Question 1

For a worker to be potentially available, he or she must

Accepted Answer

A)  know about the jobs available at a particular firm. 
B)  be in the relevant geographic market and be willing to work for minimum wage. 
C)  have most of the skills required by the firm only. 
D)  have the skills required by the firm and be in the relevant geographic market. 
A)  know about the jobs available at a particular firm. 
B)  be in the relevant geographic market and be willing to work for minimum wage. 
C)  have most of the skills required by the firm only. 
D)  have the skills required by the firm and be in the relevant geographic market.

Question 2

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 3

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers? Explain. Now, suppose the automakers improve working conditions at the plants. What are the effects? Explain.

Accepted Answer

The purchase of capital that is a substi

Question 4

Outsourcing is

Accepted Answer

A)  only beneficial to a few select countries. 
B)  another way for residents of different nations to conduct trade with one another. 
C)  not beneficial to any country. 
D)  not beneficial to the consumers who purchase outsourced goods. 
A)  only beneficial to a few select countries. 
B)  another way for residents of different nations to conduct trade with one another. 
C)  not beneficial to any country. 
D)  not beneficial to the consumers who purchase outsourced goods.

Question 5

A perfectly competitive firm is hiring variable resources M and N. It will minimize total costs

Accepted Answer

A)  MRPm/MFCm = MRPn/MFCn. 
B)  MRPm ∗ MFCm = MRPn ∗ MFCn. 
C)  Pm/MPPm = Pn/MPPn. 
D)  MPPm/Pm = MPPn/Pn. 
A)  MRPm/MFCm = MRPn/MFCn. 
B)  MRPm ∗ MFCm = MRPn ∗ MFCn. 
C)  Pm/MPPm = Pn/MPPn. 
D)  MPPm/Pm = MPPn/Pn.

Question 6

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

Accepted Answer

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

Question 7

The profit-maximizing combination of resources in a perfectly competitive situation occurs at the point at which

Accepted Answer

A)  MRP of labor = price of labor (wage rate). 
B)  MRP of land = price of land (rental rate per unit). 
C)  MRP of capital = price of capital (cost per unit of service). 
D)  All of the above are correct. 
A)  MRP of labor = price of labor (wage rate). 
B)  MRP of land = price of land (rental rate per unit). 
C)  MRP of capital = price of capital (cost per unit of service). 
D)  All of the above are correct.

Question 8

Cost minimization suggests that two inputs should be employed to the point where

Accepted Answer

A)  the marginal cost of each input is identical. 
B)  the marginal revenue product of each input is identical. 
C)  the marginal physical product per dollar spent on each input is identical. 
D)  the extra contribution to physical output of the inputs is identical. 
A)  the marginal cost of each input is identical. 
B)  the marginal revenue product of each input is identical. 
C)  the marginal physical product per dollar spent on each input is identical. 
D)  the extra contribution to physical output of the inputs is identical.

Question 9

Profit maximization occurs where

Accepted Answer

A)  each factor is used up to the point where its marginal revenue product is equal to its marginal factor cost. 
B)  each factor is used up to the point where its marginal physical product is equal to its marginal factor cost. 
C)  average variable cost equals marginal cost. 
D)  average variable cost equals average total cost. 
A)  each factor is used up to the point where its marginal revenue product is equal to its marginal factor cost. 
B)  each factor is used up to the point where its marginal physical product is equal to its marginal factor cost. 
C)  average variable cost equals marginal cost. 
D)  average variable cost equals average total cost.

Question 10

When market wages increase in a perfectly competitive market, then

Accepted Answer

A)  the marginal factor cost increases. 
B)  the marginal product increases. 
C)  the marginal factor cost decreases. 
D)  the marginal product decreases. 
A)  the marginal factor cost increases. 
B)  the marginal product increases. 
C)  the marginal factor cost decreases. 
D)  the marginal product decreases.

Question 11

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 12

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 13

If the supply of labor to a firm is perfectly elastic at the going wage rate established by the forces of supply and demand then

Accepted Answer

A)  the firm is price taker. 
B)  the firm can only hire additional units of labor by driving the wage rate up. 
C)  the wage rate has been decreasing. 
D)  full employment exists in the labor market. 
A)  the firm is price taker. 
B)  the firm can only hire additional units of labor by driving the wage rate up. 
C)  the wage rate has been decreasing. 
D)  full employment exists in the labor market.

Question 14

Suppose there are four industries. Labor costs are 70 percent of total costs in industry A, 80 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 15

Suppose at the current level of labor used, MRP = $20 and MFC = $25. To maximize profits, the firm should

Accepted Answer

A)  hire more labor. 
B)  reduce the level of labor. 
C)  maintain the current level of labor. 
D)  expand production. 
A)  hire more labor. 
B)  reduce the level of labor. 
C)  maintain the current level of labor. 
D)  expand production.

Question 16

An increase in the supply of labor to an industry could be caused by

Accepted Answer

A)  higher wages. 
B)  increased productivity of labor. 
C)  an increase in job flexibility in the industry. 
D)  an increase of wages in another industry. 
A)  higher wages. 
B)  increased productivity of labor. 
C)  an increase in job flexibility in the industry. 
D)  an increase of wages in another industry.

Question 17

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

Accepted Answer

A)  marginal revenue product of labor. 
B)  marginal factor cost of labor. 
C)  price of the extra output produced. 
D)  average physical product of labor. 
A)  marginal revenue product of labor. 
B)  marginal factor cost of labor. 
C)  price of the extra output produced. 
D)  average physical product of labor.

Question 18

An increase in the price of a product

Accepted Answer

A)  automatically increases wages. 
B)  raises the firm's demand for labor. 
C)  would probably decrease total revenues. 
D)  increases productivity. 
A)  automatically increases wages. 
B)  raises the firm's demand for labor. 
C)  would probably decrease total revenues. 
D)  increases productivity.

Question 19

When the marginal productivity of labor decreases, the demand curve for labor in a perfectly competitive market

Accepted Answer

A)  does not change. 
B)  becomes steeper. 
C)  shifts to the right. 
D)  shifts to the left. 
A)  does not change. 
B)  becomes steeper. 
C)  shifts to the right. 
D)  shifts to the left.

Question 20

A profit-maximizing firm will hire additional units of labor until

Accepted Answer

A)  the additional cost of hiring the last worker equals the additional revenue generated by that worker. 
B)  the additional cost of hiring the last worker equals the marginal factor cost of the worker. 
C)  the extra revenue from hiring the last worker equals the marginal physical product of labor. 
D)  the extra cost from hiring the last worker equals the cost of the product. 
A)  the additional cost of hiring the last worker equals the additional revenue generated by that worker. 
B)  the additional cost of hiring the last worker equals the marginal factor cost of the worker. 
C)  the extra revenue from hiring the last worker equals the marginal physical product of labor. 
D)  the extra cost from hiring the last worker equals the cost of the product.

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

For a worker to be potentially available, he or she must

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

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers? Explain. Now, suppose the automakers improve working conditions at the plants. What are the effects? Explain.

Outsourcing is

A perfectly competitive firm is hiring variable resources M and N. It will minimize total costs

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

The profit-maximizing combination of resources in a perfectly competitive situation occurs at the point at which

Cost minimization suggests that two inputs should be employed to the point where

Profit maximization occurs where

When market wages increase in a perfectly competitive market, then

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

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

If the supply of labor to a firm is perfectly elastic at the going wage rate established by the forces of supply and demand then

Suppose there are four industries. Labor costs are 70 percent of total costs in industry A, 80 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?

Suppose at the current level of labor used, MRP = $20 and MFC = $25. To maximize profits, the firm should

An increase in the supply of labor to an industry could be caused by

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

An increase in the price of a product

When the marginal productivity of labor decreases, the demand curve for labor in a perfectly competitive market

A profit-maximizing firm will hire additional units of labor until

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 .