Question 1

An increase in technology that enhances labor productivity will likely result in:

Accepted Answer

A)  a decrease in labor employment and an increase in the wage rate. 
B)  an increase in labor employment and an increase in the wage rate. 
C)  a decrease in labor employment and a decrease in the wage rate. 
D)  an increase in labor employment and a decrease in the wage rate. 
E)  employers using less labor and more capital while the wage effect is unknown. 
A)  a decrease in labor employment and an increase in the wage rate. 
B)  an increase in labor employment and an increase in the wage rate. 
C)  a decrease in labor employment and a decrease in the wage rate. 
D)  an increase in labor employment and a decrease in the wage rate. 
E)  employers using less labor and more capital while the wage effect is unknown. B

Question 2

A new motor manufacturing technology changes Ronald's Outboard Motor marginal product of labor from   If Ronald can sell all the motors he produces for $100 and pays each unit of labor $10, what happens to the level of employment due to this technology change?

Accepted Answer

Ronald's original marginal revenue of the product of labor is   For this original level of technology, Ronald's optimal labor employment was   At the new level of technology, Ronald's marginal revenue of the product of labor becomes   The new level of employment becomes:   Thus, this increase in technology results in over a 4% increase in the level of labor employment.

Question 3

The industry demand curve for labor is the:

Accepted Answer

A)  horizontal sum of individual firm labor demand curves. 
B)  vertical sum of individual firm demand curves. 
C)  representative firm's demand curve multiplied by the number of firms. 
D)  none of the above 
A)  horizontal sum of individual firm labor demand curves. 
B)  vertical sum of individual firm demand curves. 
C)  representative firm's demand curve multiplied by the number of firms. 
D)  none of the above A

Question 4

Under an upward sloping supply curve for land, the economic rents to land ________ as the demand for land shifts rightward.

Accepted Answer

A)  decrease 
B)  increase 
C)  remain the same 
D)  We do not have enough information to answer this question. 
A)  decrease 
B)  increase 
C)  remain the same 
D)  We do not have enough information to answer this question.

Question 5

Mr. Barnes' Mine has a monopoly on coal production in the local community. Also, Mr. Barnes' Mine is the sole employer in the local community. The market supply of labor is:
LS(w) = 50w - 250
Or equivalently
w = 50 + 0.02LS 
Mr. Barnes' wage bill is:
WB = 50L + 0.02L2 
The resulting marginal expenditure of labor function is:
ME(L) = 50 + 0.04L
The marginal product of coal as a function of labor is:   = 0.01.
The marginal revenue of coal sales as a function of labor is:
MR(L) = 100,000 - 28.57L
Determine Mr. Barnes' marginal revenue of the product of labor. What is Mr. Barnes' optimal employment of labor? What is the wage rate Mr. Barnes pays for a unit of labor?

Accepted Answer

Mr. Barnes' marginal revenue of the prod

Question 6

The Acme Company is a perfect competitor in its input markets and a monopolist in its output market. The marginal product of labor is 20 and the price of Acme's output is $10. For Acme Company, the marginal revenue product of labor is:

Accepted Answer

A)  less than $10. 
B)  $10. 
C)  $20. 
D)  less than $200. 
E)  $200. 
A)  less than $10. 
B)  $10. 
C)  $20. 
D)  less than $200. 
E)  $200.

Question 7

The marginal revenue product can be expressed as the:

Accepted Answer

A)  additional revenue received from selling one more unit of product. 
B)  increment to revenue received from one additional unit of input hired. 
C)  marginal physical product of an input times the average revenue received from the sale of the product. 
D)  average physical product of the input times the marginal revenue received from the sale of the final product. 
A)  additional revenue received from selling one more unit of product. 
B)  increment to revenue received from one additional unit of input hired. 
C)  marginal physical product of an input times the average revenue received from the sale of the product. 
D)  average physical product of the input times the marginal revenue received from the sale of the final product.

Question 8

Figure 14.2.1
-Refer to Figure 14.2.1 above. The firm in panel (b) pays a wage equal to:

Accepted Answer

A)  w1. 
B)  w2. 
C)  the wage paid by the firm in the competitive labor market in panel (a). 
D)  the price of the product. 
A)  w1. 
B)  w2. 
C)  the wage paid by the firm in the competitive labor market in panel (a). 
D)  the price of the product.

Question 9

Suppose the local market for legal services has an upward sloping supply curve, PL = 150 + 0.0001QL where PL is the price of legal services and QL is the number of hours of legal services. If the equilibrium price of legal services is $250 per hour and the average number of hours that a lawyer works per year is 2,500, what is the average economic rent earned per lawyer in this market?

Accepted Answer

A)  $10,000 
B)  $20,000 
C)  $50,000 
D)  $1,000,000 
A)  $10,000 
B)  $20,000 
C)  $50,000 
D)  $1,000,000

Question 10

Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers, and there is wage discrimination in the union and nonunion sectors. If the union shifts its policy from maximizing total economic rents to maximizing total wages earned by members, what happens to the equilibrium employment level and wage for non-union workers?

Accepted Answer

A)  Both increase. 
B)  Employment increases and wage declines. 
C)  Wage increases and employment declines. 
D)  Both decline. 
A)  Both increase. 
B)  Employment increases and wage declines. 
C)  Wage increases and employment declines. 
D)  Both decline.

Question 11

The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is at its maximum and equals 30. The marginal revenue product of labor is $300. The price of its output:

Accepted Answer

A)  is $0.10. 
B)  is $10. 
C)  is $9,000. 
D)  cannot be determined without more information. 
A)  is $0.10. 
B)  is $10. 
C)  is $9,000. 
D)  cannot be determined without more information.

Question 12

Figure 14.1.2
-Refer to Figure 14.1.2 above. Which of these two effects prevails in the backward bending portion of the supply curve?

Accepted Answer

A)  The income effect 
B)  The substitution effect 
C)  The leisure effect 
D)  The wage effect 
A)  The income effect 
B)  The substitution effect 
C)  The leisure effect 
D)  The wage effect

Question 13

Edna has a monopoly in the sale of engineering services in the local market. Also, Edna is the only employer of high skilled labor in the local market. The marginal product of labor is:   (L) = 250.
The marginal revenue of engineering services is:
MR(L) = 12,000 - 0.25L
The local supply of high skilled labor is:
LS (w) = 200w - 10,000
Or equivalently
w = 50 + 0.005LS 
This implies Edna's marginal high-skill labor wage bill expenditures is:
ME(L) = 50 + 0.01L
Determine Edna's optimal level of employment. Also, what is the wage rate Edna pays for a unit of high skilled labor? What is the marginal revenue of the product of labor at the optimal employment level? Suppose Edna acted as a wage taker in determining high-skilled labor employment. How much labor would she hire and at what wage rate? At this level of employment, calculate the marginal revenue of the product of labor.

Accepted Answer

To determine Edna's optimal level of emp

Question 14

Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is PQ and the input price is Pi. Efficient use of resources requires that:

Accepted Answer

A)  MRPi = MPi. 
B)  MRPi = Mpi/PQ. 
C)  MRPi = MPi PQ. 
D)  MRPi = Pi. 
A)  MRPi = MPi. 
B)  MRPi = Mpi/PQ. 
C)  MRPi = MPi PQ. 
D)  MRPi = Pi.

Question 15

A firm should hire more labor when the marginal revenue product of labor:

Accepted Answer

A)  equals the wage rate. 
B)  exceeds the wage rate. 
C)  is less than the wage rate. 
D)  Any of these can be true. 
E)  None of these are true. 
A)  equals the wage rate. 
B)  exceeds the wage rate. 
C)  is less than the wage rate. 
D)  Any of these can be true. 
E)  None of these are true.

Question 16

An example of monopoly power in input markets is:

Accepted Answer

A)  major league baseball owners in the market for player services. 
B)  the United Auto Workers union in the market for auto worker services. 
C)  OPEC in the market for crude oil. 
D)  all of the above 
A)  major league baseball owners in the market for player services. 
B)  the United Auto Workers union in the market for auto worker services. 
C)  OPEC in the market for crude oil. 
D)  all of the above

Question 17

A new pizza producing technology changes One Guy's marginal product of labor from   If One Guy's can sell all the pizza it produces for $12 and pays each unit of labor $8, what happens to the level of employment due to this technology change?

Accepted Answer

One Guy's old marginal revenue of the pr

Question 18

In general, does the demand for labor become more or less elastic as we increase the number of other variable inputs used in a production process?

Accepted Answer

A)  More elastic 
B)  No change in elasticity 
C)  Less elastic 
D)  We cannot answer this question without more information about the other inputs. 
A)  More elastic 
B)  No change in elasticity 
C)  Less elastic 
D)  We cannot answer this question without more information about the other inputs.

Question 19

Figure 14.3.1
-Refer to Figure 14.3.1 above. The quantity traded in this market equals:

Accepted Answer

A)  L1. 
B)  L2. 
C)  the same as the competitive quantity. 
D)  Depends on the wage rate. 
A)  L1. 
B)  L2. 
C)  the same as the competitive quantity. 
D)  Depends on the wage rate.

Question 20

Scenario 14.4:
John's firm is a competitor in your product market and a monopsonist in the labor market. The current market price of the product that your firm produces is $2. The total product and marginal product of labor are given as:
TP = 100L - 0.125LS1U1P12 S1S1P0MP = 100 - 0.25L
where L is the amount of labor employed. The supply curve for labor and the marginal expenditure curve for labor are given as follows:
L = PS1U1B1LS1U1B0 -5 MES1U1B1LS1U1B0 = 2L + 5
-Refer to Scenario 14.4. Suppose that a tax is imposed on each unit of the product that John produces. Which curve will shift?

Accepted Answer

A)  Marginal product of labor 
B)  Marginal revenue product of labor 
C)  The supply of labor 
D)  All of the above will shift due to the tax on output. 
A)  Marginal product of labor 
B)  Marginal revenue product of labor 
C)  The supply of labor 
D)  All of the above will shift due to the tax on output.

An increase in technology that enhances labor productivity will likely result in:

A new motor manufacturing technology changes Ronald's Outboard Motor marginal product of labor from If Ronald can sell all the motors he produces for $100 and pays each unit of labor $10, what happens to the level of employment due to this technology change?

The industry demand curve for labor is the:

Under an upward sloping supply curve for land, the economic rents to land ________ as the demand for land shifts rightward.

The Acme Company is a perfect competitor in its input markets and a monopolist in its output market. The marginal product of labor is 20 and the price of Acme's output is $10. For Acme Company, the marginal revenue product of labor is:

The marginal revenue product can be expressed as the:

Figure 14.2.1 -Refer to Figure 14.2.1 above. The firm in panel (b) pays a wage equal to:

The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is at its maximum and equals 30. The marginal revenue product of labor is $300. The price of its output:

Figure 14.1.2 -Refer to Figure 14.1.2 above. Which of these two effects prevails in the backward bending portion of the supply curve?

Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is P_Q and the input price is P_i. Efficient use of resources requires that:

A firm should hire more labor when the marginal revenue product of labor:

An example of monopoly power in input markets is:

A new pizza producing technology changes One Guy's marginal product of labor from If One Guy's can sell all the pizza it produces for $12 and pays each unit of labor $8, what happens to the level of employment due to this technology change?

In general, does the demand for labor become more or less elastic as we increase the number of other variable inputs used in a production process?

Figure 14.3.1 -Refer to Figure 14.3.1 above. The quantity traded in this market equals:

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 14: Markets for Factor Inputs

An increase in technology that enhances labor productivity will likely result in:

A new motor manufacturing technology changes Ronald's Outboard Motor marginal product of labor from If Ronald can sell all the motors he produces for $100 and pays each unit of labor $10, what happens to the level of employment due to this technology change?

The industry demand curve for labor is the:

Under an upward sloping supply curve for land, the economic rents to land ________ as the demand for land shifts rightward.

The Acme Company is a perfect competitor in its input markets and a monopolist in its output market. The marginal product of labor is 20 and the price of Acme's output is $10. For Acme Company, the marginal revenue product of labor is:

The marginal revenue product can be expressed as the:

Figure 14.2.1 -Refer to Figure 14.2.1 above. The firm in panel (b) pays a wage equal to:

The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is at its maximum and equals 30. The marginal revenue product of labor is $300. The price of its output:

Figure 14.1.2 -Refer to Figure 14.1.2 above. Which of these two effects prevails in the backward bending portion of the supply curve?

Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is PQ and the input price is Pi. Efficient use of resources requires that:

A firm should hire more labor when the marginal revenue product of labor:

An example of monopoly power in input markets is:

A new pizza producing technology changes One Guy's marginal product of labor from If One Guy's can sell all the pizza it produces for $12 and pays each unit of labor $8, what happens to the level of employment due to this technology change?

In general, does the demand for labor become more or less elastic as we increase the number of other variable inputs used in a production process?

Figure 14.3.1 -Refer to Figure 14.3.1 above. The quantity traded in this market equals:

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is P_Q and the input price is P_i. Efficient use of resources requires that: