Question 1

Marginal productivity theory states that

Accepted Answer

A)  firms in price searcher product markets pay factors their marginal factor cost. 
B)  firms in perfect factor markets pay factors their equilibrium wages. 
C)  firms that are more productive, earn higher profits. 
D)  firms in perfect product and factor markets pay factors their marginal revenue products. 
E)  none of the above 
A)  firms in price searcher product markets pay factors their marginal factor cost. 
B)  firms in perfect factor markets pay factors their equilibrium wages. 
C)  firms that are more productive, earn higher profits. 
D)  firms in perfect product and factor markets pay factors their marginal revenue products. 
E)  none of the above

Question 2

Marginal productivity theory implies that a worker will be paid an amount

Accepted Answer

A)  equal to his or her contribution to the productive process. 
B)  less than his or her contribution to the productive process. 
C)  greater than his or her contribution to the productive process. 
D)  determined by his or her individual bargaining. 
A)  equal to his or her contribution to the productive process. 
B)  less than his or her contribution to the productive process. 
C)  greater than his or her contribution to the productive process. 
D)  determined by his or her individual bargaining.

Question 3

As a firm buys more capital and less labor,the marginal physical product of capital __________ and the marginal physical product of labor __________,assuming the law of diminishing marginal returns has set in for each factor.

Accepted Answer

A)  decreases; increases 
B)  increases; increases 
C)  decreases; decreases 
D)  increases; remains constant 
E)  remains constant; decreases 
A)  decreases; increases 
B)  increases; increases 
C)  decreases; decreases 
D)  increases; remains constant 
E)  remains constant; decreases

Question 4

Exhibit 27-3
  
-Refer to Exhibit 27-3.The marginal factor cost (MFC)of the fourth unit of labor is

Accepted Answer

A)  greater than $10 if the firm expects to hire the fourth worker. 
B)  the same as the MFC of the first unit. 
C)  less than the wage rate. 
D)  equal to the wage rate. 
E)  b and d 
A)  greater than $10 if the firm expects to hire the fourth worker. 
B)  the same as the MFC of the first unit. 
C)  less than the wage rate. 
D)  equal to the wage rate. 
E)  b and d

Question 5

The market supply curve of labor

Accepted Answer

A)  slopes downward, indicating that as the wage rate falls, the quantity supplied of labor rises. 
B)  slopes upward, indicating that as the wage rate rises, the quantity supplied of labor rises. 
C)  is vertical, indicating that the quantity supplied of labor is independent of the wage rate. 
D)  slopes upward, indicating that as the wage rate falls, the quantity supplied of labor rises. 
A)  slopes downward, indicating that as the wage rate falls, the quantity supplied of labor rises. 
B)  slopes upward, indicating that as the wage rate rises, the quantity supplied of labor rises. 
C)  is vertical, indicating that the quantity supplied of labor is independent of the wage rate. 
D)  slopes upward, indicating that as the wage rate falls, the quantity supplied of labor rises.

Question 6

If the market supply of labor increases,the total wage income will increase if the

Accepted Answer

A)  demand for labor is elastic. 
B)  demand for labor is inelastic. 
C)  supply of labor is elastic. 
D)  supply of labor is inelastic. 
A)  demand for labor is elastic. 
B)  demand for labor is inelastic. 
C)  supply of labor is elastic. 
D)  supply of labor is inelastic.

Question 7

If a firm is a factor price taker in the labor market,

Accepted Answer

A)  it must pay higher wages in order to hire additional workers. 
B)  it can hire all the workers it wants to at the going wage rate. 
C)  it must hire all workers who apply for a job. 
D)  it will continue to hire workers as long as MFC > MRP. 
A)  it must pay higher wages in order to hire additional workers. 
B)  it can hire all the workers it wants to at the going wage rate. 
C)  it must hire all workers who apply for a job. 
D)  it will continue to hire workers as long as MFC > MRP.

Question 8

When deciding whether a person is "worth" a certain salary,economists will want to compare a person's __________ with his or her wage or salary.

Accepted Answer

A)  marginal physical product 
B)  marginal revenue product 
C)  marginal factor cost 
D)  derived demand 
E)  none of the above 
A)  marginal physical product 
B)  marginal revenue product 
C)  marginal factor cost 
D)  derived demand 
E)  none of the above

Question 9

Which is the following is most likely to be a derived demand?

Accepted Answer

A)  the demand for new clothes to wear to a party 
B)  the demand for a house to live in 
C)  the demand for oranges that will be used to produce and sell orange juice 
D)  the demand for oranges to eat 
A)  the demand for new clothes to wear to a party 
B)  the demand for a house to live in 
C)  the demand for oranges that will be used to produce and sell orange juice 
D)  the demand for oranges to eat

Question 10

Suppose that all the necessary conditions exist for the realization of equal wage rates in every labor market,but that currently the wage rate in market X is higher than the wage rate in market Y.We expect that eventually the wage rate

Accepted Answer

A)  in market X will increase more. 
B)  in market Y will decrease. 
C)  in market X will decrease and the wage rate in market Y will increase. 
D)  will not change in either market, because something out of the ordinary must have caused the wage rates in the two markets not to be equal. 
E)  a and b 
A)  in market X will increase more. 
B)  in market Y will decrease. 
C)  in market X will decrease and the wage rate in market Y will increase. 
D)  will not change in either market, because something out of the ordinary must have caused the wage rates in the two markets not to be equal. 
E)  a and b

Question 11

Suppose it has just been discovered that working for long periods of time at a computer terminal causes eye strain,poor posture,and stress.We would expect,ceteris paribus,that the supply curve of computer programmers would shift __________ and the wage rate paid to programmers would __________.

Accepted Answer

A)  rightward; decrease 
B)  rightward; increase 
C)  leftward; decrease 
D)  leftward; increase 
A)  rightward; decrease 
B)  rightward; increase 
C)  leftward; decrease 
D)  leftward; increase

Question 12

Which of the following conditions is not necessary for wage rates to be identical in every labor market in both the short run and the long run?

Accepted Answer

A)  Demand for labor is identical in each market. 
B)  Nonpecuniary factors in each job are the same. 
C)  All labor is homogeneous. 
D)  All labor has zero costs of mobility. 
E)  All of the above are necessary conditions. 
A)  Demand for labor is identical in each market. 
B)  Nonpecuniary factors in each job are the same. 
C)  All labor is homogeneous. 
D)  All labor has zero costs of mobility. 
E)  All of the above are necessary conditions.

Question 13

Exhibit 27-8
  
-Refer to Exhibit 27-8.The dollar amounts that go in blanks (E)and (F)are,respectively,

Accepted Answer

A)  $6 and $6. 
B)  $70 and $60. 
C)  $84 and $72. 
D)  $72 and $24. 
E)  There is not enough information to answer the question. 
A)  $6 and $6. 
B)  $70 and $60. 
C)  $84 and $72. 
D)  $72 and $24. 
E)  There is not enough information to answer the question.

Question 14

The demand for factors (which arises from the demand for the products that the factors help produce)is called a(n)__________ demand.

Accepted Answer

A)  derived 
B)  indirect 
C)  secondary 
D)  expressed 
A)  derived 
B)  indirect 
C)  secondary 
D)  expressed

Question 15

The least-cost rule states that a firm minimizes costs by buying factors in the combination at which the MRP-to-price ratio for each is the same.

Accepted Answer

A) True 
 B)False

Question 16

Situation 27-2
  
-Refer to Situation 27-2.If good Y is produced in the United States,the output per $1 of cost would be ___________________ than if good Y were produced in Mexico,thus it would be best to produce good Y in ____________________.

Accepted Answer

A)  higher; Mexico. 
B)  lower; Mexico. 
C)  higher; the United States. 
D)  lower; the United States. 
A)  higher; Mexico. 
B)  lower; Mexico. 
C)  higher; the United States. 
D)  lower; the United States.

Question 17

The higher the labor cost to total cost ratio,the lower the elasticity of demand for labor.

Accepted Answer

A) True 
 B)False

Question 18

The marginal productivity theory states that

Accepted Answer

A)  as variable inputs are added to a fixed quantity of other inputs eventually the additional output produced by each additional variable input will decrease. 
B)  inputs will be used most efficiently when the additional output gained from each type of input is exactly the same. 
C)  firms in perfectly competitive product and factor markets will pay factors their marginal revenue products. 
D)  marginally productive inputs (that is, inputs that are not particularly productive) will not be heavily utilized. 
A)  as variable inputs are added to a fixed quantity of other inputs eventually the additional output produced by each additional variable input will decrease. 
B)  inputs will be used most efficiently when the additional output gained from each type of input is exactly the same. 
C)  firms in perfectly competitive product and factor markets will pay factors their marginal revenue products. 
D)  marginally productive inputs (that is, inputs that are not particularly productive) will not be heavily utilized.

Question 19

For a perfectly competitive firm,a decrease in the price of the product it sells will shift

Accepted Answer

A)  the demand curve of its product to the left. 
B)  the demand curve of its product to the right. 
C)  its MRP curve to the left. 
D)  its MRP curve to the right. 
E)  b and c 
A)  the demand curve of its product to the left. 
B)  the demand curve of its product to the right. 
C)  its MRP curve to the left. 
D)  its MRP curve to the right. 
E)  b and c

Question 20

The elasticity of demand for labor is 2.16.It follows that if the

Accepted Answer

A)  wage rate changes by 10 percent, the demand for labor changes by 2.16 percent. 
B)  demand for labor changes by 2.16 percent, the wage rate changes by 1.0 percent. 
C)  wage rate changes by 10 percent, the quantity demanded of labor changes by 21.6 percent. 
D)  wage rate changes by 2.16 percent, the quantity demanded of labor changes by 2.16 percent. 
E)  none of the above 
A)  wage rate changes by 10 percent, the demand for labor changes by 2.16 percent. 
B)  demand for labor changes by 2.16 percent, the wage rate changes by 1.0 percent. 
C)  wage rate changes by 10 percent, the quantity demanded of labor changes by 21.6 percent. 
D)  wage rate changes by 2.16 percent, the quantity demanded of labor changes by 2.16 percent. 
E)  none of the above

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

Marginal productivity theory states that

Marginal productivity theory implies that a worker will be paid an amount

As a firm buys more capital and less labor,the marginal physical product of capital __________ and the marginal physical product of labor __________,assuming the law of diminishing marginal returns has set in for each factor.

Exhibit 27-3 -Refer to Exhibit 27-3.The marginal factor cost (MFC)of the fourth unit of labor is

The market supply curve of labor

If the market supply of labor increases,the total wage income will increase if the

If a firm is a factor price taker in the labor market,

When deciding whether a person is "worth" a certain salary,economists will want to compare a person's __________ with his or her wage or salary.

Which is the following is most likely to be a derived demand?

Suppose that all the necessary conditions exist for the realization of equal wage rates in every labor market,but that currently the wage rate in market X is higher than the wage rate in market Y.We expect that eventually the wage rate

Suppose it has just been discovered that working for long periods of time at a computer terminal causes eye strain,poor posture,and stress.We would expect,ceteris paribus,that the supply curve of computer programmers would shift __________ and the wage rate paid to programmers would __________.

Which of the following conditions is not necessary for wage rates to be identical in every labor market in both the short run and the long run?

Exhibit 27-8 -Refer to Exhibit 27-8.The dollar amounts that go in blanks (E)and (F)are,respectively,

The demand for factors (which arises from the demand for the products that the factors help produce)is called a(n)__________ demand.

The least-cost rule states that a firm minimizes costs by buying factors in the combination at which the MRP-to-price ratio for each is the same.

Situation 27-2 -Refer to Situation 27-2.If good Y is produced in the United States,the output per $1 of cost would be ___________________ than if good Y were produced in Mexico,thus it would be best to produce good Y in ____________________.

The higher the labor cost to total cost ratio,the lower the elasticity of demand for labor.

The marginal productivity theory states that

For a perfectly competitive firm,a decrease in the price of the product it sells will shift

The elasticity of demand for labor is 2.16.It follows that if the

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Filters

As a firm buys more capital and less labor,the marginal physical product of capital and the marginal physical product of labor ,assuming the law of diminishing marginal returns has set in for each factor.

Suppose it has just been discovered that working for long periods of time at a computer terminal causes eye strain,poor posture,and stress.We would expect,ceteris paribus,that the supply curve of computer programmers would shift and the wage rate paid to programmers would .

Situation 27-2 -Refer to Situation 27-2.If good Y is produced in the United States,the output per $1 of cost would be _ than if good Y were produced in Mexico,thus it would be best to produce good Y in __.