Question 1

If an increase in the cost of labor causes the firm to use less capital,then

Accepted Answer

A)  the scale effect has dominated over the substitution effect. 
B)  the substitution effect has dominated over the scale effect. 
C)  the firm has moved along an isoquant curve. 
D)  the firm has moved onto a higher isoquant. 
A)  the scale effect has dominated over the substitution effect. 
B)  the substitution effect has dominated over the scale effect. 
C)  the firm has moved along an isoquant curve. 
D)  the firm has moved onto a higher isoquant.

Question 2

The marginal product of an individual

Accepted Answer

A)  depends on the number of similar workers that the firm employs as well as on the size of the firm's capital stock. 
B)  is solely a function of the worker's personal characteristics. 
C)  is a poorly defined concept because individual effort is difficult to identify and measure. 
D)  initially decreases but ultimately increases beyond the minimum effort level. 
A)  depends on the number of similar workers that the firm employs as well as on the size of the firm's capital stock. 
B)  is solely a function of the worker's personal characteristics. 
C)  is a poorly defined concept because individual effort is difficult to identify and measure. 
D)  initially decreases but ultimately increases beyond the minimum effort level.

Question 3

For two substitutes in production,if the substitution effect dominates,

Accepted Answer

A)  then the inputs are gross complements. 
B)  then the inputs are gross substitutes. 
C)  then the inputs could be either gross complements or gross substitutes. 
D)  then the inputs cannot be used at the same time. 
A)  then the inputs are gross complements. 
B)  then the inputs are gross substitutes. 
C)  then the inputs could be either gross complements or gross substitutes. 
D)  then the inputs cannot be used at the same time.

Question 4

Suppose that a firm is competitive in both the product market and the labor market.Graph the firm's marginal revenue product curve (be sure to label the axes of your graph appropriately).Explain why the marginal revenue product curve is also the firm's short run labor demand curve.

Accepted Answer

Given the assumption of competition in t

Question 5

When the price of capital increases,a firm will

Accepted Answer

A)  employ more labor because labor has become relatively cheaper. 
B)  employ less labor due to the increase in costs. 
C)  employ the same amount of labor. 
D)  employ more, less, or the same amount of labor. 
A)  employ more labor because labor has become relatively cheaper. 
B)  employ less labor due to the increase in costs. 
C)  employ the same amount of labor. 
D)  employ more, less, or the same amount of labor.

Question 6

All of the following firms are producing on the same output isoquant.Which firm will use the most labor?

Accepted Answer

A)  Wage $120; Hourly Price of Capital $240 
B)  Wage $60; Hourly Price of Capital $40 
C)  Wage $6; Hourly Price of Capital $2 
D)  Wage $15; Hourly Price of Capital $15 
A)  Wage $120; Hourly Price of Capital $240 
B)  Wage $60; Hourly Price of Capital $40 
C)  Wage $6; Hourly Price of Capital $2 
D)  Wage $15; Hourly Price of Capital $15

Question 7

A profit-maximizing firm decides to produce 100 units of output.This implies that the firm will

Accepted Answer

A)  produce on its lowest isoexpenditure line. 
B)  produce at a point where its isoexpenditure line is everywhere below the isoquant curve for 100 units of output. 
C)  produce at a point where its isoexpenditure line is tangent to the isoquant curve for 100 units of output. 
D)  produce where the marginal rate of technical substitution equals the wage rate. 
A)  produce on its lowest isoexpenditure line. 
B)  produce at a point where its isoexpenditure line is everywhere below the isoquant curve for 100 units of output. 
C)  produce at a point where its isoexpenditure line is tangent to the isoquant curve for 100 units of output. 
D)  produce where the marginal rate of technical substitution equals the wage rate.

Question 8

If the firm operates in a competitive labor market,

Accepted Answer

A)  it faces a positively sloped labor supply curve, and the marginal expense of labor is less than the market wage. 
B)  it faces a horizontal labor supply curve, and the marginal expense of labor equals the market wage. 
C)  it must compete against other employers by offering a generous compensation package. 
D)  it faces a vertical labor supply curve, and it competes against other employers by moving to the lowest attainable point on the labor supply curve. 
A)  it faces a positively sloped labor supply curve, and the marginal expense of labor is less than the market wage. 
B)  it faces a horizontal labor supply curve, and the marginal expense of labor equals the market wage. 
C)  it must compete against other employers by offering a generous compensation package. 
D)  it faces a vertical labor supply curve, and it competes against other employers by moving to the lowest attainable point on the labor supply curve.

Question 9

Consider an employer that is a monopolist in its product market versus an otherwise comparable employer that is a competitor in its product market.A wage increase will have

Accepted Answer

A)  a comparatively larger effect on employment of the monopolist because the monopolist is the only seller of the good. 
B)  no effect on employment of the monopolist because the monopolist will simply pass the increase in wage cost on to consumers by charging a higher price. 
C)  the same effect on employment because the profit maximization condition is MRP = MEL whether the firm is a monopolist or whether it is competitive in the product market. 
D)  a comparatively smaller effect on employment of the monopolist because the monopolist will be able to pass some of the increase in wage cost on to consumers by charging a higher price. 
A)  a comparatively larger effect on employment of the monopolist because the monopolist is the only seller of the good. 
B)  no effect on employment of the monopolist because the monopolist will simply pass the increase in wage cost on to consumers by charging a higher price. 
C)  the same effect on employment because the profit maximization condition is MRP = MEL whether the firm is a monopolist or whether it is competitive in the product market. 
D)  a comparatively smaller effect on employment of the monopolist because the monopolist will be able to pass some of the increase in wage cost on to consumers by charging a higher price.

Question 10

When unemployment is widespread and the wage is above its market clearing level,a cut in employer payroll tax will

Accepted Answer

A)  be largely ineffective. 
B)  benefit employers and have no effect on workers. 
C)  increase employment, reduce unemployment, and have little to no effect on wages. 
D)  drive up wages but have little to no effect on employment and unemployment. 
A)  be largely ineffective. 
B)  benefit employers and have no effect on workers. 
C)  increase employment, reduce unemployment, and have little to no effect on wages. 
D)  drive up wages but have little to no effect on employment and unemployment.

Question 11

In the short run,

Accepted Answer

A)  a firm cannot hire new workers. 
B)  wage rates and product prices cannot change. 
C)  a firm cannot add on to an assembly line or introduce new machines to the production process. 
D)  employment levels cannot change. 
A)  a firm cannot hire new workers. 
B)  wage rates and product prices cannot change. 
C)  a firm cannot add on to an assembly line or introduce new machines to the production process. 
D)  employment levels cannot change.

Question 12

If a firm hires another unit of labor,output goes up by 12 units.The wage rate for the unit of labor is $6.What is the firm's cost of producing another unit of output using labor?

Accepted Answer

A)  $18 
B)  $9 
C)  $1.50 
D)  $0.50 
A)  $18 
B)  $9 
C)  $1.50 
D)  $0.50

Question 13

In the long run,a profit-maximizing firm will select capital and labor so that

Accepted Answer

A)  the marginal product of labor equals the marginal product of capital. 
B)  the wage divided by the marginal product of labor equals the rental cost of a unit of capital divided by the marginal product of capital. 
C)  labor equals capital. 
D)  the wage equals the rental cost of a unit of capital. 
A)  the marginal product of labor equals the marginal product of capital. 
B)  the wage divided by the marginal product of labor equals the rental cost of a unit of capital divided by the marginal product of capital. 
C)  labor equals capital. 
D)  the wage equals the rental cost of a unit of capital.

If an increase in the cost of labor causes the firm to use less capital,then

The marginal product of an individual

For two substitutes in production,if the substitution effect dominates,

Suppose that a firm is competitive in both the product market and the labor market.Graph the firm's marginal revenue product curve (be sure to label the axes of your graph appropriately).Explain why the marginal revenue product curve is also the firm's short run labor demand curve.

When the price of capital increases,a firm will

All of the following firms are producing on the same output isoquant.Which firm will use the most labor?

A profit-maximizing firm decides to produce 100 units of output.This implies that the firm will

If the firm operates in a competitive labor market,

Consider an employer that is a monopolist in its product market versus an otherwise comparable employer that is a competitor in its product market.A wage increase will have

When unemployment is widespread and the wage is above its market clearing level,a cut in employer payroll tax will

In the short run,

If a firm hires another unit of labor,output goes up by 12 units.The wage rate for the unit of labor is $6.What is the firm's cost of producing another unit of output using labor?

In the long run,a profit-maximizing firm will select capital and labor so that

Introduction

Overview of the Labor Market

Labor Demand Elasticities

Frictions in the Labor Market

Supply of Labor to the Economy: The Decision to Work

Labor Supply: Household Production, the Family, and the Life Cycle

Compensating Wage Differentials and Labor Markets

Investments in Human Capital: Education and Training

Worker Mobility: Migration, Immigration, and Turnover

Pay and Productivity: Wage Determination within the Firm

Gender,Race,and Ethnicity in the Labor Market

Unions and the Labor Market

Unemployment

Inequality in Earnings

The Labor-Market Effects of International Trade and Production Sharing

Filters

Exam 3: The Demand for Labor

If an increase in the cost of labor causes the firm to use less capital,then

The marginal product of an individual

For two substitutes in production,if the substitution effect dominates,

Suppose that a firm is competitive in both the product market and the labor market.Graph the firm's marginal revenue product curve (be sure to label the axes of your graph appropriately).Explain why the marginal revenue product curve is also the firm's short run labor demand curve.

When the price of capital increases,a firm will

All of the following firms are producing on the same output isoquant.Which firm will use the most labor?

A profit-maximizing firm decides to produce 100 units of output.This implies that the firm will

If the firm operates in a competitive labor market,

Consider an employer that is a monopolist in its product market versus an otherwise comparable employer that is a competitor in its product market.A wage increase will have

When unemployment is widespread and the wage is above its market clearing level,a cut in employer payroll tax will

In the short run,

If a firm hires another unit of labor,output goes up by 12 units.The wage rate for the unit of labor is $6.What is the firm's cost of producing another unit of output using labor?

In the long run,a profit-maximizing firm will select capital and labor so that

Introduction

Overview of the Labor Market

Labor Demand Elasticities

Frictions in the Labor Market

Supply of Labor to the Economy: The Decision to Work

Labor Supply: Household Production, the Family, and the Life Cycle

Compensating Wage Differentials and Labor Markets

Investments in Human Capital: Education and Training

Worker Mobility: Migration, Immigration, and Turnover

Pay and Productivity: Wage Determination within the Firm

Gender,Race,and Ethnicity in the Labor Market

Unions and the Labor Market

Unemployment

Inequality in Earnings

The Labor-Market Effects of International Trade and Production Sharing

Filters