Question 1

A firm's demand for labor is known as a "derived demand" because

Accepted Answer

A) the firm gains utility from hiring more labor. 
B) the amount of labor hired depends upon how much output the firm can sell. 
C) the wage rate paid to workers is derived from the market for labor. 
D) it is derived from the demand for capital. 
A) the firm gains utility from hiring more labor. 
B) the amount of labor hired depends upon how much output the firm can sell. 
C) the wage rate paid to workers is derived from the market for labor. 
D) it is derived from the demand for capital. B

Question 2

A price discriminating monopsonist could increase its profits by

Accepted Answer

A) paying the minimum wages possible. 
B) hiring as little capital as possible. 
C) paying lower wages to workers with inelastic supply of labor curves than to workers with elastic curves. 
D) paying lower wages to workers with elastic supply of labor curves than to workers with inelastic curves. 
A) paying the minimum wages possible. 
B) hiring as little capital as possible. 
C) paying lower wages to workers with inelastic supply of labor curves than to workers with elastic curves. 
D) paying lower wages to workers with elastic supply of labor curves than to workers with inelastic curves. C

Question 3

Suppose Woody Chuck's business is to clear trees for housing developments.Given the constraints of fixed capital,the production function is $q = .01 \sqrt { L }$ .Suppose Woody Chuck's is one of many firms clearing land and that the market price per cleared lot is $5000.(Note $M P _ { L } = \frac { .005 } { \sqrt { L } }$ )The marginal Revenue Product of labor is

Accepted Answer

A) constant at $5000. 
B) constant at 25 
C)  $\frac { 25 } { \sqrt { L } }$ 
D)  $25 \cdot \sqrt { L }$ 
A) constant at $5000. 
B) constant at 25 
C)  $\frac { 25 } { \sqrt { L } }$ 
D)  $25 \cdot \sqrt { L }$ C

Question 4

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the total unemployed ( $L _ { S } - L _ { D }$ )will be

Accepted Answer

A) 20 
B) 40 
C) 60 
D) 80 
A) 20 
B) 40 
C) 60 
D) 80

Question 5

If a factor of production comes to have more and more alternative uses,its supply curve to any one use

Accepted Answer

A) remains unchanged. 
B) becomes more inelastic. 
C) becomes more elastic. 
D) may move in any direction. 
A) remains unchanged. 
B) becomes more inelastic. 
C) becomes more elastic. 
D) may move in any direction.

Question 6

If an individual's supply of labor curve is positively sloped throughout,then

Accepted Answer

A) the substitution effect always dominates the income effect. 
B) the income effect always dominates the substitution effect. 
C) the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels. 
D) the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels. 
A) the substitution effect always dominates the income effect. 
B) the income effect always dominates the substitution effect. 
C) the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels. 
D) the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels.

Question 7

When an individual's wage rises,the substitution effect tends to

Accepted Answer

A) increase hours worked. 
B) decrease hours worked. 
C) leave hours worked unchanged. 
D) it is impossible to predict what will happen to hours worked. 
A) increase hours worked. 
B) decrease hours worked. 
C) leave hours worked unchanged. 
D) it is impossible to predict what will happen to hours worked.

Question 8

If the wage rate rises,labor's share in the total costs of a production process

Accepted Answer

A) will increase. 
B) will decrease. 
C) may increase or decrease depending on the elasticity of demand for the product. 
D) may increase or decrease depending on the ease of substitution of other inputs for labor. 
A) will increase. 
B) will decrease. 
C) may increase or decrease depending on the elasticity of demand for the product. 
D) may increase or decrease depending on the ease of substitution of other inputs for labor.

Question 9

Suppose a firm is a monopolist in its output market and a perfect competitor in its input market.The demand for its output is $Q _ { D } = 1800 - P$ .The firm's production is given by $Q = 10 \sqrt { L }$ and the market wage is $50.The profit-maximizing level of labor input is

Accepted Answer

A) 100 
B) 1,000 
C) 3,600 
D) 5,000 
A) 100 
B) 1,000 
C) 3,600 
D) 5,000

Question 10

Suppose Woody Chuck's business is to clear trees for housing developments.Given the constraints of fixed capital,the production function is $q = .01 \sqrt { L }$ .Suppose Woody Chuck's is one of many firms clearing land and that the market price per cleared lot is $5000.(Note $M P _ { L } = \frac { .005 } { \sqrt { L } }$ )How many workers will Woody Chuck hire at w = 6.25?

Accepted Answer

A) 1 
B) 4 
C) 16 
D) 25 
A) 1 
B) 4 
C) 16 
D) 25

Question 11

If the price of an input falls,a firm would increase the use of that input for two reasons:

Accepted Answer

A) The input is now more productive,and the firm can substitute this input for other relatively more expensive inputs. 
B) The input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production. 
C) Overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs. 
D) Overall production costs are now lower and the firm will have more of other inputs to use with the one in question. 
A) The input is now more productive,and the firm can substitute this input for other relatively more expensive inputs. 
B) The input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production. 
C) Overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs. 
D) Overall production costs are now lower and the firm will have more of other inputs to use with the one in question.

Question 12

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be

Accepted Answer

A) +1. 
B) -1. 
C) 0. 
D) infinite. 
A) +1. 
B) -1. 
C) 0. 
D) infinite.

Question 13

An input's marginal revenue product is given by

Accepted Answer

A) the input's marginal expense times marginal revenue. 
B) the input's marginal expense times the input's marginal physical productivity. 
C) marginal revenue times the number of units employed. 
D) the input's marginal physical productivity times marginal revenue of the firm's output. 
A) the input's marginal expense times marginal revenue. 
B) the input's marginal expense times the input's marginal physical productivity. 
C) marginal revenue times the number of units employed. 
D) the input's marginal physical productivity times marginal revenue of the firm's output.

Question 14

In the study of labor supply,"leisure" refers to

Accepted Answer

A) time spent sleeping. 
B) time spent doing absolutely nothing (except breathing). 
C) time spent in one's place of residence. 
D) time spent that is not spent in market work. 
A) time spent sleeping. 
B) time spent doing absolutely nothing (except breathing). 
C) time spent in one's place of residence. 
D) time spent that is not spent in market work.

Question 15

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the net gain to all workers,not just those who keep their jobs,(in producer surplus terms)will be

Accepted Answer

A) 10 
B) 20 
C) 30 
D) 40 
A) 10 
B) 20 
C) 30 
D) 40

Question 16

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the number of workers hired will be

Accepted Answer

A) 20 
B) 40 
C) 60 
D) 80 
A) 20 
B) 40 
C) 60 
D) 80

Question 17

The fact that more women have chosen to work as real wages rise is evidence that,for them

Accepted Answer

A) leisure is an inferior good. 
B) income and substitution effects of higher real wages work in the same direction. 
C) income and substitution effects of higher real wages may work in opposite directions. 
D) income and substitution effects may work in opposite directions but that the substitution effect is stronger. 
A) leisure is an inferior good. 
B) income and substitution effects of higher real wages work in the same direction. 
C) income and substitution effects of higher real wages may work in opposite directions. 
D) income and substitution effects may work in opposite directions but that the substitution effect is stronger.

Question 18

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant

Accepted Answer

A) the greater the change in output. 
B) the more sharply curved are the firm's isoquants. 
C) the flatter are the firm's isoquants. 
D) the larger the quantity of labor employed. 
A) the greater the change in output. 
B) the more sharply curved are the firm's isoquants. 
C) the flatter are the firm's isoquants. 
D) the larger the quantity of labor employed.

Question 19

In an input market,economic rent is defined as

Accepted Answer

A) the total remuneration paid to a factor of production. 
B) the minimum amount required to retain a factor of production in its present use. 
C) the total cost for a firm of renting land,equipment,and buildings. 
D) the extent to which payments to a factor of production exceed the minimum amount required to retain it in its present use. 
A) the total remuneration paid to a factor of production. 
B) the minimum amount required to retain a factor of production in its present use. 
C) the total cost for a firm of renting land,equipment,and buildings. 
D) the extent to which payments to a factor of production exceed the minimum amount required to retain it in its present use.

Question 20

Suppose Woody Chuck's business is to clear trees for housing developments.Given the constraints of fixed capital,the production function is $q = .01 \sqrt { L }$ .Suppose Woody Chuck's is one of many firms clearing land and that the market price per cleared lot is $5000.(Note $M P _ { L } = \frac { .005 } { \sqrt { L } }$ )How many workers will Woody Chuck hire at w = 5?

Accepted Answer

A) 1 
B) 4 
C) 16 
D) 25 
A) 1 
B) 4 
C) 16 
D) 25

A firm's demand for labor is known as a "derived demand" because

A price discriminating monopsonist could increase its profits by

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the total unemployed ( $L _ { S } - L _ { D }$ )will be

If a factor of production comes to have more and more alternative uses,its supply curve to any one use

If an individual's supply of labor curve is positively sloped throughout,then

When an individual's wage rises,the substitution effect tends to

If the wage rate rises,labor's share in the total costs of a production process

Suppose a firm is a monopolist in its output market and a perfect competitor in its input market.The demand for its output is $Q _ { D } = 1800 - P$ .The firm's production is given by $Q = 10 \sqrt { L }$ and the market wage is $50.The profit-maximizing level of labor input is

If the price of an input falls,a firm would increase the use of that input for two reasons:

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be

An input's marginal revenue product is given by

In the study of labor supply,"leisure" refers to

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the net gain to all workers,not just those who keep their jobs,(in producer surplus terms)will be

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the number of workers hired will be

The fact that more women have chosen to work as real wages rise is evidence that,for them

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant

In an input market,economic rent is defined as

Economic Models

Utility and Choice

Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 13: Pricing in Input Markets

A firm's demand for labor is known as a "derived demand" because

A price discriminating monopsonist could increase its profits by

Suppose the market for labor is perfectly competitive and the demand for labor is L=100−10wL = 100 - 10 wL=100−10w and market supply is L=−20+10wL = - 20 + 10 wL=−20+10w .If a minimum wage is imposed at w = 8,the total unemployed ( LS−LDL _ { S } - L _ { D }LS​−LD​ )will be

If a factor of production comes to have more and more alternative uses,its supply curve to any one use

If an individual's supply of labor curve is positively sloped throughout,then

When an individual's wage rises,the substitution effect tends to

If the wage rate rises,labor's share in the total costs of a production process

If the price of an input falls,a firm would increase the use of that input for two reasons:

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be

An input's marginal revenue product is given by

In the study of labor supply,"leisure" refers to

Suppose the market for labor is perfectly competitive and the demand for labor is L=100−10wL = 100 - 10 wL=100−10w and market supply is L=−20+10wL = - 20 + 10 wL=−20+10w .If a minimum wage is imposed at w = 8,the number of workers hired will be

The fact that more women have chosen to work as real wages rise is evidence that,for them

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant

In an input market,economic rent is defined as

Economic Models

Utility and Choice

Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the total unemployed ( $L _ { S } - L _ { D }$ )will be

Suppose the market for labor is perfectly competitive and the demand for labor is $L = 100 - 10 w$ and market supply is $L = - 20 + 10 w$ .If a minimum wage is imposed at w = 8,the number of workers hired will be