Question 1

When the price of a product decreases, the marginal revenue product curve in a perfectly competitive market

Accepted Answer

A)  does not change.
B)  becomes flatter.
C)  shifts to the right.
D)  shifts to the left.E) C) and D)
F) B) and C)

Question 2

Suppose the market for autoworkers is initially in equilibrium, but then suppose the automakers improve working conditions at the plants. What happens in the market for autoworkers?

Accepted Answer

A)  The equilibrium wage rate will increase and the equilibrium quantity of labor will decrease.
B)  The equilibrium wage rate and the equilibrium quantity of labor will both increase.
C)  The equilibrium wage rate and the equilibrium quantity of labor will both decrease.
D)  The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase.E) A) and C)
F) All of the above

Question 3

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

Accepted Answer

A)  a monopolist has to pay higher wages in order to attract additional workers.
B)  the monopolist substitutes more capital for labor when compared to a competitive industry.
C)  the monopolist producer has to deal with unions and face higher wages than do competitive industries.
D)  the monopolist produces less output than a competitive industry.E) A) and D)
F) A) and C)

Question 4

Suppose a U.S. computer company outsources its technical-support services to India. This will cause

Accepted Answer

A)  the demand for labor in the United States to fall, lowering U.S. wage rates, and the demand for labor in India to increase, increasing Indian wage rates.
B)  the demand for labor in the United States to increase, lowering U.S. wage rates, and the demand for labor in India to fall, increasing Indian wage rates.
C)  the demand for labor in the United States to fall, lowering U.S. wage rates, and the demand for labor in India to fall, decreasing Indian wage rates.
D)  the demand for labor in the United States to increase, increasing U.S. wage rates, and the demand for labor in India to fall, decreasing Indian wage rates.E) A) and B)
F) A) and C)

Question 5

The monopolist's input demand curve is equal to its

Accepted Answer

A)  variable cost curve.
B)  marginal cost curve.
C)  average cost curve.
D)  marginal revenue product curve.E) A) and B)
F) A) and C)

Question 6

As more workers are hired, the marginal physical product of labor eventually declines because

Accepted Answer

A)  less efficient workers are hired as the number of workers increases.
B)  workers do not work well together when the number of workers increases.
C)  the amount of capital each worker has to work with declines as the number of workers increases.
D)  of diseconomies of scale.E) B) and C)
F) None of the above

Question 7

The MRP of labor will shift to the left if

Accepted Answer

A)  labor productivity increases.
B)  labor productivity decreases.
C)  wages increase.
D)  wages decrease.E) C) and D)
F) B) and C)

Question 8

Since the demand for labor depends upon the demand for the final product, we say that labor is

Accepted Answer

A)  a derived demand.
B)  an "inverse" demand.
C)  a positive demand.
D)  a reverse demand.E) None of the above
F) C) and D)

Question 9

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

Accepted Answer

A)  marginal revenue product of labor.
B)  marginal factor cost of labor.
C)  price of the extra output produced.
D)  average physical product of labor.E) A) and B)
F) All of the above

Question 10

When the price of labor increases, the substitution effect will ________ the quantity of labor demanded and the output effect will ________ it.

Accepted Answer

A)  increase; increase
B)  increase; decrease
C)  decrease; increase
D)  decrease; decreaseE) A) and B)
F) A) and C)

Question 11

In a perfectly competitive labor market, the least-cost combination rule for resource use

Accepted Answer

A)  requires that resources be used in combinations such that marginal products are equal.
B)  requires that the marginal physical product per dollar spent for each resource is equalized.
C)  assures the firm an economic profit.
D)  assures the firm a normal profit.E) A) and B)
F) A) and C)

Question 12

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

Question 13

When market wages increase in a perfectly competitive market, then

Accepted Answer

A)  the marginal factor cost increases.
B)  the marginal product increases.
C)  the marginal factor cost decreases.
D)  the marginal product decreases.E) A) and D)
F) None of the above

Question 14

If workers in an industry become less productive, we would expect the

Accepted Answer

A)  supply of workers to increase.
B)  supply of workers to decrease.
C)  demand for workers to decrease.
D)  demand for workers to increase.E) B) and C)
F) A) and B)

Question 15

Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajax do?

Accepted Answer

A)  Leave the level of production unchanged.
B)  Increase the amount produced.
C)  Reduce the amount produced.
D)  Collect more information before making a decision.E) None of the above
F) A) and C)

Question 16

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 11th worker?

Accepted Answer

A)  $1.50
B)  $13.64
C)  $150
D)  $900E) None of the above
F) All of the above

Question 17

If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should

Accepted Answer

A)  increase its use of labor and sell employ less capital.
B)  employ more capital.
C)  increase its use of both labor and capital.
D)  maintain its current factor utilization pattern.E) A) and B)
F) All of the above

Question 18

A firm that maximizes profits also

Accepted Answer

A)  is inefficient.
B)  cuts corners in production processes so that its products are made too cheaply.
C)  uses the least-cost combination of resources.
D)  pays input prices lower than other firms do.E) B) and D)
F) A) and D)

Question 19

If we assume competitive labor markets, the supply curve of labor when the firm is a monopoly is

Accepted Answer

A)  upward sloping.
B)  vertical.
C)  horizontal.
D)  downward sloping.E) C) and D)
F) B) and C)

Question 20

-Refer to the above table. The marginal factor cost of labor is $200. To get the firm to hire 8 workers, the

Accepted Answer

A)  firm must be able to reduce wages below the marginal factor cost.
B)  price of the good must be $8.
C)  eighth worker must be at least as productive as the seventh worker was.
D)  wage rate must be a fraction of the marginal factor cost of labor.E) C) and D)
F) All of the above

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

Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajax do?

Correct Answer
verified

Suppose a U.S. computer company outsources its technical-support services to India. This will cause

Correct Answer
verified

The monopolist's input demand curve is equal to its

Correct Answer
verified

When the price of labor increases, the substitution effect will the quantity of labor demanded and the output effect will it.

Correct Answer
verified

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

Correct Answer
verified

Correct Answer
verified

When market wages increase in a perfectly competitive market, then

Correct Answer
verified

Since the demand for labor depends upon the demand for the final product, we say that labor is

Correct Answer
verified

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

Correct Answer
verified

A firm that maximizes profits also

Correct Answer
verified

If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should

Correct Answer
verified

If we assume competitive labor markets, the supply curve of labor when the firm is a monopoly is

Correct Answer
verified

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 11th worker?

Correct Answer
verified

As more workers are hired, the marginal physical product of labor eventually declines because

Correct Answer
verified

The MRP of labor will shift to the left if

Correct Answer
verified

Suppose the market for autoworkers is initially in equilibrium, but then suppose the automakers improve working conditions at the plants. What happens in the market for autoworkers?

Correct Answer
verified

When the price of a product decreases, the marginal revenue product curve in a perfectly competitive market

Correct Answer
verified

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

Correct Answer
verified

In a perfectly competitive labor market, the least-cost combination rule for resource use

Correct Answer
verified

If workers in an industry become less productive, we would expect the

Correct Answer
verified

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

Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajax do?

Correct AnswerverifiedShow Answer

Suppose a U.S. computer company outsources its technical-support services to India. This will cause

Correct AnswerverifiedShow Answer

The monopolist's input demand curve is equal to its

Correct AnswerverifiedShow Answer

When the price of labor increases, the substitution effect will ________ the quantity of labor demanded and the output effect will ________ it.

Correct AnswerverifiedShow Answer

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

Correct AnswerverifiedShow Answer

-Refer to the above table. The marginal factor cost of labor is $200. To get the firm to hire 8 workers, the

Correct AnswerverifiedShow Answer

When market wages increase in a perfectly competitive market, then

Correct AnswerverifiedShow Answer

Since the demand for labor depends upon the demand for the final product, we say that labor is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm that maximizes profits also

Correct AnswerverifiedShow Answer

If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should

Correct AnswerverifiedShow Answer

If we assume competitive labor markets, the supply curve of labor when the firm is a monopoly is

Correct AnswerverifiedShow Answer

-Refer to the above table. If the price of the product is $1.50, what is the marginal revenue product of the 11th worker?

Correct AnswerverifiedShow Answer

As more workers are hired, the marginal physical product of labor eventually declines because

Correct AnswerverifiedShow Answer

The MRP of labor will shift to the left if

Correct AnswerverifiedShow Answer

Suppose the market for autoworkers is initially in equilibrium, but then suppose the automakers improve working conditions at the plants. What happens in the market for autoworkers?

Correct AnswerverifiedShow Answer

When the price of a product decreases, the marginal revenue product curve in a perfectly competitive market

Correct AnswerverifiedShow Answer

A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because

Correct AnswerverifiedShow Answer

In a perfectly competitive labor market, the least-cost combination rule for resource use

Correct AnswerverifiedShow Answer

If workers in an industry become less productive, we would expect the

Correct AnswerverifiedShow Answer

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When the price of labor increases, the substitution effect will the quantity of labor demanded and the output effect will it.

Correct Answer
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