Question 1

-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

Question 2

-Refer to the above table. If the price of the good produced is $6, the marginal revenue product of the 11th worker is

Accepted Answer

A)  $60. 
B)  $66. 
C)  $350. 
D)  $360. 
A)  $60. 
B)  $66. 
C)  $350. 
D)  $360.

Question 3

-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 4

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 6th laborer?

Accepted Answer

A)  11 cabinets 
B)  7 cabinets 
C)  36 cabinets 
D)  9 cabinets 
A)  11 cabinets 
B)  7 cabinets 
C)  36 cabinets 
D)  9 cabinets

Question 5

An increase in the marginal factor cost of labor will

Accepted Answer

A)  lead to an increase in the quantity demanded of labor. 
B)  induce a firm to hire fewer workers. 
C)  lead to an increase in the value of an additional worker. 
D)  cause the value of the marginal product of labor to increase. 
A)  lead to an increase in the quantity demanded of labor. 
B)  induce a firm to hire fewer workers. 
C)  lead to an increase in the value of an additional worker. 
D)  cause the value of the marginal product of labor to increase.

Question 6

-Refer to the above figure. The firm is operating using MRP0. An increase in productivity has occurred. The relevant curve for the firm after the increase in productivity

Accepted Answer

A)  is MRP0. 
B)  is MRP1. 
C)  is MRP2. 
D)  could be MRP1 or MRP2 depending upon whether the firm was earning a positive profit. 
A)  is MRP0. 
B)  is MRP1. 
C)  is MRP2. 
D)  could be MRP1 or MRP2 depending upon whether the firm was earning a positive profit.

Question 7

Profit maximization requires that

Accepted Answer

A)  the marginal factor cost of every input equals that input's marginal physical product. 
B)  the marginal factor cost of every input equals that input's marginal revenue product. 
C)  the amount of one input hired divided by the amount of another input hired equals the total costs of the first input hired divided by the total costs of the second input. 
D)  equal amounts of each input are employed. 
A)  the marginal factor cost of every input equals that input's marginal physical product. 
B)  the marginal factor cost of every input equals that input's marginal revenue product. 
C)  the amount of one input hired divided by the amount of another input hired equals the total costs of the first input hired divided by the total costs of the second input. 
D)  equal amounts of each input are employed.

Question 8

Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week. If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210 computers are produced per week. Given this information, there

Accepted Answer

A)  is diminishing marginal product. 
B)  are too many workers. 
C)  are not enough workers. 
D)  is increasing marginal product. 
A)  is diminishing marginal product. 
B)  are too many workers. 
C)  are not enough workers. 
D)  is increasing marginal product.

Question 9

The elasticity of demand for labor will be less the

Accepted Answer

A)  longer the time period. 
B)  easier it is to substitute one input for another. 
C)  less the demand elasticity for the final product. 
D)  larger the share of total costs accounted for by labor. 
A)  longer the time period. 
B)  easier it is to substitute one input for another. 
C)  less the demand elasticity for the final product. 
D)  larger the share of total costs accounted for by labor.

Question 10

-Refer to the above table. Suppose the price of the good sold is $10 and the marginal factor cost of labor is $70, how many units of labor will the firm hire?

Accepted Answer

A)  10 
B)  11 
C)  12 
D)  13 
A)  10 
B)  11 
C)  12 
D)  13

Question 11

"Other things being equal, the monopolist hires fewer workers than would be hired than a perfectly competitive industry." Do you agree or disagree? Why?

Accepted Answer

Agree. For competitive firms, marginal r

Question 12

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 13

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 14

As more workers are hired, the marginal physical product of labor eventually declines because

Accepted Answer

A)  less efficient workers are hired as the number of workers increases. 
B)  workers do not work well together when the number of workers increases. 
C)  the amount of capital each worker has to work with declines as the number of workers increases. 
D)  of diseconomies of scale. 
A)  less efficient workers are hired as the number of workers increases. 
B)  workers do not work well together when the number of workers increases. 
C)  the amount of capital each worker has to work with declines as the number of workers increases. 
D)  of diseconomies of scale.

Question 15

Which of the following represents the general rule of hiring for a firm?

Accepted Answer

A)  Total physical product equals marginal factor cost. 
B)  Average revenue product equals the wage rate. 
C)  Marginal cost equals marginal revenue. 
D)  Marginal revenue product equals marginal factor cost. 
A)  Total physical product equals marginal factor cost. 
B)  Average revenue product equals the wage rate. 
C)  Marginal cost equals marginal revenue. 
D)  Marginal revenue product equals marginal factor cost.

Question 16

If a firm employs an extra unit of labor, the additional product generated by employing the extra unit of labor is

Accepted Answer

A)  the marginal physical product of labor. 
B)  the diminished marginal product. 
C)  marginal revenue. 
D)  total product. 
A)  the marginal physical product of labor. 
B)  the diminished marginal product. 
C)  marginal revenue. 
D)  total product.

Question 17

An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will

Accepted Answer

A)  cause the demand for labor to increase, raising wages of both skilled and unskilled labor. 
B)  cause the wage of unskilled labor to rise relative to the price of skilled labor. 
C)  induce the firms in the industry to cut back on all levels-capital, unskilled and skilled labor. 
D)  cause the demand for skilled labor to rise and the demand for unskilled labor to fall. 
A)  cause the demand for labor to increase, raising wages of both skilled and unskilled labor. 
B)  cause the wage of unskilled labor to rise relative to the price of skilled labor. 
C)  induce the firms in the industry to cut back on all levels-capital, unskilled and skilled labor. 
D)  cause the demand for skilled labor to rise and the demand for unskilled labor to fall.

Question 18

The price elasticity of demand for labor will be greater, the

Accepted Answer

A)  smaller is the price elasticity of demand for the final product. 
B)  easier it is to employ substitute inputs in production. 
C)  smaller is the proportion of wage costs in the total cost of production. 
D)  shorter is the time period under examination. 
A)  smaller is the price elasticity of demand for the final product. 
B)  easier it is to employ substitute inputs in production. 
C)  smaller is the proportion of wage costs in the total cost of production. 
D)  shorter is the time period under examination.

Question 19

Company A has just discovered that the marginal revenue product generated by the last worker hired was $80 while the marginal factor cost was $90. What should Company A do?

Accepted Answer

A)  Leave the level of production unchanged. 
B)  Increase the amount produced. 
C)  Reduce the amount produced. 
D)  Collect more information before making a decision. 
A)  Leave the level of production unchanged. 
B)  Increase the amount produced. 
C)  Reduce the amount produced. 
D)  Collect more information before making a decision.

Question 20

When an input represents a larger proportion of a firm's total costs, then

Accepted Answer

A)  demand for the input will tends to be less elastic. 
B)  the input demand will not vary significantly with a change in input price. 
C)  the usage of the input cannot be varied in the production function. 
D)  demand for the input will tends to be more elastic. 
A)  demand for the input will tends to be less elastic. 
B)  the input demand will not vary significantly with a change in input price. 
C)  the usage of the input cannot be varied in the production function. 
D)  demand for the input will tends to be more elastic.

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

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

-Refer to the above table. If the price of the good produced is $6, the marginal revenue product of the 11th worker is

-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.?

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 6th laborer?

An increase in the marginal factor cost of labor will

-Refer to the above figure. The firm is operating using MRP0. An increase in productivity has occurred. The relevant curve for the firm after the increase in productivity

Profit maximization requires that

Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week. If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210 computers are produced per week. Given this information, there

The elasticity of demand for labor will be less the

-Refer to the above table. Suppose the price of the good sold is $10 and the marginal factor cost of labor is $70, how many units of labor will the firm hire?

"Other things being equal, the monopolist hires fewer workers than would be hired than a perfectly competitive industry." Do you agree or disagree? Why?

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

The marginal factor cost is the

As more workers are hired, the marginal physical product of labor eventually declines because

Which of the following represents the general rule of hiring for a firm?

If a firm employs an extra unit of labor, the additional product generated by employing the extra unit of labor is

An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will

The price elasticity of demand for labor will be greater, the

Company A has just discovered that the marginal revenue product generated by the last worker hired was $80 while the marginal factor cost was $90. What should Company A do?

When an input represents a larger proportion of a firm's total costs, then

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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