Question 1

A perfectly competitive firm 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 E

Question 2

The term "derived demand" refers to the idea that a change in the

Accepted Answer

A) demand for one good, say, tennis racquets, will affect the demand for related goods, say, tennis balls. 
B) demand for a good is affected by the supply of that good. 
C) demand for a good will affect the demand for the factors used to produce that good. 
D) supply of a factor will affect the demand for that factor. 
A) demand for one good, say, tennis racquets, will affect the demand for related goods, say, tennis balls. 
B) demand for a good is affected by the supply of that good. 
C) demand for a good will affect the demand for the factors used to produce that good. 
D) supply of a factor will affect the demand for that factor. C

Question 3

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. B

Question 4

Marginal productivity theory implies that a worker will be paid a wage (W) such that

Accepted Answer

A) W = MRP, but W < VMP. 
B) W < MRP, but W = VMP. 
C) W = MRP and W = VMP. 
D) W = MFC, but W < MRP. 
E) W < MRP and W < VMP. 
A) W = MRP, but W < VMP. 
B) W < MRP, but W = VMP. 
C) W = MRP and W = VMP. 
D) W = MFC, but W < MRP. 
E) W < MRP and W < VMP.

Question 5

When a prospective employer asks a graduating college senior for evidence of his grade point average (GPA), the employer is

Accepted Answer

A) discriminating against the graduating senior. 
B) screening the graduating senior. 
C) probably just trying to intimidate the graduating senior. 
D) b and c 
A) discriminating against the graduating senior. 
B) screening the graduating senior. 
C) probably just trying to intimidate the graduating senior. 
D) b and c

Question 6

Exhibit 26-6
​
  
-Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

Accepted Answer

A) QA 
B) QB 
C) QC 
D) none of the above is possible 
A) QA 
B) QB 
C) QC 
D) none of the above is possible

Question 7

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 8

Marginal revenue product (MRP) is the

Accepted Answer

A) additional output generated by employing an additional factor unit. 
B) additional profit generated by employing an additional factor unit. 
C) additional revenue generated by employing an additional factor unit minus the additional cost. 
D) additional revenue generated by employing an additional factor unit. 
E) total revenue from the sale of a product divided by the total output of the product. 
A) additional output generated by employing an additional factor unit. 
B) additional profit generated by employing an additional factor unit. 
C) additional revenue generated by employing an additional factor unit minus the additional cost. 
D) additional revenue generated by employing an additional factor unit. 
E) total revenue from the sale of a product divided by the total output of the product.

Question 9

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 10

Value marginal product (VMP) is

Accepted Answer

A) a measure of additional revenue minus additional cost as a result of additional output. 
B) the price of the product multiplied by the additional output resulting from an additional factor unit employed. 
C) the marginal revenue of the product divided by the additional output resulting from an additional factor unit employed. 
D) the value of an additional unit of product as measured in terms of additional factor cost. 
E) the total value of the total output of a firm divided by the total quantity of output. 
A) a measure of additional revenue minus additional cost as a result of additional output. 
B) the price of the product multiplied by the additional output resulting from an additional factor unit employed. 
C) the marginal revenue of the product divided by the additional output resulting from an additional factor unit employed. 
D) the value of an additional unit of product as measured in terms of additional factor cost. 
E) the total value of the total output of a firm divided by the total quantity of output.

Question 11

If all the individuals had the same innate and learned skills and abilities, applied the same degree of effort on the job, and worked with the same amount and quality of other factors of production,

Accepted Answer

A) all labor supply curves would be horizontal. 
B) all labor demand curves would be horizontal. 
C) wages in different markets would differ less than they currently do. 
D) the quantity of labor supplied would decrease in all markets. 
E) the demand curve for capital would be upward sloping. 
A) all labor supply curves would be horizontal. 
B) all labor demand curves would be horizontal. 
C) wages in different markets would differ less than they currently do. 
D) the quantity of labor supplied would decrease in all markets. 
E) the demand curve for capital would be upward sloping.

Question 12

Exhibit 26-1
   ​
-Refer to Exhibit 26-l. What dollar value goes in blank (B)?

Accepted Answer

A) $36 
B) $17 
C) $144 
D) $136 
A) $36 
B) $17 
C) $144 
D) $136

Question 13

Labor supply is a reflection of the number of persons who can actually do a job.

Accepted Answer

A) True 
 B)False

Question 14

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve __________, while its VMP of labor curve __________.

Accepted Answer

A) stays where it is; shifts to the right 
B) shifts to the right; shifts to the right 
C) shifts to the right; stays where it is 
D) shifts to the left; shifts to the left 
A) stays where it is; shifts to the right 
B) shifts to the right; shifts to the right 
C) shifts to the right; stays where it is 
D) shifts to the left; shifts to the left

Question 15

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 16

Exhibit 26-7
​
   Market A Market B
-Refer to Exhibit 26-7. The exhibit shows two markets in which labor of identical skills is employed. Assume that both markets are in equilibrium with Q1 and Q2 quantities 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 17

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 18

Exhibit 26-1
   ​
-Refer to Exhibit 26-1. What dollar value goes in blank (D)?

Accepted Answer

A) $6 
B) $28 
C) $46 
D) $18 
A) $6 
B) $28 
C) $46 
D) $18

Question 19

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

Exam 26: Factor Markets With Emphasis on the Labor Market

A perfectly competitive firm will maximize its profits by hiring factors up to the point at which

The term "derived demand" refers to the idea that a change in the

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

Marginal productivity theory implies that a worker will be paid a wage (W) such that

When a prospective employer asks a graduating college senior for evidence of his grade point average (GPA), the employer is

Exhibit 26-6 ​ -Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

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

Marginal revenue product (MRP) is the

Value marginal product (VMP) is

If all the individuals had the same innate and learned skills and abilities, applied the same degree of effort on the job, and worked with the same amount and quality of other factors of production,

Exhibit 26-1 ​ -Refer to Exhibit 26-l. What dollar value goes in blank (B)?

Labor supply is a reflection of the number of persons who can actually do a job.

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve __________, while its VMP of labor curve __________.

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

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

Exhibit 26-1 ​ -Refer to Exhibit 26-1. What dollar value goes in blank (D)?

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

The firm's factor demand curve is the

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Exhibit 26-6 -Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

Exhibit 26-1 -Refer to Exhibit 26-l. What dollar value goes in blank (B)?

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve , while its VMP of labor curve .

Exhibit 26-1 -Refer to Exhibit 26-1. What dollar value goes in blank (D)?