AP Microeconomics Unit 5

In a competitive industry, suppose the marginal revenue product of the last sandwich maker is $20 and the marginal revenue product of the last soup maker hired is $15. A restaurant must pay sandwich makers $30 a day and soup makers $10 per day. Which of the following should the restaurant hire to maximize profits?

fewer sandwich makers and more soup makers

The graph above illustrates the labor market for teenage workers. The current minimum wage for all workers is W1. If congress introduces a sub-minimum wage, W2, that applies only to teenagers what is the most likely effect of teenage employment?

teenage employment will increase because firms will want to hire more teenagers at W2 than W1

As a factor of production, capital refers to the

tools and machinery used to produce goods and services

A perfectly competitive employer hires labor up to the point where

wage = marginal revenue product of labor

If total product of labor (Q) is rising at an increasing rate

marginal product of labor is rising

If a monopsony labor market suddenly were transformed into a perfectly competitive labor market, how would the wage and employment change?

both would increase

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?

4

Chart for 6 and 7 If output sells for $20 per unit what is the marginal revenue product of the 5th worker?

$40

The marginal physical product of the 2nd worker is

19

Chart for 13 & 14 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

4

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 margin 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?

Employment of labor increase Employment of capital decrease

The graph above shows the marginal revenue product and the market wage rate for a profit maximizing firm. Which of the following is true of the firm's of hiring labor?

It should hire 90 workers

Which of the following is most likely to increase the supply of soldiers for an all-volunteer army?

a decrease in the average wage rate in civilian employment

If labor is the only variable input of a firm and the marginal product of labor is falling, the firm will always produce

at a level of output where marginal costs are rising

An increase in the demand for automobiles will cause the demand for skilled automobile workers and the wage rate of skilled automobile workers to change in which of the following ways?

demand for workers- increase wage rate- increase

A monopsony employer hires labor up to the point where

marginal resource cost = marginal revenue product of labor

A change in a firms total revenue which results from the hire of an additional worker is measured by

marginal revenue product

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 firm's product will result in which of the following changes in the labor market?

the demand curve for labor will shift to the right

Which of the following explains why the marginal revenue product of an input in a perfectly competitive product market decreases as a firm increases the quantity of an input used?

the law of diminishing marginal returns

A profit maximizing firm that sells its output in a perfectly competitive market hires 2 additional workers, calculating that the contribution to total revenue of the last worker hired equals the extra cost of hiring that worker. Six months later, the firm finds that the last worker's contribution to total revenue is less than the extra cost of hiring that worker. Which of the following may have occurred to explain this change?

the market demand for the firm's product decreased