Econ Chapter 12

Which of the following is a correct statement about the labor market? a. Workers determine the supply of labor, and firms determine the demand for labor. b. Workers determine the demand for labor, and firms determine the supply of labor. c. Workers determine the supply of labor, and government determines the demand for labor. d. The forces of supply and demand, while present in the labor market, have nothing to balance in that market.

a. Workers determine the supply of labor, and firms determine the demand for labor.

Refer to Figure 12-4. With regard to cookie production, the figure implies a. diminishing marginal product of workers. b. diminishing marginal cost of cookie production. c. decreasing cost of cookie production. d. increasing marginal product of workers.

a. diminishing marginal product of workers.

What concept implies that a firm's marginal revenue product curve for labor will slope downward in the short run? a. diminishing marginal returns b. the law of supply c. the law of decreasing cost d. the price equalization principle

a. diminishing marginal returns

A firm's demand curve for labor shifts when the a. price of its output changes. b. wage rate changes. c. number of available workers changes. d. All of the above are correct.

a. price of its output changes.

If the demand for workers with doctorate degrees in economics increases, we would expect a. the wages of economists to increase in the short run and the number of economists employed to increase in the long run. b. the supply of economists to increase in the short run and their wages to rise in the long run. c. a rapid increase in the supply of economists, causing wages to remain constant. d. the wages of economists to decrease in the short run and the number of economists employed to increase in the long run.

a. the wages of economists to increase in the short run and the number of economists employed to increase in the long run.

The demand curve for a human resource will be more elastic when a. there are more and better substitutes are available for it. b. it is more difficult to substitute other resources for it. c. the demand for the product the resource is used to produce becomes more inelastic. d. the time period under consideration is shorter.

a. there are more and better substitutes are available for it.

Refer to Figure 12-4. As the number of workers increases, a. total output increases, but at a decreasing rate. b. marginal product increases, but at a decreasing rate. c. marginal product increases at an increasing rate. d. total output decreases.

a. total output increases, but at a decreasing rate.

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil a. will increase the demand for coal. b. will reduce the demand for coal. c. will increase the supply of coal. d. will reduce the supply of coal. e. will not affect the demand for coal.

a. will increase the demand for coal.

An increase in the demand for a product will cause a. both the demand for and prices of the resources used to produce the product to decline. b. both the demand for and prices of the resources used to produce the product to increase. c. the demand for the resources used to produce the product to increase and their prices to decline. d. the demand for the resources used to produce the product to decline and their prices to increase.

b. both the demand for and prices of the resources used to produce the product to increase.

The notion that the demand for inputs depends on the demand for outputs is termed a. inverse demand. b. derived demand. c. proportional demand. d. complementary demand.

b. derived demand.

The demand D1 and short-run supply SSR of accountants is indicated in Figure 12-2. Which of the following would most likely shift the demand for accountants from D1 to D2? a. an increase in the number of accounting majors in college b. enacting legislation that increases the complexity of personal and business tax returns c. high wages for accountants d. a reduction in the wages of bookkeepers, a substitute resource for accountants

b. enacting legislation that increases the complexity of personal and business tax returns

The marginal productivity principle says that a profit-maximizing firm should a. hire capital until its marginal product is zero. b. hire labor until another worker costs more to hire than he can earn for the firm. c. hire the quantities of capital and of labor at which their marginal products are equal. d. hire capital until its marginal product is negative.

b. hire labor until another worker costs more to hire than he can earn for the firm.

If unskilled labor is relatively plentiful and cheap in many foreign countries, then as the United States expands its trade with these foreign countries, the domestic demand for a. unskilled labor will rise and skilled labor will fall. b. skilled labor will rise and unskilled labor will fall. c. both skilled and unskilled labor will rise proportionately. d. both skilled and unskilled labor will be unaffected, assuming no barriers to free trade.

b. skilled labor will rise and unskilled labor will fall.

If the marginal revenue product of the fifth worker hired by a firm is $15 and the price of a unit of output is $5 regardless of how much is sold, then the marginal product of the fifth worker is a. 15 units of output. b. 5 units of output. c. 3 units of output. d. 45 units of output. e. 75 units of output.

c. 3 units of output.

Which one of the following labor resources will likely have the most inelastic supply schedule in the short run? a. filling station attendants b. sales clerks c. construction laborers d. dentists

d. dentists

If the market wage rate is $150 per worker, how many workers should be employed if the firm wants to maximize profit? a. 3 b. 4 c. 5 d. 6

c. 5

Refer to Table 12-6. If the market wage rate is $25 per day, how many workers should the firm hire if it wants to maximize profits? a. 4 b. 5 c. 6 d. 7

c. 6

Which of the following would tend to decrease the demand for carpenters? a. An increase in the wages of carpenters. b. An increase in the price of houses. c. A decrease in the demand for houses. d. An increase in the supply of carpenters.

c. A decrease in the demand for houses.

If the demand for a consumer good decreases, the demand for resources required to make the good will a. increase. b. remain the same, but the quantity demanded will increase. c. decrease. d. increase or decrease depending on whether the demand for the product is elastic or inelastic.

c. decrease.

If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a profit-maximizing firm will a. reduce the labor used and increase the machinery used if labor costs half as much as machinery. b. reduce the labor used and increase the machinery used if labor and machinery cost the same amount. c. reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery. d. reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery.

c. reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery.

As the price paid to a resource increases, a. the supply of that resource will increase in the resource market. b. the supply of that resource will decrease in the resource market. c. resources will shift from other resource markets to this one. d. resources will shift from this resource market to others. e. resource usage will be unaffected.

c. resources will shift from other resource markets to this one.

Refer to Table 12-5. At which number of workers does diminishing marginal product begin? a. 2 b. 3 c. 4 d. 5

d. 5

If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product? a. Its wage always equals its marginal revenue product. b. Its wage is always greater than its marginal revenue product. c. Its wage is always total revenue minus marginal revenue product. d. Its wage is always less than or equal to its marginal revenue product.

d. Its wage is always less than or equal to its marginal revenue product.

If Figure 12-1 indicated the short-run and long-run supply curves for a resource, which of the following would probably be the long-run supply curve of the resource? a. Q2 b. Q3 c. Sb d. Sa

d. Sa

Farmer Ted owned a worn-out piece of farmland for growing cotton, which he had been unable to rent for years. Suddenly he was getting offers from cotton farmers to lease his land. What is the most likely explanation of this? a. The price of cotton went down. b. The physical productivity of the land went up. c. Taxes on the land went up. d. The price of cotton went up.

d. The price of cotton went up.

The demand for a factor of production depends largely on the a. supply of the factor. b. supply of other factors of production. c. demand for other factors of production. d. demand for the products that it helps to produce.

d. demand for the products that it helps to produce.

If skilled labor is three times the cost of unskilled labor, a profit-maximizing firm will vary the quantity of each type of labor until the a. marginal product of each is the same. b. amount of unskilled labor used is three times the quantity of skilled labor used. c. amount of unskilled labor used is one-third the quantity of skilled labor used. d. marginal product of unskilled labor is one-third that of skilled labor.

d. marginal product of unskilled labor is one-third that of skilled labor.

The derived demand curve for a resource is downward sloping because a. the demand for products that utilize the resource is directly related to the price of the resource. b. the marginal productivity of resources will decline as their price increases. c. as the price of a resource rises, other resources will be less desirable than the higher priced resource. d. other resources will be substituted for a resource that increases in price.

d. other resources will be substituted for a resource that increases in price.

According to the principle of marginal productivity, if a. the product price is less than marginal revenue product (MRP), the firm is using too little of the input. b. the price of an input rises, the quantity demanded of the input will increase. c. MRP is greater than product price, the firm should reduce the use of the input. d. price of the input equals MRP, the firm is maximizing profit.

d. price of the input equals MRP, the firm is maximizing profit.

Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at point A. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20, then there will be an excess a. supply of 3,000 workers. b. demand of 7,000 workers. c. supply of 4,000 workers. d. supply of 7,000 workers.

d. supply of 7,000 workers.