Question 1

The price elasticity of demand for labor will depend upon all but the

Accepted Answer

A)  price elasticity of demand for the final product. 
B)  price elasticity of supply for the final product. 
C)  time period being considered. 
D)  availability of substitutes for inputs. 
A)  price elasticity of demand for the final product. 
B)  price elasticity of supply for the final product. 
C)  time period being considered. 
D)  availability of substitutes for inputs.

Question 2

-Refer to the above figure. MRP0 represents

Accepted Answer

A)  the supply curve for the product. 
B)  the supply curve for labor. 
C)  the demand curve for the product. 
D)  the demand curve for labor. 
A)  the supply curve for the product. 
B)  the supply curve for labor. 
C)  the demand curve for the product. 
D)  the demand curve for labor.

Question 3

Explain what the profit-maximizing combination of resources is for the perfectly competitive firm.

Accepted Answer

The firm hires each input such that the

Question 4

In the employment of any resource, a firm should

Accepted Answer

A)  equate marginal revenue product with the cost of the additional resource. 
B)  hire each input unit that adds more to revenue than it adds to costs. 
C)  hire each input unit provided its marginal physical product is greater than zero. 
D)  A and B are both correct. 
A)  equate marginal revenue product with the cost of the additional resource. 
B)  hire each input unit that adds more to revenue than it adds to costs. 
C)  hire each input unit provided its marginal physical product is greater than zero. 
D)  A and B are both correct.

Question 5

When the supply of labor to a firm is perfectly elastic the marginal factor cost will equal the

Accepted Answer

A)  market price of the product. 
B)  wage rate. 
C)  marginal physical product. 
D)  wage rate times the number of workers. 
A)  market price of the product. 
B)  wage rate. 
C)  marginal physical product. 
D)  wage rate times the number of workers.

Question 6

The labor supply curve faced by an individual firm in a perfectly competitive market is

Accepted Answer

A)  upward sloping. 
B)  horizontal. 
C)  vertical. 
D)  downward sloping. 
A)  upward sloping. 
B)  horizontal. 
C)  vertical. 
D)  downward sloping.

Question 7

Suppose at the current level of labor used, MRP = $100 and MFC = $50. 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)  shut down. 
A)  hire more labor. 
B)  reduce the level of labor. 
C)  maintain the current level of labor. 
D)  shut down.

Question 8

Compared to the perfectly competitive firm, the monopolist's input demand curve is

Accepted Answer

A)  more elastic. 
B)  more inelastic. 
C)  due to a constant per-unit price of the product. 
D)  marginal factor cost. 
A)  more elastic. 
B)  more inelastic. 
C)  due to a constant per-unit price of the product. 
D)  marginal factor cost.

Question 9

An increase in labor productivity will shift

Accepted Answer

A)  MRP curve to the left. 
B)  MFC curve to the right. 
C)  MRP curve to the right. 
D)  MFC curve to the left. 
A)  MRP curve to the left. 
B)  MFC curve to the right. 
C)  MRP curve to the right. 
D)  MFC curve to the left.

Question 10

-Refer to the above table. What does the marginal revenue product equal when 28 workers are hired a week?

Accepted Answer

A)  $1040 
B)  $900 
C)  $210 
D)  $7.50 
A)  $1040 
B)  $900 
C)  $210 
D)  $7.50

Question 11

A firm's marginal factor cost describes

Accepted Answer

A)  the increase in the firm's total revenue as one more unit of output is sold. 
B)  the change in total fixed cost that results from hiring one more unit of input. 
C)  the change in total variable cost that results from the production of an extra unit of output. 
D)  the change in total cost that results from using one more unit of an input. 
A)  the increase in the firm's total revenue as one more unit of output is sold. 
B)  the change in total fixed cost that results from hiring one more unit of input. 
C)  the change in total variable cost that results from the production of an extra unit of output. 
D)  the change in total cost that results from using one more unit of an input.

Question 12

A perfectly competitive firm discovers that its MRPL divided by the wage equals 1.5. The firm should

Accepted Answer

A)  check the MRP of the other inputs and divide them by their prices. If they are all equal to 1.5 it is maximizing profits. 
B)  hire more labor. 
C)  purchase more capital. 
D)  try to pay a lower wage rate. 
A)  check the MRP of the other inputs and divide them by their prices. If they are all equal to 1.5 it is maximizing profits. 
B)  hire more labor. 
C)  purchase more capital. 
D)  try to pay a lower wage rate.

Question 13

An increase in the supply of labor generates

Accepted Answer

A)  increased unemployment. 
B)  lower wages. 
C)  an offsetting increase in the demand for labor. 
D)  a decrease in the quantity demanded of labor. 
A)  increased unemployment. 
B)  lower wages. 
C)  an offsetting increase in the demand for labor. 
D)  a decrease in the quantity demanded of labor.

Question 14

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Accepted Answer

A)  a decrease in labor productivity 
B)  an increase in the price of robots that are used to solder parts of the car together 
C)  an increase in the demand for automobiles 
D)  an increase in the price of automobiles 
A)  a decrease in labor productivity 
B)  an increase in the price of robots that are used to solder parts of the car together 
C)  an increase in the demand for automobiles 
D)  an increase in the price of automobiles

Question 15

If a firm hires 200 workers and produces 5,000 computers. If the firm hires one more worker, it produces 5,050 computers. If computers sell at a constant price of $100 and labor is hired at a constant wage rate of $4,000 per worker

Accepted Answer

A)  the firm should hire and retain the additional worker. 
B)  the marginal factor cost of labor is $4,000. 
C)  the marginal revenue product of the added worker is $5,000. 
D)  all of the above. 
A)  the firm should hire and retain the additional worker. 
B)  the marginal factor cost of labor is $4,000. 
C)  the marginal revenue product of the added worker is $5,000. 
D)  all of the above.

Question 16

The additional revenue associated with hiring one additional unit of some factor input, such as labor, is called

Accepted Answer

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

Question 17

A profit-maximizing firm in a competitive market will continue to hire more workers when

Accepted Answer

A)  the marginal factor cost exceeds the marginal revenue product of the additional workers. 
B)  the marginal factor cost equals the marginal revenue product of the additional workers. 
C)  the marginal factor cost is less than the marginal revenue product of the additional workers. 
D)  the marginal factor cost is less than zero. 
A)  the marginal factor cost exceeds the marginal revenue product of the additional workers. 
B)  the marginal factor cost equals the marginal revenue product of the additional workers. 
C)  the marginal factor cost is less than the marginal revenue product of the additional workers. 
D)  the marginal factor cost is less than zero.

Question 18

Which of the following will NOT lead to a change in the demand for labor?

Accepted Answer

A)  a change in demand for the final good 
B)  a change in the supply of labor 
C)  a change in the price of a substitute input 
D)  a change in labor productivity 
A)  a change in demand for the final good 
B)  a change in the supply of labor 
C)  a change in the price of a substitute input 
D)  a change in labor productivity

Question 19

An outward shift in the consumer demand for wheat will

Accepted Answer

A)  raise the price of wheat and shift inward the marginal revenue product of labor producing wheat. 
B)  lead to more capital and less labor used in producing wheat. 
C)  raise the price of wheat and shift out the marginal revenue product of labor producing wheat. 
D)  lead to downward pressure on the wages of those producing wheat. 
A)  raise the price of wheat and shift inward the marginal revenue product of labor producing wheat. 
B)  lead to more capital and less labor used in producing wheat. 
C)  raise the price of wheat and shift out the marginal revenue product of labor producing wheat. 
D)  lead to downward pressure on the wages of those producing wheat.

Question 20

If laborers become more efficient over time, and if Company X would want to expand production, it would

Accepted Answer

A)  substitute capital for labor. 
B)  hire more laborers. 
C)  hire fewer laborers. 
D)  produce less product. 
A)  substitute capital for labor. 
B)  hire more laborers. 
C)  hire fewer laborers. 
D)  produce less product.

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

The price elasticity of demand for labor will depend upon all but the

-Refer to the above figure. MRP0 represents

Explain what the profit-maximizing combination of resources is for the perfectly competitive firm.

In the employment of any resource, a firm should

When the supply of labor to a firm is perfectly elastic the marginal factor cost will equal the

The labor supply curve faced by an individual firm in a perfectly competitive market is

Suppose at the current level of labor used, MRP = $100 and MFC = $50. To maximize profits, the firm should

Compared to the perfectly competitive firm, the monopolist's input demand curve is

An increase in labor productivity will shift

-Refer to the above table. What does the marginal revenue product equal when 28 workers are hired a week?

A firm's marginal factor cost describes

A perfectly competitive firm discovers that its MRPL divided by the wage equals 1.5. The firm should

An increase in the supply of labor generates

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

If a firm hires 200 workers and produces 5,000 computers. If the firm hires one more worker, it produces 5,050 computers. If computers sell at a constant price of $100 and labor is hired at a constant wage rate of $4,000 per worker

The additional revenue associated with hiring one additional unit of some factor input, such as labor, is called

A profit-maximizing firm in a competitive market will continue to hire more workers when

Which of the following will NOT lead to a change in the demand for labor?

An outward shift in the consumer demand for wheat will

If laborers become more efficient over time, and if Company X would want to expand production, it would

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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