Question 1

The least-cost rule requires that,for every factor,the ratio of the

Accepted Answer

A)  marginal physical product to factor price must be equal. 
B)  marginal revenue product to factor price must be equal. 
C)  marginal revenue product to output must be equal. 
D)  marginal cost to factor price must be equal. 
E)  b and c 
A)  marginal physical product to factor price must be equal. 
B)  marginal revenue product to factor price must be equal. 
C)  marginal revenue product to output must be equal. 
D)  marginal cost to factor price must be equal. 
E)  b and c

Question 2

Marginal revenue product is equal to marginal revenue multiplied by

Accepted Answer

A)  average physical product. 
B)  marginal physical product. 
C)  average total cost. 
D)  marginal cost. 
A)  average physical product. 
B)  marginal physical product. 
C)  average total cost. 
D)  marginal cost.

Question 3

Assume the following conditions hold: (1)the demand for every type of labor is the same,(2)there are no special nonpecuniary aspects to any job,(3)all labor is ultimately homogeneous and can costlessly be trained for different types of employment,(4)all labor is mobile at zero cost.Given these conditions,

Accepted Answer

A)  wage rates will be the same in most labor markets. 
B)  the demand for labor will be less in some labor markets than in others. 
C)  wage rates will be the same in all labor markets. 
D)  wage rates will be the same in very few labor markets. 
A)  wage rates will be the same in most labor markets. 
B)  the demand for labor will be less in some labor markets than in others. 
C)  wage rates will be the same in all labor markets. 
D)  wage rates will be the same in very few labor markets.

Question 4

If a monopolist is a factor price taker,at the profit-maximizing factor quantity

Accepted Answer

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

Question 5

The nonmoney benefits a person may receive in a job are sometimes referred to by economists as

Accepted Answer

A)  nonpayment benefits. 
B)  pecuniary benefits. 
C)  nonpecuniary benefits. 
D)  internal payments. 
A)  nonpayment benefits. 
B)  pecuniary benefits. 
C)  nonpecuniary benefits. 
D)  internal payments.

Question 6

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

Accepted Answer

A)  demand for the product produced by labor. 
B)  price of the product. 
C)  quantity supplied of labor. 
D)  wage rate. 
E)  price of substitute factors. 
A)  demand for the product produced by labor. 
B)  price of the product. 
C)  quantity supplied of labor. 
D)  wage rate. 
E)  price of substitute factors.

Question 7

What looks like discrimination in the labor markets is always just a problem of the high cost of information.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  $12 
B)  $28 
C)  $36 
D)  $18 
A)  $12 
B)  $28 
C)  $36 
D)  $18

Question 9

Applying the least-cost rule to two factors,a firm will

Accepted Answer

A)  maximize profits at the output at which MRP = MFC. 
B)  minimize costs when the MPP of factor A equals the MPP of factor B. 
C)  minimize costs when the MRP of factor A equals the MRP of factor B. 
D)  minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B. 
A)  maximize profits at the output at which MRP = MFC. 
B)  minimize costs when the MPP of factor A equals the MPP of factor B. 
C)  minimize costs when the MRP of factor A equals the MRP of factor B. 
D)  minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B.

Question 10

Exhibit 27-4
  
-Refer to Exhibit 27-4.In evaluating the marginal cost and revenues of hiring additional units of labor,the firm will not hire

Accepted Answer

A)  the second worker. 
B)  the fourth worker. 
C)  labor up to the point where MRP equals the market price of the input. 
D)  labor up to the point where MRP = MFC. 
E)  both c and d 
A)  the second worker. 
B)  the fourth worker. 
C)  labor up to the point where MRP equals the market price of the input. 
D)  labor up to the point where MRP = MFC. 
E)  both c and d

Question 11

One way to calculate marginal revenue product is

Accepted Answer

A)  MR x MPP. 
B)  MPP/MR. 
C)  MR + MPP. 
D)  MPP - MR. 
E)  none of the above 
A)  MR x MPP. 
B)  MPP/MR. 
C)  MR + MPP. 
D)  MPP - MR. 
E)  none of the above

Question 12

The elasticity of demand for labor measures the percentage change in quantity demanded of labor that occurs as a result of a percentage change in the wage rate.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 27-7
  
-Refer to Exhibit 27-7.The exhibit shows two markets in which labor of identical skills is employed.Assume that both markets are in equilibrium with Q1 and Q2quantities of labor employed at the respective prices of $4 and $6 per unit.If this equilibrium persists in the long run,an economist would suspect that

Accepted Answer

A)  nonpecuniary benefits are higher in market A. 
B)  nonpecuniary benefits are higher in market B. 
C)  there is discrimination in market A. 
D)  there is no cost of moving across markets. 
E)  b and c 
A)  nonpecuniary benefits are higher in market A. 
B)  nonpecuniary benefits are higher in market B. 
C)  there is discrimination in market A. 
D)  there is no cost of moving across markets. 
E)  b and c

Question 14

Which of the following statements is false?

Accepted Answer

A)  The higher the labor cost-total cost ratio, the higher the elasticity of demand for labor. 
B)  The more substitutes for labor, the higher the elasticity of demand for labor. 
C)  The higher the elasticity of demand for the product, the higher the elasticity of demand for the labor that produces the product. 
D)  A change in the MFC of a factor leads to a change in the MRP of a factor. 
A)  The higher the labor cost-total cost ratio, the higher the elasticity of demand for labor. 
B)  The more substitutes for labor, the higher the elasticity of demand for labor. 
C)  The higher the elasticity of demand for the product, the higher the elasticity of demand for the labor that produces the product. 
D)  A change in the MFC of a factor leads to a change in the MRP of a factor.

Question 15

If MRP = VMP = MFC = wages,then the firm is

Accepted Answer

A)  selling its product in a perfectly competitive market and is hiring its labor in a perfectly competitive labor market. 
B)  selling its product in a perfectly competitive market but is not hiring its labor in a perfectly competitive labor market. 
C)  not selling its product in a perfectly competitive market but is hiring its labor in a perfectly competitive labor market. 
D)  neither selling its product in a perfectly competitive market nor hiring its labor in a perfectly competitive labor market. 
A)  selling its product in a perfectly competitive market and is hiring its labor in a perfectly competitive labor market. 
B)  selling its product in a perfectly competitive market but is not hiring its labor in a perfectly competitive labor market. 
C)  not selling its product in a perfectly competitive market but is hiring its labor in a perfectly competitive labor market. 
D)  neither selling its product in a perfectly competitive market nor hiring its labor in a perfectly competitive labor market.

Question 16

Exhibit 27-5
  
-Refer to Exhibit 27-5.The marginal revenue product of the second unit of labor is

Accepted Answer

A)  $80. 
B)  $180. 
C)  $70. 
D)  $480. 
A)  $80. 
B)  $180. 
C)  $70. 
D)  $480.

Question 17

A price searcher (monopolist,monopolistic competitor,etc.)definitely 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 demand curve for the product it sells. 
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 demand curve for the product it sells.

Question 18

If the wage rate increases from $9 to $10 and,as a result,the quantity demanded of labor decreases from 400 workers to 350 workers,then the absolute value of the elasticity of demand for labor is

Accepted Answer

A)  0.789. 
B)  2.300. 
C)  0.435. 
D)  1.267. 
E)  3.791. 
A)  0.789. 
B)  2.300. 
C)  0.435. 
D)  1.267. 
E)  3.791.

Question 19

Suppose there are two labor markets,A and B,and labor is homogeneous between markets.The wage rate in labor market A falls relative to the wage rate in labor market B.What happens in labor market B?

Accepted Answer

A)  The supply curve of labor shifts leftward. 
B)  The supply curve of labor shifts rightward. 
C)  The demand curve for labor shifts leftward. 
D)  b and c 
E)  none of the above 
A)  The supply curve of labor shifts leftward. 
B)  The supply curve of labor shifts rightward. 
C)  The demand curve for labor shifts leftward. 
D)  b and c 
E)  none of the above

Question 20

The firm's factor demand curve is the

Accepted Answer

A)  MRP curve if the firm is a price taker (perfectly competitive firm). 
B)  MRP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
C)  VMP curve if the firm is a price taker (perfectly competitive firm). 
D)  VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
E)  a, b, and c 
A)  MRP curve if the firm is a price taker (perfectly competitive firm). 
B)  MRP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
C)  VMP curve if the firm is a price taker (perfectly competitive firm). 
D)  VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
E)  a, b, and c

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

The least-cost rule requires that,for every factor,the ratio of the

Marginal revenue product is equal to marginal revenue multiplied by

If a monopolist is a factor price taker,at the profit-maximizing factor quantity

The nonmoney benefits a person may receive in a job are sometimes referred to by economists as

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

What looks like discrimination in the labor markets is always just a problem of the high cost of information.

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

Applying the least-cost rule to two factors,a firm will

Exhibit 27-4 -Refer to Exhibit 27-4.In evaluating the marginal cost and revenues of hiring additional units of labor,the firm will not hire

One way to calculate marginal revenue product is

The elasticity of demand for labor measures the percentage change in quantity demanded of labor that occurs as a result of a percentage change in the wage rate.

Which of the following statements is false?

If MRP = VMP = MFC = wages,then the firm is

Exhibit 27-5 -Refer to Exhibit 27-5.The marginal revenue product of the second unit of labor is

A price searcher (monopolist,monopolistic competitor,etc.)definitely faces

If the wage rate increases from $9 to $10 and,as a result,the quantity demanded of labor decreases from 400 workers to 350 workers,then the absolute value of the elasticity of demand for labor is

Suppose there are two labor markets,A and B,and labor is homogeneous between markets.The wage rate in labor market A falls relative to the wage rate in labor market B.What happens in labor market B?

The firm's factor demand curve is the

What Economics Is About

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Supply and Demand: Theory

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Macroeconomic Measurements: Prices and Unemployment

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Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

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Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

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Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

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The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

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