Question 1

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 2

Given an 8 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus,

Accepted Answer

A) there are likely fewer substitutes for labor in firm B than firm A. 
B) there are likely fewer substitutes for labor in firm A than firm B. 
C) sunk costs are greater for firm A than firm B. 
D) the demand for the product that firm A produces is likely less elastic than the product that firm B produces. 
E) a and d 
A) there are likely fewer substitutes for labor in firm B than firm A. 
B) there are likely fewer substitutes for labor in firm A than firm B. 
C) sunk costs are greater for firm A than firm B. 
D) the demand for the product that firm A produces is likely less elastic than the product that firm B produces. 
E) a and d

Question 3

Exhibit 26-5
   ​
-Refer to Exhibit 26-5. Assume the firm is a factor price taker and that the price of a unit of labor is constant at $1,200. The firm should hire __________ of labor.

Accepted Answer

A) one unit 
B) two units 
C) three units 
D) four units 
E) five units 
A) one unit 
B) two units 
C) three units 
D) four units 
E) five units

Question 4

Which of the following statements is false?

Accepted Answer

A) There are no special nonpecuniary aspects to any job. 
B) Nonpecuniary aspects of a job refer to the nonmoney aspects of a job. 
C) A change in the wage rate can change the quantity demanded and quantity supplied of labor. 
D) A change in the supply of labor can affect the wage rate. 
A) There are no special nonpecuniary aspects to any job. 
B) Nonpecuniary aspects of a job refer to the nonmoney aspects of a job. 
C) A change in the wage rate can change the quantity demanded and quantity supplied of labor. 
D) A change in the supply of labor can affect the wage rate.

Question 5

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

Question 6

The marginal factor cost (MFC) curve for a factor price taker is

Accepted Answer

A) vertical. 
B) horizontal. 
C) downward sloping. 
D) upward sloping. 
A) vertical. 
B) horizontal. 
C) downward sloping. 
D) upward sloping.

Question 7

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 8

For a product price searcher (such as a monopolist),

Accepted Answer

A) P > MR, therefore VMP MR, therefore VMP > MRP. D) P < MR, therefore VMP < MRP. A) P > MR, therefore VMP MR, therefore VMP > MRP. D) P < MR, therefore VMP < MRP.

Question 9

The market demand curve for labor is

Accepted Answer

A) the horizontal summation of the firms' demand curves for labor, derived exactly the same way the product market demand curve is derived from the consumers' demand curves. 
B) the vertical summation of the firms' demand curves for labor. 
C) any one firm's demand curve labor multiplied horizontally by the number of firms in the labor market. 
D) none of the above 
A) the horizontal summation of the firms' demand curves for labor, derived exactly the same way the product market demand curve is derived from the consumers' demand curves. 
B) the vertical summation of the firms' demand curves for labor. 
C) any one firm's demand curve labor multiplied horizontally by the number of firms in the labor market. 
D) none of the above

Question 10

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 11

Given a 10 percent decrease in wages, firm A hires more labor than firm B. It follows that, ceteris paribus,

Accepted Answer

A) the elasticity of demand for the product that firm A produces is likely lower than the elasticity of demand for the product that firm B produces. 
B) firm A likely has a lower labor cost-total cost ratio than firm B. 
C) firm A likely has more substitutes for labor than firm B. 
D) firm A likely has higher per-unit costs than firm B. 
E) none of the above 
A) the elasticity of demand for the product that firm A produces is likely lower than the elasticity of demand for the product that firm B produces. 
B) firm A likely has a lower labor cost-total cost ratio than firm B. 
C) firm A likely has more substitutes for labor than firm B. 
D) firm A likely has higher per-unit costs than firm B. 
E) none of the above

Question 12

A profit maximizing firm that is a price taker in both product and factor markets will hire a factor up to the point at which

Accepted Answer

A) the last unit of the factor hired adds as much to costs as it does to revenues. 
B) the value of marginal product equals the wage rate. 
C) the marginal revenue product equals the wage rate. 
D) all of the above 
E) a and b 
A) the last unit of the factor hired adds as much to costs as it does to revenues. 
B) the value of marginal product equals the wage rate. 
C) the marginal revenue product equals the wage rate. 
D) all of the above 
E) a and b

Question 13

When a perfectly competitive firm (that sells its good for $20 per unit) hires 1 unit of factor X it produces 70 units of output and when it hires 2 units of factor X it produces 85 units of output. Marginal revenue product of the second unit of factor X is equal to

Accepted Answer

A) $30. 
B) $530. 
C) $265. 
D) $300. 
E) none of the above 
A) $30. 
B) $530. 
C) $265. 
D) $300. 
E) none of the above

Question 14

Which of the following assumptions is not likely to be met in the real world?

Accepted Answer

A) Demand for labor is identical in every labor 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 
A) Demand for labor is identical in every labor 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

Question 15

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

Accepted Answer

A) $160 
B) $96 
C) $48 
D) $35 
A) $160 
B) $96 
C) $48 
D) $35

Question 16

According to the marginal productivity theory, a perfectly competitive firm that is a factor price taker pays its factors their

Accepted Answer

A) MRP. 
B) VMP. 
C) MPP. 
D) a and b 
E) all of the above 
A) MRP. 
B) VMP. 
C) MPP. 
D) a and b 
E) all of the above

Question 17

Describe how the substitution effect and the income effect influence the slope of an individual's supply curve of labor.

Accepted Answer

According to the substitution effect, as

Question 18

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 19

If MPPX/PX Y/PY, the firm should buy

Accepted Answer

A) more of factor X and less of factor Y. 
B) less of factor X and more of factor Y. 
C) more of factor Y and the same amount of factor X. 
D) less of factor X and factor Y. 
E) more of factor X and factor Y. 
A) more of factor X and less of factor Y. 
B) less of factor X and more of factor Y. 
C) more of factor Y and the same amount of factor X. 
D) less of factor X and factor Y. 
E) more of factor X and factor Y.

Question 20

Between two wages, an individual's supply curve of labor will be upward sloping if the individual's substitution effect outweighs the income effect between those two wages.

Accepted Answer

A) True 
 B)False

Exam 26: Factor Markets With Emphasis on the Labor Market

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

Given an 8 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus,

Exhibit 26-5 ​ -Refer to Exhibit 26-5. Assume the firm is a factor price taker and that the price of a unit of labor is constant at $1,200. The firm should hire __________ of labor.

Which of the following statements is false?

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

The marginal factor cost (MFC) curve for a factor price taker is

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

For a product price searcher (such as a monopolist),

The market demand curve for labor is

Which of the following statements is false?

Given a 10 percent decrease in wages, firm A hires more labor than firm B. It follows that, ceteris paribus,

A profit maximizing firm that is a price taker in both product and factor markets will hire a factor up to the point at which

When a perfectly competitive firm (that sells its good for $20 per unit) hires 1 unit of factor X it produces 70 units of output and when it hires 2 units of factor X it produces 85 units of output. Marginal revenue product of the second unit of factor X is equal to

Which of the following assumptions is not likely to be met in the real world?

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

According to the marginal productivity theory, a perfectly competitive firm that is a factor price taker pays its factors their

Describe how the substitution effect and the income effect influence the slope of an individual's supply curve of labor.

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?

If MPPX/PX < MPPY/PY, the firm should buy

Between two wages, an individual's supply curve of labor will be upward sloping if the individual's substitution effect outweighs the income effect between those two wages.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

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

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Wages Unions and Labor

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

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Exhibit 26-5 -Refer to Exhibit 26-5. Assume the firm is a factor price taker and that the price of a unit of labor is constant at $1,200. The firm should hire __________ of labor.

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

If MPP_X/P_X < MPP_Y/P_Y, the firm should buy