Question 1

If a firm wants to maximize profits it should

Accepted Answer

A)  hire each factor of production up to the point at which the marginal physical product per last dollar spent is equalized. 
B)  hire each factor of production up to the point at which the marginal revenue product per last dollar spent is equalized. 
C)  hire each factor of production up to the point at which the marginal factor cost per last dollar spent is equalized. 
D)  hire the same number of units of all inputs. 
A)  hire each factor of production up to the point at which the marginal physical product per last dollar spent is equalized. 
B)  hire each factor of production up to the point at which the marginal revenue product per last dollar spent is equalized. 
C)  hire each factor of production up to the point at which the marginal factor cost per last dollar spent is equalized. 
D)  hire the same number of units of all inputs.

Question 2

-In the above table, if the marginal factor cost is $480, 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 3

-In the above table, if this is a perfectly competitive firm and the market price of the product is $8, what is the marginal revenue product of worker 3?

Accepted Answer

A)  $96 
B)  $88 
C)  $80 
D)  $240 
A)  $96 
B)  $88 
C)  $80 
D)  $240

Question 4

In a perfectly competitive situation, the profit-maximizing hiring situation for all inputs being used is where

Accepted Answer

A)  the MRP of each input is equal to the price of each input. 
B)  the MRP of each input is greater than the price of each input. 
C)  the MRP of each input is less than the price of each input. 
D)  There is no relationship between MRP and the prices of the inputs. 
A)  the MRP of each input is equal to the price of each input. 
B)  the MRP of each input is greater than the price of each input. 
C)  the MRP of each input is less than the price of each input. 
D)  There is no relationship between MRP and the prices of the inputs.

Question 5

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

Accepted Answer

A)  a monopolist has to pay higher wages in order to attract additional workers. 
B)  the monopolist substitutes more capital for labor when compared to a competitive industry. 
C)  the monopolist producer has to deal with unions and face higher wages than do competitive industries. 
D)  the monopolist produces less output than a competitive industry. 
A)  a monopolist has to pay higher wages in order to attract additional workers. 
B)  the monopolist substitutes more capital for labor when compared to a competitive industry. 
C)  the monopolist producer has to deal with unions and face higher wages than do competitive industries. 
D)  the monopolist produces less output than a competitive industry.

Question 6

-In the above figure, the line labeled "MRPL" also represents the firm's

Accepted Answer

A)  supply curve. 
B)  marginal physical product curve. 
C)  total physical product curve. 
D)  demand curve. 
A)  supply curve. 
B)  marginal physical product curve. 
C)  total physical product curve. 
D)  demand curve.

Question 7

Derived demand means

Accepted Answer

A)  the labor demand curve will be upward sloping. 
B)  labor demand is derived from demand for the product it produces. 
C)  labor demand will shift about in a random fashion. 
D)  labor demand is determined by the supply of labor. 
A)  the labor demand curve will be upward sloping. 
B)  labor demand is derived from demand for the product it produces. 
C)  labor demand will shift about in a random fashion. 
D)  labor demand is determined by the supply of labor.

Question 8

The downward sloping marginal revenue product of labor is

Accepted Answer

A)  the firm's supply of labor. 
B)  the firm's short-run demand for labor. 
C)  the firm's marginal cost of labor. 
D)  another term for the marginal revenue product of labor. 
A)  the firm's supply of labor. 
B)  the firm's short-run demand for labor. 
C)  the firm's marginal cost of labor. 
D)  another term for the marginal revenue product of labor.

Question 9

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers?

Accepted Answer

A)  The equilibrium wage rate will increase and the equilibrium quantity of labor will decrease. 
B)  The equilibrium wage rate and the equilibrium quantity of labor will both 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 decrease. 
B)  The equilibrium wage rate and the equilibrium quantity of labor will both 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.

Question 10

-Refer to the above table. If the price of the good produced is $10 and the wage rate is $500, then the marginal revenue product of the 5th worker is

Accepted Answer

A)  $10. 
B)  $50. 
C)  $750. 
D)  $4,750. 
A)  $10. 
B)  $50. 
C)  $750. 
D)  $4,750.

Question 11

Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because

Accepted Answer

A)  the firm is a price taker. 
B)  the wage rate increases when additional workers are hired. 
C)  of the law of diminishing marginal product. 
D)  the supply of labor is perfectly elastic. 
A)  the firm is a price taker. 
B)  the wage rate increases when additional workers are hired. 
C)  of the law of diminishing marginal product. 
D)  the supply of labor is perfectly elastic.

Question 12

The demands for labor and other input factors are called

Accepted Answer

A)  derived demands, because the demand for these inputs depends on the demand for goods and services they are employed to produce. 
B)  developed demands, because the demand for these inputs is developed from an analysis of the costs of advertising products. 
C)  indirect demands, because the demand for these inputs is indirectly related to the costs of advertising products. 
D)  reverse demands, because the demand for these inputs varies inversely with the demand for goods and services they are employed to produce. 
A)  derived demands, because the demand for these inputs depends on the demand for goods and services they are employed to produce. 
B)  developed demands, because the demand for these inputs is developed from an analysis of the costs of advertising products. 
C)  indirect demands, because the demand for these inputs is indirectly related to the costs of advertising products. 
D)  reverse demands, because the demand for these inputs varies inversely with the demand for goods and services they are employed to produce.

Question 13

In a perfectly competitive labor market, the labor supply curve facing the firm will be

Accepted Answer

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

Question 14

Suppose a firm employs only capital and labor as inputs. Explain how the firm should allocate its inputs in order to maximize profits in a perfectly competitive market.

Accepted Answer

To maximize profits, the firm should all

Question 15

A firm will hire a unit of input up to the point where

Accepted Answer

A)  the marginal cost of the input equals the marginal cost of output. 
B)  the marginal revenue product of the input is equal to the marginal factor cost of the input. 
C)  the price of the input is equal to the price of output. 
D)  the marginal physical product of the input is equal to the price of output. 
A)  the marginal cost of the input equals the marginal cost of output. 
B)  the marginal revenue product of the input is equal to the marginal factor cost of the input. 
C)  the price of the input is equal to the price of output. 
D)  the marginal physical product of the input is equal to the price of output.

Question 16

Whenever an input makes up a large percentage of a good's final cost, an increase in that input's price will

Accepted Answer

A)  affect total cost relatively more. 
B)  not affect total revenues. 
C)  affect only accounting profits. 
D)  cause the firm to shutdown. 
A)  affect total cost relatively more. 
B)  not affect total revenues. 
C)  affect only accounting profits. 
D)  cause the firm to shutdown.

Question 17

The firm's demand for labor curve is its

Accepted Answer

A)  average product of labor curve. 
B)  marginal product of labor curve. 
C)  marginal revenue product of labor curve. 
D)  average revenue product of labor curve. 
A)  average product of labor curve. 
B)  marginal product of labor curve. 
C)  marginal revenue product of labor curve. 
D)  average revenue product of labor curve.

Question 18

The demand curve for labor will shift whenever

Accepted Answer

A)  the wage rate changes. 
B)  the marginal factor cost changes. 
C)  demand for the final product changes. 
D)  the supply of labor changes. 
A)  the wage rate changes. 
B)  the marginal factor cost changes. 
C)  demand for the final product changes. 
D)  the supply of labor changes.

Question 19

A firm's demand curve for labor is equal to the

Accepted Answer

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

Question 20

-Refer to the above table. What does the marginal physical product equal when the amount of labor goes from 12 to 13 units?

Accepted Answer

A)  10 
B)  7 
C)  69 
D)  76 
A)  10 
B)  7 
C)  69 
D)  76

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

If a firm wants to maximize profits it should

-In the above table, if the marginal factor cost is $480, how many workers would be hired?

-In the above table, if this is a perfectly competitive firm and the market price of the product is $8, what is the marginal revenue product of worker 3?

In a perfectly competitive situation, the profit-maximizing hiring situation for all inputs being used is where

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

-In the above figure, the line labeled "MRPL" also represents the firm's

Derived demand means

The downward sloping marginal revenue product of labor is

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers?

-Refer to the above table. If the price of the good produced is $10 and the wage rate is $500, then the marginal revenue product of the 5th worker is

Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because

The demands for labor and other input factors are called

In a perfectly competitive labor market, the labor supply curve facing the firm will be

Suppose a firm employs only capital and labor as inputs. Explain how the firm should allocate its inputs in order to maximize profits in a perfectly competitive market.

A firm will hire a unit of input up to the point where

Whenever an input makes up a large percentage of a good's final cost, an increase in that input's price will

The firm's demand for labor curve is its

The demand curve for labor will shift whenever

A firm's demand curve for labor is equal to the

-Refer to the above table. What does the marginal physical product equal when the amount of labor goes from 12 to 13 units?

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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