Question 1

When MFC < MRP, a firm in a competitive market will

Accepted Answer

A)  stop hiring. 
B)  hire more workers. 
C)  earn fewer profits. 
D)  layoff workers. 
A)  stop hiring. 
B)  hire more workers. 
C)  earn fewer profits. 
D)  layoff workers.

Question 2

-Refer to the above table. How do we know that this is not a competitive firm?

Accepted Answer

A)  The marginal physical product decreases as the amount of labor hired increases. 
B)  The marginal revenue changes as output changes. 
C)  The marginal revenue product decreases as the amount of labor increases. 
D)  Marginal physical product cannot be computed for competitive firms. 
A)  The marginal physical product decreases as the amount of labor hired increases. 
B)  The marginal revenue changes as output changes. 
C)  The marginal revenue product decreases as the amount of labor increases. 
D)  Marginal physical product cannot be computed for competitive firms.

Question 3

If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should

Accepted Answer

A)  increase its use of labor and sell employ less capital. 
B)  employ more capital. 
C)  increase its use of both labor and capital. 
D)  maintain its current factor utilization pattern. 
A)  increase its use of labor and sell employ less capital. 
B)  employ more capital. 
C)  increase its use of both labor and capital. 
D)  maintain its current factor utilization pattern.

Question 4

The MRP is

Accepted Answer

A)  the supply curve of labor for an individual firm. 
B)  the demand curve for labor for an individual firm. 
C)  the demand curve for labor for the entire market. 
D)  the supply curve of labor for the entire market. 
A)  the supply curve of labor for an individual firm. 
B)  the demand curve for labor for an individual firm. 
C)  the demand curve for labor for the entire market. 
D)  the supply curve of labor for the entire market.

Question 5

If a perfectly competitive firm is currently employing workers to the point where the value of the last worker's marginal product is equal to the wage rate, and the government imposes a minimum wage higher than the value of the worker's marginal product, we can predict that

Accepted Answer

A)  the firm will pay the higher wage rate and not change the number of workers hired. 
B)  the firm will no longer employ the marginal worker. 
C)  the firm will increase its price. 
D)  the firm will employ more workers. 
A)  the firm will pay the higher wage rate and not change the number of workers hired. 
B)  the firm will no longer employ the marginal worker. 
C)  the firm will increase its price. 
D)  the firm will employ more workers.

Question 6

If the marginal revenue product of an input exceeds the marginal factor cost of the input, the firm

Accepted Answer

A)  should hire less of the input. 
B)  is maximizing profit. 
C)  is not on its marginal cost curve. 
D)  should increase its use of the input. 
A)  should hire less of the input. 
B)  is maximizing profit. 
C)  is not on its marginal cost curve. 
D)  should increase its use of the input.

Question 7

What does it mean for a firm to be a price taker in the labor market?

Accepted Answer

A price taker in the labor mar

Question 8

To minimize total costs for a particular rate of output, a firm will equate

Accepted Answer

A)  the average cost of each factor. 
B)  the marginal revenue of each factor. 
C)  the marginal physical product per dollar spent on each factor. 
D)  the marginal revenue product and variable marginal revenue for each factor. 
A)  the average cost of each factor. 
B)  the marginal revenue of each factor. 
C)  the marginal physical product per dollar spent on each factor. 
D)  the marginal revenue product and variable marginal revenue for each factor.

Question 9

If labor productivity increases,

Accepted Answer

A)  labor costs rise by equal increments. 
B)  the demand for labor increases. 
C)  some workers will be laid off. 
D)  jobs will relocate. 
A)  labor costs rise by equal increments. 
B)  the demand for labor increases. 
C)  some workers will be laid off. 
D)  jobs will relocate.

Question 10

Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 5th laborer?

Accepted Answer

A)  8 cabinets 
B)  7 cabinets 
C)  6 cabinets 
D)  4 cabinets 
A)  8 cabinets 
B)  7 cabinets 
C)  6 cabinets 
D)  4 cabinets

Question 11

The marginal factor cost is the

Accepted Answer

A)  additional revenue obtained from a one-unit change in labor input. 
B)  additional revenue obtained from a one-unit change in output. 
C)  change in output resulting from the addition of one more worker. 
D)  cost of using an additional unit of an input. 
A)  additional revenue obtained from a one-unit change in labor input. 
B)  additional revenue obtained from a one-unit change in output. 
C)  change in output resulting from the addition of one more worker. 
D)  cost of using an additional unit of an input.

Question 12

-Refer to the above figure. Which panel represents what happens in the foreign job market in the short-run when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?

Accepted Answer

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

Question 13

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 11th worker?

Accepted Answer

A)  $1.50 
B)  $13.64 
C)  $150 
D)  $900 
A)  $1.50 
B)  $13.64 
C)  $150 
D)  $900

Question 14

Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because

Accepted Answer

A)  the firm is a price taker. 
B)  the wage rate increases when additional workers are hired. 
C)  of the law of diminishing marginal product. 
D)  the supply of labor is perfectly elastic. 
A)  the firm is a price taker. 
B)  the wage rate increases when additional workers are hired. 
C)  of the law of diminishing marginal product. 
D)  the supply of labor is perfectly elastic.

Question 15

Marginal revenue product is

Accepted Answer

A)  marginal physical product multiplied by marginal revenue. 
B)  marginal physical product multiplied by average variable cost of the product. 
C)  the price of the product. 
D)  the total revenue from the sale of the product sales. 
A)  marginal physical product multiplied by marginal revenue. 
B)  marginal physical product multiplied by average variable cost of the product. 
C)  the price of the product. 
D)  the total revenue from the sale of the product sales.

Question 16

Marginal factor cost is computed as

Accepted Answer

A)  total cost of the resource/total amount of the resource being used. 
B)  change in the total cost of the resource/total amount of the resource being used. 
C)  total cost of the resource/change in the amount of the resource being used. 
D)  change in the total cost of the resource/change in the amount of the resource being used. 
A)  total cost of the resource/total amount of the resource being used. 
B)  change in the total cost of the resource/total amount of the resource being used. 
C)  total cost of the resource/change in the amount of the resource being used. 
D)  change in the total cost of the resource/change in the amount of the resource being used.

Question 17

The additional cost associated with the hiring of one more unit of labor is known as the

Accepted Answer

A)  marginal physical product of labor. 
B)  marginal revenue product of labor. 
C)  marginal factor cost of labor. 
D)  marginal utility of labor. 
A)  marginal physical product of labor. 
B)  marginal revenue product of labor. 
C)  marginal factor cost of labor. 
D)  marginal utility of labor.

Question 18

In an imperfectly competitive labor market, the firm is faced with a(n) ________ MPP curve and a(n) ________ MR curve.

Accepted Answer

A)  downward sloping; upward sloping 
B)  downward sloping; downward sloping 
C)  upward sloping; downward sloping 
D)  downward sloping; horizontal 
A)  downward sloping; upward sloping 
B)  downward sloping; downward sloping 
C)  upward sloping; downward sloping 
D)  downward sloping; horizontal

Question 19

-Refer to the above table. If the price of the good produced is $5, the marginal revenue product of the 5th worker is

Accepted Answer

A)  $3350. 
B)  $670. 
C)  $500. 
D)  $100. 
A)  $3350. 
B)  $670. 
C)  $500. 
D)  $100.

Question 20

A profit-maximizing firm in a competitive market will continue to hire more workers when

Accepted Answer

A)  the marginal factor cost exceeds the marginal revenue product of the additional workers. 
B)  the marginal factor cost equals the marginal revenue product of the additional workers. 
C)  the marginal factor cost is less than the marginal revenue product of the additional workers. 
D)  the marginal factor cost is less than zero. 
A)  the marginal factor cost exceeds the marginal revenue product of the additional workers. 
B)  the marginal factor cost equals the marginal revenue product of the additional workers. 
C)  the marginal factor cost is less than the marginal revenue product of the additional workers. 
D)  the marginal factor cost is less than zero.

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

When MFC < MRP, a firm in a competitive market will

-Refer to the above table. How do we know that this is not a competitive firm?

If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should

The MRP is

If a perfectly competitive firm is currently employing workers to the point where the value of the last worker's marginal product is equal to the wage rate, and the government imposes a minimum wage higher than the value of the worker's marginal product, we can predict that

If the marginal revenue product of an input exceeds the marginal factor cost of the input, the firm

What does it mean for a firm to be a price taker in the labor market?

To minimize total costs for a particular rate of output, a firm will equate

If labor productivity increases,

Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 5th laborer?

The marginal factor cost is the

-Refer to the above figure. Which panel represents what happens in the foreign job market in the short-run when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 11th worker?

Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because

Marginal revenue product is

Marginal factor cost is computed as

The additional cost associated with the hiring of one more unit of labor is known as the

In an imperfectly competitive labor market, the firm is faced with a(n) ________ MPP curve and a(n) ________ MR curve.

-Refer to the above table. If the price of the good produced is $5, the marginal revenue product of the 5th worker is

A profit-maximizing firm in a competitive market will continue to hire more workers when

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 an imperfectly competitive labor market, the firm is faced with a(n) MPP curve and a(n) MR curve.