Question 1

As firms hire additional units of labor, eventually the marginal revenue product will always increase.

Accepted Answer

A) True 
 B)False

Question 2

The marginal revenue product of labor curve will always shift to the left if

Accepted Answer

A)  the wage rate falls. 
B)  product demand decreases and product price decreases. 
C)  product demand increases and product price increases. 
D)  the price of capital falls.

Question 3

A firm is currently hiring capital and labor so that MPL/PL > MPK/PK. If the firm wishes to maximize profits it should hire

Accepted Answer

A)  less labor and less capital. 
B)  more capital and more labor. 
C)  more labor and less capital. 
D)  less labor and more capital.

Question 4

An increase in the productivity of a factor of production will

Accepted Answer

A)  shift its marginal revenue product curve to the right. 
B)  shift its marginal revenue product curve to the left. 
C)  cause a firm to move down the marginal revenue product curve. 
D)  cause a firm to move up the marginal revenue product curve.

Question 5

Refer to the data provided in Table 10.3 below to answer the following question(s).
Table 10.3 
-Refer to Table 10.3. Diminishing returns to labor start with the ________ worker.

Accepted Answer

A)  second 
B)  third 
C)  fourth 
D)  fifth

Question 6

A firm competing in a perfectly competitive labor market desires to maximize

Accepted Answer

A)  marginal profit, not total profit. 
B)  total profit, not marginal profit. 
C)  marginal profit, not average profit. 
D)  average profit, not marginal profit.

Question 7

Where L represents labor and X represents output, MPL x PX is the value of labor's marginal product while the wage rate is the

Accepted Answer

A)  value of labor's marginal revenue. 
B)  cost of a marginal unit of labor. 
C)  marginal cost of a unit of output. 
D)  marginal revenue of a unit of output.

Question 8

Refer to the data provided in Table 10.3 below to answer the following question(s).
Table 10.3 
-Refer to Table 10.3. The most firms would be willing to pay per worker and hire three total workers is

Accepted Answer

A)  $360. 
B)  $600. 
C)  $800. 
D)  $1,000.

Question 9

The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate if

Accepted Answer

A)  the demand for labor decreases. 
B)  the demand for labor increases. 
C)  the supply of labor decreases. 
D)  the supply of labor increases.

Question 10

If the marginal product of a worker for a hearing aid manufacturer is 6 hearing aids, and the price of a hearing aid is $300, the firmʹs marginal revenue product is

Accepted Answer

A)  $50. 
B)  $300. 
C)  $1,800. 
D)  $18,000.

Question 11

Refer to the information provided in Figure 10.1 below to answer the question(s) that follow.  Figure 10.1
-Refer to Figure 10.1. This firm is currently hiring 15 workers and paying a wage of $10. This firm should

Accepted Answer

A)  do nothing because it is maximizing profits. 
B)  reduce employment to 15 workers to increase profits. 
C)  reduce employment to 14 workers to increase profits. 
D)  increase employment to 17 workers to increase profits.

Question 12

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 10 bushels. What would you advise this farmer to do?

Accepted Answer

A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is less than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal.

Question 13

ʺDemand determinedʺ means that price is set by buyers' demand and a fixed supply.

Accepted Answer

A) True 
 B)False

Question 14

The return to any factor of production that is in ________ is pure rent.

Accepted Answer

A)  variable supply 
B)  fixed supply 
C)  fixed demand 
D)  variable demand

Question 15

A decrease in the productivity of a factor of production will

Accepted Answer

A)  shift its marginal revenue product curve to the right. 
B)  shift its marginal revenue product curve to the left. 
C)  cause a firm to move down the marginal revenue product curve. 
D)  cause a firm to move up the marginal revenue product curve.

Question 16

Related to the Economics in Practice on page 214: According to the Economics in Practice, firms where managers had ________ extensive training became ________ productive than firms where managers had no training.

Accepted Answer

A)  less; no less 
B)  less; more 
C)  more; more 
D)  more; no more

Question 17

Assuming that labor is the only variable input, if society values a good ________ it costs firms to hire the workers to produce that good, the good ________ be produced.

Accepted Answer

A)  equal to what; will not 
B)  less than; will 
C)  more than; will not 
D)  less than; will not

Question 18

The return to any factor of production that is in fixed supply is

Accepted Answer

A)  pure profit. 
B)  pure rent. 
C)  producer surplus. 
D)  factor surplus.

Question 19

The curve that indicates how many workers a firm will hire at different wages is the factor's

Accepted Answer

A)  supply curve. 
B)  marginal cost curve. 
C)  marginal revenue product curve. 
D)  marginal product curve.

Question 20

Refer to the data provided in Table 10.1 below to answer the following question(s).
Table 10.1 $$\begin{array}{l}
\text { Total Labor Units } \quad \text { Total Product } \quad \text { Marginal Product of Price per }\
\begin{array} { c c c c } 
\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \
\hline 0 & 0 & - & - \
1 & 20 & 20 & \$ 5 \
2 & 50 & 30 & 5 \
3 & 75 & 25 & 5 \
4 & 95 & 20 & 5 \
5 & 110 & 15 & 5
\end{array}
\end{array}$$
-Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is maximizing profits if he will hire ________ employee(s).

Accepted Answer

A)  one 
B)  two 
C)  four 
D)  five

Exam 10: Input Demand: the Labor and Land Markets

As firms hire additional units of labor, eventually the marginal revenue product will always increase.

The marginal revenue product of labor curve will always shift to the left if

A firm is currently hiring capital and labor so that MP_L/P_L > MP_K/P_K. If the firm wishes to maximize profits it should hire

An increase in the productivity of a factor of production will

Refer to the data provided in Table 10.3 below to answer the following question(s) . Table 10.3 -Refer to Table 10.3. Diminishing returns to labor start with the ________ worker.

A firm competing in a perfectly competitive labor market desires to maximize

Where L represents labor and X represents output, MP_L x P_X is the value of labor's marginal product while the wage rate is the

Refer to the data provided in Table 10.3 below to answer the following question(s) . Table 10.3 -Refer to Table 10.3. The most firms would be willing to pay per worker and hire three total workers is