Question 1

Coal and iron ore are complements in the manufacture of steel. An increase in the price of coal would lead to

Accepted Answer

A)  an increase in the demand for iron ore as producers substitute more iron ore for coal in the production process. 
B)  a decrease in the demand for iron ore as steel manufacturers reduce production of steel. 
C)  an increase in the supply of iron ore as iron ore producers see an opportunity to expand their markets. 
D)  no change in the demand for iron ore since the steel makers must use both iron ore and coal if they are to make steel. 
A)  an increase in the demand for iron ore as producers substitute more iron ore for coal in the production process. 
B)  a decrease in the demand for iron ore as steel manufacturers reduce production of steel. 
C)  an increase in the supply of iron ore as iron ore producers see an opportunity to expand their markets. 
D)  no change in the demand for iron ore since the steel makers must use both iron ore and coal if they are to make steel.

Question 2

When the demand curve for an input is a derived demand this means that

Accepted Answer

A)  the demand curve is derived from the demand for the final product being produced. 
B)  the demand curve depends upon the MFC. 
C)  the law of diminishing marginal product does not hold. 
D)  the demand curve slopes upward. 
A)  the demand curve is derived from the demand for the final product being produced. 
B)  the demand curve depends upon the MFC. 
C)  the law of diminishing marginal product does not hold. 
D)  the demand curve slopes upward.

Question 3

-Refer to the above table. What does the marginal revenue product equal when 27 workers are hired a week?

Accepted Answer

A)  $1040 
B)  $216 
C)  $16.25 
D)  $8 
A)  $1040 
B)  $216 
C)  $16.25 
D)  $8

Question 4

A monopolist will hire an additional unit of labor as long as

Accepted Answer

A)  the additional cost of the worker is outweighed by the additional revenues made from selling the output of theses workers. 
B)  the marginal revenue curve is above the demand curve. 
C)  the marginal revenue product is larger than the marginal factor cost. 
D)  the marginal revenue product is less than the marginal factor cost. 
A)  the additional cost of the worker is outweighed by the additional revenues made from selling the output of theses workers. 
B)  the marginal revenue curve is above the demand curve. 
C)  the marginal revenue product is larger than the marginal factor cost. 
D)  the marginal revenue product is less than the marginal factor cost.

Question 5

Which of the following will not lead to a change in the demand for labor?

Accepted Answer

A)  A change in demand for the final good. 
B)  A change in the supply of labor. 
C)  A change in the price of a substitute input. 
D)  A change in labor productivity. 
A)  A change in demand for the final good. 
B)  A change in the supply of labor. 
C)  A change in the price of a substitute input. 
D)  A change in labor productivity.

Question 6

Other things being equal, the behavior of a monopolist differs from that of a competitive industry in that

Accepted Answer

A)  the monopolist does not attempt to maximize economic profit. 
B)  the monopolist hires more labor. 
C)  the monopolist restricts output and hires less labor. 
D)  the monopolist must consider fixed costs in deciding the optimal level of output to produce in the short run. 
A)  the monopolist does not attempt to maximize economic profit. 
B)  the monopolist hires more labor. 
C)  the monopolist restricts output and hires less labor. 
D)  the monopolist must consider fixed costs in deciding the optimal level of output to produce in the short run.

Question 7

All of the following shift an industry's labor supply curve EXCEPT changes in

Accepted Answer

A)  market wages offered in other industries. 
B)  the demand for the final product. 
C)  job flexibility. 
D)  working conditions. 
A)  market wages offered in other industries. 
B)  the demand for the final product. 
C)  job flexibility. 
D)  working conditions.

Question 8

The contribution to total revenues coming from the next worker hired is

Accepted Answer

A)  marginal product. 
B)  marginal revenue product. 
C)  total product. 
D)  total revenues. 
A)  marginal product. 
B)  marginal revenue product. 
C)  total product. 
D)  total revenues.

Question 9

When 4 units of labor are employed, total product is 6 units; when 5 units of labor are employed, total product is 9 units of output. If the price of output is $5 per unit, what is the marginal revenue product of the 5th unit of labor?

Accepted Answer

A)  $3 
B)  $5 
C)  $15 
D)  $45 
A)  $3 
B)  $5 
C)  $15 
D)  $45

Question 10

The demand for labor is

Accepted Answer

A)  derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money. 
B)  derived from the demand for the final product being produced. 
C)  derived from a utility maximizing process similar to that used to derive the demand curve for goods and services. 
D)  totally unrelated to the demand curve for the final product. 
A)  derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money. 
B)  derived from the demand for the final product being produced. 
C)  derived from a utility maximizing process similar to that used to derive the demand curve for goods and services. 
D)  totally unrelated to the demand curve for the final product.

Question 11

-Refer to the above table. What does the marginal physical product equal when the amount of labor goes from 11 to 12 units?

Accepted Answer

A)  600 
B)  90 
C)  100 
D)  690 
A)  600 
B)  90 
C)  100 
D)  690

Question 12

-Refer to the above figure. Which panel represents what happens in the U.S. 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 figure. The firm is operating using   . An increase in demand for the product has occurred. The relevant curve for the firm after the increase in price

Accepted Answer

A)  is   . 
B)  is   . 
C)  is   . 
D)  could be   or   depending upon whether the firm was earning a positive profit. 
A)  is   . 
B)  is   . 
C)  is   . 
D)  could be   or   depending upon whether the firm was earning a positive profit.

Question 14

A firm wanting to maximize profits should operate in such a way that

Accepted Answer

A)  the MRP of each input is equal to or greater than its MFC. 
B)  MRP equal MFC in the input market but MC must exceed MR in the output market. 
C)  marginal revenue must be equal to the marginal revenue product. 
D)  none of the above 
A)  the MRP of each input is equal to or greater than its MFC. 
B)  MRP equal MFC in the input market but MC must exceed MR in the output market. 
C)  marginal revenue must be equal to the marginal revenue product. 
D)  none of the above

Question 15

The downward sloping marginal revenue product of labor is

Accepted Answer

A)  the firm's supply of labor. 
B)  the firm's short-run demand for labor. 
C)  the firm's marginal cost of labor. 
D)  another term for the marginal revenue product of labor. 
A)  the firm's supply of labor. 
B)  the firm's short-run demand for labor. 
C)  the firm's marginal cost of labor. 
D)  another term for the marginal revenue product of labor.

Question 16

A perfectly competitive firm discovers that its   divided by the wage equals 1.25. The firm should

Accepted Answer

A)  check the MRP of the other inputs and divide them by their prices. If they are all equal to 1.25 it is maximizing profits. 
B)  hire more labor. 
C)  purchase more capital. 
D)  try to pay a lower wage rate. 
A)  check the MRP of the other inputs and divide them by their prices. If they are all equal to 1.25 it is maximizing profits. 
B)  hire more labor. 
C)  purchase more capital. 
D)  try to pay a lower wage rate.

Question 17

-Refer to the above table. What does the marginal revenue product equal when 26 workers are hired a week?

Accepted Answer

A)  $8.50 
B)  $26 
C)  $221 
D)  $1190 
A)  $8.50 
B)  $26 
C)  $221 
D)  $1190

Question 18

Ajax Corporation has just decided to let managers work from home one day a week. This decision will make working conditions better and will

Accepted Answer

A)  cause the demand curve for labor for managers to increase. 
B)  increase the elasticity of demand for labor for managers. 
C)  lead to an increase in the supply curve of labor for managers. 
D)  leave the supply curve of labor unchanged. 
A)  cause the demand curve for labor for managers to increase. 
B)  increase the elasticity of demand for labor for managers. 
C)  lead to an increase in the supply curve of labor for managers. 
D)  leave the supply curve of labor unchanged.

Question 19

A firm that wants to maximize profits should hire each input to the point where

Accepted Answer

A)  its marginal revenue product divided by the price of the input equals one. 
B)  its marginal revenue product divided by its marginal physical product equals the wage. 
C)  its marginal revenue product divided by the product price equals one. 
D)  its marginal physical product divided by the price of the input equals the product price. 
A)  its marginal revenue product divided by the price of the input equals one. 
B)  its marginal revenue product divided by its marginal physical product equals the wage. 
C)  its marginal revenue product divided by the product price equals one. 
D)  its marginal physical product divided by the price of the input equals the product price.

Question 20

-Refer to the above table. How many workers will this firm hire if the weekly wage rate is $900?

Accepted Answer

A)  26 
B)  27 
C)  28 
D)  29 
A)  26 
B)  27 
C)  28 
D)  29

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

Coal and iron ore are complements in the manufacture of steel. An increase in the price of coal would lead to

When the demand curve for an input is a derived demand this means that

-Refer to the above table. What does the marginal revenue product equal when 27 workers are hired a week?

A monopolist will hire an additional unit of labor as long as

Which of the following will not lead to a change in the demand for labor?

Other things being equal, the behavior of a monopolist differs from that of a competitive industry in that

All of the following shift an industry's labor supply curve EXCEPT changes in

The contribution to total revenues coming from the next worker hired is

When 4 units of labor are employed, total product is 6 units; when 5 units of labor are employed, total product is 9 units of output. If the price of output is $5 per unit, what is the marginal revenue product of the 5th unit of labor?

The demand for labor is

-Refer to the above table. What does the marginal physical product equal when the amount of labor goes from 11 to 12 units?

-Refer to the above figure. Which panel represents what happens in the U.S. 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 figure. The firm is operating using . An increase in demand for the product has occurred. The relevant curve for the firm after the increase in price

A firm wanting to maximize profits should operate in such a way that

The downward sloping marginal revenue product of labor is

A perfectly competitive firm discovers that its divided by the wage equals 1.25. The firm should

-Refer to the above table. What does the marginal revenue product equal when 26 workers are hired a week?

Ajax Corporation has just decided to let managers work from home one day a week. This decision will make working conditions better and will

A firm that wants to maximize profits should hire each input to the point where

-Refer to the above table. How many workers will this firm hire if the weekly wage rate is $900?

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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