Economics Unit 7

The marginal physical product of the second worker is A 19 B 22 C 25 D 44 E 75

A 19

Which of the following statements about a monopsonistic labor market is true? A Compared to the wage paid in a competitive labor market, the wage paid by a monopsonist is lower and the quantity of labor hired is lower. B Since the single firm is a wage taker, the marginal factor cost of labor is equal to the wage rate. C Since marginal revenue product equals marginal factor cost, this labor market is efficient with no deadweight loss. D A legal minimum wage equal to the competitive wage would further reduce the employment of labor. E As the firm hires more labor, the firm is able to pay each unit of labor a lower wage.

A Compared to the wage paid in a competitive labor market, the wage paid by a monopsonist is lower and the quantity of labor hired is lower.

If a firm employs only labor and capital in its production process, which of the following best describes the optimal combination of inputs for the firm in the long run? A The marginal product per dollar spent on labor is equal to the marginal product per dollar spent on capital. B The marginal product of labor is equal to the marginal product of capital. C The total product of labor is equal to the total product of capital. D The marginal product of labor and capital are both zero. E All marginal products are equal to all average products.

A The marginal product per dollar spent on labor is equal to the marginal product per dollar spent on capital.

The marginal revenue product of labor is the A product price times the wage rate B additional revenue a firm earns when it employs an additional unit of labor C increase in the average product of labor when the firm employs an additional unit of labor D increase in the price of labor when the firm employs an additional unit of labor E marginal revenue plus product price

B additional revenue a firm earns when it employs an additional unit of labor

In a monopsonistic labor market, a firm will continue to hire workers until the marginal revenue product of labor A equals marginal factor (resource) cost, resulting in more workers being hired at a lower wage compared with a perfectly competitive labor market B equals marginal factor (resource) cost, resulting in fewer workers being hired at a lower wage compared with a perfectly competitive labor market C equals marginal factor (resource) cost, resulting in fewer workers being hired at a higher wage compared with a perfectly competitive labor market D is less than marginal factor (resource) cost, resulting in more workers being hired at a lower wage compared with a perfectly competitive labor market E is less than marginal factor (resource) cost, resulting in fewer workers being hired at a lower wage compared with a perfectly competitive labor market

B equals marginal factor (resource) cost, resulting in fewer workers being hired at a lower wage compared with a perfectly competitive labor market

The table above shows the short-run output for a perfectly competitive firm. If the price of the product is $10, what is the marginal revenue product of the third worker hired? A $24 B $27 C $40 D $240 E $300

C $40

If the firm can sell as many potatoes as it wants for $2 per pound and has to pay each worker $5 per hour, how many workers should the firm employ to maximize profits? A 1 B 2 C 3 D 4 E 5

C 3

If output sells for $20 per unit and the daily wage is $100 per worker, how many workers should the firm hire to maximize profit? A 1 B 2 C 4 D 5 E 6

C 4

A firm uses capital and labor in its production process. The marginal product for the last unit of labor is 5, the marginal product for the last unit of capital is 10, and the wage is $10. At what cost of hiring each unit of capital would the firm be minimizing the cost of the current output? A $5 B $10 C $15 D $20 E $50

D $20

In the long run, assume a firm uses both labor and capital to produce 25 units of output. The marginal product of the last unit of labor being employed is 100; the marginal product of the last unit of capital being employed is 500. The wage rate of labor is $10. If the firm is minimizing the cost of producing 25 units of output, what must be the unit price of capital? A $5$5 B $10$10 C $25$25 D $50$50 E $500$500

D $50

Which of the following is likely to shift an industry's labor supply curve to the left? A A decrease in immigration restrictions B A decrease in the cost of child care C An increase in the number of remote-working jobs D An increase in preference for leisure E An increase in wages

D An increase in preference for leisure

The graph above shows the marginal revenue product (MRP) and the market wage rate for a profit-maximizing firm. Which of the following is true of the firm's hiring of labor? A It should hire 15 workers. B It should hire between 15 and 40 workers. C It should hire 40 workers. D It should hire between 40 and 90 workers. E It should hire 90 workers.

E It should hire 90 workers.

For a competitive labor market, an increase in which of the following will lead to an increase in the demand for labor? A The supply of labor B The minimum wage C The cost of medical benefits pro- vided to the labor hired by firms D Labor union dues E The demand for the good that labor produces

E The demand for the good that labor produces

A profit-maximizing firm will continue to hire workers until the marginal revenue product of labor is equal to the A marginal product of labor B marginal revenue product of capital C demand for labor D price of the good that labor is producing E marginal factor cost

E marginal factor cost

Max employs both labor and capital to produce toy trains. Currently the last unit of labor employed has a marginal product of 15 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $3 per unit, and the price of capital is $10 per unit. Which of the following employment decisions should Max follow to use the least-cost combination of labor and capital to produce the current quantity of toy trains? A Employment of LaborEmployment of CapitalIncreaseNo change B Employment of LaborEmployment of CapitalDecreaseIncrease C Employment of LaborEmployment of CapitalDecreaseDecrease D Employment of LaborEmployment of CapitalIncreaseIncrease E Employment of LaborEmployment of CapitalIncreaseDecrease

Employment of labor: Increase Employment of capital: Decrease

Which of the following will occur in a perfectly competitive labor market if Firm X's demand for labor decreases? A Equilibrium Market Wage RateEquilibrium Market Wage RateIncreaseIncrease B Equilibrium Market Wage RateEmployment by Firm XNo changeNo change C Equilibrium Market Wage RateEmployment by Firm X No change Decrease D Equilibrium Market Wage RateEmployment by Firm XDecreaseDecrease E Equilibrium Market Wage RateEmployment by Firm XDecreaseNo change

Equilibrium market wage: No change Employment by firm x: Decrease

Assume a perfectly competitive labor market. Which of the following correctly describes the individual firm's demand curve for labor and the market demand curve for labor? A Firm's Demand Curve for LaborMarket Demand Curve for LaborDownward slopingDownward sloping B Firm's Demand Curve for LaborMarket Demand Curve for LaborDownward slopingHorizontal C Firm's Demand Curve for LaborMarket Demand Curve for LaborHorizontalDownward Sloping D Firm's Demand Curve for LaborMarket Demand Curve for LaborHorizontalHorizontal E Firm's Demand Curve for LaborMarket Demand Curve for LaborHorizontalUpward Sloping

Firm's demand for labor: downward slopping Market demand for labor: downward sloping

At its current employment level of labor and capital, a firm observes the following. Marginal product of labor = 30 units Marginal product of capital = 60 units Price of labor = $3 per unit Price of capital = $15 per unit Which of the following actions should the firm take in order to achieve the least-cost combination of labor and capital and produce the same level of output? A LaborCapitalIncreaseIncrease B LaborCapitalIncreaseDecrease C LaborCapitalDecreaseIncrease D LaborCapitalDecreaseDecrease E LaborCapitalNo changeNo change

Labor: Increase Capital: Decrease

If a large number of unskilled workers enter the labor market, which of the following is most likely to occur in the labor market for unskilled workers? A The supply curve will shift to the right and the wage rate will decrease. B The supply curve will shift to the left and the wage rate will increase. C The demand curve will shift to the right and the wage rate will increase. D The demand curve will shift to the left and the wage rate will decrease. E There will be a movement up along the demand curve and the wage rate will increase.

A The supply curve will shift to the right and the wage rate will decrease.

Assume that both the product and labor markets are perfectly competitive. It would be profitable for a firm to hire additional labor if the ratio of the wage to the marginal product of labor is A less than the output price B less than the marginal cost C greater than the output price D greater than the marginal cost E equal to the output price

A less than the output price

A profit-maximizing firm will continue to hire workers until the A marginal factor cost of labor is equal to the marginal revenue product of labor B marginal factor cost of labor is equal to the price of the good produced using labor C marginal product of labor is equal to the marginal revenue product of labor D marginal product of labor is equal to the marginal factor cost of labor E marginal product of labor is equal to the price of labor

A marginal factor cost of labor is equal to the marginal revenue product of labor

A firm is currently employing a cost-minimizing combination of labor and capital for a given level of output. The firm is employing 20 workers, and the marginal product of the last worker is 40 units of output. The firm is employing 100 units of capital, and the marginal product of the last unit of capital is 10 units of output. If the wage rate is $20 per hour, what is the price of capital? A $2.5 per hour B $5 per hour C $10 per hour D $100 per hour E $200 per hour

B $5 per hour

The marginal product of labor is constant at 1 unit for every additional unit of labor. The monopolist hires labor in a perfectly competitive market at the wage rate of $5 per hour. What is the marginal revenue product of labor when the firm produces the third unit of output? A $3 B $7 C $9 D $20 E $27

B $7

How many workers would the coal company want to hire if the price of coal were competitively priced at $5 per ton and the wage rate were $40 per day? A 5 B 4 C 3 D 2 E 0

B 4

Based on the graph above, which of the following statements is true? A Hiring unit of labor L0L0 will add $15$15 to a firm's economic profits. B The market wage rate is $10$10 per unit of labor. C The profit-maximizing firm will hire its labor at less than $10$10 per unit. D From 00 units of labor to L0L0 units of labor, there are increasing marginal returns to labor. E Along the firm's marginal revenue product of labor curve, the price of output falls as more labor is hired and more output is produced.

B The market wage rate is $10$10 per unit of labor.

Assume that firms sell their output in a perfectly competitive product market and hire labor in a perfectly competitive labor market. If all other factors remain constant, an increase in the demand for the firms' product will result in which of the following changes in the labor market? A Firms will move down along the demand curve for labor and hire more workers. B The supply curve for labor will shift to the right. C The demand curve for labor will shift to the right. D The supply curve for labor will shift to the left. E The demand curve for labor will shift to the left.

C The demand curve for labor will shift to the right.

Firm Z is producing 50 widgets using labor and capital. The marginal product of the last unit of labor employed is 500; the marginal product of the last unit of machinery (or capital) is 1000. The unit price of labor is $10, and the unit price of machinery or capital is $100. With competitive input markets, which of the following statements is true? A The firm is minimizing the cost of producing 5050 widgets with this combination of labor and capital. B The marginal product of labor is 500500 and the marginal product of capital is 10001000, so the firm is employing too much labor and too few machines to produce the 5050 widgets. C The marginal product per dollar of labor exceeds the marginal product per dollar of machinery, so more labor and less capital should be used to produce the 5050 widgets. D The firm should lower the price of machinery so that it is equal to the price of labor. E The firm is producing the given quantity inefficiently and should shut down.

C The marginal product per dollar of labor exceeds the marginal product per dollar of machinery, so more labor and less capital should be used to produce the 5050 widgets.

The demand curve for labor shows which of the following? A The quantity of output each worker can produce at various wage rates B The number of workers required to produce a given level of output C The number of workers a firm is willing and able to hire at various wage rates D The positive relationship between the wage rate and the number of hours people wish to work E The number of workers who are willing and able to work at various wage rates

C The number of workers a firm is willing and able to hire at various wage rates

Which of the following will occur when wage rates decrease in a given labor market? A The supply of labor will decrease. B The demand for labor will increase. C The quantity supplied of labor will decrease. D The quantity demanded of labor will decrease. E The supply of labor will decrease and the demand for labor will increase.

C The quantity supplied of labor will decrease.

Assume that a firm uses labor and capital to produce a product. The firm hires labor at a wage rate of $4 per unit and rents capital at $5 per unit. At its current output level, the marginal physical products of labor and capital are 20 and 30 units, respectively. To minimize its cost of production without changing the level of output, the firm should A make no changes B hire more labor and rent more capital C hire less labor and rent more capital D hire more labor and rent less capital E hire less labor and rent less capital

C hire less labor and rent more capital

Marginal resource (factor) cost can be defined as A the change in total resource cost caused by the production of one more unit of output B the change in total revenue caused by the addition of one more unit of a resource C the change in total resource cost caused by the addition of one more unit of a resource D the total resource cost divided by the number of inputs used E total resource cost divided by output

C the change in total resource cost caused by the addition of one more unit of a resource

Assume that barber shops operate in perfectly competitive product and factor markets. Which of the following will happen to working barbers if the price of haircuts decreases? A The marginal product of the last barber hired will not change. B The marginal product of the last barber hired will decrease. C The marginal revenue product curve will shift to the right. D The marginal revenue product curve will shift to the left. E There will be a movement upward along the marginal revenue curve.

D The marginal revenue product curve will shift to the left.

A perfectly competitive firm is currently producing at the profit-maximizing output level. If the marginal physical product of labor is 10 units per hour and the firm pays a wage rate of $8 per hour, which of the following is true? A The marginal revenue product of labor is $80. B The marginal cost is $1.25. C The average total cost is $0.80 per unit. D The output price is $0.80 per unit. E The output price is $1.25 per unit.

D The output price is $0.80 per unit.

A firm's demand for labor is known as a derived demand because A the firm gains utility from hiring more labor B the wage rate paid to workers depends on the demand for labor C the amount of labor demanded depends on the amount of capital invested D the amount of labor demanded depends on the demand for the firm's product E the firm will benefit from hiring additional labor

D the amount of labor demanded depends on the demand for the firm's product

The table above describes the production function of an auto parts manufacturer. Assume that the firm can hire as many workers as it wants at the market wage rate of $600 per week per worker and sell as many auto parts as it wants at the price of $10 per part. To maximize profits, the firm should hire A 0 workers B 1 worker C 3 workers D 5 workers E 7 workers

D 5 workers

Which of the following will cause an increase in the supply of labor? A An increase in the wage rate B An increase in the marginal product of labor C An increase in the tax rates applied to labor income D An increase in the desire for greater leisure time E An increase in the retirement age

E An increase in the retirement age

A firm sells its output in a perfectly competitive market and hires two inputs, capital and labor, in perfectly competitive factor markets. The product price is $15 per unit, the wage is $75 per day, and the marginal product of capital is 3. If the firm is choosing the least-cost combination of labor and capital, the firm's marginal product of labor and the price of capital must be equal to which of the following? A Marginal Product of LaborPrice of Capital25$5 B Marginal Product of LaborPrice of Capital25$45 C Marginal Product of LaborPrice of Capital5$15 D Marginal Product of LaborPrice of Capital5$25 E Marginal Product of LaborPrice of Capital5$4

MPL: 5 Price of Capital: $4

In the monopsonistic labor market shown in the diagram above, which of the following indicates the number of workers the firm will hire and the wage rate it will pay? A Number of Workers: L1Wage Rate: W1 B Number of Workers: L1Wage Rate: W2 C Number of Workers: L1Wage Rate: W3 D Number of Workers: L2Wage Rate: W2 E Number of Workers: L2Wage Rate: W4

Number of workers: L1 Wage rate: W1

Suppose that people who work in the paint industry face a great risk of developing an incurable disease. A medical breakthrough that eliminates the risk will most likely cause which of the following shifts in the supply and demand curves for workers in the paint industry? A Supply CurveDemand CurveShift rightNo shift B Supply CurveDemand CurveShift leftNo shift C Supply CurveDemand CurveShift rightShift left D Supply CurveDemand CurveShift leftShift right E Supply CurveDemand CurveNo ShiftShift left

Supply curve: shift right Demand curve: shift left