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