Ch 14
What happens to the marginal revenue product curve of a factor as more of a complementary factor is hired
It shifts to the right, because it's marginal product increases
Which of the following statements is true when comparing monopsony and competitive labor markets
The monopolist's wage and quantity of labor are lower than would prevail under the perfect competition
The acme Co is a perfect competitor in its input markets and its output markets. It's average product of labor is at its mascimum and equals 30. The marginal revenue product of labor is $300. The price of its outputs
$10
The acme company is a perfect competitor in its input markets and its output markets. It's average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme company, the marginal revenue product of labor
$100
How much labor should the firms employ if labor costs $30 a unit
4 units of labor
What is the marginal profit from hiring the third unit of labor
65
The marginal expenditure curve for labor is based on the assumption that
All workers are paid the same wage rate
An increase in technology that enhances labor productivity will likely result in
An increase in labor employment and an increase in the wage rate
The acme co is a perfect competitor in its input markets and a monopolist in its output market. It's average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For acme co, the marginal revenue product of labor
Cannot be determined with the info given
The marginal product of labor for acme is 15. The average product of labor a 25, and the price of labor is $10. Assuming that acme is a competitor in it's output and input markets, the marginal revenue product of labor
Cannot be determined with the information provided
What can account for the negative slope of the marginal revenue product curve
Diminishing marginal returns
In a competitive labor market, with one variable factor, the supply of labor to the firm is
Equal to the marginal expenditure curve
Why doesn't the marginal worker hired earn economic rent in a competitive labor market
His reservation wage is equal to the wage
The industry demand curve for labor is the
Horizontal sum of individual firm labor demand curves
When the factor market is purely competitive, the firm's average expenditure curve for a factor of production is
Identical to the marginal expenditure curve
The substitution effect of a decrease in the wage will
Increase leisure, regardless of whether leisure is a normal or inferior good
A firm purchases a factor of production in a competitive market. The the current purchase rate the MRP of the factor is greater than the marginal expenditure for the factor. Thus, the firm
Increase profit by expanding the employment of the factor of production
If leisure is a normal good, then the income effect of a decrease in wage will
Increase the number of hours worked
The income effect of the wage increase on the amount of hours of leisure is
L0 to L2
The substitution effect of the wage increase on the amount of hours of leisure is
L1 to L0
The substitution effect of the wage decrease on the amount of hours of leisure
L1 to L2
Other things being equal, the marginal revenue product curve for competitive seller
Lies above the MRP curve for a monopolist
Supposed that a tax is imposed on each unit of the product that John produces. Which curve will shift?
Marginal revenue of the product of labor
In the US, Major League Baseball is exempt from antitrust laws. Before 1975 the baseball team owners agreed to home an annual draft of amateur baseball players. Once the players were drafted and signed by a team, they were effectively fired to that team for life. This allowed baseball owners to operate like
Monopolistic cartel
The income effect of the wage decrease on the amount of hours of leisure is
None of the above
When contemplating the purchase of a resource, the pure monopsonist should do which of the following to maximize profit
Purchase enough to make the marginal expenditure equal to the marginal revenue product
If the firms in an industry could take advantage of a reduced wage of labor, how could one best describe the firm's demand for labor? The MRPL
Schedule would remain unchanged, and the firms would hire more labor at the lower wage
There is always some economic rent whenever
Supply of a factor is upward sloping
An example of monopoly power in input markets is
The United Auto Workers union in the market for auto worker services
When comparing the market price of an input in a market characterized by bilateral monopoly to a perfectly competitive price
The bilateral monopoly price can be higher than, lower than, or equal to the competitive price
Which of the following is true concerning equilibrium in a monopolistic factor market
The firm maximizes profit but does not use the efficient level of the input
If an individual's labor supply curve is backward bending, then
The income effect associated with a higher wage is greater than the substitution effect
Who does not earn economic rent in a competitive factor market
The last factor of production hired
If only one firm in an industry could take advantage of a reduced wage of labor and all other firms continue paying the old wage, how could one best describe the one firm's reaction to this reduced wage assuming labor is the only variable input?
The marginal revenue product of labor curve would remain unchanged and the firm would hire more labor at the lower wage
Supposed the labor market and all output markets are perfectly competitive. When the labor market is in equilibrium,
The wage rate equal the marginal revenue product of labor
Suppose that the labor market is perfectly competitive but the output market is not. When the labor market is in equilibrium
The wage rate will be less than the price times the marginal product of labor
Supposed that the labor market is perfectly competitive, but the output market is not. When the labor market is in equilibrium,
The wage rate will equal the marginal revenue product of labor
Under what circumstances are the marginal expenditure for an input and the average expenditure always equal?
There is a competitive buyer
Suppose that a pollution tax is imposed on each unit of a firm's output. The number of workers hired
Will decrease
Suppose that a subsidy is implemented on each unit of labor hired, then the number of workers hired
Will increase
Suppose that the price of the product rises to $5, the price of labor
Will increase
Supposed that the price of the product rises to $5, the number of workers hired
Will increase
How much will the monopsonist pay each worker
83
The marginal revenue product can be expressed as the
Increment to revenue received from one additional unit of input hired
Under what circumstance will all of the payment to a factor of production be economic rent? When a factor of production has
Infinitely elastic supply curve
Under what circumstances will the economic rent earned by a doctor of production always be zero
Infinitely elastic supply curve
The bilateral monopoly wage rate is
Any of the above
Which of the following is not true about the supply of labor to the firm in a competitive labor market
It is upward sloping
The acme company is a perfect competitor in its input markets and monopolist in its output market. The marginal product of labor is 20 and the price of Acme's output is $10. for acme co, the marginal revenue product of labor
Less than $200
In the US, Major League Baseball is exempt from antitrust laws. Before 1975 the baseball team owners agreed to home an annual draft of amateur baseball players. Once the players were drafted and signed by a team, they were effectively fired to that team for life. Before 1975, professional baseball players were paid
Less than their marginal revenue product
For a monopsony buyer, the marginal expenditure curve
Lies above the average expenditure curve
If the factor supply curve facing a monopolist is the market supply curve, and if the market supply curve is an upward sloping straight line, the marginal expenditure curve
Lies above the market supply curve
In the competitive output market for good Q, marginal revenue product for an input X can be expressed as
MPx * Pq
Suppose that the price of the product rises to $5, which is the following curves shifts
MRP curve
If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where
MRP labor = wage
If a competitive industry produces output, Q, using some input, I, efficient use of resources requires that
MRPi = Pi
When compared to the demand curve for only one variable input the demand curve for a factor input when several inputs are variable is
More elastic
Assume that labor and capital are complements in production and that the wage of labor is being reduced. Which of the following statement best describes the adjustments in the use of labor
More labor is used both because of the reduced wage and increased use of capital
The monopsony wage rate is
W1
To maximize the number of workers hired, the labor union will agree to wage rate
W1
The competitive wage rate is
W2
The maximize total wages paid to workers, the labor union will agree to wage rate
W2
The monopoly wage rate is
W3
To maximize economic rent, the labor union will agree to wage rate
W3
A firm should hire more labor when the marginal revenue product of labor
exceeds the wage rate
Assume tat as the wage rate rises a worker's substitution effect for leisure is larger than the income effect. We can conclude that in this region, the worker's
labor supply curve will have the usual upward slope
The marginal revenue product of labor is equal to
the marginal physical product multiplied by the marginal revenue of the output
