AP Econ Unit 7
A firm is hiring labor and capital in the cost-minimizing combination. which of the following would cause the firm to increase hiring of both labor and capital?
the price of capital and labor both decrease by 5%
Davey works ________ hours when the wage falls only if the
the same amount of, substitution effect equals the income effect
Max employs both labor and capital to produce his trinkets. Currently the last unit of labor employed has a marginal product of 100 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $25 per unit and the price of capital $10 per unit. Max should:
Do nothing; he is hiring the optimal quantity of labor and capital
Assume a firm employs two inputs, A and B. The optimal hiring of inputs occurs when which of the following is true?
MPA/PA=MPB/PB
Semi Scientific Superconductors, a firm that produces goods and hires labor in competitive markets, should continue hiring worker until:
MPL*P=wage
A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring labor and decrease hiring capital?
The productivity of labor increases by 5%
Barry's Brewpub is considering hiring more bremasters (they already employ several). The current market wage for a brewnaster is $120 . The average brewmaster produces 40 pints per day, but Barry expects the next bremaster hired to produce only 20 additional pints per day. Barry's Brewpub will hire another brewmaster only if:
a pint of brew sells for $6 or more
An efficiency wage describes a wage rate that is:
above the equilibrium wage and is paid in order to provide workers with an incentive to perform efficiently
The largest component of the factor distribution of income in the United States is:
compensation of employees
The demand for factors of production is called a derived demand because it is:
derived from the demand for the outputs that are produced by the factors of production
A small college employs two economist. Rob has been employed by the college for 15 years and Nasrin has been employed for one year. Rob's salary is significantly higher than Nasrin's, despite the fact that they both have a doctoral degrees in economics. Each professor averages one publication per year and both are excellent teachers. Given this info, the wage difference is best explained by:
differences in human capital
The marginal productivity theory of income distribution is that:
each factor is paid the value of the output generated by the last unit employed in the factor market as a whole
Davey works ________ hours when the wage falls only if the
fewer; substitution effect outweighs the income effect
Suppose a firm is producing the profit-maximizing level of output and the MP of capital is $25, which of the following is true? To minimize costs the firm should
hire more labor and use less capital
Mr.Cobb, a corn farmer, pays his workers $8 an hour. At his current level of labor use, the marginal product of an additional hour of labor is three bushels of corn. The market price of corn is $2.75. In order to maximize his profits, Mr.Cobb should:
hire more labor because the marginal revenue product exceeds the wage
Which of the following is NOT believed to explain actual wage differentials in labor markets?
homogeneous units of labor
In terms of contribution to total income, the single most important factor of production is:
labor
In the model of labor supply, workers must decide how to allocate scarce hours between:
labor and leisure
Human capital is the improvement in ________ created by ________
labor; education and knowledge
The marginal revenue product is equal to:
marginal product times the price per unit of output
Eric is a college professor who uses a laptop computer to write exam questions on the side. For Eric, he and his laptop computer are:
more productive when used together, rather than when they are used separately
Davey works ________ hours when the wage rises only if the
more, substitution effect outweighs the income effect
Barry's Brewpub is considering hiring more brewmasters (they already employ several). A pint of brew sells for $3. The current market wage of a brewmaster is $150 per day. Barry's brewpub will hire another brewmaster only if they believe the new brewmaster will:
produce at least 50 additional pints per day
Which of the following would cause the supply of nurses to increase?
the government offered to pay for student loans if students enrolled in nursing schools
In the competitive market for capital, firms employ units of capital to the point where
the marginal revenue product of capital is equal to the rental rate per unit
