Question 1

The additional output from one more worker is known as

Accepted Answer

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

Question 2

If the marginal productivity of labor decreases, then

Accepted Answer

A)  the quantity of labor demanded at every possible wage rate will be less. 
B)  the quantity of labor demanded at every possible wage rate will be higher. 
C)  the quantity of labor demanded will not be affected. 
D)  the demand curve for labor will shift upward and to the right. 
A)  the quantity of labor demanded at every possible wage rate will be less. 
B)  the quantity of labor demanded at every possible wage rate will be higher. 
C)  the quantity of labor demanded will not be affected. 
D)  the demand curve for labor will shift upward and to the right.

Question 3

Marginal revenue product is

Accepted Answer

A)  marginal physical product multiplied by marginal revenue. 
B)  marginal physical product multiplied by average variable cost of the product. 
C)  the price of the product. 
D)  the total revenue from the sale of the product sales. 
A)  marginal physical product multiplied by marginal revenue. 
B)  marginal physical product multiplied by average variable cost of the product. 
C)  the price of the product. 
D)  the total revenue from the sale of the product sales.

Question 4

Which of the following statements is TRUE?

Accepted Answer

A)  A firm cannot increase quantity demand for labor when the wage rate falls without causing the product price to decline. 
B)  A movement along the market demand curve for labor does not require a change in the product price. 
C)  A firm can increase quantity demanded for labor when the wage rate falls without affecting the product price but the industry cannot hire more workers without causing the product price to fall. 
D)  Both a firm and the industry can move down their demand curves for labor without causing product price to change. 
A)  A firm cannot increase quantity demand for labor when the wage rate falls without causing the product price to decline. 
B)  A movement along the market demand curve for labor does not require a change in the product price. 
C)  A firm can increase quantity demanded for labor when the wage rate falls without affecting the product price but the industry cannot hire more workers without causing the product price to fall. 
D)  Both a firm and the industry can move down their demand curves for labor without causing product price to change.

Question 5

The practice of outsourcing has been given a boost by

Accepted Answer

A)  advances in telecommunications and computer networking. 
B)  support from organized labor. 
C)  firms that are becoming more risk-averse. 
D)  sharp increases in the cost of overseas labor. 
A)  advances in telecommunications and computer networking. 
B)  support from organized labor. 
C)  firms that are becoming more risk-averse. 
D)  sharp increases in the cost of overseas labor.

Question 6

Company B has just discovered that the marginal revenue product generated by the last worker hired was $25 while the marginal factor cost was $25. What should Company B 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 7

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 8

Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits 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 9

A decrease in demand for a product, holding other things constant, will

Accepted Answer

A)  increase the marginal revenue product of labor. 
B)  decrease the marginal revenue product of labor. 
C)  not change the marginal revenue product of labor. 
D)  have an undetermined effect upon the marginal revenue product of labor. 
A)  increase the marginal revenue product of labor. 
B)  decrease the marginal revenue product of labor. 
C)  not change the marginal revenue product of labor. 
D)  have an undetermined effect upon the marginal revenue product of labor.

Question 10

-Refer to the above table. How do we know that this is NOT a competitive firm?

Accepted Answer

A)  The marginal physical product decreases as the amount of labor hired increases. 
B)  The marginal revenue changes as output changes. 
C)  The marginal revenue product decreases as the amount of labor increases. 
D)  Marginal physical product cannot be computed for competitive firms. 
A)  The marginal physical product decreases as the amount of labor hired increases. 
B)  The marginal revenue changes as output changes. 
C)  The marginal revenue product decreases as the amount of labor increases. 
D)  Marginal physical product cannot be computed for competitive firms.

Question 11

-Refer to the above table. Suppose the marginal revenue product of the 5th worker is $800. This implies that

Accepted Answer

A)  the price of the good is $5.33. 
B)  the price of the good is $8. 
C)  the price of the good is $70. 
D)  we cannot tell what the price of the good is without more information. 
A)  the price of the good is $5.33. 
B)  the price of the good is $8. 
C)  the price of the good is $70. 
D)  we cannot tell what the price of the good is without more information.

Question 12

There are a number of reasons why labor supply curves will shift in a particular industry. Which one of the following is NOT one of them?

Accepted Answer

A)  Changes in working conditions in an industry affect the labor supply curve. 
B)  job flexibility that determines the position of the labor supply curve 
C)  There is a change in the market wage rate. 
D)  Taxes on labor affect the labor supply curve. 
A)  Changes in working conditions in an industry affect the labor supply curve. 
B)  job flexibility that determines the position of the labor supply curve 
C)  There is a change in the market wage rate. 
D)  Taxes on labor affect the labor supply curve.

Question 13

When a firm has monopoly power, it

Accepted Answer

A)  hires fewer workers because its marginal revenue lies below the demand curve. 
B)  hires more workers because its marginal revenue lies below the demand curve. 
C)  hires fewer workers because its marginal revenue lies above the demand curve. 
D)  hires more workers because its marginal revenue lies above the demand curve. 
A)  hires fewer workers because its marginal revenue lies below the demand curve. 
B)  hires more workers because its marginal revenue lies below the demand curve. 
C)  hires fewer workers because its marginal revenue lies above the demand curve. 
D)  hires more workers because its marginal revenue lies above the demand curve.

Question 14

In the perfectly competitive market, the labor supply curve faced by the individual firm is ________, while that of the market is ________.

Accepted Answer

A)  perfectly elastic; perfectly inelastic 
B)  perfectly inelastic; perfectly elastic 
C)  perfectly elastic; upward sloping 
D)  perfectly inelastic; upward sloping 
A)  perfectly elastic; perfectly inelastic 
B)  perfectly inelastic; perfectly elastic 
C)  perfectly elastic; upward sloping 
D)  perfectly inelastic; upward sloping

Question 15

Suppose there are four industries. Labor costs are 20 percent of total costs in A, 40 percent in B, 60 percent in C, and 80 percent in D. A ten percent increase in the price of labor will cause industry ________ to 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 16

Suppose the market for autoworkers is initially in equilibrium, but then the demand for automobiles increases and simultaneously the automakers allow autoworkers less flexibility working at the plants. What happens in the market for autoworkers?

Accepted Answer

A)  The equilibrium wage rate will increase and the equilibrium quantity of labor will increase, decrease or stay the same. 
B)  The equilibrium wage rate will increase, decrease or stay the same and the equilibrium quantity of labor will increase. 
C)  The equilibrium wage rate and the equilibrium quantity of labor will both decrease. 
D)  The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase. 
A)  The equilibrium wage rate will increase and the equilibrium quantity of labor will increase, decrease or stay the same. 
B)  The equilibrium wage rate will increase, decrease or stay the same and the equilibrium quantity of labor will increase. 
C)  The equilibrium wage rate and the equilibrium quantity of labor will both decrease. 
D)  The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase.

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

The additional output from one more worker is known as

If the marginal productivity of labor decreases, then

Marginal revenue product is

Which of the following statements is TRUE?

The practice of outsourcing has been given a boost by

Company B has just discovered that the marginal revenue product generated by the last worker hired was $25 while the marginal factor cost was $25. What should Company B do?

If MFC > MRPL, the firm should

Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should

A decrease in demand for a product, holding other things constant, will

-Refer to the above table. How do we know that this is NOT a competitive firm?

-Refer to the above table. Suppose the marginal revenue product of the 5th worker is $800. This implies that

There are a number of reasons why labor supply curves will shift in a particular industry. Which one of the following is NOT one of them?

When a firm has monopoly power, it

In the perfectly competitive market, the labor supply curve faced by the individual firm is ________, while that of the market is ________.

Suppose there are four industries. Labor costs are 20 percent of total costs in A, 40 percent in B, 60 percent in C, and 80 percent in D. A ten percent increase in the price of labor will cause industry ________ to reduce quantity demanded of labor by the largest proportion.

Suppose the market for autoworkers is initially in equilibrium, but then the demand for automobiles increases and simultaneously the automakers allow autoworkers less flexibility working at the plants. What happens in the market for autoworkers?

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 the perfectly competitive market, the labor supply curve faced by the individual firm is , while that of the market is .