Question 1

The higher the labor cost to total cost ratio, the lower the elasticity of demand for labor.

Accepted Answer

A) True 
 B)False

Question 2

List and describe the four conditions necessary for everyone to receive equal pay in the long run.

Accepted Answer

Given the following conditions, there wo

Question 3

Which of the following can change the supply of labor in labor market A?

Accepted Answer

A) a change in the wage rate in labor market A. 
B) a change in the wage rate in related labor markets B or C. 
C) a positive change in the overall pleasantness of working in labor market A. 
D) a negative change in the working conditions in labor market A. 
E) b, c, and d 
A) a change in the wage rate in labor market A. 
B) a change in the wage rate in related labor markets B or C. 
C) a positive change in the overall pleasantness of working in labor market A. 
D) a negative change in the working conditions in labor market A. 
E) b, c, and d

Question 4

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

Accepted Answer

A) MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist. 
B) P = MC, if the firm is a perfect competitor. 
C) MRP = MFC. 
D) VMP = MFC, if the firm is a price searcher (monopolist, etc.). 
E) a and b 
A) MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist. 
B) P = MC, if the firm is a perfect competitor. 
C) MRP = MFC. 
D) VMP = MFC, if the firm is a price searcher (monopolist, etc.). 
E) a and b

Question 5

Which of the following statements is false?

Accepted Answer

A) If a firm is a factor price taker, marginal factor cost is constant and equal to factor price.This means a factor price taker pays a wage equal to its marginal factor cost. 
B) Firms hire the factor quantity at which marginal revenue product equals marginal factor cost. 
C) If a firm is a product price taker, marginal revenue product is greater than value marginal product. 
D) If a firm is product price taker and a factor price taker, it pays labor a wage equal to its value marginal product. 
A) If a firm is a factor price taker, marginal factor cost is constant and equal to factor price.This means a factor price taker pays a wage equal to its marginal factor cost. 
B) Firms hire the factor quantity at which marginal revenue product equals marginal factor cost. 
C) If a firm is a product price taker, marginal revenue product is greater than value marginal product. 
D) If a firm is product price taker and a factor price taker, it pays labor a wage equal to its value marginal product.

Question 6

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

Accepted Answer

A) the demand curve of its product to the left. 
B) the demand curve of its product to the right. 
C) its MRP curve to the left. 
D) its MRP curve to the right. 
E) b and c 
A) the demand curve of its product to the left. 
B) the demand curve of its product to the right. 
C) its MRP curve to the left. 
D) its MRP curve to the right. 
E) b and c

Question 7

Consider two labor markets, C and D. Wages in labor market D fall. This could be due to

Accepted Answer

A) the marginal revenue curve in the product market (that employees in labor market D supply with goods) shifts to the left. 
B) an increase in the marginal physical product of the employees in labor market D. 
C) an increase in the price and marginal revenue of the product that employees in labor market D produce. 
D) b and c 
E) a, b, and c 
A) the marginal revenue curve in the product market (that employees in labor market D supply with goods) shifts to the left. 
B) an increase in the marginal physical product of the employees in labor market D. 
C) an increase in the price and marginal revenue of the product that employees in labor market D produce. 
D) b and c 
E) a, b, and c

Question 8

If, at a particular wage rate in a competitive market, the quantity supplied of labor exceeds the quantity demanded of labor, then

Accepted Answer

A) the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated. 
B) since wages are so high, the quantity supplied of workers will increase further, and the quantity demanded will decrease further. 
C) some workers will begin to accept lower wages and, as a result, employers will begin to hire more workers. 
D) the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated. 
A) the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated. 
B) since wages are so high, the quantity supplied of workers will increase further, and the quantity demanded will decrease further. 
C) some workers will begin to accept lower wages and, as a result, employers will begin to hire more workers. 
D) the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated.

Question 9

If the MPP of the last unit of labor hired equals 6 and the MPP of the last unit of capital hired equals 8, and the price of labor is $4 per unit and the price of capital is $4 per unit, then the firm

Accepted Answer

A) is minimizing its costs with this combination of factors. 
B) is maximizing its profits with this combination of factors. 
C) should hire more labor and less capital in order to minimize its costs. 
D) should hire more capital and less labor in order to minimize its costs. 
E) a and b 
A) is minimizing its costs with this combination of factors. 
B) is maximizing its profits with this combination of factors. 
C) should hire more labor and less capital in order to minimize its costs. 
D) should hire more capital and less labor in order to minimize its costs. 
E) a and b

Question 10

Exhibit 26-4
​
  
-Refer to Exhibit 26-4. How many units of labor should this firm employ?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 11

If, at a particular wage rate in a competitive market, the quantity demanded of labor exceeds the quantity supplied of labor, then

Accepted Answer

A) the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated. 
B) since wages are so low, the quantity supplied of workers will decrease further, and the quantity demanded will increase further. 
C) some workers will begin to demand higher wages, as a result, employers will begin to hire more workers. 
D) the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated. 
E) none of the above 
A) the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated. 
B) since wages are so low, the quantity supplied of workers will decrease further, and the quantity demanded will increase further. 
C) some workers will begin to demand higher wages, as a result, employers will begin to hire more workers. 
D) the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated. 
E) none of the above

Question 12

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

Accepted Answer

A) $300 
B) $10 
C) $30 
D) $80 
A) $300 
B) $10 
C) $30 
D) $80

Question 13

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 14

Marginal factor cost (MFC) is

Accepted Answer

A) the additional cost incurred by employing an additional factor unit. 
B) the additional output generated by employing an additional factor unit. 
C) equal to factor price for a factor price taker. 
D) a and c 
E) b and c 
A) the additional cost incurred by employing an additional factor unit. 
B) the additional output generated by employing an additional factor unit. 
C) equal to factor price for a factor price taker. 
D) a and c 
E) b and c

Question 15

The elasticity of demand for a factor is lower,

Accepted Answer

A) the higher the elasticity of demand for the product the factor helps to produce. 
B) the higher the factor cost-total cost ratio. 
C) the fewer substitutes for the factor. 
D) a and c 
E) all of the above 
A) the higher the elasticity of demand for the product the factor helps to produce. 
B) the higher the factor cost-total cost ratio. 
C) the fewer substitutes for the factor. 
D) a and c 
E) all of the above

Question 16

Refer to Exhibit 26-8. The dollar amounts that go in blanks (E) and (F) are, respectively,

Accepted Answer

A) $6 and $6. 
B) $70 and $60. 
C) $84 and $72. 
D) $72 and $24. 
E) There is not enough information to answer the question. 
A) $6 and $6. 
B) $70 and $60. 
C) $84 and $72. 
D) $72 and $24. 
E) There is not enough information to answer the question.

Question 17

Exhibit 26-5
   ​
-Refer to Exhibit 26-5. Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $1,000. 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 18

The demand for factors (which arises from the demand for the products that the factors help produce) is called a(n) __________ demand.

Accepted Answer

A) derived 
B) indirect 
C) secondary 
D) expressed 
A) derived 
B) indirect 
C) secondary 
D) expressed

Question 19

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Accepted Answer

A) $22.00. 
B) $29.00. 
C) $0.53. 
D) $114. 
E) There is not enough information to answer the question. 
A) $22.00. 
B) $29.00. 
C) $0.53. 
D) $114. 
E) There is not enough information to answer the question.

Question 20

Exhibit 26-6
​
  
-Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

Accepted Answer

A) AA 
B) BB 
C) CC 
D) any of the above 
A) AA 
B) BB 
C) CC 
D) any of the above

Exam 26: Factor Markets With Emphasis on the Labor Market

The higher the labor cost to total cost ratio, the lower the elasticity of demand for labor.

List and describe the four conditions necessary for everyone to receive equal pay in the long run.

Which of the following can change the supply of labor in labor market A?

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

Which of the following statements is false?

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

Consider two labor markets, C and D. Wages in labor market D fall. This could be due to

If, at a particular wage rate in a competitive market, the quantity supplied of labor exceeds the quantity demanded of labor, then

If the MPP of the last unit of labor hired equals 6 and the MPP of the last unit of capital hired equals 8, and the price of labor is $4 per unit and the price of capital is $4 per unit, then the firm

Exhibit 26-4 ​ -Refer to Exhibit 26-4. How many units of labor should this firm employ?

If, at a particular wage rate in a competitive market, the quantity demanded of labor exceeds the quantity supplied of labor, then

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

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

Marginal factor cost (MFC) is

The elasticity of demand for a factor is lower,

Refer to Exhibit 26-8. The dollar amounts that go in blanks (E) and (F) are, respectively,

Exhibit 26-5 ​ -Refer to Exhibit 26-5. Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $1,000. The firm should hire __________ of labor.

The demand for factors (which arises from the demand for the products that the factors help produce) is called a(n) __________ demand.

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Exhibit 26-6 ​ -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

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 26-4 -Refer to Exhibit 26-4. How many units of labor should this firm employ?

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

Exhibit 26-5 -Refer to Exhibit 26-5. Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $1,000. The firm should hire __________ of labor.

Exhibit 26-6 -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?