Question 1

The demand curve for labor of a monopolist

Accepted Answer

A)  is horizontal even though the demand curve for labor for a competitive firm is downward sloping.
B)  slopes down for the same reason as the demand curve for labor of a perfectly competitive firm.
C)  slopes down because of the law of diminishing marginal product and because the monopolist must lower prices to sell additional units of the good.
D)  slopes upward because monopolists use more capital than do perfectly competitive firms.E) B) and C)
F) A) and D)

Question 2

We would expect unions to have a more difficult time negotiating higher wages for their members when

Accepted Answer

A)  labor represents a small portion of total costs.
B)  the product produced makes up a small portion of families' budgets.
C)  the product produced has several close substitutes.
D)  there are not good substitutes for labor in the production process.E) A) and D)
F) B) and C)

Question 3

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.E) B) and D)
F) B) and C)

Question 4

Which of the following would cause the price elasticity of demand for a variable input to be greater?

Accepted Answer

A)  The smaller the price elasticity of demand for the final product
B)  The longer the time period being considered
C)  The smaller the proportion of total costs accounted for by the variable input
D)  The harder it is for a variable input to be substituted for by other inputsE) A) and D)
F) A) and C)

Question 5

Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate and the equilibrium quantity of labor both increased. What happened in the market for pizza makers?

Accepted Answer

A)  The demand for pizza makers increased.
B)  The demand for pizza makers decreased.
C)  The supply for pizza makers increased.
D)  The supply for pizza makers decreased.E) None of the above
F) A) and B)

Question 6

Holding other things constant, an increase in the use of capital in production would

Accepted Answer

A)  increase the marginal productivity of labor.
B)  decrease, but not proportionately, the marginal productivity of labor.
C)  not change the marginal productivity of labor.
D)  decrease proportionately the marginal productivity of labor.E) A) and D)
F) B) and D)

Question 7

Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 6th laborer?

Accepted Answer

A)  11 cabinets
B)  7 cabinets
C)  36 cabinets
D)  9 cabinetsE) B) and D)
F) B) and C)

Question 8

A firm that wants to maximize profits should hire each input to the point where

Accepted Answer

A)  its marginal revenue product divided by the price of the input equals one.
B)  its marginal revenue product divided by its marginal physical product equals the wage.
C)  its marginal revenue product divided by the product price equals one.
D)  its marginal physical product divided by the price of the input equals the product price.E) C) and D)
F) None of the above

Question 9

Other things being equal, the behavior of a monopolist differs from that of a competitive industry in that

Accepted Answer

A)  the monopolist does not attempt to maximize economic profit.
B)  the monopolist hires more labor.
C)  the monopolist restricts output and hires less labor.
D)  the monopolist must consider fixed costs in deciding the optimal level of output to produce in the short run.E) None of the above
F) A) and B)

Question 10

For a perfectly competitive firm, the value of the marginal product of labor falls as more workers are hired because of the diminishing

Accepted Answer

A)  output price.
B)  marginal physical product of labor.
C)  price of labor.
D)  marginal cost of production.E) All of the above
F) B) and C)

Question 11

The supply of labor to an industry will decrease when

Accepted Answer

A)  the price of leisure falls.
B)  the income effect dominates the substitution effect.
C)  the demand for labor falls in the industry.
D)  workers receive better employment opportunities in other industries.E) A) and B)
F) A) and C)

Question 12

-In the above table, what is the marginal revenue product of the 4th worker?

Accepted Answer

A)  $92
B)  $70
C)  $40
D)  $8E) B) and D)
F) A) and D)

Question 13

An increase in the supply of labor generates

Accepted Answer

A)  increased unemployment.
B)  lower wages.
C)  an offsetting increase in the demand for labor.
D)  a decrease in the quantity demanded of labor.E) A) and B)
F) All of the above

Question 14

The wage rate found by the intersection of the market demand and supply curves for labor then determines the

Accepted Answer

A)  firm's demand curve for labor.
B)  firm's supply curve for labor.
C)  labor's supply curve of labor.
D)  labor's demand curve for jobs.E) None of the above
F) All of the above

Question 15

When an input represents a small proportion of a firm's total costs, then

Accepted Answer

A)  demand for the input will tend to be less elastic.
B)  the input demand will vary significantly with a change in input price.
C)  the usage of the input cannot be varied in the production function.
D)  output demand will be highly elastic.E) B) and D)
F) A) and B)

Question 16

-Refer to the above table. Suppose the marginal revenue product of the 5th worker is $800. This implies that

Accepted Answer

A)  the price of the good is $5.33.
B)  the price of the good is $8.
C)  the price of the good is $70.
D)  we cannot tell what the price of the good is without more information.E) B) and D)
F) B) and C)

Question 17

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.E) A) and B)
F) C) and D)

Question 18

At a perfectly competitive firm, all of the following is true of the MRP curve EXCEPT

Accepted Answer

A)  the MRP curve is the derived supply of labor.
B)  the MRP curve shifts leftward when labor productivity falls.
C)  the MRP curve shifts rightward when the product price rises.
D)  the MRP curve shifts leftward when the demand for the final product falls.E) A) and C)
F) A) and D)

Question 19

Which of the following represents the general rule of hiring for a firm?

Accepted Answer

A)  TPP = TFC
B)  APP = W
C)  MC = MR
D)  MRP = MFCE) None of the above
F) B) and C)

Question 20

The marginal revenue product represents

Accepted Answer

A)  the marginal physical product of labor divided by the price of the good produced.
B)  the worker's contribution to the firm's total revenues.
C)  the worker's contribution to the firm's output.
D)  the value of each additional unit of output.E) B) and D)
F) A) and B)

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

A firm that wants to maximize profits should hire each input to the point where

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The demand curve for labor of a monopolist

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Which of the following represents the general rule of hiring for a firm?

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An increase in the supply of labor generates

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The supply of labor to an industry will decrease when

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For a perfectly competitive firm, the value of the marginal product of labor falls as more workers are hired because of the diminishing

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-In the above table, what is the marginal revenue product of the 4th worker?

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The wage rate found by the intersection of the market demand and supply curves for labor then determines the

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-Refer to the above table. Suppose the marginal revenue product of the 5th worker is $800. This implies that

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Which of the following would cause the price elasticity of demand for a variable input to be greater?

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The marginal revenue product represents

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When an input represents a small proportion of a firm's total costs, then

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We would expect unions to have a more difficult time negotiating higher wages for their members when

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Other things being equal, the behavior of a monopolist differs from that of a competitive industry in that

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At a perfectly competitive firm, all of the following is true of the MRP curve EXCEPT

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Holding other things constant, an increase in the use of capital in production would

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Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 6th laborer?

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

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Profit-maximizing employment is the quantity of labor at which

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Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate and the equilibrium quantity of labor both increased. What happened in the market for pizza makers?

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