Question 1

If capital and labor are gross complements in production,

Accepted Answer

A)  then the scale effect dominates. 
B)  then the substitution effect dominates. 
C)  then the scale and substitution effects are of equal magnitude. 
D)  then capital and labor must be used in a one to one ratio. 
E)  then capital and labor cannot be used at the same time. 
A)  then the scale effect dominates. 
B)  then the substitution effect dominates. 
C)  then the scale and substitution effects are of equal magnitude. 
D)  then capital and labor must be used in a one to one ratio. 
E)  then capital and labor cannot be used at the same time. A

Question 2

Which of the following increases the power of unions?

Accepted Answer

A)  Deregulation of an industry,removing a firm's monopoly power. 
B)  An increase in the tariff on foreign inputs. 
C)  An elastic demand curve. 
D)  An increase in the price elasticity of demand for the industry's product. 
E)  The firm not agreeing to a set number of union workers that it must employ (manning levels) 
A)  Deregulation of an industry,removing a firm's monopoly power. 
B)  An increase in the tariff on foreign inputs. 
C)  An elastic demand curve. 
D)  An increase in the price elasticity of demand for the industry's product. 
E)  The firm not agreeing to a set number of union workers that it must employ (manning levels) B

Question 3

Adjustment costs:

Accepted Answer

A)  are costs incurred by a firm when it has to advertise to hire more workers. 
B)  are costs incurred by a firm when it decides it needs to layoff workers. 
C)  result in less employment volatility. 
D)  result in a firm optimally choosing to reach the cost minimizing level of employment. 
E)  All of the above are true statements about adjustment costs. 
A)  are costs incurred by a firm when it has to advertise to hire more workers. 
B)  are costs incurred by a firm when it decides it needs to layoff workers. 
C)  result in less employment volatility. 
D)  result in a firm optimally choosing to reach the cost minimizing level of employment. 
E)  All of the above are true statements about adjustment costs. E

Question 4

A result of the Le Châtelier Brown principle is

Accepted Answer

A)  an increase in the price of capital has a larger effect in the short run than the long run. 
B)  an increase in the price of capital has a larger effect in the long run than the short run. 
C)  an increase in the price of labor has a larger effect in the short run than the long run. 
D)  an increase in the price of labor has a larger effect in the long run than the short run. 
E)  an increase in the price of labor has a large effect in the short run but no effect in the long run. 
A)  an increase in the price of capital has a larger effect in the short run than the long run. 
B)  an increase in the price of capital has a larger effect in the long run than the short run. 
C)  an increase in the price of labor has a larger effect in the short run than the long run. 
D)  an increase in the price of labor has a larger effect in the long run than the short run. 
E)  an increase in the price of labor has a large effect in the short run but no effect in the long run.

Question 5

What is the firm's long run optimal capital stock?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
E)  8 
A)  0 
B)  1 
C)  2 
D)  3 
E)  8

Question 6

Suppose a 2% increase in wages decreases the demand for labor by 1%.What is the own wage elasticity?

Accepted Answer

A)  - 0.5% 
B)  -1% 
C)  -1.5% 
D)  -2% 
E)  -3% 
A)  - 0.5% 
B)  -1% 
C)  -1.5% 
D)  -2% 
E)  -3%

Question 7

What is the firm's long run optimal employment level?

Accepted Answer

A)  0 workers 
B)  4 workers 
C)  5 workers 
D)  10 workers 
E)  20 workers 
A)  0 workers 
B)  4 workers 
C)  5 workers 
D)  10 workers 
E)  20 workers

Question 8

Suppose the substitution elasticity between capital and labor is -2.6%.What does this imply about the demand for labor?

Accepted Answer

A)  The long run demand for labor is relatively inelastic. 
B)  The long run demand for labor is relatively elastic. 
C)  The short run demand for labor is relatively inelastic. 
D)  The long run supply of labor is relatively inelastic. 
E)  The long run supply of labor is relatively elastic. 
A)  The long run demand for labor is relatively inelastic. 
B)  The long run demand for labor is relatively elastic. 
C)  The short run demand for labor is relatively inelastic. 
D)  The long run supply of labor is relatively inelastic. 
E)  The long run supply of labor is relatively elastic.

Question 9

What are the firm's profits?

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $4 
E)  More than $11 
A)  $1 
B)  $2 
C)  $3 
D)  $4 
E)  More than $11

Question 10

If it is costly for a firm to adjust its employment level rapidly,the firm faces

Accepted Answer

A)  a positive labor demand elasticity. 
B)  linear adjustment costs. 
C)  concave adjustment costs. 
D)  convex adjustment costs. 
E)  lumpy adjustment costs. 
A)  a positive labor demand elasticity. 
B)  linear adjustment costs. 
C)  concave adjustment costs. 
D)  convex adjustment costs. 
E)  lumpy adjustment costs.

Question 11

Suppose the current level inputs is 20 units of capital and 10 units of labor.What is the marginal rate of technical substitution (MRTS)?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
E)  5 
A)  1 
B)  2 
C)  3 
D)  4 
E)  5

Question 12

When the price of labor increases,

Accepted Answer

A)  a firm will increase the amount of capital used in the short run because it is cheaper. 
B)  a firm will increase the amount of capital used in the long run because it is cheaper. 
C)  a firm will decrease the amount of capital used in the long run because it is more costly. 
D)  a firm will not change the amount of capital used in the long run because an increase in the price of labor does not affect capital. 
E)  it is ambiguous how the firm will adjust the level of capital in the long run. 
A)  a firm will increase the amount of capital used in the short run because it is cheaper. 
B)  a firm will increase the amount of capital used in the long run because it is cheaper. 
C)  a firm will decrease the amount of capital used in the long run because it is more costly. 
D)  a firm will not change the amount of capital used in the long run because an increase in the price of labor does not affect capital. 
E)  it is ambiguous how the firm will adjust the level of capital in the long run.

Question 13

What are the firm's total costs?

Accepted Answer

A)  $30 
B)  $50 
C)  $60 
D)  $80 
E)  $90 
A)  $30 
B)  $50 
C)  $60 
D)  $80 
E)  $90

Question 14

Suppose the own wage elasticity of labor is 0.75%.What does this imply?

Accepted Answer

A)  The supply of labor is elastic. 
B)  The supply of labor is inelastic. 
C)  The demand for labor is elastic. 
D)  The demand for labor is inelastic. 
E)  The demand for labor is unitary elastic. 
A)  The supply of labor is elastic. 
B)  The supply of labor is inelastic. 
C)  The demand for labor is elastic. 
D)  The demand for labor is inelastic. 
E)  The demand for labor is unitary elastic.

Question 15

Suppose the own wage elasticity of labor is 0.75%.What does this imply?

Accepted Answer

A)  The supply of labor is elastic. 
B)  The supply of labor is inelastic. 
C)  The demand for labor is elastic. 
D)  The demand for labor is inelastic. 
E)  The demand for labor is unitary elastic. 
A)  The supply of labor is elastic. 
B)  The supply of labor is inelastic. 
C)  The demand for labor is elastic. 
D)  The demand for labor is inelastic. 
E)  The demand for labor is unitary elastic.

Question 16

In the long run,when the price of labor increases,

Accepted Answer

A)  the demand for labor will decrease and demand for capital will decrease. 
B)  the demand for labor will decrease and demand for capital will increase. 
C)  the demand for labor will decrease and demand for capital will either decrease or increase. 
D)  the demand for labor will increase and demand for capital will increase. 
E)  the demand for labor will increase and demand for capital will either decrease or increase. 
A)  the demand for labor will decrease and demand for capital will decrease. 
B)  the demand for labor will decrease and demand for capital will increase. 
C)  the demand for labor will decrease and demand for capital will either decrease or increase. 
D)  the demand for labor will increase and demand for capital will increase. 
E)  the demand for labor will increase and demand for capital will either decrease or increase.

Question 17

Which of the following is a condition that will result in the demand for labor being inelastic?

Accepted Answer

A)  The task can be performed easily using capital or labor. 
B)  The demand for the good is elastic. 
C)  Capital is a small share of the firm's total costs. 
D)  Labor is a small share of the firm's total costs. 
E)  The supply of capital is inelastic. 
A)  The task can be performed easily using capital or labor. 
B)  The demand for the good is elastic. 
C)  Capital is a small share of the firm's total costs. 
D)  Labor is a small share of the firm's total costs. 
E)  The supply of capital is inelastic.

Question 18

Suppose capital and labor are gross complements.If the supply of capital is relatively inelastic,then the labor demand elasticity will be

Accepted Answer

A)  high. 
B)  low. 
C)  zero. 
D)  one. 
E)  positive. 
A)  high. 
B)  low. 
C)  zero. 
D)  one. 
E)  positive.

Question 19

If capital and labor are gross substitutes in production,

Accepted Answer

A)  then the scale effect dominates. 
B)  then the substitution effect dominates. 
C)  then the scale and substitution effects are of equal magnitude. 
D)  then capital and labor must be used in a one to one ratio. 
E)  then capital and labor cannot be used at the same time 
A)  then the scale effect dominates. 
B)  then the substitution effect dominates. 
C)  then the scale and substitution effects are of equal magnitude. 
D)  then capital and labor must be used in a one to one ratio. 
E)  then capital and labor cannot be used at the same time

Question 20

The wage in the market is $500,and the firing cost of each worker is $300.What is the cost to the firm of replacing one worker with another?

Accepted Answer

A)  $200 
B)  $300 
C)  $500 
D)  $800 
E)  $1100 
A)  $200 
B)  $300 
C)  $500 
D)  $800 
E)  $1100

If capital and labor are gross complements in production,

Which of the following increases the power of unions?

Adjustment costs:

A result of the Le Châtelier Brown principle is

What is the firm's long run optimal capital stock?

Suppose a 2% increase in wages decreases the demand for labor by 1%.What is the own wage elasticity?

What is the firm's long run optimal employment level?

Suppose the substitution elasticity between capital and labor is -2.6%.What does this imply about the demand for labor?

What are the firm's profits?

If it is costly for a firm to adjust its employment level rapidly,the firm faces

Suppose the current level inputs is 20 units of capital and 10 units of labor.What is the marginal rate of technical substitution (MRTS)?

When the price of labor increases,

What are the firm's total costs?

Suppose the own wage elasticity of labor is 0.75%.What does this imply?

Suppose the own wage elasticity of labor is 0.75%.What does this imply?

In the long run,when the price of labor increases,

Which of the following is a condition that will result in the demand for labor being inelastic?

Suppose capital and labor are gross complements.If the supply of capital is relatively inelastic,then the labor demand elasticity will be

If capital and labor are gross substitutes in production,

The wage in the market is $500,and the firing cost of each worker is $300.What is the cost to the firm of replacing one worker with another?

Introduction

The Uslabor Market

The Short Run Demand for Labor

The Supply of Labor

Human Capital

On-The-Job Training

Competitive Equilibrium

Policy Application: the Minimum Wage

Policy Application: the War on Poverty

Death and Injury in the Usworkplace-A Hedonic Analysis

Discrimination I: Theory

Discrimination Ii: Evidence and Policy

The Hiring Process

Incentives

Tasks,technologies,and Organizational Design

Careers and the Employment Relation

Filters

Exam 26: The Long Run Demand for Labor and Adjustment Costs

If capital and labor are gross complements in production,

Which of the following increases the power of unions?

Adjustment costs:

A result of the Le Châtelier Brown principle is

What is the firm's long run optimal capital stock?

Suppose a 2% increase in wages decreases the demand for labor by 1%.What is the own wage elasticity?

What is the firm's long run optimal employment level?

Suppose the substitution elasticity between capital and labor is -2.6%.What does this imply about the demand for labor?

What are the firm's profits?

If it is costly for a firm to adjust its employment level rapidly,the firm faces

Suppose the current level inputs is 20 units of capital and 10 units of labor.What is the marginal rate of technical substitution (MRTS)?

When the price of labor increases,

What are the firm's total costs?

Suppose the own wage elasticity of labor is 0.75%.What does this imply?

Suppose the own wage elasticity of labor is 0.75%.What does this imply?

In the long run,when the price of labor increases,

Which of the following is a condition that will result in the demand for labor being inelastic?

Suppose capital and labor are gross complements.If the supply of capital is relatively inelastic,then the labor demand elasticity will be

If capital and labor are gross substitutes in production,

The wage in the market is $500,and the firing cost of each worker is $300.What is the cost to the firm of replacing one worker with another?

Introduction

The Uslabor Market

The Short Run Demand for Labor

The Supply of Labor

Human Capital

On-The-Job Training

Competitive Equilibrium

Policy Application: the Minimum Wage

Policy Application: the War on Poverty

Death and Injury in the Usworkplace-A Hedonic Analysis

Discrimination I: Theory

Discrimination Ii: Evidence and Policy

The Hiring Process

Incentives

Tasks,technologies,and Organizational Design

Careers and the Employment Relation

Filters