Question 1

Suppose a U.S. computer company outsources its technical-support services to India. This will cause

Accepted Answer

A)  the demand for labor in the United States to fall, lowering U.S. wage rates, and the demand for labor in India to increase, increasing Indian wage rates. 
B)  the demand for labor in the United States to increase, lowering U.S. wage rates, and the demand for labor in India to fall, increasing Indian wage rates. 
C)  the demand for labor in the United States to fall, lowering U.S. wage rates, and the demand for labor in India to fall, decreasing Indian wage rates. 
D)  the demand for labor in the United States to increase, increasing U.S. wage rates, and the demand for labor in India to fall, decreasing Indian wage rates. 
A)  the demand for labor in the United States to fall, lowering U.S. wage rates, and the demand for labor in India to increase, increasing Indian wage rates. 
B)  the demand for labor in the United States to increase, lowering U.S. wage rates, and the demand for labor in India to fall, increasing Indian wage rates. 
C)  the demand for labor in the United States to fall, lowering U.S. wage rates, and the demand for labor in India to fall, decreasing Indian wage rates. 
D)  the demand for labor in the United States to increase, increasing U.S. wage rates, and the demand for labor in India to fall, decreasing Indian wage rates.

Question 2

Suppose there are 100 firms in a market and all are identical. Firm A will hire 20 workers when the wage rate is $10, 25 workers when the wage rate is $9, and 30 workers when the wage rate is $8. The equilibrium wage rate for a number of years has been $9. If the wage rate falls to $8, we know that

Accepted Answer

A)  the quantity demanded for the market will increase to 3,000 workers. 
B)  the quantity demanded for the market will increase to more than 3,000 workers. 
C)  the quantity demanded for the market will increase to less than 3,000 workers. 
D)  the quantity demanded for the market will increase, but we can't tell which of the above answers is correct. 
A)  the quantity demanded for the market will increase to 3,000 workers. 
B)  the quantity demanded for the market will increase to more than 3,000 workers. 
C)  the quantity demanded for the market will increase to less than 3,000 workers. 
D)  the quantity demanded for the market will increase, but we can't tell which of the above answers is correct.

Question 3

The marginal revenue product

Accepted Answer

A)  represents the incremental contribution to the firm's total revenues obtained from an increase in a variable input. 
B)  always increases when there is an increase in a variable input. 
C)  gives the increase in cost when there is an increase in a variable input. 
D)  gives the change in total product when an additional unit of a good is hired. 
A)  represents the incremental contribution to the firm's total revenues obtained from an increase in a variable input. 
B)  always increases when there is an increase in a variable input. 
C)  gives the increase in cost when there is an increase in a variable input. 
D)  gives the change in total product when an additional unit of a good is hired.

Question 4

The marginal revenue product curve shifts when

Accepted Answer

A)  wages fall. 
B)  there is a change in the product price workers are producing. 
C)  wages rise. 
D)  the wages paid exceed the price. 
A)  wages fall. 
B)  there is a change in the product price workers are producing. 
C)  wages rise. 
D)  the wages paid exceed the price.

Question 5

Show how the profit-maximizing rule for hiring resources is equivalent to the cost-minimizing rule.

Accepted Answer

The cost-minimizing rule for hiring reso

Question 6

A profit maximizing monopolist will hire labor up to the point where

Accepted Answer

A)  marginal revenue product equals the price of the product. 
B)  marginal revenue product is greater than the wage rate. 
C)  marginal revenue product equals than the wage rate. 
D)  marginal revenue product is less than the wage rate. 
A)  marginal revenue product equals the price of the product. 
B)  marginal revenue product is greater than the wage rate. 
C)  marginal revenue product equals than the wage rate. 
D)  marginal revenue product is less than the wage rate.

Question 7

An increase in the productivity of labor induces

Accepted Answer

A)  an increase in the demand for labor. 
B)  an increase in the cost of labor. 
C)  a firm to hire fewer workers since fewer workers are needed with the increase in productivity. 
D)  a firm to offer a higher wage for workers since the workers are now more productive. 
A)  an increase in the demand for labor. 
B)  an increase in the cost of labor. 
C)  a firm to hire fewer workers since fewer workers are needed with the increase in productivity. 
D)  a firm to offer a higher wage for workers since the workers are now more productive.

Question 8

If the marginal factor cost of hiring an additional worker is $10 while the marginal revenue product is $15, then the firm should

Accepted Answer

A)  hire more workers. 
B)  stop hiring more workers. 
C)  fire some workers. 
D)  none of the above: insufficient information to answer the question. 
A)  hire more workers. 
B)  stop hiring more workers. 
C)  fire some workers. 
D)  none of the above: insufficient information to answer the question.

Question 9

The profit maximizing combination of resources

Accepted Answer

A)  usually involves more of each input hired than the cost minimizing combination of resources. 
B)  usually involves less of each input hired than the cost minimizing combination of resources. 
C)  usually involves hiring more of some resources and less of other resources than the cost minimizing combination of resources. 
D)  is also the cost minimizing combination of resources. 
A)  usually involves more of each input hired than the cost minimizing combination of resources. 
B)  usually involves less of each input hired than the cost minimizing combination of resources. 
C)  usually involves hiring more of some resources and less of other resources than the cost minimizing combination of resources. 
D)  is also the cost minimizing combination of resources.

Question 10

Suppose at the current level of labor used, MRP = $20 and MFC = $20. 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 11

For a perfectly competitive firm, the value of the marginal product is

Accepted Answer

A)  the same thing as marginal factor cost. 
B)  the same thing as marginal physical product. 
C)  marginal physical product times the product price. 
D)  marginal physical product times the wage rate. 
A)  the same thing as marginal factor cost. 
B)  the same thing as marginal physical product. 
C)  marginal physical product times the product price. 
D)  marginal physical product times the wage rate.

Question 12

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

Accepted Answer

A)  workers can easily be replaced by capital goods. 
B)  the product produced in the industry has very few substitutes. 
C)  the product is produced in a perfectly competitive industry. 
D)  labor represents a relatively small portion of total costs. 
A)  workers can easily be replaced by capital goods. 
B)  the product produced in the industry has very few substitutes. 
C)  the product is produced in a perfectly competitive industry. 
D)  labor represents a relatively small portion of total costs.

Question 13

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

Accepted Answer

A)  an increase in the price of output 
B)  less capital per unit of labor 
C)  a decline in labor productivity 
D)  a reduction in average consumer income 
A)  an increase in the price of output 
B)  less capital per unit of labor 
C)  a decline in labor productivity 
D)  a reduction in average consumer income

Question 14

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 12th worker?

Accepted Answer

A)  $1035 
B)  $135 
C)  $90 
D)  $1.50 
A)  $1035 
B)  $135 
C)  $90 
D)  $1.50

Question 15

In a perfectly competitive labor market, the least-cost combination rule for resource use

Accepted Answer

A)  requires that resources be used in combinations such that marginal products are equal. 
B)  requires that the marginal physical product per dollar spent for each resource is equalized. 
C)  assures the firm an economic profit. 
D)  assures the firm a normal profit. 
A)  requires that resources be used in combinations such that marginal products are equal. 
B)  requires that the marginal physical product per dollar spent for each resource is equalized. 
C)  assures the firm an economic profit. 
D)  assures the firm a normal profit.

Question 16

As the wage rate falls, other things constant, perfectly competitive firms will employ

Accepted Answer

A)  fewer workers. 
B)  more capital. 
C)  the same number of workers. 
D)  more workers. 
A)  fewer workers. 
B)  more capital. 
C)  the same number of workers. 
D)  more workers.

Question 17

For a firm in a perfectly competitive labor market

Accepted Answer

A)  W > MFC. 
B)  W  MRP. 
D)  W = MFC. 
A)  W > MFC. 
B)  W  MRP. 
D)  W = MFC.

Question 18

A firm is a price taker in the labor market if

Accepted Answer

A)  the skills of available workers do not match the requirements for the job. 
B)  there is a scarcity of labor in the market. 
C)  the hiring of more workers will drive the existing wage rate up. 
D)  the hiring of more workers will leave the existing wage rate unchanged. 
A)  the skills of available workers do not match the requirements for the job. 
B)  there is a scarcity of labor in the market. 
C)  the hiring of more workers will drive the existing wage rate up. 
D)  the hiring of more workers will leave the existing wage rate unchanged.

Question 19

The additional cost associated with the hiring of one more unit of labor is known as the

Accepted Answer

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

Question 20

Which of the following will not cause the supply of labor curve to shift in the economics professor industry?

Accepted Answer

A)  a decrease in the wage rate for Ph.D. economists in the banking industry 
B)  a decrease in the number of courses a professor must teach 
C)  Universities have discovered a way to make professors more productive. 
D)  University professors are going to be required to spend more time in their offices. 
A)  a decrease in the wage rate for Ph.D. economists in the banking industry 
B)  a decrease in the number of courses a professor must teach 
C)  Universities have discovered a way to make professors more productive. 
D)  University professors are going to be required to spend more time in their offices.

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

Suppose a U.S. computer company outsources its technical-support services to India. This will cause

Suppose there are 100 firms in a market and all are identical. Firm A will hire 20 workers when the wage rate is $10, 25 workers when the wage rate is $9, and 30 workers when the wage rate is $8. The equilibrium wage rate for a number of years has been $9. If the wage rate falls to $8, we know that

The marginal revenue product

The marginal revenue product curve shifts when

Show how the profit-maximizing rule for hiring resources is equivalent to the cost-minimizing rule.

A profit maximizing monopolist will hire labor up to the point where

An increase in the productivity of labor induces

If the marginal factor cost of hiring an additional worker is $10 while the marginal revenue product is $15, then the firm should

The profit maximizing combination of resources

Suppose at the current level of labor used, MRP = $20 and MFC = $20. To maximize profits, the firm should

For a perfectly competitive firm, the value of the marginal product is

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

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

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 12th worker?

In a perfectly competitive labor market, the least-cost combination rule for resource use

As the wage rate falls, other things constant, perfectly competitive firms will employ

For a firm in a perfectly competitive labor market

A firm is a price taker in the labor market if

The additional cost associated with the hiring of one more unit of labor is known as the

Which of the following will not cause the supply of labor curve to shift in the economics professor industry?

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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