Chapter 28

When viewing unions as monopoly sellers of a​ service, the goals the unions may pursue include all of the following except A. maximizing profits for the employers of union members. B. maximizing gross income for its members. C. employment for all union members. D. maximizing wage rates for certain workers.

A. maximizing profits for the employers of union members.

Which of the following will not shift the supply of​ labor? A. Changes in working conditions. B. Job flexibility. C. A large increase in the relative wages paid in a related industry. D. An increase in the wage rate

D. An increase in the wage rate

The amount of unemployment equals the quantity of labor at point ______ minus the quantity of labor at point _____ at a weekly wage rate tha is _______ than $600.

B A higher

A purely competitive firm faces the marginal product schedule shown in the table below. The price of the product is ​$25 and the wage rate is ​$200 per worker. The firm should hire A. 12 workers B. 14 workers C. 15 workers D. 11 workers

B. 14 workers

A​ profit-maximizing monopolist hires workers in a perfectly competitive labor market. Employing the last worker increased the​ firm's total weekly output from 110 units to 111 units and caused the​ firm's weekly revenues to rise from ​$25,250 to ​$25,875. What is the current prevailing weekly wage rate in the labor​ market? ​$______

$625

In the figure to the​ right, suppose that We is a wage rate of ​$31 per hour and Wu is a wage rate of ​$41 per hour. In​ addition, Qd is 11,000 workers per​ hour, Qe is 17,000 workers per​ hour, and Qs is 20,000 workers per hour. How much more or less do the firms in this industry​ spend, in​ total, on the labor employed each hour as a consequence of establishment of the union wage Wu above the equilibrium wage We​? Firms spend a total of ​$_____ per hour _____ on unionized labor.

$76,000 less (41 x 11,000 = 451,000 31 x 17,000 = 527,000 527,000 (ununionized) - 451,000 (unionized) = 76,000)

To minimize total costs for a particular rate of​ production, the firm will hire factors of production up to the point at which the marginal product per last dollar spent on each factor of production is equalized. A. True B. False

A. True

If the marginal productivity of labor​ increases, the​ ________ curve for labor will shift to the​ ________. A. demand; right B. supply; left C. supply; right D. demand; left

A. demand; right

For a​ monopolist, marginal revenue A. is less than price. B. is greater than price. C. is equal to price. D. may be greater​ than, less​ than, or equal to price.

A. is less than price.

A bilateral monopoly refers to a monopolist that only sells two products. A. True B. False

B. False

Changes in working conditions in an industry can affect its labor demand curve but not its labor supply curve. A. True B. False

B. False

Each time a monopsonist buyer of labor wants to hire more​ workers, it must raise wage rates. A. False B. True

B. True

In order to raise wages above the market level for its​ workers, a union must A. have monopsony power. B. recruit better workers. C. limit the supply of labor in an industry. D.have the support of the government.

C. limit the supply of labor in an industry.

The market demand curve for labor A. is vertical. B. is horizontal. C. is upward sloping. D. is downward sloping.

D. is downward sloping.

Explain how the following events would affect the demand for labor. a. A new education program administered by the company increases​ labor's marginal product. The demand for labor would ________. b. The firm completes a new plant with a larger workspace and new machinery that workers can utilize and that does not substitute for the functions provided by​ workers' labor. The demand for labor would _______.

Increase Increase

Maximum wage payed

Equal to marginal revenue product

Suppose that for the​ firm, the goods market is perfectly competitive. The market price of the product is ​$4 at each quantity supplied by the firm. What is the amount of labor that this​ profit-maximizing firm will​ hire? _____ workers. What wage rate will this​ profit-maximizing firm​ pay? ​$______

13 workers $8

A monopoly firm hires workers in a perfectly competitive labor market in which the market wage rate is ​$60 per day. If the firm maximizes​ profit, and if the marginal revenue from the last unit of output produced by the last worker hired equals ​$10​, what is the marginal physical product of​ labor? ______ units

6

The marginal revenue curve for a monopolist always lies above the​ downward-sloping product demand curve. A. True B. False

B. False

For a firm facing a perfectly elastic supply of​ labor, the employment of workers will continue until A. marginal factor cost​ = wage rate. B. MRP​ = wage rate. C. MPP​ = MR. D. All of the above.

B. MRP​ = wage rate.

At​ present, less than 7 percent of workers in the private sector in the United States belong to unions. A. False B. True

B. True

Each firm purchasing labor in a perfectly competitive market can purchase all of the input it wants at the going market wage. A. False B. True

B. True

The MRP curve of the monopolist is A. never less elastic than the MRP curve of the perfect competitor. B. always less elastic than the MRP curve of the perfect competitor. C. always more unit elastic than the MRP curve of the perfect competitor. D. None of the above.

B. always less elastic than the MRP curve of the perfect competitor.

In a prefectly competitive​ market, firms will hire workers up to the point where the wage rate equals the marginal revenue product. A. True B. False

A. True

Under conditions of perfect competition in both product and labor​ markets, the demand for labor is a derived demand. A. True B. False

A. True

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

B. slopes down because of the law of diminishing marginal returns and because the monopolist must lower prices to sell additional units of the good.

For the perfectly competitive​ firm, the marginal revenue product is A. marginal physical product times the product price. B. the same thing as marginal factor cost. C. marginal physical product times the wage rate. D. the same thing as marginal physical product.

A. marginal physical product times the product price.

A perfectly competitive firm faces the marginal product schedule shown above. The price of the product is ​$20 and the wage rate is​ $320 per worker. The marginal revenue product of the 14th worker is A. $20. B. $320. C. $120. D. $200.

C. $120.

If the MRP of labor is less than the wage​ rate, the perfectly competitive firm will A. increase employment. B. raise the wage rate. C. decrease employment. D. maintain the current level of employment.

C. decrease employment.

Under bilateral​ monopoly, the wage rate is A. equal to the competitive wage rate. B. lower than the competitive wage rate. C. indeterminate. D. higher than the competitive wage rate.

C. indeterminate.

The monopolist hires fewer workers than the perfect competitor because A. the MRP curve for the monopolist is above the MRP curve of the perfect competitor. B. product price must rise for the monopolist to sell more. C. the monopolist produces less than the perfect competitor and needs less​ labor, other things being equal. D. None of the above.

C. the monopolist produces less than the perfect competitor and needs less​ labor, other things being equal.

If the industry shown in the graph to the right​ unionizes, the wage rate will be A. $25. B. ​$15. C. ​$45. D. between​ $12.50 and​ $25.

D. between​ $12.50 and​ $25.

A firm is minimizing costs of production. The wage rate is ​$125 per​ worker, and the relevant price of capital is ​$ 500 per unit. The price of the final product is ​$25​, and the marginal product of labor at the​ cost-minimizing quantity of labor is 50. The marginal product of capital is A. 5,000 units. B. 50 units. C. 5 units. D. 200 units.

D. 200 units

The marginal factor cost curve is​ ________ whenever the supply curve is upward sloping. A. the same as the supply curve B. below the supply curve C. nonexistent D. above the supply curve

D. above the supply curve

Marginal Revenue Product

Marginal physical product x price

Other things​ equal, an increase in the productivity of labor will lead to A. fewer workers being hired. B. no change in the number of workers being hired. C. lower wages. D. higher wages.

D. higher wages.

The individual perfectly competitive firm faces a perfectly ______ labor supply curve—it can hire all the labor it wants at the going market wage rate. The industry supply curve of labor slopes _______. By plotting an industrywide supply curve for labor and an industrywide demand curve for labor on the same​ graph, we obtain the _______ wage rate in the industry. The labor demand curve can shift because the​ __________ the final product​ shifts, labor​ __________ changes, or the price of a related​ (__________ or​ __________) factor of production changes. A. supply​ of; productivity;​ substitute; complementary. B. demand​ for; productivity;​ substitute; complementary. C. supply​ of; supply;​ substitute; complementary. D. demand​ for; supply;​ substitute; complementary.

elastic upward equilibrium B. demand​ for; productivity;​ substitute; complementary.

The effect of the supply shift is that the market wage rate ______ and equilibrium employment _______

falls rises

When a firm sells its output in a monopoly​ market, marginal revenue is _______ than price. Just as the MRP is the perfectly competitive​ firm's input demand​ curve, the MRP is also the _______ input demand curve. The​ profit-maximizing combination of factors will occur when each factor is used up to the point at which its MRP is equal to its unit _______. To minimize total costs for a given​ output, the​ profit-maximizing firm will hire each factor of production up to the point at which the ______ product per last dollar spent on each factor is equal to the _______ product per last dollar spent on each of the other factors of production. To maximize​ profits, the _______ product of each resource must equal the​ resource's _______

less monopolist's price marginal marginal marginal revenue price

The change in total _____ due to a​ one-unit change in one variable _____​, holding all other ______ ​constant, is called the marginal product​ (MP). When we multiply marginal product times _______​, we obtain the marginal revenue product​ (MRP). A firm will hire workers up to the point at which the additional cost of hiring one more worker is equal to the additional revenue generated. For the individual​ firm, therefore, its MRP of labor curve is also its ______ labor curve. The demand for labor is ______ ​demand, _______ from the demand for final output.​ Therefore, a change in the price of the final output will cause ______ the MRP curve​ (which is also the​ firm's demand for labor​ curve).

output input inputs marginal revenue demand for a derived derived a shift in

Evidence shows that many young men substitute time that otherwise could be spent on​ wage-earning work with leisure time devoted to playing video games. What effect will this trend have on the equilibrium labor​ market? If more young men choose to play video games instead of supplying​ labor, the labor supply curve will ______. This will cause the market clearing wage rate to ______ and the equilibrium quantity of labor to ______.

shift to the left rise fall

In a perfectly competitive labor​ market, firms are price takers. A. False B. True

B. True

Suppose labor is available to a firm at a cost of ​$15 per hour. Also suppose that employing another hour of labor adds 2 units to output and that any amount of output can be sold for ​$10 per unit. An additional hour of labor would add ​$______in additional revenue to the firm. ​ This firm should hire _______ labor. Now suppose that the last hour of labor hired by the firm has a marginal product of 1 units of output. The marginal revenue product of labor is now ​$_______ In this​ case, assuming the wage rate is still ​$15 per​ hour, the firm can increase its profits by hiring _______ labor.

$20 more $10 less

A single firm is the only employer in a labor market. The marginal revenue​ product, labor​ supply, and marginal factor cost curves that it faces are displayed in the diagram at the right. Use this information to answer the following questions. a. How many units of labor will this firm employ in order to maximize its economic​ profits? ______ units b. What hourly wage rate will this firm pay its​ workers? ​$______ c. What is the total amount of wage payments that this firm will make to its workers each​ hour? ​$______

1000 $10 $10000

Suppose the market wage it faces is ​$50. How many workers will the​ profit-maximizing firm​ hire? ______ workers

13

Margianl Physical Product

Change in total physical output

When unions set wage rates ______ market clearing​ prices, they face the problem of ______ a restricted number of jobs to workers who desire to earn the higher wages. Unions may pursue any one of three​ goals: (1) to employ ______ union​ members, (2) to maximize total ______ of the​ union's members, or​ (3) to ______ wages for​ certain, usually​ high-seniority, workers. Unions can increase the wage rate of members by engaging in practices that shift the union labor supply curve ______ or shift the demand curve for union labor ______ ​(or both).

above rationing all income maximize inward outward

The market demand curve for labor is a simple horizontal summation of the labor demand curves of all individual firms. A. False B. True

A. False

In light of your answer to part​ (a), explain why many hog​ farmers, who in the past used corn as the main feed input in hog​ production, switched to​ cookies, licorice, cheese​ curls, candy​ bars, and other human snack foods instead of corn as food for their hogs. A. Human snack food is a relatively lower cost substitute for corn as hog feed. B. Human snack food is an absolutely lower cost complement for corn as hog feed. C. Human snack food is an absolutely lower cost substitute for corn as hog feed. D. Human snack food is a relatively lower cost complement for corn as hog feed.

A. Human snack food is a relatively lower cost substitute for corn as hog feed.

The current wage rate is ​$20​, and the rental rate of capital is ​$400. A​ firm's marginal physical product of labor is 160​, and its marginal physical product of capital is 20,000. Is the firm maximizing profits for the given cost​ outlay? A. No. The marginal physical product of labor per dollar spent on wages is not equal to the marginal physical product of capital per dollar spent on capital. B. No. The marginal factor cost of labor is not equal to the marginal factor cost of capital. C. No. The marginal physical product of labor is not equal to the marginal physical product of capital. D. Yes. The firm is maximizing profits.

A. No. The marginal physical product of labor per dollar spent on wages is not equal to the marginal physical product of capital per dollar spent on capital.

Suppose that the objective of a union is to maximize the total dues paid to the union by its membership.​ Now, consider the case where union dues are a percentage of total earnings of the union membership. Then the​ union's strategy will be to A. negotiate for the wage level that is consistent with unit elastic demand for labor. B. negotiate for a higher than market wage hike every year through collective bargaining. C.negotiate for the maximum wage rate the employer is willing to pay for the number of workers belonging to the union. D. negotiate for limiting the entry of new workers over time. b. Suppose that the objective of a union is to maximize the total dues paid to the union by its membership. If union dues are paid as a flat amount per union member​ employed, the​ union's strategy will be to A. negotiate for the maximum wage rate the employer is willing to pay for the number of workers belonging to the union. B. negotiate for the wage level that is consistent with unit elastic demand for labor. C. negotiate for limiting the entry of new workers over time. D. negotiate for the wage level that is consistent with perfectly elastic demand for labor.

A. negotiate for the wage level that is consistent with unit elastic demand for labor. A. negotiate for the maximum wage rate the employer is willing to pay for the number of workers belonging to the union.

For a​ monopsonist, the quantity of labor hired is determined by the intersection of the ​ ________ curves and the wage rate is determined by the​ ________ curve. A. labor supply and labor​ demand; MRP B. MRP and labor​ supply; labor demand C. MFC and labor​ supply; MRP D. MRP and​ MFC; labor supply

D. MRP and​ MFC; labor supply

onsider the figure to the right. Suppose that the monopolist is contemplating hiring 14 units of​ labor, which it knows would cause the marginal product to decline to 142 units of output per unit of labor. The product price would also decrease to ​$4.40 per​ unit, and the​ firm's marginal revenue would decline to ​$3.20 per unit. What would be the​ firm's marginal revenue product if it hires the 14th unit of​ labor? If the firm hires the 14th unit of​ labor, the marginal revenue product of that unit of labor would be ​$______ per unit of labor.

$454.40 (mr x mp)

Suppose that the firm in the figure to the right is contemplating using 17 units of​ labor, and it knows that doing so would cause its total product to increase from 357 to 374 units. What would be the resulting marginal product of the 17th unit of labor​ employed? The marginal product of the 17th unit of labor employed would be _____ units of output per unit of labor

17

The labor demand curve will shift for all of the following reasons except A. a change in wages in a competing industry. B. a change in demand for the final product. C. a change in labor productivity. D. a change in the price of a substitute or complementary resource.

A. a change in wages in a competing industry.

A perfectly competitive firm determines that its MRP of labor divided the wage equals 1.2. This firm should A. hire more labor. B. pay a lower wage. C. purchase less labor. D. examine the MRP of the other inputs and divide them by their prices. If they are all equal to​ 1.2, the firm is maximizing profits.

A. hire more labor.

The market demand curve for labor is A. less elastic than the horizontal summation of the individual​ firms' demand curves because output price changes as total output changes. B. the vertical summation of the individual​ firms' demand curves for labor. C. the horizontal summation of the individual​ firms' demand curves for labor. D. affected by the marginal factor cost of labor.

A. less elastic than the horizontal summation of the individual​ firms' demand curves because output price changes as total output changes.

If unions are successful in establishing a wage rate above the competitive market equilibrium​ wage, then A. there will be an excess of labor supplied. B. there will be an excess demand for labor. C. employment of union members will increase. D. the union has a goal of employing all of its workers.

A. there will be an excess of labor supplied.

The table above gives some data from the production function of a firm that is a perfect competitor in both the product and labor markets. The wage rate in the industry is ​$300 and the price of the good produced is ​$15. The​ profit-maximizing quantity of labor to hire is A. 102 workers. B. 103 workers. C. 104 workers. D. 105 workers.

B. 103 workers.

The current market wage rate is ​$20​, the rental rate of land is ​$200 per​ unit, and the rental rate of capital is ​$500. Production managers at the firm find that under their current allocation of factors of​ production, the marginal revenue product of labor is ​$160​, the marginal revenue product of land is ​$1,600​, and the marginal revenue product of capital is ​$1,500. Is the firm maximizing​ profit? A. No. The marginal factor cost of each input is not equal. B. No. The marginal revenue product per dollar spent on each input is not equal. C. No. The marginal revenue product of each input is not equal. D. Yes. The firm is maximizing profits.

B. No. The marginal revenue product per dollar spent on each input is not equal.

If a perfectly competitive industry in the output market suddenly became one in which there is monopoly in the output​ market, the amount of employment would fall. A. False B. True

B. True

The marginal product of labor represents the extra output attributed to employing additional workers. A. False B. True

B. True

A profit maximizing firm will hire inputs in combinations A. that minimize the prices of inputs. B. such that the marginal physical product per last dollar spent on each factor of production is equalized. C. that equate marginal revenue products of each input. D. that equate marginal physical products of each input.

B. such that the marginal physical product per last dollar spent on each factor of production is equalized.

Marginal revenue product is calculated as A. (change in total​ product) /​ (change in labor​ input). B. ​(marginal product) × ​(marginal revenue). C. (marginal revenue) × ​(marginal cost). D. (change in total​ cost) /​ (change in amount of resource​ used).

B. ​(marginal product) × ​(marginal revenue).

Which of the following statements explains why the MRP curve is the​ firm's labor demand​ curve? A. The MRP curve shows how many units of labor will be hired at different product prices. B. The MRP curve shows how many units of the product will be produced at different wage rates. C. The MRP curve shows how many units of labor will be hired at different input prices. D. All of the above.

C. The MRP curve shows how many units of labor will be hired at different input prices.

All of the following can cause the demand curve for labor to shift to the right except A. an increase in the productivity of labor. B. an increase in the price of the final product. C. an increase in the supply of labor. D. an increase in the demand for the final product.

C. an increase in the supply of labor.

A perfectly competitive firm that hires labor and sells its product in purely competitive markets will A. have a horizontal supply curve for its product. B. face a​ downward-sloping demand curve for its product. C. have a​ downward-sloping demand curve for labor. D. have a horizontal demand curve for labor.

C. have a​ downward-sloping demand curve for labor.

In the graph to the​ right, the marginal factor cost line of a monopsonist is A. line A. B. line B. C. line C. D. not pictured. n the graph to the​ right, the monopsonist will A. hire 15 workers and pay wage rate​ $45. B. hire 25 workers and pay wage rate​ $25. C. hire 25 workers and pay wage rate​ $12.50. D. hire 30 workers and pay wage rate​ $15.

C. line C. C. hire 25 workers and pay wage rate​ $12.50.

How many workers will this firm employ if the weekly wage is ​$300​? A. 0 B. 27 C. 28 D. 29

D. 29

For the purely competitive​ firm, the marginal revenue product is A. the same thing as marginal factor cost. B. the same thing as marginal product. C. the marginal product times the wage rate. D. the marginal product times the product price.

D. the marginal product times the product price.

Since marginal revenue product is _______ along the MRP1 curve and equals the marginal product times the _______​, a rise in the product price to ​$7 per unit causes the MRP curve to shift _______ to MRP2

constant product price up (or right)

In the figure to the​ right, suppose that We is a wage rate of ​$28 per hour and Wu is a wage rate of ​$41 per hour. In​ addition, Qd is 12,000 workers per​ hour, Qe is 15,000 workers per​ hour, and Qs is 18,000 workers per hour. If each worker hired corresponds to a job available within the unionized​ industry, how many jobs must the union ration at the wage rate Wu​? What is the shortage of​ jobs? The quantity of jobs that the union must ration across its membership at the wage rate Wu ​= ​$41 per hour equals the quantity of labor ______​, which is ______ workers per hour. The shortage of jobs at this wage rate is ______ jobs per hour

demanded by firms 12,000 6,000

A monopsonist is the only _____ in a market. The monopsonist faces ______​-sloping supply curve of labor. Because the monopsonist faces ______​-sloping supply curve of​ labor, the marginal factor cost of increasing the labor input by one unit is ______ than the wage rate.​ Thus, the marginal factor cost curve always lies ______ the supply curve. A monopsonist will hire workers up to the point at which marginal ______ cost equals marginal _______ product. Then the monopsonist will find the lowest necessary wage to attract that number of​ workers, as indicated by the supply curve.

only buyer an upward an upward greater above factor revenue

A firm hires labor in a perfectly competitive labor market. Its current​ profit-maximizing hourly output is 100​ units, which the firm sells at a price of ​$10 per unit. The marginal physical product of the last unit of labor employed is 5 units per hour. The firm pays each worker an hourly wage of ​$20. a. What marginal revenue does the firm earn from sale of the output produced by the last worker​ employed? ​$______ b. Does this firm sell its output in a perfectly competitive​ market? _______

$4 No