Question 1

Factor X is used in the production of good Y.Which of the following will increase the demand for factor X?

Accepted Answer

A)  a decrease in the demand for Y 
B)  a rise in the MPP of factor X 
C)  a fall in the price of good Y 
D)  a fall in the cost of employing factor X 
E)  a and b 
A)  a decrease in the demand for Y 
B)  a rise in the MPP of factor X 
C)  a fall in the price of good Y 
D)  a fall in the cost of employing factor X 
E)  a and b B

Question 2

Marginal productivity theory implies that a worker will be paid a wage (W)such that

Accepted Answer

A)  W = MRP, but W < VMP. 
B)  W < MRP, but W = VMP. 
C)  W = MRP and W = VMP. 
D)  W = MFC, but W < MRP. 
E)  W < MRP and W < VMP. 
A)  W = MRP, but W < VMP. 
B)  W < MRP, but W = VMP. 
C)  W = MRP and W = VMP. 
D)  W = MFC, but W < MRP. 
E)  W < MRP and W < VMP. C

Question 3

A factor price taker is a firm that

Accepted Answer

A)  can sell as many units of its good as it wants without affecting price. 
B)  sells fewer units of its good at higher prices than lower prices. 
C)  can buy all of a factor it wants at the equilibrium price. 
D)  drives up factor price if it buys an additional factor unit. 
E)  none of the above 
A)  can sell as many units of its good as it wants without affecting price. 
B)  sells fewer units of its good at higher prices than lower prices. 
C)  can buy all of a factor it wants at the equilibrium price. 
D)  drives up factor price if it buys an additional factor unit. 
E)  none of the above C

Question 4

Exhibit 27-6
  
-Refer to Exhibit 27-6.Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist,respectively.Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

Accepted Answer

A)  QA 
B)  QB 
C)  QC 
D)  none of the above is possible 
A)  QA 
B)  QB 
C)  QC 
D)  none of the above is possible

Question 5

Exhibit 27-4
  
-Refer to Exhibit 27-4.The marginal factor cost of labor

Accepted Answer

A)  is $14. 
B)  is $7. 
C)  is $3. 
D)  is $10. 
E)  depends on the amount of labor employed. 
A)  is $14. 
B)  is $7. 
C)  is $3. 
D)  is $10. 
E)  depends on the amount of labor employed.

Question 6

The value of marginal product (VMP)is

Accepted Answer

A)  equal to the product price multiplied by the marginal physical product of the factor. 
B)  equal to marginal revenue product for a product price taker. 
C)  the firm's factor demand curve if the firm is a product price taker. 
D)  a measure of the value that each factor unit adds to the firm's product. 
E)  all of the above 
A)  equal to the product price multiplied by the marginal physical product of the factor. 
B)  equal to marginal revenue product for a product price taker. 
C)  the firm's factor demand curve if the firm is a product price taker. 
D)  a measure of the value that each factor unit adds to the firm's product. 
E)  all of the above

Question 7

Labor supply is a reflection of the number of persons who can actually do a job.

Accepted Answer

A) True 
 B)False

Question 8

A decrease in the wage rate

Accepted Answer

A)  shifts the supply curve of labor rightward. 
B)  increases the quantity supplied of labor. 
C)  shifts the supply curve of labor leftward. 
D)  decreases the quantity supplied of labor. 
A)  shifts the supply curve of labor rightward. 
B)  increases the quantity supplied of labor. 
C)  shifts the supply curve of labor leftward. 
D)  decreases the quantity supplied of labor.

Question 9

Exhibit 27-l
  
-Refer to Exhibit 27-1.What dollar value goes in blank (C)?

Accepted Answer

A)  $300 
B)  $12 
C)  $30 
D)  $84 
A)  $300 
B)  $12 
C)  $30 
D)  $84

Question 10

If a perfectly competitive firm is a factor price taker,at the profit- maximizing factor quantity

Accepted Answer

A)  VMP = MRP. 
B)  MRP = MFC. 
C)  MFC = factor price. 
D)  both a and b 
E)  all of the above 
A)  VMP = MRP. 
B)  MRP = MFC. 
C)  MFC = factor price. 
D)  both a and b 
E)  all of the above

Question 11

Firm X is a monopolistic competitive firm and a factor price taker.For this firm at the profit-maximizing factor quantity,

Accepted Answer

A) VMP = MRP > MFC = factor price. B) VMP> MRP = MFC > factor price. C) VMP > MRP = MFC = factor price. D) VMP < MRP = MFC = factor price. A) VMP = MRP > MFC = factor price. B) VMP> MRP = MFC > factor price. C) VMP > MRP = MFC = factor price. D) VMP < MRP = MFC = factor price.

Question 12

A perfectly competitive firm will continue to hire more factor units as long as

Accepted Answer

A)  MRP > MFC. 
B)  VMP > MFC. 
C)  MRP > VMP. 
D)  VMP = MFC. 
E)  a and b 
A)  MRP > MFC. 
B)  VMP > MFC. 
C)  MRP > VMP. 
D)  VMP = MFC. 
E)  a and b

Question 13

The factor demand curve shifts leftward as a result of

Accepted Answer

A)  an increase in the price of the product the factor helps to produce. 
B)  an increase in the marginal physical product of the factor. 
C)  a decrease in the price of the product the factor helps to produce. 
D)  a and b 
E)  b and c 
A)  an increase in the price of the product the factor helps to produce. 
B)  an increase in the marginal physical product of the factor. 
C)  a decrease in the price of the product the factor helps to produce. 
D)  a and b 
E)  b and c

Question 14

Situation 27-2
  
-Refer to Situation 27-2.The output produced per $1 of cost in the U.S.is

Accepted Answer

A)  120 units of good Y. 
B)  0.83 units of good Y. 
C)  22 units of good Y. 
D)  2 units of good Y. 
A)  120 units of good Y. 
B)  0.83 units of good Y. 
C)  22 units of good Y. 
D)  2 units of good Y.

Question 15

For a perfectly competitive firm,when the price of the product it sells rises,its MRP of labor curve __________,while its VMP of labor curve __________.

Accepted Answer

A)  stays where it is; shifts to the right 
B)  shifts to the right; shifts to the right 
C)  shifts to the right; stays where it is 
D)  shifts to the left; shifts to the left 
A)  stays where it is; shifts to the right 
B)  shifts to the right; shifts to the right 
C)  shifts to the right; stays where it is 
D)  shifts to the left; shifts to the left

Question 16

Employers use screening mechanisms,such as GPA,because they lack complete information about job applicants.

Accepted Answer

A) True 
 B)False

Question 17

Consider two labor markets,A and B.Wages in labor market A rise.This could be due to

Accepted Answer

A)  decreasing wages in labor market B. 
B)  the negative nonpecuniary aspects of work in labor market A rise. 
C)  the number of people who can do the work that is done in labor market A increases. 
D)  the demand for the product that employees in labor market A produce falls. 
E)  a and d 
A)  decreasing wages in labor market B. 
B)  the negative nonpecuniary aspects of work in labor market A rise. 
C)  the number of people who can do the work that is done in labor market A increases. 
D)  the demand for the product that employees in labor market A produce falls. 
E)  a and d

Question 18

Marginal productivity theory states that if a firm sells its product in a perfectly competitive product market it will necessarily pay its factors their VMP.

Accepted Answer

A) True 
 B)False

Question 19

The market demand curve for labor is

Accepted Answer

A)  the horizontal summation of the firms' demand curves for labor, derived exactly the same way the product market demand curve is derived from the consumers' demand curves. 
B)  the vertical summation of the firms' demand curves for labor. 
C)  any one firm's demand curve labor multiplied horizontally by the number of firms in the labor market. 
D)  none of the above 
A)  the horizontal summation of the firms' demand curves for labor, derived exactly the same way the product market demand curve is derived from the consumers' demand curves. 
B)  the vertical summation of the firms' demand curves for labor. 
C)  any one firm's demand curve labor multiplied horizontally by the number of firms in the labor market. 
D)  none of the above

Question 20

Given a 3 percent decrease in wages,firm A hires more labor than firm B.It follows that,ceteris paribus,

Accepted Answer

A)  the elasticity of demand for the product that firm A produces is lower than the elasticity of demand for the product that firm B produces. 
B)  firm A has a lower labor cost-total cost ratio than firm B. 
C)  firm A has more substitutes for labor than firm B. 
D)  firm A has higher per-unit costs than firm B. 
E)  none of the above 
A)  the elasticity of demand for the product that firm A produces is lower than the elasticity of demand for the product that firm B produces. 
B)  firm A has a lower labor cost-total cost ratio than firm B. 
C)  firm A has more substitutes for labor than firm B. 
D)  firm A has higher per-unit costs than firm B. 
E)  none of the above

Exam 27: Factor Markets: With Emphasis on the Labor Market

Factor X is used in the production of good Y.Which of the following will increase the demand for factor X?

Marginal productivity theory implies that a worker will be paid a wage (W)such that

A factor price taker is a firm that

Exhibit 27-6 -Refer to Exhibit 27-6.Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist,respectively.Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

Exhibit 27-4 -Refer to Exhibit 27-4.The marginal factor cost of labor

The value of marginal product (VMP)is

Labor supply is a reflection of the number of persons who can actually do a job.

A decrease in the wage rate

Exhibit 27-l -Refer to Exhibit 27-1.What dollar value goes in blank (C)?

If a perfectly competitive firm is a factor price taker,at the profit- maximizing factor quantity

Firm X is a monopolistic competitive firm and a factor price taker.For this firm at the profit-maximizing factor quantity,

A perfectly competitive firm will continue to hire more factor units as long as

The factor demand curve shifts leftward as a result of

Situation 27-2 -Refer to Situation 27-2.The output produced per $1 of cost in the U.S.is

For a perfectly competitive firm,when the price of the product it sells rises,its MRP of labor curve __________,while its VMP of labor curve __________.

Employers use screening mechanisms,such as GPA,because they lack complete information about job applicants.

Consider two labor markets,A and B.Wages in labor market A rise.This could be due to

Marginal productivity theory states that if a firm sells its product in a perfectly competitive product market it will necessarily pay its factors their VMP.

The market demand curve for labor is

Given a 3 percent decrease in wages,firm A hires more labor than firm B.It follows that,ceteris paribus,

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For a perfectly competitive firm,when the price of the product it sells rises,its MRP of labor curve ,while its VMP of labor curve .