Question 1

We would expect that a fall in labor supply will have a proportionately larger effect on the market wage rate when

Accepted Answer

A)  capital goods exist that can replace many of the workers. 
B)  the product produced in the industry has several close substitutes. 
C)  the product produced in the industry makes up a large portion of most families' budgets. 
D)  labor represents a relatively small portion of total costs. 
A)  capital goods exist that can replace many of the workers. 
B)  the product produced in the industry has several close substitutes. 
C)  the product produced in the industry makes up a large portion of most families' budgets. 
D)  labor represents a relatively small portion of total costs.

Question 2

The marginal physical product of labor for the most recent worker hired by a company is 100. If this company were to hire an additional worker we would expect the marginal physical product of labor to

Accepted Answer

A)  remain at 100. 
B)  be below 100. 
C)  be above 100 by a small amount. 
D)  be infinity. 
A)  remain at 100. 
B)  be below 100. 
C)  be above 100 by a small amount. 
D)  be infinity.

Question 3

The marginal physical product of labor is

Accepted Answer

A)  the output of the firm divided by the number of workers. 
B)  the change in total revenues resulting from the addition of one more worker, while increasing one other factor of production. 
C)  the change in output resulting from the addition of one more worker, holding other factors of production constant. 
D)  the change in output resulting from the addition of one more worker, adjusting the level of the capital stock accordingly. 
A)  the output of the firm divided by the number of workers. 
B)  the change in total revenues resulting from the addition of one more worker, while increasing one other factor of production. 
C)  the change in output resulting from the addition of one more worker, holding other factors of production constant. 
D)  the change in output resulting from the addition of one more worker, adjusting the level of the capital stock accordingly.

Question 4

When firms in a U.S. industry outsource some of their production,

Accepted Answer

A)  both U.S. labor demand and U.S. wages in the industry fall 
B)  U.S. labor demand falls, but U.S. wages are not affected. 
C)  U.S. labor demand remains unchanged, but U.S. wages fall. 
D)  U.S. labor demand falls, but U.S. wages increase. 
A)  both U.S. labor demand and U.S. wages in the industry fall 
B)  U.S. labor demand falls, but U.S. wages are not affected. 
C)  U.S. labor demand remains unchanged, but U.S. wages fall. 
D)  U.S. labor demand falls, but U.S. wages increase.

Question 5

Steel cannot be produced without iron. Hence, the price elasticity of demand for iron by steel mills will be

Accepted Answer

A)  perfectly elastic. 
B)  elastic. 
C)  inelastic. 
D)  unitary elastic. 
A)  perfectly elastic. 
B)  elastic. 
C)  inelastic. 
D)  unitary elastic.

Question 6

Absent government interference, the wage rate for labor in a competitive market is established

Accepted Answer

A)  solely by the firm's demand for labor. 
B)  solely by the market supply of labor. 
C)  by both the demand for and supply of labor at each individual firm. 
D)  by the the market supply and market demand for labor. 
A)  solely by the firm's demand for labor. 
B)  solely by the market supply of labor. 
C)  by both the demand for and supply of labor at each individual firm. 
D)  by the the market supply and market demand for labor.

Question 7

The price elasticity of demand for a variable input will be greater

Accepted Answer

A)  the fewer substitutes there are for the final product. 
B)  the easier it is for a particular input to be substituted for by other inputs. 
C)  the lower the price elasticity of supply of all other inputs. 
D)  the smaller the proportion of total costs accounted for by a particular variable input. 
A)  the fewer substitutes there are for the final product. 
B)  the easier it is for a particular input to be substituted for by other inputs. 
C)  the lower the price elasticity of supply of all other inputs. 
D)  the smaller the proportion of total costs accounted for by a particular variable input.

Question 8

The marginal revenue product is

Accepted Answer

A)  the change in total output resulting from a one-unit change in variable output. 
B)  the change in marginal output resulting from a one-unit change in variable input. 
C)  the change in total revenue resulting from a one-unit change in variable input. 
D)  the change in marginal revenue resulting from a one-unit change in variable input. 
A)  the change in total output resulting from a one-unit change in variable output. 
B)  the change in marginal output resulting from a one-unit change in variable input. 
C)  the change in total revenue resulting from a one-unit change in variable input. 
D)  the change in marginal revenue resulting from a one-unit change in variable input.

Question 9

The increase in output that results when one more unit of a variable input is hired is called

Accepted Answer

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

Question 10

Some companies are having their technical support calls answered by people located in India. This is an example of

Accepted Answer

A)  a factor that shifts the supply of labor curve in the U.S. 
B)  insourcing. 
C)  outsourcing. 
D)  a change in the demand for the final product that labor produces. 
A)  a factor that shifts the supply of labor curve in the U.S. 
B)  insourcing. 
C)  outsourcing. 
D)  a change in the demand for the final product that labor produces.

Question 11

The marginal revenue product gives

Accepted Answer

A)  the change in total product for an additional unit of a variable input. 
B)  the amount that other inputs must increase by when labor increase by one unit. 
C)  the additions to total cost when an additional unit of a variable input is hired. 
D)  the additional revenue obtained when an additional unit of a variable input is hired. 
A)  the change in total product for an additional unit of a variable input. 
B)  the amount that other inputs must increase by when labor increase by one unit. 
C)  the additions to total cost when an additional unit of a variable input is hired. 
D)  the additional revenue obtained when an additional unit of a variable input is hired.

Question 12

What is the general rule for hiring for a perfectly competitive firm? Show it on a graph. What is the demand curve for labor on the graph? Explain.

Accepted Answer

@#IMG-DLM& The firm hires workers up to the point

Question 13

A change in a price of a substitute input for labor will cause

Accepted Answer

A)  a change in the demand for labor in the opposite direction of the price change. 
B)  no change in the demand for labor. 
C)  a change in the supply of labor in the opposite direction of the price change. 
D)  a change in the demand for labor in the same direction of the price change. 
A)  a change in the demand for labor in the opposite direction of the price change. 
B)  no change in the demand for labor. 
C)  a change in the supply of labor in the opposite direction of the price change. 
D)  a change in the demand for labor in the same direction of the price change.

Question 14

Explain the implications of outsourcing for employment and wages in the domestic and foreign labor markets.

Accepted Answer

If domestic firms out source their jobs

Question 15

If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is lower than the marginal physical product of capital per last dollar spent?

Accepted Answer

A)  The firm should increase both the quantity of capital and the quantity of labor. 
B)  The firm should decrease both the quantity of capital and the quantity of labor. 
C)  The firm should increase the quantity of capital and reduce the quantity of labor. 
D)  The firm should decrease the quantity of capital and increase the quantity of labor. 
A)  The firm should increase both the quantity of capital and the quantity of labor. 
B)  The firm should decrease both the quantity of capital and the quantity of labor. 
C)  The firm should increase the quantity of capital and reduce the quantity of labor. 
D)  The firm should decrease the quantity of capital and increase the quantity of labor.

Question 16

Suppose the MRP of the 49th worker at a firm is $25 and that the market wage rate is $15. We know that if this firm operates in perfectly competitive product and labor markets

Accepted Answer

A)  the firm is paying wages above the minimum wages. 
B)  the firm's profits would increase if it fired some workers. 
C)  the firm would be more profitable if it hired more workers. 
D)  the firm should use more capital. 
A)  the firm is paying wages above the minimum wages. 
B)  the firm's profits would increase if it fired some workers. 
C)  the firm would be more profitable if it hired more workers. 
D)  the firm should use more capital.

Question 17

Outsourcing is being practiced by

Accepted Answer

A)  U.S. firms that want to keep jobs at home in the United States. 
B)  overseas firms hiring in the U.S. labor market and by U.S. firms hiring in foreign labor markets with lower wages. 
C)  U.S. firms only. 
D)  governments but private firms are not allowed to outsource work. 
A)  U.S. firms that want to keep jobs at home in the United States. 
B)  overseas firms hiring in the U.S. labor market and by U.S. firms hiring in foreign labor markets with lower wages. 
C)  U.S. firms only. 
D)  governments but private firms are not allowed to outsource work.

Question 18

-Refer to the above table. Suppose the marginal revenue product of the 7th worker is $1100. This implies that

Accepted Answer

A)  the price of the good is $1. 
B)  the price of the good is $8. 
C)  the price of the good is $20. 
D)  we cannot tell what the price of the good is without more information. 
A)  the price of the good is $1. 
B)  the price of the good is $8. 
C)  the price of the good is $20. 
D)  we cannot tell what the price of the good is without more information.

Question 19

If a firm wants to maximize profits it should

Accepted Answer

A)  hire lots of capital and very little labor since labor needs to be trained. 
B)  hire unskilled labor rather than skilled labor since unskilled labor is cheaper. 
C)  equate the marginal physical product for each input to the price of the input. 
D)  equate the marginal revenue product for each input to the price of the input. 
A)  hire lots of capital and very little labor since labor needs to be trained. 
B)  hire unskilled labor rather than skilled labor since unskilled labor is cheaper. 
C)  equate the marginal physical product for each input to the price of the input. 
D)  equate the marginal revenue product for each input to the price of the input.

Question 20

If the price of golf balls increases, what will likely happen to the demand for golf club manufacturing employees?

Accepted Answer

A)  It will increase. 
B)  It will decrease. 
C)  It will stay the same. 
D)  Nothing, the two are not related. 
A)  It will increase. 
B)  It will decrease. 
C)  It will stay the same. 
D)  Nothing, the two are not related.

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

We would expect that a fall in labor supply will have a proportionately larger effect on the market wage rate when

The marginal physical product of labor for the most recent worker hired by a company is 100. If this company were to hire an additional worker we would expect the marginal physical product of labor to

The marginal physical product of labor is

When firms in a U.S. industry outsource some of their production,

Steel cannot be produced without iron. Hence, the price elasticity of demand for iron by steel mills will be

Absent government interference, the wage rate for labor in a competitive market is established

The price elasticity of demand for a variable input will be greater

The marginal revenue product is

The increase in output that results when one more unit of a variable input is hired is called

Some companies are having their technical support calls answered by people located in India. This is an example of

The marginal revenue product gives

What is the general rule for hiring for a perfectly competitive firm? Show it on a graph. What is the demand curve for labor on the graph? Explain.

A change in a price of a substitute input for labor will cause

Explain the implications of outsourcing for employment and wages in the domestic and foreign labor markets.

If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is lower than the marginal physical product of capital per last dollar spent?

Suppose the MRP of the 49th worker at a firm is $25 and that the market wage rate is $15. We know that if this firm operates in perfectly competitive product and labor markets

Outsourcing is being practiced by

-Refer to the above table. Suppose the marginal revenue product of the 7th worker is $1100. This implies that

If a firm wants to maximize profits it should

If the price of golf balls increases, what will likely happen to the demand for golf club manufacturing employees?

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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