Question 1

As a firm buys more capital and less labor, the marginal physical product of capital __________ and the marginal physical product of labor __________, assuming the law of diminishing marginal returns has set in for each factor.

Accepted Answer

A) decreases; increases 
B) increases; increases 
C) decreases; decreases 
D) increases; remains constant 
E) remains constant; decreases

Question 2

Suppose that all the necessary conditions exist for the realization of equal wage rates in every labor market, but that currently the wage rate in market X is higher than the wage rate in market Y. We expect that eventually the wage rate

Accepted Answer

A) in market X will increase more. 
B) in market Y will decrease. 
C) in market X will decrease and the wage rate in market Y will increase. 
D) will not change in either market, because something out of the ordinary must have caused the wage rates in the two markets not to be equal. 
E) a and b

Question 3

For a given labor market, an increase in the MPP of labor will shift the demand curve for labor rightward.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following can bring about an increase in the demand for labor?

Accepted Answer

A) an increase in the demand for the product that labor produces 
B) an increase in the marginal physical product of labor 
C) a decrease in the price of labor (wage rate) 
D) a and b 
E) a, b, and c

Question 5

Marginal factor cost (MFC) is

Accepted Answer

A) the additional cost generated by producing an additional unit of output. 
B) the additional revenue generated by employing an additional factor unit. 
C) the additional cost generated by employing an additional factor unit. 
D) total cost from the production of a product divided by the total number of factor units used.

Question 6

A decrease in the wage rate

Accepted Answer

A) shifts the supply curve of labor rightward. 
B) increases the quantity supplied of labor. 
C) shifts the supply curve of labor leftward. 
D) decreases the quantity supplied of labor.

Question 7

Suppose there are two labor markets, A and B, and labor is homogeneous between markets. The wage rate in labor market A falls relative to the wage rate in labor market B. What happens in labor market B?

Accepted Answer

A) The supply curve of labor shifts leftward. 
B) The supply curve of labor shifts rightward. 
C) The demand curve for labor shifts leftward. 
D) b and c 
E) none of the above

Question 8

Employers use screening mechanisms, such as GPA, because they lack complete information about job applicants.

Accepted Answer

A) True 
 B)False

Question 9

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm) will maximize its profits by hiring factors up to the point at which

Accepted Answer

A) MRP > MFC. 
B) VMP > MFC. 
C) MRP = MFC. 
D) VMP = MFC. 
E) c and d

Question 10

Which of the following statements is false?

Accepted Answer

A) The value marginal product is a measure of the value that each factor unit adds to the firm's product. 
B) For a monopolist, value marginal product equals marginal revenue product. 
C) A change in the price of the product labor produces or a change in the marginal physical product of labor (reflect in a shift in the MPP curve) will shift the demand curve for labor. 
D) For a perfectly competitive firm, value marginal product equals marginal revenue product.

Question 11

Which of the following statements is true?

Accepted Answer

A) Employers are not concerned with determining a potential employee's productivity because they know that with experience the employee's output will increase. 
B) Employers are not concerned with determining a potential employee's productivity because they realize that they cannot accurately determine it beforehand. 
C) Employers are not concerned with determining a potential employee's productivity because they know that they can train the employee after he's hired. 
D) Employers are concerned with determining a potential employee's productivity due to the high costs of training new employees. 
E) a, b, and c

Question 12

Situation 26-2
A company is trying to decide whether it should produce good Y in the U.S. or in Mexico. Suppose a U.S. worker earns $12 per hour and a worker in Mexico earns $4 per hour. Also suppose that the marginal physical product (MPP) of the U.S. worker is 10 units of good Y and the MPP of the Mexican worker is 5 units of good Y.
-Refer to Situation 26-2. The output produced per $1 of cost in the U.S. is

Accepted Answer

A) 120 units of good Y. 
B) 0.83 units of good Y. 
C) 22 units of good Y. 
D) 2 units of good Y.

Question 13

"Screening" is the process used by

Accepted Answer

A) employers to increase the probability of choosing good employees based on certain criteria. 
B) tax evaluators to make sure that business firms pay the amount of taxes they owe. 
C) employees to try to get their wages up. 
D) employers to spy on their competitors. 
E) none of the above

Question 14

Exhibit 26-4
​
 
-Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

Accepted Answer

A) the second worker. 
B) the fourth worker. 
C) labor up to the point where MRP equals the market price of the input. 
D) labor up to the point where MRP = MFC. 
E) both c and d

Question 15

Consider two labor markets, A and B. Wages in labor market A rise. This could be due to

Accepted Answer

A) decreasing wages in labor market B. 
B) an increase in the negative nonpecuniary aspects of working in labor market A. 
C) an increase in the number of people who can do the work that is done in labor market A. 
D) a decrease in the demand for the product that employees in labor market A produce. 
E) a and d

Question 16

If MPPX/PX > MPPY/PY, the firm should buy

Accepted Answer

A) more of factor X and less of factor Y. 
B) less of factor X and more of factor Y. 
C) more of factor Y and the same amount of factor X. 
D) less of factor X and factor Y. 
E) more of factor X and factor Y.

Question 17

If the demand for a product that labor produces is highly elastic, a small percentage increase in price will __________ quantity demanded of the product by a relatively __________ percentage, which, in turn, will __________ the demand for the labor that produces the product.

Accepted Answer

A) increase; small; slightly reduce 
B) decrease; small; greatly increase 
C) decrease; large; greatly increase 
D) decrease; large; greatly reduce 
E) increase; large; greatly reduce

Question 18

Exhibit 26-5
  ​
-Refer to Exhibit 26-5. The data illustrate that the firm in question is a

Accepted Answer

A) price searcher (monopolist, oligopolist, etc.). 
B) price taker (perfectly competitive firm). 
C) factor price searcher. 
D) factor price taker.

Question 19

Exhibit 26-4
​
 
-Refer to Exhibit 26-4. The marginal factor cost of labor

Accepted Answer

A) is $14. 
B) is $7. 
C) is $3. 
D) is $10. 
E) depends on the amount of labor employed.

Question 20

Exhibit 26-1
  ​
-Refer to Exhibit 26-1. For this firm, the demand curve for factor X is

Accepted Answer

A) downward-sloping. 
B) upward-sloping. 
C) vertical. 
D) horizontal. 
E) There is not enough information given to determine the shape of the factor X demand curve.

Exam 26: Factor Markets With Emphasis on the Labor Market

As a firm buys more capital and less labor, the marginal physical product of capital and the marginal physical product of labor , assuming the law of diminishing marginal returns has set in for each factor.

Suppose that all the necessary conditions exist for the realization of equal wage rates in every labor market, but that currently the wage rate in market X is higher than the wage rate in market Y. We expect that eventually the wage rate

For a given labor market, an increase in the MPP of labor will shift the demand curve for labor rightward.

Which of the following can bring about an increase in the demand for labor?

Marginal factor cost (MFC) is

A decrease in the wage rate

Suppose there are two labor markets, A and B, and labor is homogeneous between markets. The wage rate in labor market A falls relative to the wage rate in labor market B. What happens in labor market B?

Employers use screening mechanisms, such as GPA, because they lack complete information about job applicants.

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm) will maximize its profits by hiring factors up to the point at which

Which of the following statements is false?

Which of the following statements is true?

"Screening" is the process used by

Exhibit 26-4 -Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

Consider two labor markets, A and B. Wages in labor market A rise. This could be due to

If MPP_X/P_X > MPP_Y/P_Y, the firm should buy

If the demand for a product that labor produces is highly elastic, a small percentage increase in price will quantity demanded of the product by a relatively percentage, which, in turn, will __ the demand for the labor that produces the product.

Exhibit 26-5 -Refer to Exhibit 26-5. The data illustrate that the firm in question is a

Exhibit 26-4 -Refer to Exhibit 26-4. The marginal factor cost of labor

Exhibit 26-1 -Refer to Exhibit 26-1. For this firm, the demand curve for factor X is

Exam 26: Factor Markets With Emphasis on the Labor Market

As a firm buys more capital and less labor, the marginal physical product of capital __________ and the marginal physical product of labor __________, assuming the law of diminishing marginal returns has set in for each factor.

Suppose that all the necessary conditions exist for the realization of equal wage rates in every labor market, but that currently the wage rate in market X is higher than the wage rate in market Y. We expect that eventually the wage rate

For a given labor market, an increase in the MPP of labor will shift the demand curve for labor rightward.

Which of the following can bring about an increase in the demand for labor?

Marginal factor cost (MFC) is

A decrease in the wage rate

Suppose there are two labor markets, A and B, and labor is homogeneous between markets. The wage rate in labor market A falls relative to the wage rate in labor market B. What happens in labor market B?

Employers use screening mechanisms, such as GPA, because they lack complete information about job applicants.

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm) will maximize its profits by hiring factors up to the point at which

Which of the following statements is false?

Which of the following statements is true?

"Screening" is the process used by

Exhibit 26-4 ​ -Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

Consider two labor markets, A and B. Wages in labor market A rise. This could be due to

If MPPX/PX > MPPY/PY, the firm should buy

If the demand for a product that labor produces is highly elastic, a small percentage increase in price will __________ quantity demanded of the product by a relatively __________ percentage, which, in turn, will __________ the demand for the labor that produces the product.

Exhibit 26-5 ​ -Refer to Exhibit 26-5. The data illustrate that the firm in question is a

Exhibit 26-4 ​ -Refer to Exhibit 26-4. The marginal factor cost of labor

Exhibit 26-1 ​ -Refer to Exhibit 26-1. For this firm, the demand curve for factor X is

As a firm buys more capital and less labor, the marginal physical product of capital and the marginal physical product of labor , assuming the law of diminishing marginal returns has set in for each factor.

Exhibit 26-4 -Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

If MPP_X/P_X > MPP_Y/P_Y, the firm should buy

If the demand for a product that labor produces is highly elastic, a small percentage increase in price will quantity demanded of the product by a relatively percentage, which, in turn, will __ the demand for the labor that produces the product.

Exhibit 26-5 -Refer to Exhibit 26-5. The data illustrate that the firm in question is a

Exhibit 26-4 -Refer to Exhibit 26-4. The marginal factor cost of labor

Exhibit 26-1 -Refer to Exhibit 26-1. For this firm, the demand curve for factor X is