Question 1

What does the elasticity of demand for labor measure? List and describe the three determinants of this type of elasticity.

Accepted Answer

The elasticity of demand for labor measu

Question 2

To minimize cost,a firm should hire two factors,X and Y,until

Accepted Answer

A)  MPPX/PX = MPPY/PY. 
B)  MPPX = MPPY. 
C)  MPPX x PX = MPPY x PY. 
D)  MRPX/PX = MRPY/PY. 
E)  MRPX x PX = MRPY x PY. 
A)  MPPX/PX = MPPY/PY. 
B)  MPPX = MPPY. 
C)  MPPX x PX = MPPY x PY. 
D)  MRPX/PX = MRPY/PY. 
E)  MRPX x PX = MRPY x PY.

Question 3

A price searcher (monopolist,oligopolist)will hire more factor units as long as

Accepted Answer

A)  MRP > MFC. 
B)  MRP > VMP. 
C)  MRP = MFC. 
D)  VMP = MFC. 
E)  c and d 
A)  MRP > MFC. 
B)  MRP > VMP. 
C)  MRP = MFC. 
D)  VMP = MFC. 
E)  c and d

Question 4

In a research paper titled An Economic Analysis of a Drug-Selling Gang's Finances,researchers revealed that street-level drug dealers appeared to earn less than the minimum wage.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 27-2
  
-Refer to Exhibit 27-2.What factor quantity should the firm purchase?

Accepted Answer

A)  Q1 
B)  Q2 
C)  Q1 + Q2 
D)  Q3 
E)  Q3 - Q1 
A)  Q1 
B)  Q2 
C)  Q1 + Q2 
D)  Q3 
E)  Q3 - Q1

Question 6

Suppose wages for construction workers are higher in Hawaii than in Florida.This could be because the

Accepted Answer

A)  moving costs between Florida and Hawaii are so high that construction workers in Florida do not relocate to Hawaii. 
B)  product price of what construction workers in Hawaii produce is higher than the product price of what construction workers in Florida produce and the moving costs between Florida and Hawaii are zero. 
C)  moving costs between Florida and Hawaii are zero. 
D)  marginal physical product of construction workers in Hawaii is higher than the marginal physical product of construction workers in Florida and the moving costs between Florida and Hawaii are zero. 
E)  b and d 
A)  moving costs between Florida and Hawaii are so high that construction workers in Florida do not relocate to Hawaii. 
B)  product price of what construction workers in Hawaii produce is higher than the product price of what construction workers in Florida produce and the moving costs between Florida and Hawaii are zero. 
C)  moving costs between Florida and Hawaii are zero. 
D)  marginal physical product of construction workers in Hawaii is higher than the marginal physical product of construction workers in Florida and the moving costs between Florida and Hawaii are zero. 
E)  b and d

Question 7

A price searcher (monopolist,oligopolist,etc.)will maximize its profits by hiring factors up to the point at which

Accepted Answer

A)  MRP > MFC. 
B)  VMP > MFC. 
C)  MRP = MFC. 
D)  VMP = MFC. 
E)  c and d 
A)  MRP > MFC. 
B)  VMP > MFC. 
C)  MRP = MFC. 
D)  VMP = MFC. 
E)  c and d

Question 8

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

Accepted Answer

A)  MRP  MFC. 
C)  VMP  MR. 
A)  MRP  MFC. 
C)  VMP  MR.

Question 9

Which of the following is false?

Accepted Answer

A)  If a firm is a factor price taker, marginal factor cost is constant and equal to factor price. This means a factor price taker pays a wage equal to its marginal factor cost. 
B)  Firms hire the factor quantity at which marginal revenue product equals marginal factor cost. 
C)  If a firm is a product price taker, marginal revenue product is greater than value marginal product. 
D)  If a firm is product price taker and a factor price taker, it pays labor a wage equal to its value marginal product. 
A)  If a firm is a factor price taker, marginal factor cost is constant and equal to factor price. This means a factor price taker pays a wage equal to its marginal factor cost. 
B)  Firms hire the factor quantity at which marginal revenue product equals marginal factor cost. 
C)  If a firm is a product price taker, marginal revenue product is greater than value marginal product. 
D)  If a firm is product price taker and a factor price taker, it pays labor a wage equal to its value marginal product.

Question 10

As the wage rate rises,

Accepted Answer

A)  the supply of labor rises. 
B)  the quantity demanded of labor rises. 
C)  the quantity supplied of labor rises. 
D)  the demand for labor falls. 
E)  a and d 
A)  the supply of labor rises. 
B)  the quantity demanded of labor rises. 
C)  the quantity supplied of labor rises. 
D)  the demand for labor falls. 
E)  a and d

Question 11

Suppose a sailboat factory and a fishing boat factory exist in the same town.Employees at both factories have the same skills and are initially paid the same wage rate.If the sailboat manufacturer increases the hourly wage paid to his employees,then the

Accepted Answer

A)  demand for sailboats will increase, and the supply will decrease. 
B)  supply of sailboats will decrease. 
C)  supply of labor at the fishing boat factory will increase. 
D)  a and c 
E)  none of the above 
A)  demand for sailboats will increase, and the supply will decrease. 
B)  supply of sailboats will decrease. 
C)  supply of labor at the fishing boat factory will increase. 
D)  a and c 
E)  none of the above

Question 12

An increase in the demand for a good will lead to a

Accepted Answer

A)  rightward shift of the MRP of labor curve. 
B)  leftward shift of the MRP of labor curve. 
C)  movement up and along a given MRP of labor curve. 
D)  movement down and along a given MRP of labor curve. 
A)  rightward shift of the MRP of labor curve. 
B)  leftward shift of the MRP of labor curve. 
C)  movement up and along a given MRP of labor curve. 
D)  movement down and along a given MRP of labor curve.

Question 13

The addition to total cost that results from employing one additional unit of a resource is called

Accepted Answer

A)  average factor cost. 
B)  marginal factor cost. 
C)  average total cost. 
D)  marginal cost. 
A)  average factor cost. 
B)  marginal factor cost. 
C)  average total cost. 
D)  marginal cost.

Question 14

If for a firm MRP > MFC,then the firm

Accepted Answer

A)  is maximizing profits and should continue producing its current output. 
B)  is minimizing factor costs and therefore is maximizing profits. 
C)  should produce more output by increasing the quantity of factors employed. 
D)  should produce less output by decreasing the quantity of factors employed. 
A)  is maximizing profits and should continue producing its current output. 
B)  is minimizing factor costs and therefore is maximizing profits. 
C)  should produce more output by increasing the quantity of factors employed. 
D)  should produce less output by decreasing the quantity of factors employed.

Question 15

Exhibit 27-l
  
-Refer to Exhibit 27-1.The data show that marginal revenue is __________ price,thus we are dealing with a(n)__________ competitive firm.

Accepted Answer

A)  greater than; perfectly 
B)  equal to; imperfectly 
C)  equal to; perfectly 
D)  less than; perfectly 
A)  greater than; perfectly 
B)  equal to; imperfectly 
C)  equal to; perfectly 
D)  less than; perfectly

Question 16

The additional revenue generated by a firm by hiring one more unit of a factor of production is the

Accepted Answer

A)  MFC. 
B)  MC. 
C)  MR. 
D)  MRP. 
E)  MPP. 
A)  MFC. 
B)  MC. 
C)  MR. 
D)  MRP. 
E)  MPP.

Question 17

Given a 10 percent increase in wages,firm A cuts back on labor more than firm B.It follows that,ceteris paribus,

Accepted Answer

A)  firm A has a higher labor cost-total cost ratio than firm B. 
B)  firm B has a higher labor cost-total cost ratio than firm A. 
C)  the elasticity of demand for labor is higher for firm B than firm A. 
D)  firm B has higher fixed costs than firm A. 
E)  firm A has higher per-unit costs than firm B. 
A)  firm A has a higher labor cost-total cost ratio than firm B. 
B)  firm B has a higher labor cost-total cost ratio than firm A. 
C)  the elasticity of demand for labor is higher for firm B than firm A. 
D)  firm B has higher fixed costs than firm A. 
E)  firm A has higher per-unit costs than firm B.

Question 18

Situation 27-1
  
-Refer to Situation 27-1.The output produced per $1 of cost in Mexico is

Accepted Answer

A)  12.0 units of good X. 
B)  1.0 units of good X. 
C)  1.33 units of good X. 
D)  0.75 units of good X. 
A)  12.0 units of good X. 
B)  1.0 units of good X. 
C)  1.33 units of good X. 
D)  0.75 units of good X.

Question 19

A factor price taker faces

Accepted Answer

A)  a perfectly elastic demand curve for the product it sells. 
B)  a downward-sloping demand curve for the product it sells. 
C)  a perfectly elastic supply curve of factors. 
D)  an upward-sloping supply curve of factors. 
E)  a perfectly inelastic supply curve of factors. 
A)  a perfectly elastic demand curve for the product it sells. 
B)  a downward-sloping demand curve for the product it sells. 
C)  a perfectly elastic supply curve of factors. 
D)  an upward-sloping supply curve of factors. 
E)  a perfectly inelastic supply curve of factors.

Question 20

A firm obeys the least-cost rule for factors X and Y by equating

Accepted Answer

A)  MRPx to MRPy. 
B)  MPPx/Px to MPPy/Py. 
C)  Px/MPPx to Py/MPPy. 
D)  MFCx to MFCy. 
A)  MRPx to MRPy. 
B)  MPPx/Px to MPPy/Py. 
C)  Px/MPPx to Py/MPPy. 
D)  MFCx to MFCy.

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

What does the elasticity of demand for labor measure? List and describe the three determinants of this type of elasticity.

To minimize cost,a firm should hire two factors,X and Y,until

A price searcher (monopolist,oligopolist)will hire more factor units as long as

In a research paper titled An Economic Analysis of a Drug-Selling Gang's Finances,researchers revealed that street-level drug dealers appeared to earn less than the minimum wage.

Exhibit 27-2 -Refer to Exhibit 27-2.What factor quantity should the firm purchase?

Suppose wages for construction workers are higher in Hawaii than in Florida.This could be because the

A price searcher (monopolist,oligopolist,etc.)will maximize its profits by hiring factors up to the point at which

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

Which of the following is false?

As the wage rate rises,

Suppose a sailboat factory and a fishing boat factory exist in the same town.Employees at both factories have the same skills and are initially paid the same wage rate.If the sailboat manufacturer increases the hourly wage paid to his employees,then the

An increase in the demand for a good will lead to a

The addition to total cost that results from employing one additional unit of a resource is called

If for a firm MRP > MFC,then the firm

Exhibit 27-l -Refer to Exhibit 27-1.The data show that marginal revenue is __________ price,thus we are dealing with a(n)__________ competitive firm.

The additional revenue generated by a firm by hiring one more unit of a factor of production is the

Given a 10 percent increase in wages,firm A cuts back on labor more than firm B.It follows that,ceteris paribus,

Situation 27-1 -Refer to Situation 27-1.The output produced per $1 of cost in Mexico is

A factor price taker faces

A firm obeys the least-cost rule for factors X and Y by equating

What Economics Is About

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Exhibit 27-l -Refer to Exhibit 27-1.The data show that marginal revenue is price,thus we are dealing with a(n) competitive firm.