Question 1

The greater the elasticity of demand for a final product, we find ________ the demand for the factor inputs.

Accepted Answer

A)  the greater will be 
B)  the lower will be 
C)  that it will not impact 
D)  The answer cannot be determined. 
A)  the greater will be 
B)  the lower will be 
C)  that it will not impact 
D)  The answer cannot be determined.

Question 2

When hiring additional workers, a firm operating in a perfectly competitive labor market will

Accepted Answer

A)  have to offer higher wages to hire additional workers, but the old workers do not get the higher wage. 
B)  have to offer higher wages to hire additional workers, and the old workers will also receive the new, higher wage. 
C)  be able to hire additional workers without offering higher wages. 
D)  be able to hire additional workers at lower wages because the new workers have been unemployed. 
A)  have to offer higher wages to hire additional workers, but the old workers do not get the higher wage. 
B)  have to offer higher wages to hire additional workers, and the old workers will also receive the new, higher wage. 
C)  be able to hire additional workers without offering higher wages. 
D)  be able to hire additional workers at lower wages because the new workers have been unemployed.

Question 3

The more inelastic the consumer demand for the final product, the

Accepted Answer

A)  greater will be the economic profit in a competitive market. 
B)  greater the impact on employment from a change in the wage rate. 
C)  more inelastic the demand for labor producing the product. 
D)  more responsive the output demand to a change in the price of labor. 
A)  greater will be the economic profit in a competitive market. 
B)  greater the impact on employment from a change in the wage rate. 
C)  more inelastic the demand for labor producing the product. 
D)  more responsive the output demand to a change in the price of labor.

Question 4

Assume that the labor market is perfectly competitive. An increase in the productivity of labor

Accepted Answer

A)  causes the marginal factor cost of labor to decrease. 
B)  generates a lower wage rate. 
C)  causes an increase in the demand for labor. 
D)  causes a reduction in the demand for labor since each worker is now more productive. 
A)  causes the marginal factor cost of labor to decrease. 
B)  generates a lower wage rate. 
C)  causes an increase in the demand for labor. 
D)  causes a reduction in the demand for labor since each worker is now more productive.

Question 5

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 5th laborer?

Accepted Answer

A)  8 cabinets 
B)  7 cabinets 
C)  6 cabinets 
D)  4 cabinets 
A)  8 cabinets 
B)  7 cabinets 
C)  6 cabinets 
D)  4 cabinets

Question 6

What are the short-run economic effects when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?

Accepted Answer

A)  The wage rate in the U.S. will remain the same, and the wage rate in the foreign country will decrease. 
B)  The wage rate in the U.S. will increase, and the wage rate in the foreign country will decrease. 
C)  The wage rate in the U.S. will decrease, and the wage rate in the foreign country will decrease. 
D)  The wage rate in the U.S. will decrease, and the wage rate in the foreign country will increase. 
A)  The wage rate in the U.S. will remain the same, and the wage rate in the foreign country will decrease. 
B)  The wage rate in the U.S. will increase, and the wage rate in the foreign country will decrease. 
C)  The wage rate in the U.S. will decrease, and the wage rate in the foreign country will decrease. 
D)  The wage rate in the U.S. will decrease, and the wage rate in the foreign country will increase.

Question 7

The following table depicts both the product and labor markets for imported coffee. What is the total revenue when 15 workers per day are hired?

Accepted Answer

A)  $5,000 
B)  $6,750 
C)  $7,350 
D)  $7,500 
A)  $5,000 
B)  $6,750 
C)  $7,350 
D)  $7,500

Question 8

The addition to revenue obtained from hiring an additional unit of labor is

Accepted Answer

A)  total product. 
B)  marginal revenue product. 
C)  marginal factor cost. 
D)  marginal physical product of labor. 
A)  total product. 
B)  marginal revenue product. 
C)  marginal factor cost. 
D)  marginal physical product of labor.

Question 9

A firm purchases less capital equipment. We would expect to observe

Accepted Answer

A)  a rightward shift in the supply curve of labor to this firm. 
B)  a decrease in the supply of labor for this firm. 
C)  a decrease in the demand for labor by this firm. 
D)  a decrease in the wage rate paid for labor by this firm. 
A)  a rightward shift in the supply curve of labor to this firm. 
B)  a decrease in the supply of labor for this firm. 
C)  a decrease in the demand for labor by this firm. 
D)  a decrease in the wage rate paid for labor by this firm.

Question 10

Which of the following will lead to an increase in the firm's short-run demand for labor?

Accepted Answer

A)  a decrease in the price of the final product 
B)  an increase in price of the final product's substitute good 
C)  an improvement in labor productivity 
D)  a decrease in the number of buyers for the final product 
A)  a decrease in the price of the final product 
B)  an increase in price of the final product's substitute good 
C)  an improvement in labor productivity 
D)  a decrease in the number of buyers for the final product

Question 11

A 10 percent increase in the wage rate induces firms in an industry to reduce quantity demanded for labor by 5 percent in the first year. Five years later we would expect, other things constant,

Accepted Answer

A)  the reduction in the quantity demanded of labor to be much greater than 5 percent. 
B)  the reduction in the quantity demanded of labor to be less than 5 percent. 
C)  the reduction in the quantity demanded of labor to be about 5 percent. 
D)  the quantity demanded of labor to be back to its original level. 
A)  the reduction in the quantity demanded of labor to be much greater than 5 percent. 
B)  the reduction in the quantity demanded of labor to be less than 5 percent. 
C)  the reduction in the quantity demanded of labor to be about 5 percent. 
D)  the quantity demanded of labor to be back to its original level.

Question 12

If MFC < MRPL, the firm should

Accepted Answer

A)  hire more workers. 
B)  lower wages. 
C)  get rid of some capital. 
D)  reduce the number of workers. 
A)  hire more workers. 
B)  lower wages. 
C)  get rid of some capital. 
D)  reduce the number of workers.

Question 13

-In the above table, if the marginal factor cost is $200, how many workers would be hired?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

Question 14

The monopolist's input demand curve is the

Accepted Answer

A)  marginal revenue curve. 
B)  marginal revenue product curve. 
C)  marginal physical product curve. 
D)  marginal factor cost. 
A)  marginal revenue curve. 
B)  marginal revenue product curve. 
C)  marginal physical product curve. 
D)  marginal factor cost.

Question 15

The cost of using an additional unit of an input is called the

Accepted Answer

A)  marginal revenue product. 
B)  marginal physical product cost. 
C)  marginal factor cost. 
D)  marginal product of labor. 
A)  marginal revenue product. 
B)  marginal physical product cost. 
C)  marginal factor cost. 
D)  marginal product of labor.

Question 16

If a firm faces perfectly competitive product and factor markets and the marginal product of labor and capital are 4 and 9, respectively, while the wage rate is $2 and the rental rate on capital is $4, the firm should

Accepted Answer

A)  use relatively more labor. 
B)  use relatively less labor. 
C)  increase all inputs proportionately. 
D)  decrease all inputs proportionately. 
A)  use relatively more labor. 
B)  use relatively less labor. 
C)  increase all inputs proportionately. 
D)  decrease all inputs proportionately.

Question 17

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 and the fact that the firm receives $200 per computer, the marginal revenue product of the third worker is

Accepted Answer

A)  $4,200. 
B)  $12,000. 
C)  $10,000. 
D)  $14,000. 
A)  $4,200. 
B)  $12,000. 
C)  $10,000. 
D)  $14,000.

Question 18

The change in output resulting from the addition of one more worker is

Accepted Answer

A)  marginal physical product. 
B)  marginal revenue product. 
C)  average physical product. 
D)  average revenue product. 
A)  marginal physical product. 
B)  marginal revenue product. 
C)  average physical product. 
D)  average revenue product.

Question 19

Which of the following is an example of outsourcing?

Accepted Answer

A)  A U.S. firm moves a manufacturing plant from the U.S. to Thailand where the firm can hire cheaper labor. 
B)  A German firm hires an accountant in the U.S. to manage its payrolls. 
C)  All the above are examples of outsourcing. 
D)  None of the above is an example of outsourcing. 
A)  A U.S. firm moves a manufacturing plant from the U.S. to Thailand where the firm can hire cheaper labor. 
B)  A German firm hires an accountant in the U.S. to manage its payrolls. 
C)  All the above are examples of outsourcing. 
D)  None of the above is an example of outsourcing.

Question 20

The price elasticity of demand for labor equals

Accepted Answer

A)  the percentage change in the price of labor divided by the percentage change in the supply of labor. 
B)  the change in the quantity demanded of labor divided by the change in the price of labor. 
C)  the slope of the demand curve for labor. 
D)  the percentage change in the quantity demanded of labor divided by the percentage change in the price of labor. 
A)  the percentage change in the price of labor divided by the percentage change in the supply of labor. 
B)  the change in the quantity demanded of labor divided by the change in the price of labor. 
C)  the slope of the demand curve for labor. 
D)  the percentage change in the quantity demanded of labor divided by the percentage change in the price of labor.

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

The greater the elasticity of demand for a final product, we find ________ the demand for the factor inputs.

When hiring additional workers, a firm operating in a perfectly competitive labor market will

The more inelastic the consumer demand for the final product, the

Assume that the labor market is perfectly competitive. An increase in the productivity of labor

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 5th laborer?

What are the short-run economic effects when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?

The following table depicts both the product and labor markets for imported coffee. What is the total revenue when 15 workers per day are hired?

The addition to revenue obtained from hiring an additional unit of labor is

A firm purchases less capital equipment. We would expect to observe

Which of the following will lead to an increase in the firm's short-run demand for labor?

A 10 percent increase in the wage rate induces firms in an industry to reduce quantity demanded for labor by 5 percent in the first year. Five years later we would expect, other things constant,

If MFC < MRPL, the firm should

-In the above table, if the marginal factor cost is $200, how many workers would be hired?

The monopolist's input demand curve is the

The cost of using an additional unit of an input is called the

If a firm faces perfectly competitive product and factor markets and the marginal product of labor and capital are 4 and 9, respectively, while the wage rate is $2 and the rental rate on capital is $4, the firm should

The change in output resulting from the addition of one more worker is

Which of the following is an example of outsourcing?

The price elasticity of demand for labor equals

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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