Question 1

A perfectly competitive firm's downward sloping demand for an input is determined by the:

Accepted Answer

A) price of output and the average product of the input. 
B) demand for output. 
C) price of output and the marginal product of the input. 
D) price of output and the price of the input. 
A) price of output and the average product of the input. 
B) demand for output. 
C) price of output and the marginal product of the input. 
D) price of output and the price of the input.

Question 2

Fred has just arrived at college and is trying to figure out hoe to supplement the meager $50 a week checks that he gets from home. The amount of leisure time that has left after allowing for necessary activities like sleeping, and studying economics class is 50 hours a week. He can work as many hours per week at a nearby Taco Bell for
$5 an hour. Fred's utility function for leisure and money to spend on consumption is U(C,L)=CL.
a)Write down Fred's budget constraint for leisure and consumption. Draw the corresponding budget line on a diagram with leisure on the X- axis.
b)Sketch Fred's indifference curves.
c)Find the optimal bundle. That is: find the bundle of leisure and consumption that maximizes Fred's utility.
d)Find the optimal labor supply. That is the number of hour Fred chooses to work in Taco Bell.

Accepted Answer

a)Fred has an endowment that consists of

Question 3

The dead weight loss of a monopsonist is caused by

Accepted Answer

A) the average revenue product exceeding input price 
B) the marginal revenue product exceeding input price 
C) input price exceeding average revenue product 
D) input price exceeding marginal revenue product 
A) the average revenue product exceeding input price 
B) the marginal revenue product exceeding input price 
C) input price exceeding average revenue product 
D) input price exceeding marginal revenue product

Question 4

As a response to a change in the wage rate, the substitution effect will:

Accepted Answer

A) produce an direct relationship between the quantity demanded of an input and its price. 
B) produce an direct relationship between the quantity demanded of an input and the price of the other input. 
C) produce an inverse relationship between the quantity demanded of an input and the price of the other input. 
D) produce an inverse relationship between the quantity demanded of an input and its price. 
A) produce an direct relationship between the quantity demanded of an input and its price. 
B) produce an direct relationship between the quantity demanded of an input and the price of the other input. 
C) produce an inverse relationship between the quantity demanded of an input and the price of the other input. 
D) produce an inverse relationship between the quantity demanded of an input and its price.

Question 5

A perfectly competitive firm that operates in a perfectly competitive labour market will hire labour until the marginal product of labour equals:

Accepted Answer

A) P. 
B) w. 
C) wP. 
D) w/P. 
A) P. 
B) w. 
C) wP. 
D) w/P.

Question 6

The supply of labour:

Accepted Answer

A) is always backward bending. 
B) is the result of a maximization process. 
C) is independent of non- wage income. 
D) is the inverse of the supply of capital. 
A) is always backward bending. 
B) is the result of a maximization process. 
C) is independent of non- wage income. 
D) is the inverse of the supply of capital.

Question 7

An increase in the wage rate:

Accepted Answer

A) rotates outward the income- leisure budget constraint. 
B) rotates outward the income budget constraint. 
C) rotates outward the time constraint. 
D) does not affect the income- leisure budget constraint. 
A) rotates outward the income- leisure budget constraint. 
B) rotates outward the income budget constraint. 
C) rotates outward the time constraint. 
D) does not affect the income- leisure budget constraint.

Question 8

The demand for labour can be expressed as Q = 10,000 - w and the supply of labour is Q = 5,000 + w where Q is total person- hours of work during the week and w is the weekly salary. How much compensation do the workers receive weekly?

Accepted Answer

A) 28,125,000 
B) 43,750,000 
C) 15,625,000 
D) 18,750,000 
A) 28,125,000 
B) 43,750,000 
C) 15,625,000 
D) 18,750,000

Question 9

An increase in one's non- labour income:

Accepted Answer

A) shifts the income- leisure budget constraint up in a parallel fashion. 
B) shifts the income budget constraint up in a parallel fashion. 
C) does not affect he income- leisure budget constraint. 
D) shifts the time constraint up in a parallel fashion. 
A) shifts the income- leisure budget constraint up in a parallel fashion. 
B) shifts the income budget constraint up in a parallel fashion. 
C) does not affect he income- leisure budget constraint. 
D) shifts the time constraint up in a parallel fashion.

Question 10

The employment of librarians by public libraries can be characterized as a monopsony. Suppose the demand for librarians is W = 30,000 - 125n, where W is the wage (as an annual salary), and n is the number of librarians hired. The supply of librarians is given by W = 1,000 + 75n.
i)If the public library takes advantage of its monopsony position, how many librarians will it hire? What wage will it pay?
ii)If, instead, the public library faced an infinite supply of librarians at the annual wage level of $10,000, how many librarians would it hire?

Accepted Answer

i)With a supply curve of W = 1,000 + 75n

Question 11

If an input market is monopsonistic, and the firm's output market is monopolistic, then in equilibrium:

Accepted Answer

A) w < MFC = MRP < VMP. 
B) w = MFC = MRP = VMP. 
C) w < MFC = MRP = VMP. 
D) w = MFC = MRP < VMP. 
A) w < MFC = MRP < VMP. 
B) w = MFC = MRP = VMP. 
C) w < MFC = MRP = VMP. 
D) w = MFC = MRP < VMP.

Question 12

Unlike a competitive buyer:

Accepted Answer

A) a monopsonist pays a different price for each unit purchased. 
B) the price that a monopsonist pays depends on the number of units purchased. 
C) a monopsonist sets marginal value equal to marginal expenditure. 
D) a monopsonist faces an upward- sloping industry supply curve. 
A) a monopsonist pays a different price for each unit purchased. 
B) the price that a monopsonist pays depends on the number of units purchased. 
C) a monopsonist sets marginal value equal to marginal expenditure. 
D) a monopsonist faces an upward- sloping industry supply curve.

Question 13

In the labour market, the optimal number of work hours is determined when:

Accepted Answer

A) the MRS of income for leisure is the wage. 
B) the MRS of income for consumption is the wage. 
C) the MRS of leisure for consumption is the wage. 
D) total utility is maximized. 
A) the MRS of income for leisure is the wage. 
B) the MRS of income for consumption is the wage. 
C) the MRS of leisure for consumption is the wage. 
D) total utility is maximized.

Question 14

Figure 11A
 
-In Figure 11A, the individual's Intertemporal budget line is:

Accepted Answer

A) the line including the points G, N* and E*. 
B) the line including the points N* and E*. 
C) the line including the point E* only. 
D) the line including the points G, N*, and 0'. 
A) the line including the points G, N* and E*. 
B) the line including the points N* and E*. 
C) the line including the point E* only. 
D) the line including the points G, N*, and 0'.

Question 15

If leisure is a normal good and the wage increases:

Accepted Answer

A) labour supply may be upward sloping. 
B) labour supply may decrease if substitution effect for leisure outweighs the income effect. 
C) labour supply will shift to the right. 
D) labour supply must increase if substitution effect for leisure outweighs the income effect. 
A) labour supply may be upward sloping. 
B) labour supply may decrease if substitution effect for leisure outweighs the income effect. 
C) labour supply will shift to the right. 
D) labour supply must increase if substitution effect for leisure outweighs the income effect.

Question 16

If the marginal product of labour (z1)is 100/z1, the marginal product of capital (z2)is 50/z2, the wage rate is $5, the price of capital is $100, and the price of the product is $12, how much capital and labour will a perfectly competitive firm demand?

Accepted Answer

A perfectly competitive firm will equate

Question 17

If the supply function of input z to some monopsonist is 10 + 2z:

Accepted Answer

A) MFC = 10. 
B) MFC = 4z. 
C) MFC = 10 + 4z. 
D) MFC = 10 + 2z. 
A) MFC = 10. 
B) MFC = 4z. 
C) MFC = 10 + 4z. 
D) MFC = 10 + 2z.

Question 18

Monopsony in an input market is a source of inefficiency in the allocation of resources because:

Accepted Answer

A) monopsony always entails discrimination. 
B) the monopsonist hires too little of the input. 
C) MR is necessarily less than price in the output market. 
D) in equilibrium MRP < w. 
A) monopsony always entails discrimination. 
B) the monopsonist hires too little of the input. 
C) MR is necessarily less than price in the output market. 
D) in equilibrium MRP < w.

Question 19

In long- run equilibrium, for a firm which is a perfect competitor in its input and its output markets:

Accepted Answer

A) w = MRP = VMP for all inputs. 
B) MP/p is identical for all inputs. 
C) w = MRP < VMP. 
D) VMP is identical for all inputs. 
A) w = MRP = VMP for all inputs. 
B) MP/p is identical for all inputs. 
C) w = MRP < VMP. 
D) VMP is identical for all inputs.

Question 20

Consider a firm which is initially in long- run equilibrium and is faced with an increase in the price of a variable input, z. In that case, the:

Accepted Answer

A) firm will demand more if the input is inferior. 
B) input quantity demanded will be reduced more in the long run. 
C) firm's demand for that input will shift down. 
D) input quantity demanded will be reduced more in the short run. 
A) firm will demand more if the input is inferior. 
B) input quantity demanded will be reduced more in the long run. 
C) firm's demand for that input will shift down. 
D) input quantity demanded will be reduced more in the short run.

A perfectly competitive firm's downward sloping demand for an input is determined by the:

The dead weight loss of a monopsonist is caused by

As a response to a change in the wage rate, the substitution effect will:

A perfectly competitive firm that operates in a perfectly competitive labour market will hire labour until the marginal product of labour equals:

The supply of labour:

An increase in the wage rate:

The demand for labour can be expressed as Q = 10,000 - w and the supply of labour is Q = 5,000 + w where Q is total person- hours of work during the week and w is the weekly salary. How much compensation do the workers receive weekly?

An increase in one's non- labour income:

If an input market is monopsonistic, and the firm's output market is monopolistic, then in equilibrium:

Unlike a competitive buyer:

In the labour market, the optimal number of work hours is determined when:

Figure 11A -In Figure 11A, the individual's Intertemporal budget line is:

If leisure is a normal good and the wage increases:

If the marginal product of labour (z₁)is 100/z₁, the marginal product of capital (z₂)is 50/z₂, the wage rate is $5, the price of capital is $100, and the price of the product is $12, how much capital and labour will a perfectly competitive firm demand?

If the supply function of input z to some monopsonist is 10 + 2z:

Monopsony in an input market is a source of inefficiency in the allocation of resources because:

In long- run equilibrium, for a firm which is a perfect competitor in its input and its output markets:

Consider a firm which is initially in long- run equilibrium and is faced with an increase in the price of a variable input, z. In that case, the:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 11: Input Markets and the Allocation of Resources

A perfectly competitive firm's downward sloping demand for an input is determined by the:

The dead weight loss of a monopsonist is caused by

As a response to a change in the wage rate, the substitution effect will:

A perfectly competitive firm that operates in a perfectly competitive labour market will hire labour until the marginal product of labour equals:

The supply of labour:

An increase in the wage rate:

The demand for labour can be expressed as Q = 10,000 - w and the supply of labour is Q = 5,000 + w where Q is total person- hours of work during the week and w is the weekly salary. How much compensation do the workers receive weekly?

An increase in one's non- labour income:

If an input market is monopsonistic, and the firm's output market is monopolistic, then in equilibrium:

Unlike a competitive buyer:

In the labour market, the optimal number of work hours is determined when:

Figure 11A -In Figure 11A, the individual's Intertemporal budget line is:

If leisure is a normal good and the wage increases:

If the marginal product of labour (z1)is 100/z1, the marginal product of capital (z2)is 50/z2, the wage rate is $5, the price of capital is $100, and the price of the product is $12, how much capital and labour will a perfectly competitive firm demand?

If the supply function of input z to some monopsonist is 10 + 2z:

Monopsony in an input market is a source of inefficiency in the allocation of resources because:

In long- run equilibrium, for a firm which is a perfect competitor in its input and its output markets:

Consider a firm which is initially in long- run equilibrium and is faced with an increase in the price of a variable input, z. In that case, the:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

If the marginal product of labour (z₁)is 100/z₁, the marginal product of capital (z₂)is 50/z₂, the wage rate is $5, the price of capital is $100, and the price of the product is $12, how much capital and labour will a perfectly competitive firm demand?