Exam 14: Markets for Factor Inputs

Umberto has a monopoly in providing taxicab services in the local market. The relevant marginal revenue of taxicab sales as a function of labor employment is: The marginal product of labor in providing taxicab services is 50. Umberto is a price taker in the labor employment market and the market price of labor is $15. Determine Umberto's optimal employment of labor.

Figure 14.1.4 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage decrease, the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.1.4 above. The substitution effect of the wage decrease on the amount of hours of leisure is:

The table below shows a firm's output per day for zero through six workers. Q L 0 0 46 1 84 2 114 3 136 4 150 5 156 6 The firm's demand and marginal revenue curves are: P = 50 - 0.125Q MR = 50 - 0.25Q, where Q = daily sales, and P = output price. a. Determine the marginal product of labor for one through six workers. b. Determine the firm's marginal revenue product. c. How many workers should the firm hire if total wage costs including fringe benefits are $30 per hour? (Each worker is employed for eight hours per day.)

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 - 0.125L² MP = 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 = P_L -5 ME_L = 2L + 5 -Refer to Scenario 14.4. Suppose that the price of the product rises to $5. Which of the following curves shifts?

Figure 14.1.3 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage increase, the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.1.3. The income effect of the wage increase on the amount of hours of leisure is:

If leisure is a normal good, then the income effect of a decrease in wage will:

Figure 14.4.1 A labor union is exercising monopoly power in the labor market. -Refer to Figure 14.4.1. To maximize the number of workers hired, the labor union will agree to wage rate:

Figure 14.4.2 -Given the information in Figure 14.4.2, the monopoly wage rate is:

Suppose the supply of farmland is infinitely inelastic and the demand for land is downward sloping but inelastic at the current equilibrium. If the supply curve shifts leftward (e.g., some farmland is permanently converted to other uses), what happens to the aggregate economic rents in this market?

Clarke Mementos manufactures small figurines that they sell to retailers around the country. Clarke sells the figurines for $5.00 each, a price the firm considers given. Clarke's production function is given by the expression: Q = 60L - 0.5L², where Q = number of figurines per day, and L = number of skilled workers per day. Based on this production function, the average and marginal products of labor are as follows: AP = 60 - 0.5L MP = 60 - L a. Write an expression for the firm's marginal revenue product. b. Clarke currently pays $150 per day (including fringe benefits) for each of its skilled workers. How many workers should the firm employ? c. Clarke's workers are highly skilled artisans with a great deal of job mobility. The firm's managers fear that they must increase the workers' total compensation to $200 per day to remain competitive. What impact would the wage increase have upon the firm's employment?

Which of the following is NOT true about the supply of labor to the firm in a competitive labor market?

Suppose the upward sloping labor supply curve shifts leftward in a labor market with a single employer (monopsony). What happens to the equilibrium wage and level of employment in the market?

Suppose the labor market is perfectly competitive, but the output market is not. When the labor market is in equilibrium, the wage rate will:

Suppose the federal government allows labor unions to act as the sole seller in labor markets, but the government collects a $1 per hour fee to cover unemployment insurance for each union worker. Assuming this fee is not so large that it forces the unions to disband, what is the impact of this fee on the equilibrium wage and employment level in the monopolized labor market?

In a competitive labor market, with one variable factor, the supply of labor to the firm is:

Which of the following is TRUE concerning equilibrium in a monopsonistic factor market?

The Acme Company is a perfect competitor in its input markets and its output market. Its 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:

Currently, Trisha's Fashion Boutique uses 2 sewing machines in the production of dresses (K represents the number of sewing machines). Trisha's marginal product of labor function is Trisha can sell all the dresses she produces for $150 per unit and hire all the labor units she desires at $25 per unit. What happens to Trisha's optimal labor employment if she increases the number of sewing machines to 4?

Figure 14.1.3 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage increase, the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.1.3 above. The substitution effect of the wage increase on the amount of hours of leisure is:

Under what circumstances are the marginal expenditure for an input and the average expenditure always equal? Where there is a: