Question 1

The demand curve for labor slopes down because

Accepted Answer

A)  firms value less efficient workers less than they value more efficient workers. 
B)  firms must lower prices to sell the additional units of its product that the extra workers produce. 
C)  of the law of diminishing marginal product. 
D)  of profit maximizing behavior. 
A)  firms value less efficient workers less than they value more efficient workers. 
B)  firms must lower prices to sell the additional units of its product that the extra workers produce. 
C)  of the law of diminishing marginal product. 
D)  of profit maximizing behavior.

Question 2

All of the following shift an industry's labor supply curve EXCEPT changes in

Accepted Answer

A)  market wages offered in other industries. 
B)  the demand for the final product. 
C)  job flexibility. 
D)  working conditions. 
A)  market wages offered in other industries. 
B)  the demand for the final product. 
C)  job flexibility. 
D)  working conditions.

Question 3

The demand for LED TVs increases. As a result

Accepted Answer

A)  the wage rate in the LED TV industry increases and the quantity demanded of workers increases. 
B)  the wage rate in the LED TV industry increases and the quantity supplied of workers increases. 
C)  the demand for labor increases and the supply of labor also increases, leaving wages unchanged. 
D)  the demand for labor increases, but since the supply curve of labor is perfectly elastic, the wage rate does not change. 
A)  the wage rate in the LED TV industry increases and the quantity demanded of workers increases. 
B)  the wage rate in the LED TV industry increases and the quantity supplied of workers increases. 
C)  the demand for labor increases and the supply of labor also increases, leaving wages unchanged. 
D)  the demand for labor increases, but since the supply curve of labor is perfectly elastic, the wage rate does not change.

Question 4

A firm's employment of labor outside the country in which the firm is located

Accepted Answer

A)  is outsourcing. 
B)  shifts the supply of labor in the original country. 
C)  is the marginal revenue product. 
D)  shifts the supply of labor in the other country. 
A)  is outsourcing. 
B)  shifts the supply of labor in the original country. 
C)  is the marginal revenue product. 
D)  shifts the supply of labor in the other country.

Question 5

If labor is 20 percent of total costs in industry A and 70 percent in industry B, then other things equal, we would expect the elasticity of demand for labor to be

Accepted Answer

A)  greater in industry A than in industry B. 
B)  greater in industry B than in industry A. 
C)  the same in both industries. 
D)  uncertain since no general relationship exists between cost shares and elasticities. 
A)  greater in industry A than in industry B. 
B)  greater in industry B than in industry A. 
C)  the same in both industries. 
D)  uncertain since no general relationship exists between cost shares and elasticities.

Question 6

When a firm is hiring an input such that the marginal revenue product of the input is equal to the marginal factor cost of the input, the firm

Accepted Answer

A)  should be expanding output. 
B)  is hiring too little of the input. 
C)  is maximizing economic profit. 
D)  is producing too much output. 
A)  should be expanding output. 
B)  is hiring too little of the input. 
C)  is maximizing economic profit. 
D)  is producing too much output.

Question 7

The additional revenue obtained by a firm when it hires an additional worker, holding other inputs constant, is

Accepted Answer

A)  the marginal physical product of labor. 
B)  the marginal revenue product of labor. 
C)  the marginal cost of labor. 
D)  equal to total revenue divided by the number of workers. 
A)  the marginal physical product of labor. 
B)  the marginal revenue product of labor. 
C)  the marginal cost of labor. 
D)  equal to total revenue divided by the number of workers.

Question 8

When increased demand raises the price of the product, the

Accepted Answer

A)  marginal revenue product will also increase. 
B)  marginal revenue product will fall. 
C)  marginal revenue product will remain unchanged. 
D)  sales will fall. 
A)  marginal revenue product will also increase. 
B)  marginal revenue product will fall. 
C)  marginal revenue product will remain unchanged. 
D)  sales will fall.

Question 9

"The market demand curve for labor is the horizontal summation of the labor demand curves of all firms." Do you agree or disagree? Why?

Accepted Answer

Disagree. A reduction in the wage rate c

Question 10

Suppose the market price of zinc doubles. Which of the following scenarios is most likely?

Accepted Answer

A)  The demand for zinc miners will increase, raising the market wage rate. 
B)  The demand for zinc miners will decrease, reducing the market wage rate. 
C)  The demand for zinc will increase, raising the market price further. 
D)  The demand for zinc miners will decrease, reducing the market price back to its original price. 
A)  The demand for zinc miners will increase, raising the market wage rate. 
B)  The demand for zinc miners will decrease, reducing the market wage rate. 
C)  The demand for zinc will increase, raising the market price further. 
D)  The demand for zinc miners will decrease, reducing the market price back to its original price.

Question 11

What can cause the demand curve for labor to shift? Explain.

Accepted Answer

The demand curve for labor is the margin

Question 12

The marginal revenue product of labor is

Accepted Answer

A)  the marginal physical product multiplied by marginal revenue. 
B)  the marginal revenue of output multiplied by the price of the input. 
C)  total sales divided by total labor employed. 
D)  total labor employed divided by total sales. 
A)  the marginal physical product multiplied by marginal revenue. 
B)  the marginal revenue of output multiplied by the price of the input. 
C)  total sales divided by total labor employed. 
D)  total labor employed divided by total sales.

Question 13

Profit-maximizing employment is the quantity of labor at which

Accepted Answer

A)  marginal revenue product is equal to marginal factor cost. 
B)  marginal revenue product is equal to product price. 
C)  marginal factor cost is equal to marginal revenue. 
D)  marginal factor product is equal to product price. 
A)  marginal revenue product is equal to marginal factor cost. 
B)  marginal revenue product is equal to product price. 
C)  marginal factor cost is equal to marginal revenue. 
D)  marginal factor product is equal to product price.

Question 14

The price elasticity of demand for labor will be smaller, the

Accepted Answer

A)  smaller is the price elasticity of demand for the final product. 
B)  easier it is to employ substitute inputs in production. 
C)  larger is the proportion of wage costs in the total cost of production. 
D)  longer is the time period under examination. 
A)  smaller is the price elasticity of demand for the final product. 
B)  easier it is to employ substitute inputs in production. 
C)  larger is the proportion of wage costs in the total cost of production. 
D)  longer is the time period under examination.

Question 15

-Refer to the above table. Suppose the firm hires 4 workers and the price of the good sold is $4. The marginal factor cost of labor must be

Accepted Answer

A)  $4. 
B)  $150. 
C)  $3080. 
D)  $600. 
A)  $4. 
B)  $150. 
C)  $3080. 
D)  $600.

Question 16

If the marginal revenue product of the last worker hired exceeds the marginal factor cost of the worker, the firm would be better served if it

Accepted Answer

A)  hires additional workers. 
B)  maintains its current level of workers already hired. 
C)  lays off the last worker hired. 
D)  None of the above is a good option for a profit-seeking firm. 
A)  hires additional workers. 
B)  maintains its current level of workers already hired. 
C)  lays off the last worker hired. 
D)  None of the above is a good option for a profit-seeking firm.

Question 17

The demand curve for labor will shift whenever

Accepted Answer

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

Question 18

When manufacturing an iPhone, parts must be soldered together. This work can be done by labor or by a robot (capital). More robots will be hired when the price of labor increases. This is known as

Accepted Answer

A)  the effect of changing labor productivity. 
B)  marginal revenue product. 
C)  the complementary effect. 
D)  the substitution effect. 
A)  the effect of changing labor productivity. 
B)  marginal revenue product. 
C)  the complementary effect. 
D)  the substitution effect.

Question 19

The market demand curve for labor

Accepted Answer

A)  slopes downward. 
B)  slopes upward. 
C)  is vertical at the existing supply of labor. 
D)  is horizontal at the going wage rate. 
A)  slopes downward. 
B)  slopes upward. 
C)  is vertical at the existing supply of labor. 
D)  is horizontal at the going wage rate.

Question 20

When MFC < MRP, a firm in a competitive market will

Accepted Answer

A)  stop hiring more workers. 
B)  hire more workers. 
C)  earn fewer profits. 
D)  layoff workers. 
A)  stop hiring more workers. 
B)  hire more workers. 
C)  earn fewer profits. 
D)  layoff workers.

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

The demand curve for labor slopes down because

All of the following shift an industry's labor supply curve EXCEPT changes in

The demand for LED TVs increases. As a result

A firm's employment of labor outside the country in which the firm is located

If labor is 20 percent of total costs in industry A and 70 percent in industry B, then other things equal, we would expect the elasticity of demand for labor to be

When a firm is hiring an input such that the marginal revenue product of the input is equal to the marginal factor cost of the input, the firm

The additional revenue obtained by a firm when it hires an additional worker, holding other inputs constant, is

When increased demand raises the price of the product, the

"The market demand curve for labor is the horizontal summation of the labor demand curves of all firms." Do you agree or disagree? Why?

Suppose the market price of zinc doubles. Which of the following scenarios is most likely?

What can cause the demand curve for labor to shift? Explain.

The marginal revenue product of labor is

Profit-maximizing employment is the quantity of labor at which

The price elasticity of demand for labor will be smaller, the

-Refer to the above table. Suppose the firm hires 4 workers and the price of the good sold is $4. The marginal factor cost of labor must be

If the marginal revenue product of the last worker hired exceeds the marginal factor cost of the worker, the firm would be better served if it

The demand curve for labor will shift whenever

When manufacturing an iPhone, parts must be soldered together. This work can be done by labor or by a robot (capital). More robots will be hired when the price of labor increases. This is known as

The market demand curve for labor

When MFC < MRP, a firm in a competitive market will

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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