Question 1

A decrease in the wage rate will change

Accepted Answer

A)  only the amount of labor hired. 
B)  the amount of labor employed, and it may also change the amount of other inputs employed. 
C)  the price the firm charges for the product, but it will not affect the demand for any of the inputs. 
D)  the firm's profit-maximizing level output, but not its usage of inputs. 
A)  only the amount of labor hired. 
B)  the amount of labor employed, and it may also change the amount of other inputs employed. 
C)  the price the firm charges for the product, but it will not affect the demand for any of the inputs. 
D)  the firm's profit-maximizing level output, but not its usage of inputs.

Question 2

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 3 bushels. What would you advise this farmer to do?

Accepted Answer

A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is more than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal. 
A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is more than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal.

Question 3

A firm hires labor, capital, and land to produce grapefruits. Currently the marginal product of the last unit of labor input is 40, the marginal product of the last unit of capital input is 60, and the marginal product of the last unit of land input is 200. The market wage is $20 and the market price for capital is $30. If the firm is using the optimal combination of inputs, then the price of land is

Accepted Answer

A)  $4. 
B)  $40. 
C)  $100. 
D)  indeterminate from the given information. 
A)  $4. 
B)  $40. 
C)  $100. 
D)  indeterminate from the given information.

Question 4

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

Accepted Answer

A)  MPL = MPK = MPA 
B)  PL = PK = PA 
C)  MPL/PL = MPK/PK = MPA/PA 
D)  MPL = MPK = MPA = 1/PX 
A)  MPL = MPK = MPA 
B)  PL = PK = PA 
C)  MPL/PL = MPK/PK = MPA/PA 
D)  MPL = MPK = MPA = 1/PX

Question 5

Refer to the information provided in Figure 10.3 below to answer the question(s) that follow.   Figure 10.3
-Refer to Figure 10.3. The market wage is initially W1 and the firm is initially at Point E. Labor supply increases from S1 to S0. After the firm is fully able to adjust all inputs, the firm will hire ________ units of labor to maximize profits.

Accepted Answer

A)  I0 
B)  I1 
C)  I2 
D)  I3 
A)  I0 
B)  I1 
C)  I2 
D)  I3

Question 6

MPL multiplied by PX is the ________, where L denotes labor and X denotes output.

Accepted Answer

A)  cost of a marginal unit of labor 
B)  value of labor's marginal product 
C)  marginal revenue of a unit of output 
D)  marginal cost of a unit of output 
A)  cost of a marginal unit of labor 
B)  value of labor's marginal product 
C)  marginal revenue of a unit of output 
D)  marginal cost of a unit of output

Question 7

The formula (MPL)(MRX), where L is for labor and X is the output, is for

Accepted Answer

A)  the marginal product of labor. 
B)  the marginal revenue from labor. 
C)  the marginal revenue product of labor. 
D)  total revenue of labor. 
A)  the marginal product of labor. 
B)  the marginal revenue from labor. 
C)  the marginal revenue product of labor. 
D)  total revenue of labor.

Question 8

The demand for inputs is a derived demand because

Accepted Answer

A)  it does not come from competitive markets. 
B)  it depends on the demand for outputs. 
C)  it is derived from nature. 
D)  it is derived from production. 
A)  it does not come from competitive markets. 
B)  it depends on the demand for outputs. 
C)  it is derived from nature. 
D)  it is derived from production.

Question 9

You have been hired by the No Hassle Collection Agency to provide economic advice. The owner of the agency tells you that No Hassle's only variable input is the number of collection agents. The hourly wage for collection agents is $40.00. The marginal revenue product curve for collection agents reaches its maximum at five workers with a marginal revenue product of $34.00. What advice would you give this firm?

Accepted Answer

A)  Hire five collection agents so as to minimize the amount of money the firm will lose. 
B)  Shut down immediately, as the firm is not able to cover all of its variable costs. 
C)  Increase the wage rate paid to collection agents so that their marginal revenue product will increase. 
D)  Produce as much as possible so as to maximize the difference between the wage paid to collection agents and their marginal revenue product. 
A)  Hire five collection agents so as to minimize the amount of money the firm will lose. 
B)  Shut down immediately, as the firm is not able to cover all of its variable costs. 
C)  Increase the wage rate paid to collection agents so that their marginal revenue product will increase. 
D)  Produce as much as possible so as to maximize the difference between the wage paid to collection agents and their marginal revenue product.

Question 10

If a nail salon hires an additional worker, that worker can service 8 additional customers per day. The average nail service fee is $30. The most the salon would be willing to pay that worker is

Accepted Answer

A)  $8 per day. 
B)  $30 per day. 
C)  $240 per day. 
D)  indeterminate with the given information. 
A)  $8 per day. 
B)  $30 per day. 
C)  $240 per day. 
D)  indeterminate with the given information.

Question 11

Refer to the information provided in Figure 10.1 below to answer the question(s) that follow.   Figure 10.1
-Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

Accepted Answer

A)  do nothing because it is maximizing profits. 
B)  reduce employment to 15 workers to increase profits. 
C)  reduce employment to 14 workers to increase profits. 
D)  increase employment to 17 workers to increase profits. 
A)  do nothing because it is maximizing profits. 
B)  reduce employment to 15 workers to increase profits. 
C)  reduce employment to 14 workers to increase profits. 
D)  increase employment to 17 workers to increase profits.

Question 12

If the marginal revenue product of land is greater than its price, a firm should

Accepted Answer

A)  use more land. 
B)  use less land. 
C)  try to decrease the productivity of land. 
D)  decrease the price it is willing to pay for land. 
A)  use more land. 
B)  use less land. 
C)  try to decrease the productivity of land. 
D)  decrease the price it is willing to pay for land.

Question 13

Assuming labor is the only variable factor of production, production of a good will occur

Accepted Answer

A)  as long as the marginal revenue product of labor is positive. 
B)  if society values a good more than it costs firms to hire the workers to produce the good. 
C)  as long as the product's price is greater than the marginal revenue product of labor. 
D)  if the marginal cost of a unit of output equals the marginal revenue product of labor. 
A)  as long as the marginal revenue product of labor is positive. 
B)  if society values a good more than it costs firms to hire the workers to produce the good. 
C)  as long as the product's price is greater than the marginal revenue product of labor. 
D)  if the marginal cost of a unit of output equals the marginal revenue product of labor.

Question 14

Assuming that labor is the only variable input, if society values a good ________ it costs firms to hire the workers to produce that good, the good ________ be produced.

Accepted Answer

A)  more than; will 
B)  less than; will 
C)  more than; will not 
D)  equal to what; will not 
A)  more than; will 
B)  less than; will 
C)  more than; will not 
D)  equal to what; will not

Question 15

A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $1 a bushel, the wage rate is $12, the farmer employs six workers and the marginal product of the sixth worker is 10. What would you advise this farmer to do?

Accepted Answer

A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is greater than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal. 
A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is greater than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal.

Question 16

Refer to the information provided in Figure 10.2 below to answer the question(s) that follow.   Figure 10.2
-Refer to Figure 10.2. This firmʹs marginal cost curve has shifted from MC1 to MC0. A likely explanation for this is that

Accepted Answer

A)  the productivity of a variable input increased. 
B)  the price of a variable input increased. 
C)  the demand for the firmʹs product increased. 
D)  the supply of a variable input increased. 
A)  the productivity of a variable input increased. 
B)  the price of a variable input increased. 
C)  the demand for the firmʹs product increased. 
D)  the supply of a variable input increased.

Question 17

The return to any factor of production that is in fixed supply is called

Accepted Answer

A)  marginal product. 
B)  demand. 
C)  economic profit. 
D)  pure rent. 
A)  marginal product. 
B)  demand. 
C)  economic profit. 
D)  pure rent.

Question 18

A perfectly competitive firm will hire labor as long as the marginal revenue product of labor is

Accepted Answer

A)  less than the going wage. 
B)  equal to the going wage. 
C)  greater than the going wage. 
D)  zero. 
A)  less than the going wage. 
B)  equal to the going wage. 
C)  greater than the going wage. 
D)  zero.

Question 19

The ________ is the product of the marginal product of labor and the price of the output.

Accepted Answer

A)  marginal factor cost 
B)  total revenue 
C)  average revenue 
D)  marginal revenue product 
A)  marginal factor cost 
B)  total revenue 
C)  average revenue 
D)  marginal revenue product

Question 20

A firm's ________ curve in a perfectly competitive product market is the same as its supply curve. Similarly, a firm's ________ curve in a perfectly competitive labor market is the same as its demand curve.

Accepted Answer

A)  marginal revenue product; marginal cost 
B)  marginal cost; marginal revenue product 
C)  total revenue; total cost 
D)  total cost; total revenue 
A)  marginal revenue product; marginal cost 
B)  marginal cost; marginal revenue product 
C)  total revenue; total cost 
D)  total cost; total revenue

A decrease in the wage rate will change

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

MP_L multiplied by P_X is the ________, where L denotes labor and X denotes output.

The formula (MP_L)(MR_X), where L is for labor and X is the output, is for

The demand for inputs is a derived demand because

If a nail salon hires an additional worker, that worker can service 8 additional customers per day. The average nail service fee is $30. The most the salon would be willing to pay that worker is

Refer to the information provided in Figure 10.1 below to answer the question(s) that follow. Figure 10.1 -Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

If the marginal revenue product of land is greater than its price, a firm should

Assuming labor is the only variable factor of production, production of a good will occur

Assuming that labor is the only variable input, if society values a good it costs firms to hire the workers to produce that good, the good be produced.

Refer to the information provided in Figure 10.2 below to answer the question(s) that follow. Figure 10.2 -Refer to Figure 10.2. This firmʹs marginal cost curve has shifted from MC₁ to MC₀. A likely explanation for this is that

The return to any factor of production that is in fixed supply is called

A perfectly competitive firm will hire labor as long as the marginal revenue product of labor is

The ________ is the product of the marginal product of labor and the price of the output.

A firm's curve in a perfectly competitive product market is the same as its supply curve. Similarly, a firm's curve in a perfectly competitive labor market is the same as its demand curve.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 10: Input Demand: the Labor and Land Markets

A decrease in the wage rate will change

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

MPL multiplied by PX is the ________, where L denotes labor and X denotes output.

The formula (MPL)(MRX), where L is for labor and X is the output, is for

The demand for inputs is a derived demand because

If a nail salon hires an additional worker, that worker can service 8 additional customers per day. The average nail service fee is $30. The most the salon would be willing to pay that worker is

Refer to the information provided in Figure 10.1 below to answer the question(s) that follow. Figure 10.1 -Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

If the marginal revenue product of land is greater than its price, a firm should

Assuming labor is the only variable factor of production, production of a good will occur

Assuming that labor is the only variable input, if society values a good ________ it costs firms to hire the workers to produce that good, the good ________ be produced.

Refer to the information provided in Figure 10.2 below to answer the question(s) that follow. Figure 10.2 -Refer to Figure 10.2. This firmʹs marginal cost curve has shifted from MC1 to MC0. A likely explanation for this is that

The return to any factor of production that is in fixed supply is called

A perfectly competitive firm will hire labor as long as the marginal revenue product of labor is

The ________ is the product of the marginal product of labor and the price of the output.

A firm's ________ curve in a perfectly competitive product market is the same as its supply curve. Similarly, a firm's ________ curve in a perfectly competitive labor market is the same as its demand curve.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

MP_L multiplied by P_X is the ________, where L denotes labor and X denotes output.

The formula (MP_L)(MR_X), where L is for labor and X is the output, is for

Assuming that labor is the only variable input, if society values a good it costs firms to hire the workers to produce that good, the good be produced.

Refer to the information provided in Figure 10.2 below to answer the question(s) that follow. Figure 10.2 -Refer to Figure 10.2. This firmʹs marginal cost curve has shifted from MC₁ to MC₀. A likely explanation for this is that

A firm's curve in a perfectly competitive product market is the same as its supply curve. Similarly, a firm's curve in a perfectly competitive labor market is the same as its demand curve.