Question 1

Firm A is a monopoly.The demand for its output is p = 90 - Q.Production is such that Q = L.Firm A hires only unionized labor.The marginal cost to the union is $10 per unit of labor.The union will sell

Accepted Answer

A)   20 units of labor at a wage of $10.
B)   20 units of labor at a wage of $40.
C)   20 units of labor at a wage of $50.
D)   20 units of labor at a wage of $70.E) B) and D)
F) B) and C)

Question 2

The profit maximizing condition for a firm selling its output in a competitive market and buying its resources in a competitive market is

Accepted Answer

A)   P = MC only.
B)   MRP = wage only.
C)   Both A and B.
D)   Neither A nor B.E) B) and D)
F) None of the above

Question 3

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is
p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

Accepted Answer

The firm's marginal revenue product of l...

Question 4

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

Accepted Answer

A)   the supply curve becomes more elastic at the optimum.
B)   the supply curve becomes less elastic at the optimum.
C)   the supply curve becomes horizontal.
D)   the value of the last unit of labor hired is greater than the cost.E) B) and C)
F) A) and D)

Question 5

XYZ Co.operates in a competitive market.Its production function is q = LαKβ.The exponents,α and β,are both less than 1.The firm's capital is fixed,and it takes the wage and price as given.Derive the firm's short-run demand for labor as a function of K,w,and p.How does the firm react to an increase in the wage rate?

Accepted Answer

MP_L = αL^α-1K^β.The firm sets w = p(α...

Question 6

The labor supply curve for a monopsony is

Accepted Answer

A)   perfectly horizontal.
B)   perfectly vertical.
C)   upward sloping but not perfectly vertical.
D)   downward sloping.E) A) and D)
F) B) and C)

Question 7

Company towns are often decried as monopsonists.Why was it unlikely that another employer would move into a company town?

Accepted Answer

A)   The marginal workers available in the company town had low marginal revenue product.
B)   The existing monopsonist had a first-mover advantage.
C)   The marginal workers available in the company town would demand a wage higher than that obtained at the existing monopsonist.
D)   Any of the above.E) All of the above
F) None of the above

Question 8

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Accepted Answer

The mine was operating as a mo...

Question 9

If a firm is a price taker in both the labor market and the output market,it will

Accepted Answer

A)   earn zero economic profit in the short run.
B)   hire labor until the marginal product of labor equals zero.
C)   hire labor until the marginal revenue product equals the output price.
D)   hire labor until the marginal revenue product equals the wage rate.E) B) and D)
F) A) and D)

Question 10

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

Accepted Answer

To hire additional labor,the monopsonist...

Question 11

Suppose the marginal product of labor equals 1/L.If the firm can sell its output for $10 per unit,and the wage is $1 per unit,how many units of labor will the firm hire?

Accepted Answer

A)   0
B)   1
C)   10
D)   100E) B) and D)
F) A) and B)

Question 12

In the short run,the competitive firm will hire more labor if

Accepted Answer

A)   the wage rate increases.
B)   the price the firm receives for the output increases.
C)   the price the firm receives for the output decreases.
D)   a specific tax is imposed on the output.E) A) and D)
F) A) and C)

Question 13

If a firm has market power in the output market but buys labor in a competitive market,it will hire the same quantity of labor that a competitive firm will.

Accepted Answer

A) True 
 B)False

Question 14

After Hurricane Katrina destroyed much of the infrastructure of the United States Gulf Coast,

Accepted Answer

A)   labor became more valuable.
B)   labor became less valuable because of the capital that had been destroyed.
C)   labor became less valuable because FEMA's response wasn't timely.
D)   labor became more valuable because of the rebuilding effort.E) B) and D)
F) B) and C)

Question 15

Firm A is a monopsonist that faces a labor supply elasticity of 2.4 whereas Firm B is a monopsonist that faces a labor supply elasticity of 1.4.Which of these monopsonists pays a higher wage?

Accepted Answer

A)   Firm A
B)   Firm B
C)   They both pay the same.
D)   It is impossible to tell which pays a higher wage.E) B) and C)
F) A) and B)

Question 16

For a competitive firm the marginal revenue product of labor is usually downward sloping.

Accepted Answer

A) True 
 B)False

Question 17

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Accepted Answer

A)   hires zero units of labor.
B)   chooses the perfectly competitive quantity of labor.
C)   must increase the wage to attract more units of labor.
D)   must take the wage as given by the market.E) A) and B)
F) None of the above

Question 18

For a monopoly,the value of the next worker equals

Accepted Answer

A)   MR ∗ MPL.
B)   (price + the effect of increased output on price)  ∗ MPL.
C)   P(1+1/e)  * MPL
D)   All of the above.E) B) and D)
F) B) and C)

Question 19

Monopolization of either the labor market or the output market results in

Accepted Answer

A)   higher wages than when both are competitive.
B)   a higher output price than when both are competitive.
C)   a higher level of output than when both are competitive.
D)   All of the above.E) A) and C)
F) A) and B)

Question 20

A monopoly's demand curve for labor

Accepted Answer

A)   is below that of a competitive market.
B)   is the same as that of a competitive market.
C)   is above that of a competitive market.
D)   equals p ∗ MPL.E) B) and D)
F) All of the above

Exam 15: Factor Markets

After Hurricane Katrina destroyed much of the infrastructure of the United States Gulf Coast,

Correct Answer
verified

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

Correct Answer
verified
To hire additional labor,the monopsonist...
View Answer

Suppose the marginal product of labor equals 1/L.If the firm can sell its output for $10 per unit,and the wage is $1 per unit,how many units of labor will the firm hire?

Correct Answer
verified

For a competitive firm the marginal revenue product of labor is usually downward sloping.

Correct Answer
verified

The labor supply curve for a monopsony is

Correct Answer
verified

Monopolization of either the labor market or the output market results in

Correct Answer
verified

Firm A is a monopoly.The demand for its output is p = 90 - Q.Production is such that Q = L.Firm A hires only unionized labor.The marginal cost to the union is $10 per unit of labor.The union will sell

Correct Answer
verified

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Correct Answer
verified
The mine was operating as a mo...
View Answer

Correct Answer
verified
MP_L = αL^α-1K^β.The firm sets w = p(α...
View Answer

If a firm is a price taker in both the labor market and the output market,it will

Correct Answer
verified

For a monopoly,the value of the next worker equals

Correct Answer
verified

If a firm has market power in the output market but buys labor in a competitive market,it will hire the same quantity of labor that a competitive firm will.

Correct Answer
verified

Company towns are often decried as monopsonists.Why was it unlikely that another employer would move into a company town?

Correct Answer
verified

The profit maximizing condition for a firm selling its output in a competitive market and buying its resources in a competitive market is

Correct Answer
verified

In the short run,the competitive firm will hire more labor if

Correct Answer
verified

Firm A is a monopsonist that faces a labor supply elasticity of 2.4 whereas Firm B is a monopsonist that faces a labor supply elasticity of 1.4.Which of these monopsonists pays a higher wage?

Correct Answer
verified

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Correct Answer
verified

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

Correct Answer
verified
The firm's marginal revenue product of l...
View Answer

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

Correct Answer
verified

A monopoly's demand curve for labor

Correct Answer
verified

Exam 15: Factor Markets

After Hurricane Katrina destroyed much of the infrastructure of the United States Gulf Coast,

Correct AnswerverifiedShow Answer

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

Correct AnswerverifiedTo hire additional labor,the monopsonist...View AnswerShow Answer

Suppose the marginal product of labor equals 1/L.If the firm can sell its output for $10 per unit,and the wage is $1 per unit,how many units of labor will the firm hire?

Correct AnswerverifiedShow Answer

For a competitive firm the marginal revenue product of labor is usually downward sloping.

Correct AnswerverifiedShow Answer

The labor supply curve for a monopsony is

Correct AnswerverifiedShow Answer

Monopolization of either the labor market or the output market results in

Correct AnswerverifiedShow Answer

Firm A is a monopoly.The demand for its output is p = 90 - Q.Production is such that Q = L.Firm A hires only unionized labor.The marginal cost to the union is $10 per unit of labor.The union will sell

Correct AnswerverifiedShow Answer

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Correct AnswerverifiedThe mine was operating as a mo...View AnswerShow Answer

Correct AnswerverifiedMPL = αLα-1Kβ.The firm sets w = p(α...View AnswerShow Answer

If a firm is a price taker in both the labor market and the output market,it will

Correct AnswerverifiedShow Answer

For a monopoly,the value of the next worker equals

Correct AnswerverifiedShow Answer

If a firm has market power in the output market but buys labor in a competitive market,it will hire the same quantity of labor that a competitive firm will.

Correct AnswerverifiedShow Answer

Company towns are often decried as monopsonists.Why was it unlikely that another employer would move into a company town?

Correct AnswerverifiedShow Answer

The profit maximizing condition for a firm selling its output in a competitive market and buying its resources in a competitive market is

Correct AnswerverifiedShow Answer

In the short run,the competitive firm will hire more labor if

Correct AnswerverifiedShow Answer

Firm A is a monopsonist that faces a labor supply elasticity of 2.4 whereas Firm B is a monopsonist that faces a labor supply elasticity of 1.4.Which of these monopsonists pays a higher wage?

Correct AnswerverifiedShow Answer

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Correct AnswerverifiedShow Answer

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

Correct AnswerverifiedThe firm's marginal revenue product of l...View AnswerShow Answer

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

Correct AnswerverifiedShow Answer

A monopoly's demand curve for labor

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
To hire additional labor,the monopsonist...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The mine was operating as a mo...
View Answer

Correct Answer
verified
MP_L = αL^α-1K^β.The firm sets w = p(α...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The firm's marginal revenue product of l...
View Answer

Correct Answer
verified

Correct Answer
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