URI Econ 201 Final Study Questions

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

A lower price and more firms

If economic profits are earned in a competitive market, then over time

Additional firms will enter the market

Other things being equal, which of the following would increase the market demand for labor?

An increase in the marginal productivity of labor

The demand for labor and other factors of production typically decline in a recession because those factors

Are derived from the demand for final output, which also declines in a recession.

The market supply curve for labor curve is upward-sloping because

As the wage rises, most workers are willing to work more hours

Marginal Cost

Change in Total Cost / Change in Output

In order to continue earning an economic profit, individual farmers must

Continue to improve their productivity.

If the price of the output produced by a particular type of labor decreases, which of the following shifts should occur in the labor market for the particular type of labor?

Demand for labor should shift to the left

As labor productivity increases, which of the following shifts in the labor market should occur?

Demand for labor should shift to the right

If the marginal revenue product of labor improves, which of the following shifts in the labor market should occur?

Demand for labor should shift to the right

If consumers decide to buy fewer strawberries, then the

Demand for strawberry pickers will fall

The demand for labor is downward-sloping because of

Diminishing returns to labor

Marginal physical product (MPP) diminishes as additional workers are hired because

Each worker has an increasingly smaller amount of other factors with which to work.

If an agricultural market is perfectly competitive, which of the following types of behavior might be expected?

Economic profits encourage entry.

For a competitive market in the long run

Economic profits induce firms to enter until profits are normal

In monopolistic competition, if economic profits are being earned, which of the following will NOT happen

Entry will cause the market price to fall

The equilibrium price in a competitive market

Equates the demand for goods with the supply of goods

When interest rates fall, the cost to borrow money falls, land values

Increase because the profitability of land is inversely related to interest rates.

The exit of farms from a market should

Increase the equilibrium market price.

Entry into a market characterized by monopolistic competition

Is frequent because barriers to entry are low

Which of the following is NOT true about the demand for factors of production?

It is a function of the elasticity of supply

The willingness to work a certain amount of time at a given wage rate is known as

Labor supply

If new firms enter a monopolistically competitive market, the demand curves for the existing firms will shift to the

Left and become more price-elastic

If the tax on an employee's wages is increased, there will be a

Leftward shift of the labor supply curve.

A firm should hire an additional worker as long as the wage rate is

Less than or equal to the additional revenue generated by the worker.

Individual farmers maximize profit by producing the level of output at which

Marginal cost equals price.

Which of the following characterizes the difference between oligopoly and monopolistic competition?

Monopolistic competitive firms experience zero long-run economic profit; oligopolists may experience positive long-run economic profit

If the wage rate increases, there will be a

Movement up the labor supply curve to the right

When the marginal output (MPP) of labor is zero, ceteris paribus,

No further increases in input can be achieved by using additional units of labor

If there is an increase in the number of workers who want to work as accountants, there will be a

Rightward shift of the labor supply curve.

If the number of available workers of a particular type increases, which of the following shifts should occur in the labor market for the particular type of labor?

Supply of labor should shift to the right

When people are standing in line for jobs and there are more applicants than jobs, then the labor market is characterized by a

Surplus of labor.

If the MPP of an additional unit of labor is 4 units per hour, product price is constant at $5 per unit, and the wage rate is $19 per hour, then

The additional unit of labor should be employed.

The market supply of labor is

The amount of labor all workers supply at different wage rates

The marginal physical product (MPP), also know as marginal output, of labor is equal to

The change in total output divided by the change in quantity of labor

A profit-maximizing firm should continue to hire workers until the MRP has declined to the level of the market wage rate in a competitive labor market.

True

In the long run, a monopolist can continue to earn economic profits

True

When there are more qualified applicants than job openings, this indicates that the

Wages being offered are too high

Which of the following is a characteristic of a perfectly competitive market?

Zero economic profit in the long run

Which of the following is consistent with farming as a competitive market?

Zero economic profit in the long run

If Economic Profit < 0

leave, stop what you're doing

The entry of firms into a market

Reduces the profits of existing firms in the market

Average Cost

Total Cost / Output

If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

$10 per hour

If long-run economic losses are being experienced in a competitive market

Equilibrium price will rise as firms exit

Increase the equilibrium market price.

Exit until profits are normal

For wages to be higher without sacrificing jobs, productivity must decrease

False

Which of the following is true for a perfectly competitive agricultural market with economic profits?

Firms will enter and existing firms will increase their production until economic profits are zero

If price is above the long-run competitive equilibrium level

Firms will enter the market

In a monopolistic competitive market with negative economic profits

Firms will exit until economic profits are zero

In which of the following cases would a firm enter a market?

P>long-run ATC

The exit of firms from a market, ceteris paribus

Reduces the economic losses of remaining firms in the market

If a new sushi restaurant opens, then

The market supply curve for sushi will shift to the right

The wage rate is

The payment for labor

If there is an increase in immigration into a specific labor market, then

The supply of labor shifts rightward, and the equilibrium wage will fall

The change in a firm's total revenue associated with one additional worker measures

The value of a worker to the firm

Which of the following would not shift the market demand for labor, ceteris paribus?

The wage paid to labor

For an upward-sloping labor supply curve, the quantity of labor supplied varies directly, ceteris paribus, with

The wage rate

If Economic Profit > 0

stay, don't leave, keep doing what you're doing