unit 5 microeconomics

decreases

as wage decreases, Quantity supplied

increases

as wage falls, quantity demanded...

decreases

as wage increases, Quantity demanded...

increases

as wage increases, quantity supplied...

labor

individuals supply...

minimum wage

a minimum amount employers are allowed to pay their workers; is a price floor

The graph above shows the conditions that a monopsonist faces in a labor market. How many workers would this monopsonist hire and what wage rate would it pay? A Number of WorkersWage Rate5$37.50 B Number of WorkersWage Rate10$30 C Number of WorkersWage Rate10$20 D Number of WorkersWage Rate14$24 E Number of WorkersWage Rate14$37.50

C

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

According to the information in the table above, the twelfth worker would increase the hourly profit by A $0.20 B $1.10 C $1.30 D $2.40 E $5.20

C. $1.30

Based on the table for a perfectly competitive firm above, if the wage rate for labor is $15, how many units of labor should the firm hire? A 2 B 3 C 4 D 5 E 6

C. 4

Which of the following tends to increase the gap in earnings between skilled and unskilled workers over time? A An increase in the demand for unskilled workers relative to skilled workers B An increase in the supply of skilled workers relative to unskilled workers C A decrease in the demand for unskilled workers relative to skilled workers D A decrease in both the demand for and the supply of skilled workers E An increase in both the demand for and supply of unskilled workers

C. A decrease in the demand for unskilled workers relative to skilled workers

Economists argue that most professional athletes earn economic rent because they A make additional income through commercial endorsements of products B are able to participate in sports for only a limited number of years before changing occupations C earn far more as professional athletes than they could earn in their next-best occupation D participate in sporting events only about six months during a year E work less than 40 hours a week during the sport season

C. Earn far more as professional athletes than they could earn in their next-best occupation

direct

There is a _____ relationship between wages and quantity of labor supplied

inverse

There is an _____ relationship between wage and quantity of labor demanded

supply of labor

the number of workers that are willing to work at different wage rates

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

A

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

A

productivity of the worker

A more productive worker is more valuable to a firm

The concept of derived demand is described by which of the following? A A decrease in the demand for theater tickets will decrease the demand for actresses and actors. B If the salaries of basketball players increase, the quantity of basketball players demanded will decrease. C An increase in the income of consumers will increase the demand for opera tickets. D An increase in the demand for movie tickets will decrease the demand for video rentals. E A decrease in the price of movie tickets will increase the demand for movie tickets.

A. A decrease in the demand for theater tickets will decrease the demand for actresses and actors

Which of the following statements about the relationship between the demand for apple pickers and the demand for apples is true? A An increase in the demand for apples increases the demand for apple pickers. B An increase in the demand for apples increases the wage rate and decreases the demand for apple pickers. C A decrease in the demand for apples decreases the wage rate and increases the demand for apple pickers. D An increase in the demand for apples increases productivity and the demand for apple pickers. E A decrease in the demand for apples decreases productivity and the demand for apple pickers.

A. An increase in the demand for apples increases the demand for apple pickers

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 the price for a product produced in a competitive market increases, which of the following is most likely to occur in the labor market for workers who produce that product? A The demand for labor and the number of workers hired both increase. B The supply of labor and the number of workers hired both increase. C The demand for labor and the number of workers hired both decrease. D The supply of labor and the number of workers hired both decrease. E There is a movement along the demand for labor curve, and firms hire more workers.

A. The demand for labor and the number of workers hired both increase

A profit-maximizing firm will hire A labor until its wage rate equals its average revenue product B labor until its wage rate equals its marginal revenue product C labor until its wage rate equals the interest rate D capital until the interest rate equals the wage rate E capital until the interest rate exceeds the wage rate

B. Labor until its wage rate equals its marginal revenue product

Suppose that a large number of unskilled workers enter a nation's labor market. If the labor market is competitive, the number of unskilled workers hired and the wage rate will most likely change in which of the following ways? A Number of Unskilled Workers HiredWage RateIncreaseIncrease B Number of Unskilled Workers HiredWage RateIncreaseDecrease C Number of Unskilled Workers HiredWage RateIncreaseNot change D Number of Unskilled Workers HiredWage RateDecreaseIncrease E Number of Unskilled Workers HiredWage RateDecreaseDecrease

B

The graph above shows a monopsony labor market. In the absence of any regulations, which of the following represents the number of workers the firm will hire and the wage rate it will offer to those workers? A Number of WorkersWage Rate15$30 B Number of WorkersWage Rate20$20 C Number of WorkersWage Rate20$40 D Number of WorkersWage Rate30$30 E Number of WorkersWage Rate40$40

B

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

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

Which of the following will result in an increase in labor demand? A An increase in the wage rate B An increase in the productivity of labor C A decrease in the price of the product that labor is used to produce D A decrease in the wage rate E A decrease in the demand for the product produced by labor

B. An increase in the productivity of labor

In the current labor market, suppose that the wage rate for accountants is significantly higher than the wage rate for economists. In the long run, if you observed that the wage rate for economists rose while the wage rate for accountants fell, which of the following would best explain your observation? A The supply of economists must have increased, and the supply of accountants must have decreased. B The supply of economists must have decreased, and the supply of accountants must have increased. C The demand for economists must have increased, and the supply of accountants must have decreased. D The demand for economists must have decreased, and the supply of accountants must have increased. E The demand for both economists and accountants must have decreased.

B. The supply of economists must have decreased, and the supply of accountants must have increased

Hope Hospital is a monopsonistic employer of nurses. The marginal revenue product of nursing services, the marginal factor (resource) cost of nursing services, and the market supply curve of nursing services are depicted in the figure above by MRP, MFC, and S, respectively. What wage quantity combination does Hope Hospital choose in order to maximize its profits? A W1 and Q1 B W1 and Q3 C W2 and Q2 D W2 and Q4 E W3 and Q3

B. W1 and Q3

Assume that a profit-maximizing, perfectly competitive firm hires labor in a perfectly competitive labor market. If the market wage is $12 per hour and the price of the product is $3 per unit, the firm will A hire more workers if each worker can produce 3 units per hour B hire another worker if the output per hour of the additional worker exceeds 4 units C hire fewer workers, since the hourly wage exceeds the cost of producing one unit of output D not hire any workers, since the cost of labor is greater than the price of the output E continue to operate in the short run but not in the long run

B. hire another worker if the output per hour of the additional workers exceeds 4 units

Based on the graph above, which of the following statements is true? A Hiring unit of labor L0 will add $15 to a firm's economic profits. B The market wage rate is $10 per unit of labor. C The profit-maximizing firm will hire its labor at less than $10 per unit. D From 0 units of labor to L0 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 per unit of labor

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

Firm ZZ is producing 5050 widgets using labor and capital. The marginal product of the last unit of labor employed is 500500; the marginal product of the last unit of machinery (or capital) is 10001000. The unit price of labor is $10$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 50 widgets with this combination of labor and capital. B The marginal product of labor is 500 and the marginal product of capital is 1000, so the firm is employing too much labor and too few machines to produce the 50 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 50 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 50 widgets.

If the price of a good produced by a competitive firm increases, then A the marginal product of labor will increase B the average product of labor will increase C the marginal revenue product of labor will increase D the short-run demand for labor will decrease E the supply of labor will increase

C. The marginal revenue product of labor will increase

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

Assume good ZZ is produced in a competitive output market that is in long-run equilibrium. In the short run, the variable input is unskilled labor whose wage is determined in a competitive labor market. Suppose there is an increase in consumer demand for good Z�. Which of the following explains the resulting change in the labor market for unskilled workers in the short run? A New firms will enter using more labor and more capital to produce good ZZ, lowering the price of good ZZ. B With more output of good ZZ produced, the supply of labor needed to produce good ZZ increases, and the wage rate for unskilled workers will fall. C The price of good ZZ increases and the labor demand curve shifts to the right along the existing labor supply curve, resulting in higher wages and employment of unskilled workers. D Since the market is in long-run equilibrium, economic profits are zero, and therefore the demand for labor remains unchanged. E The marginal factor cost of labor will decrease, leading to more unskilled workers being hired.

C. The price of good ZZ increases and the labor demand curve shifts to the right along the existing labor supply curve, resulting in higher wages and employment of unskilled workers.

Which of the following statements about the monopsonistic labor market shown in the accompanying graph is true? A The single firm will hire L1 and pay each laborer a wage of W2. B In this monopsonistic labor market when the single employer maximizes economic profits, there will be no deadweight loss. C The profit-maximizing monopsonist will hire L0 labor and pay each laborer W1. D When the single firm is maximizing profits, the marginal revenue product (MRP)(MRP) of labor will exceed the marginal factor cost (MFC)(MFC) of labor. E The marginal factor cost (MFC)(MFC) of labor with the competitive equilibrium exceeds the marginal factor cost of labor in monopsony.

C. The profit-maximizing monopsonist will hire L0 labor and pay each laborer W1.

In the long run, assume a firm uses both labor and capital to produce 2525 units of output. The marginal product of the last unit of labor being employed is 100100; the marginal product of the last unit of capital being employed is 500500. The wage rate of labor is $10$10. If the firm is minimizing the cost of producing 2525 units of output, what must be the unit price of capital? A $5 B $10 C $25 D $50 E $500

D. $50

If labor is the only variable input of a firm and the marginal product of labor is falling, the firm will always produce A more than the profit-maximizing level of output B less than the profit-maximizing level of output C at a level of output where average total cost is at a minimum D at a level of output where marginal costs are rising E at a level of output where average variable costs are falling

D. At a level of output where marginal costs are rising

A firm's demand curve for labor is equal to a segment of its A average variable cost curve B total revenue curve C marginal cost curve D marginal revenue product curve E average product curve

D. Marginal revenue

A factor of production will NOT earn economic rent when its supply is A elastic B inelastic C unit elastic D perfectly elastic E perfectly inelastic

D. Perfectly Elastic

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

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

Motivated by lower import prices, United States manufacturers increase their imports of steel from other steel-producing countries. Which of the following best describes the impact of the increased steel imports on the labor market for steelworkers in the United States? A Jobs in the United States steel industry will become less attractive, so wages will have to increase in this market to attract more workers to the United States steel industry. B Domestic steel prices will fall, leading to an increase in sales of domestically produced steel, which increases demand and employment of steelworkers. C The supply of steelworkers will increase, lowering the steelworker wage in the United States. D The supply of steelworkers will decrease, increasing the steelworker wage in the United States. E The demand for United States steelworkers will decline, putting downward pressure on steelworker wages.

E. The demand for United States steelworkers will decline, putting downward pressure on steelworker wages.

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

price of the output

If the price of the product goes up, the worker that produces the product becomes more valuable

marginal resource cost

The additional cost of an additional resource (worker)

Marginal Revenue Product

The additional revenue generated by an additional worker (resource)

land

all natural resources used to produce goods and services

Entrepeunership

ambitious leaders that combine other factors of production to create goods and services

labor

any effort a person devotes to a task for which that person is paid

physical capital

any human-made resource that is used to create other goods and services

capital

any human-made resource that is used to produce other goods and services

human capital

any skills or knowledge gained by a worker through education and experience

In a perfectly competitive labor market for nurses, all of the following statements are true EXCEPT: A The imposition of an effective minimum wage will result in unemployment. B An increase in the marginal product of nurses will increase the demand for nurses and increase wages. C An increase in the supply of nurses will create unemployment and leave wages unchanged. D An increase in the demand for health care will increase the demand for nurses and increase wages. E Revoking work permits for foreign nurses will increase wages of domestic nurses.

c. An increase in the supply of nurses will create unemployment and leave wages unchanged

Assuming a single, profit-maximizing employer in a labor market with many workers, which of the following statements relating to this monopsony is true? A This single employer will hire more labor than if the market were perfectly competitive but will pay a lower wage. B This single employer is a wage taker, needing to pay the equilibrium wage for the geographic area. C In increasing employment, the marginal factor cost of an additional unit of labor exceeds the wage rate paid to the laborer. D The profit-maximizing monopsonist will hire the quantity of labor where the marginal revenue product of labor intersects the labor supply curve. E The first workers hired are paid a higher wage than any additional workers hired by the monopsonist.

c. In increasing employment, the marginal factor cost of an additional unit of labor exceeds the wage rate paid to the laborer.

interest

capital is paid...

how to calculate MRC

change in total cost / change in input

how to calculate MRP

change in total revenue / change in inputs

wage rates

demand for labor shows the quantities of workers that firms will hire at different...

derived demand

demand for resources is derived from the demand for products those resources produce

profit

entrepreneurs are paid...

labor

firms demand...

industries, leisure

higher wages give workers incentives to leave other ____ or give up _____ activitites

wage

in perfectly competitive labor markets, the MRC equals the ___ set by the market and is constant

marginal product

in perfectly competitive markets the MRP equals the _____ _____ of the resource times the price of the product

goods, services

in the product market, individuals pay firms for ____ and ____

rent, wage

land is paid (two things)...

the four factors of production

land, labor, capital, entrepreneurship

equilibrium

minimum is found above the _____ on graph

what shifts the demand for labor

price of the output, productivity of the worker, change in the price of other resources

product market

resource market=

change in the price of other resources

substitute resources and complementary resources

price

wage replaces _____ on a graph as the y axis