is

If a firm hires 215 workers it will produce 3,016 units of output. If it hires 216 workers it will produce 3,128 units of output. The marginal physical product of labor equals

-In the above table, if this is a perfectly competitive firm and the market price of the product is $10, what is the marginal revenue product of worker 4?

In the employment of any resource, a firm should

A decrease in demand for a product, holding other things constant, will

If the marginal revenue product of the last worker hired exceeds the marginal factor cost of the worker, the firm would be better served if it

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 a perfectly competitive labor market, the industry demand curve is and the industry supply curve is .