Unit 9 Exam - Resource/Factor Markets

The labor demand curve slopes downward because it is the firm's marginal revenue product curve and the firm experiences diminishing marginal product. True False

True MRP = MR × MP. As more labor is hired, MP diminishes, thus causing a downward slope.

The supply curve for labor that a monopsonist faces is the supply curve for the industry. True False

True The supply curve is the industry supply. Because of this fact, the firm's MFC is greater than the wage rate.

Examine the graph below. If the wage rate is $15 per hour, the firm will hire a. 3 units of labor. b. 5 units of labor. c. 6 units of labor. d. 0 units of labor.

a. 3 units of labor. At $15, the wage rate equals the MRP at 3 units of labor.

Which of the following does not cause the labor demand curve to shift? a. Changes in the wage rate b. Changes in the price of the firm's good or service c. Increases in technology d. Increases in the firm's capital

a. Changes in the wage rate Changes in the wage rate motivate the firm to hire a a smaller or greater quantity of labor. this change is movement along a demand curve.

For a monopsonist, the marginal factor cost of labor is a. greater than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate. b. less than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate. c. less than the wage rate because if the monopsonist wants to hire another worker, it has to lower the wage rate. d. equal to the wage rate because if the monopsonist wants to hire another worker, it can hire the worker at the old wage rate.

a. greater than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate.

A firm that is perfectly competitive will hire labor as long as which of the following is true? a. VMP < W. b. VMP > W. c. MC > MR. d. VMP < MRP.

b. VMP > W. When the VMP = W, the firm stops hiring. As long as VMP > W, the firm continues to hire.

A firm produces 8 TVs with 1 unit of labor, 15 TVs with 2 units of labor, and 21 TVs with 3 units of labor. Its marginal revenue on each TV is $300. This would indicate that the firm a. has market power (monopolist or oligopolist) b. is a price taker (perfectly competitive firm). c. has market power in the labor market. d. is a factor price taker.

b. is a price taker (perfectly competitive firm). Marginal revenue is constant. Therefore, the firm is a perfectly competitive firm because the MR = price.

On a labor market graph, a firm's demand for labor is a. the wage rate. b. the marginal revenue product curve. c. the marginal product curve. d. interdeterminant.

b. the marginal revenue product curve. The marginal revenue product shows the addition to total revenue that an additional worker adds. It slopes downward because of diminishing marginal productivity. It represents the firm's demand for labor.

Which of the following businesses would most closely approximate a monopsonist? a. A steel mill in Pittsburgh b. A fast food franchise in a large city c. A large manufacturer in a rural county d. A rancher who hires ranch help

c. A large manufacturer in a rural county

Derived demand for labor means that when a firm hires labor, it has to derive its demand a. mathematically. b. based on the labor supply. c. from the demand for the product that the labor produces. d. based on the minimum wage.

c. from the demand for the product that the labor produces. Derived in this case means that the demand is based on the demand for the firm's product.

A high elasticity of demand for labor means that a. A small change in the wage rate causes a smaller percentage change in the quantity of labor demanded. b. A small change in the wage rate causes the same percentage change in the quantity of labor demanded. c. A small change in the wage rate causes no change in the quantity of labor demanded. d. A small change in the wage rate causes a larger percentage change in the quantity of labor demanded.

d. A small change in the wage rate causes a larger percentage change in the quantity of labor demanded. The elasticity ratio is grater than 1; therefore the demand is elastic.

A monopsony is a firm that, in a specific market, is the only a. seller of a product. b. buyer of a product. c. seller of a factor of production. d. buyer of a factor of production.

d. buyer of a factor of production.

In a labor market, the marginal revenue product curve is the firm's a. product demand curve. b. total product curve. c. labor supply curve. d. labor demand curve.

d. labor demand curve.

For a firm in perfect competition, the value of the marginal product is a. the value of an additional unit of output measured in terms of additional cost. b. the total value of the total output output divided by the total output. c. additional revenue minus additional cost as a result of an increase in output. d. the price of the product multiplied by the additional output resulting from an additional unit employed.

d. the price of the product multiplied by the additional output resulting from an additional unit employed. For a competitive firm, marginal revenue is the same as the product's price. Therefore, the definition of VMP is the same as the definition of MRP.