Question 1

A 20 percent increase in the wage rate induces firms in an industry to reduce quantity demanded for labor by 5 percent in the first year. Five years later we would expect, other things constant,

Accepted Answer

A)  the reduction in the quantity demanded of labor to be much greater than 5 percent.
B)  the reduction in the quantity demanded of labor to be less than 5 percent.
C)  the reduction in the quantity demanded of labor to be about 5 percent.
D)  the quantity demanded of labor to be back to its original level.E) C) and D)
F) B) and C)

Question 2

A profit-maximizing firm will hire workers up to the point at which

Accepted Answer

A)  MRP 
B)  MRP = MFC.
C)  MRP > MFC.
D)  MRP = MPP.E) A) and D)
F) A) and B)

Question 3

A monopolist will hire fewer workers than a competitive firm, other things being equal, because

Accepted Answer

A)  the monopolist exploits labor and other types of producers do not.
B)  the monopolist must take account of the declining product price that must be charged in order to sell more units of the product.
C)  the monopolist is more efficient.
D)  diminishing marginal productivity of labor is more severe for a monopolist.E) C) and D)
F) None of the above

Question 4

In an imperfectly competitive labor market, the firm is faced with a(n) ________ MPP curve and a(n) ________ MR curve.

Accepted Answer

A)  downward sloping; upward sloping
B)  downward sloping; downward sloping
C)  upward sloping; downward sloping
D)  downward sloping; horizontalE) B) and C)
F) A) and B)

Question 5

When there is an increase in the wages the banking industry offers accountants, what happens to the supply of accountants available to other industries?

Accepted Answer

A)  The supply to other industries increases.
B)  The supply to other industries falls.
C)  The supply curve for other industries shifts to the right.
D)  no changeE) A) and B)
F) B) and C)

Question 6

A profit-maximizing firm will hire additional units of labor until

Accepted Answer

A)  the additional cost of hiring the last worker equals the additional revenue generated by that worker.
B)  the additional cost of hiring the last worker equals the marginal factor cost of the worker.
C)  the extra revenue from hiring the last worker equals the marginal physical product of labor.
D)  the extra cost from hiring the last worker equals the cost of the product.E) A) and B)
F) A) and C)

Question 7

When 4 units of labor are employed, total product is 6 units; when 5 units of labor are employed, total product is 9 units of output. If the price of output is $5 per unit, what is the marginal revenue product of the 5th unit of labor?

Accepted Answer

A)  $3
B)  $5
C)  $15
D)  $45E) B) and D)
F) All of the above

Question 8

Derived demand is

Accepted Answer

A)  a derivative of the demand curve.
B)  the demand for goods and services produced by companies using scarce resources.
C)  the demand for advertising to increase the sales of the product.
D)  the demand for the factors of production that are used to produce goods and services.E) A) and C)
F) B) and C)

Question 9

The marginal physical product of labor for the most recent worker hired by Ajax is 286. If Ajax were to hire an additional worker we would expect the marginal physical product of labor to

Accepted Answer

A)  remain at 286.
B)  be below 286.
C)  be above 286 by a small amount.
D)  be above 286 by a large amount.E) A) and D)
F) A) and B)

Question 10

A firm should hire workers up to the point where

Accepted Answer

A)  MP = P.
B)  MFC = P.
C)  MFC = MRP.
D)  MP = MRP.E) C) and D)
F) B) and C)

Question 11

Employment of labor in a country other than the firm's home country is called

Accepted Answer

A)  employing guest workers.
B)  outsourcing.
C)  employing non-naturalized workers.
D)  employing illegal aliens.E) None of the above
F) A) and B)

Question 12

The demand for labor is

Accepted Answer

A)  derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money.
B)  derived from the demand for the final product being produced.
C)  derived from a utility maximizing process similar to that used to derive the demand curve for goods and services.
D)  totally unrelated to the demand curve for the final product.E) A) and C)
F) All of the above

Question 13

-Refer to the above table. Which of the following statements is correct?

Accepted Answer

A)  The table follows economic principles because in an increasing cost industry, increases in a variable input will lead to increase in output.
B)  The table does not follow economic principles because in an increasing cost industry, increases in a variable input will lead to decrease in output.
C)  The table follows economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to a decrease in the marginal physical product.
D)  The table does not follow economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to an increase in the marginal physical product.E) None of the above
F) All of the above

Question 14

Suppose at the current level of labor used, MRP = $100 and MFC = $150. To maximize profits, the firm should

Accepted Answer

A)  hire more labor.
B)  reduce the level of labor.
C)  maintain the current level of labor.
D)  expand production.E) All of the above
F) A) and B)

Question 15

-Refer to the above table. Suppose the firm hires 5 workers and the price of the good sold is $3. The marginal factor cost of labor must be

Accepted Answer

A)  $3.
B)  $100.
C)  $300.
D)  $900.E) A) and B)
F) A) and C)

Question 16

The price elasticity of demand for labor will be smaller, the

Accepted Answer

A)  greater is the price elasticity of demand for the final product.
B)  easier it is to employ substitute inputs in production.
C)  smaller is the proportion of wage costs in the total cost of production.
D)  longer is the time period under examination.E) A) and D)
F) A) and C)

Question 17

Which of the following statements is true about the market demand curve for labor?

Accepted Answer

A)  The market demand curve is the sum of the individual firm's demand curve.
B)  The market demand curve will be perfectly inelastic since firms need labor.
C)  The market demand curve shows the quantities of labor demanded by all firms in the industry at various marginal products.
D)  The market demand curve depends upon labor productivity, the wage rate and the price of the final product.E) B) and D)
F) A) and C)

Question 18

Which of the following will NOT shift the MRP curve for labor?

Accepted Answer

A)  a change in the productivity of labor
B)  a change in the price of the product being sold
C)  a change in the wage rate in the market
D)  a change in the demand for the product being producedE) B) and C)
F) A) and B)

Question 19

An increase in the price of a product

Accepted Answer

A)  automatically increases wages.
B)  raises the firm's demand for labor.
C)  would probably decrease total revenues.
D)  increases productivity.E) A) and C)
F) A) and B)

Question 20

The equilibrium wage rate in an industry is determined by

Accepted Answer

A)  finding where the market supply curve indicates that the substitution effect and income effect of a wage increase are offsetting.
B)  the intersection of the market demand curve for labor and the market supply curve for labor.
C)  the strength of the substitution effect relative to the elasticity of demand for labor.
D)  whether workers or management are better at negotiating.E) A) and C)
F) A) and B)

Exam 28: The Labor Market: Demand, Supply and Outsourcing

The equilibrium wage rate in an industry is determined by

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-Refer to the above table. Which of the following statements is correct?

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A firm should hire workers up to the point where

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Which of the following will NOT shift the MRP curve for labor?

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Derived demand is

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When 4 units of labor are employed, total product is 6 units; when 5 units of labor are employed, total product is 9 units of output. If the price of output is $5 per unit, what is the marginal revenue product of the 5th unit of labor?

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In an imperfectly competitive labor market, the firm is faced with a(n) ________ MPP curve and a(n) ________ MR curve.

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An increase in the price of a product

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A 20 percent increase in the wage rate induces firms in an industry to reduce quantity demanded for labor by 5 percent in the first year. Five years later we would expect, other things constant,

Correct AnswerverifiedShow Answer

The marginal physical product of labor for the most recent worker hired by Ajax is 286. If Ajax were to hire an additional worker we would expect the marginal physical product of labor to

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When there is an increase in the wages the banking industry offers accountants, what happens to the supply of accountants available to other industries?

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A profit-maximizing firm will hire additional units of labor until

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Which of the following statements is true about the market demand curve for labor?

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-Refer to the above table. Suppose the firm hires 5 workers and the price of the good sold is $3. The marginal factor cost of labor must be

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The price elasticity of demand for labor will be smaller, the

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A profit-maximizing firm will hire workers up to the point at which

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Suppose at the current level of labor used, MRP = $100 and MFC = $150. To maximize profits, the firm should

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Employment of labor in a country other than the firm's home country is called

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A monopolist will hire fewer workers than a competitive firm, other things being equal, because

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The demand for labor is

Correct AnswerverifiedShow Answer

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In an imperfectly competitive labor market, the firm is faced with a(n) MPP curve and a(n) MR curve.

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