Econ 4

Derived demand is (A) demand for an input used to produce a product. (B) demand derived from the satisfaction of a buyer for the product. (C) caused by monopoly control of the inputs. (D) derived from government policy. (E) dependent on the demand for a substitute or a complementary input.

A

Which of the following explains why the marginal revenue product of an input in a perfectly competitive market decreases as a firm increases the quantity of an input used? (A) The law of diminishing marginal returns (B) The law of diminishing marginal utility (C) The homogeneity of the product (D) The free mobility of resources (E) The total immobility of resources

A

Which of the following will cause an increase in the demand for labor? I. Increase in the price of the output II. Increase in worker productivity III. Increase in wages IV. Increase in the supply of workers (A) I only (B) II only (C) III only (D) I and II only (E) III and IV only

D

Which of the following would determine the marginal revenue product of an input used in a perfectly competitive output market? I. Dividing the change in total revenue by the change in the input II. Dividing the change in marginal revenue by the change in the output III. Multiplying the marginal revenue product by the marginal revenue of the output IV. Multiplying marginal revenue by the price of the output (A) I only (B) II only (C) III only (D) I and III only (E) II and IV only

D

A firm hiring inputs in a perfectly competitive market will hire up to the point where (A) marginal physical product of the input is at a minimum. (B) marginal physical product of the input is at a maximum. (C) the price of the input equals the price of the output. (D) the price of the input equals the marginal physical product of the input. (E) the price of the input equals the marginal revenue product of the input.

E

. The monopsonistic labor market shown above is initially in equilibrium. If a minimum wage is set at W, the level of employment will (A) decrease. (B) increase. (C) stay the same. (D) increase or decrease depending on how the supply curve shifts as a result of the change in the wage rate. (E) be indeterminant under monopsonistic labor markets.

B

23. The level of employment in the monopsony labor market shown above will be (A) A. (B) B. (C) C. (D) D. (E) less than A

B

The labor market shown above is initially in equilibrium. If a minimum wage level is set at Wm , employment will (A) increase from A to B. (B) increase from B to C. (C) decrease from B to A. (D) decrease from C to A. (E) decrease from C to B.

C

Number Number of Pizzas That of Chefs Can Be Made in an Hour 0 0 1 10 2 18 3 24 4 28 5 30 6 29 2. The law of diminishing marginal returns occurs after hiring which chef? (A) First (B) Second (C) Third (D) Fourth (E) Fifth 3. The marginal productivity of the third chef is (A) 24 pizzas (B) 18 pizzas (C) 10 pizzas (D) 8 pizzas (E) 6 pizzas 4. If the price per pizza is $10 and if each chef receives $20 an hour, how many chefs will the owner hire to maximize profits? (A) 2 (B) 3 (C) 4 (D) 5 (E) 6

A, E, D

In a competitive industry, suppose the marginal revenue product of the last donut baker hired is $35 and the marginal revenue product of the last bagel maker hired is $15. A bakery must pay donut bakers $40 a day and bagel makers $10 a day. Which of the following should the bakery hire to maximize profits? (A) More donut bakers and fewer bagel makers (B) Fewer donut bakers and more bagel makers (C) Fewer of both donut bakers and bagel makers (D) More of both donut bakers and bagel makers (E) Neither more nor fewer donut bakers or bagel makers

B

Pure economic rent refers to the (A) capital gains received from the sale of property. (B) payment to any resource over and above what is required to keep the resource in supply at its current level in the long run. (C) difference between the return to owners of land and the market rate of interest. (D)implicit value of owner-occupied housing in the long run. (E) price paid for a resource that has a perfectly elastic supply.

B

Use the following information to answer questions 11, 12 and 13. Units of Workers Total Product Product Price 0 0 $3.80 1 10 $3.70 2 19 $3.60 3 27 $3.50 4 34 $3.40 5 40 $3.30 11. The marginal revenue product of the third worker is approximately equal to (A) $21 (B) $26 (C) $28 (D) $30 (E) $35 12. Which of the following is true according to the information in the table? (A) The firm is selling its product in a purely competitive market. (B) The firm is selling its product in an imperfectly competitive market. (C) There is no level of output at which this firm can earn a profit. (D) The law of diminishing returns is not applicable to this firm. (E) The firm is hiring its workers in an imperfectly competitive labor market. 13. If the wage rate is constant and equal to $21, how many workers will the profit-maximizing firm hire? (A) 1 (B) 2 (C) 3 (D) 4 (E) 5

B,B,D

A firm is a competitive seller of output at a market price of $3. The only resource it requires to create its product is labor, which it purchases competitively at a wage rate of $6 per hour. The last worker it employs increases total output from 36 to 40 units per hour. What is the marginal revenue product for this worker? (A) $3 (B) $6 (C) $12 (D) $24 (E) $40

C

One reason why the supply of carpenters is greater than the supply of physicians is that (A) carpenters demand less income. (B) physicians do not belong to a union. (C) physicians must make a greater investment in human capital. (D) carpenters belong to unions. (E) carpenters are in greater demand than are doctors

C

Use the graph belowto answer questions 17, 18 and 19. 17. Under perfectly competitive conditions in the product and labor markets, the wage rate will be (A) W, and L1 workers will be hired. (B) W1 , and L1 workers will be hired. (C) W2 , and L1 workers will be hired. (D) W1 , and L2 workers will be hired. (E) W3 , and L1 workers will be hired. 18. Now suppose that through an employers' association, firms in this industry establish a monopsony in the hiring of labor. In this case, the wage rate will be (A) W, and L1 workers will be hired. (B) W1 , and L1 workers will be hired. (C) W2 , and L1 workers will be hired. (D) W2 , and L2 workers will be hired. (E) W3 , and L workers will be hired. 19. Now assume that workers react to the formation of this monopsony by establishing an inclusive union. To what level can this union increase the wage rate without causing the number of jobs to decline below that which the monopsony would otherwise provide? (A) W (B) W1 (C) W2 (D) W3 (E) Inclusive unions can never increase real wages.

D,A,C

A firm requires labor and capital to produce a given output. Labor costs $8 per hour, and capital costs $12 per hour. At the current output level, the marginal physical product of labor is 40 units, and the marginal physical product of capital is 60 units. To minimize its production costs at the current level of output, in which of the following ways should the firm change the amount of labor and capital? Labor Capital (A) Increase Increase (B) Increase Decrease (C) Decrease Increase (D) Decrease No Change (E) No Change No Change

E

A profit-maximizing firm should hire an input as long as the (A) firm can increase its total revenue. (B) price of the input doesn't exceed the price of the other inputs used in the firm's production. (C) marginal revenue product of the input is less than the cost of hiring the input. (D) marginal revenue product of the input is greater than the marginal revenue products of other inputs the firm is using. (E) marginal revenue product of the input is at least as much as the cost of hiring the input.

E

If the cost of labor, the only variable input, is $20, and the marginal physical product of labor is four units per hour, the marginal cost of the first unit of output is (A) $20. (B) $16. (C) $12. (D) $10. (E) $5.

E

The demand for labor will decrease in response to which of the following? (A) Increased productivity of labor (B) Better training of all laborers (C) A decrease in the supply of labor (D) An increase in the supply of labor (E) Decreased demand for goods and services produced by labor

E