Question 1

The MPP/Price ratio for labor is 25/$5 and the MPP/Price ratio for capital is 30/$6. A firm that employs both labor and capital will likely

Accepted Answer

A) buy more labor and less capital because labor is cheaper. 
B) buy more capital and less labor because capital is more productive. 
C) maintain the current combination of capital and labor. 
D) buy more capital and less labor because capital is cheaper. 
E) There is not enough information to answer the question. 
A) buy more labor and less capital because labor is cheaper. 
B) buy more capital and less labor because capital is more productive. 
C) maintain the current combination of capital and labor. 
D) buy more capital and less labor because capital is cheaper. 
E) There is not enough information to answer the question.

Question 2

Exhibit 26-8
  
-Refer to Exhibit 26-8. The marginal physical product of the second and third units of factor X, respectively [blanks (A) and (B)], are,

Accepted Answer

A) 19 and 20. 
B) 4.58 and 4.07. 
C) 10 and 11. 
D) 6 and 3. 
E) none of the above 
A) 19 and 20. 
B) 4.58 and 4.07. 
C) 10 and 11. 
D) 6 and 3. 
E) none of the above

Question 3

Exhibit 26-5
   ​
-Refer to Exhibit 26-5. The marginal revenue product of the first unit of labor is

Accepted Answer

A) $2,500. 
B) $500. 
C) $200. 
D) $2,000. 
A) $2,500. 
B) $500. 
C) $200. 
D) $2,000.

Question 4

Marginal revenue product is equal to marginal revenue multiplied by

Accepted Answer

A) average fixed cost. 
B) marginal physical cost. 
C) marginal physical revenue. 
D) average total cost. 
E) none of the above 
A) average fixed cost. 
B) marginal physical cost. 
C) marginal physical revenue. 
D) average total cost. 
E) none of the above

Question 5

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. This firm is a

Accepted Answer

A) product price taker. 
B) product price searcher. 
C) factor price taker. 
D) factor price searcher. 
E) none of the above 
A) product price taker. 
B) product price searcher. 
C) factor price taker. 
D) factor price searcher. 
E) none of the above

Question 6

The marginal productivity theory states that

Accepted Answer

A) as variable inputs are added to a fixed quantity of other inputs eventually the additional output produced by each additional variable input will decrease. 
B) inputs will be used most efficiently when the additional output gained from each type of input is exactly the same. 
C) firms in perfectly competitive product and factor markets will pay factors their marginal revenue products. 
D) marginally productive inputs (that is, inputs that are not particularly productive) will not be heavily utilized. 
A) as variable inputs are added to a fixed quantity of other inputs eventually the additional output produced by each additional variable input will decrease. 
B) inputs will be used most efficiently when the additional output gained from each type of input is exactly the same. 
C) firms in perfectly competitive product and factor markets will pay factors their marginal revenue products. 
D) marginally productive inputs (that is, inputs that are not particularly productive) will not be heavily utilized.

Question 7

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm) will hire more factor units as long as

Accepted Answer

A) MRP > MFC. 
B) MRP > VMP. 
C) MRP = MFC. 
D) VMP = MFC. 
E) c and d 
A) MRP > MFC. 
B) MRP > VMP. 
C) MRP = MFC. 
D) VMP = MFC. 
E) c and d

Question 8

Firm A has a higher labor cost-total cost ratio than Firm B. If both firms employ the same type of labor, and the wage rate rises by $1, then Firm A's product price will most likely ____________ than Firm B's product price.

Accepted Answer

A) rise by more 
B) fall by more 
C) fall by less 
D) rise by less 
A) rise by more 
B) fall by more 
C) fall by less 
D) rise by less

Question 9

Exhibit 26-5
   ​
-Refer to Exhibit 26-5. The marginal revenue product of the second unit of labor is

Accepted Answer

A) $2,500. 
B) $180. 
C) $400. 
D) $2,000. 
A) $2,500. 
B) $180. 
C) $400. 
D) $2,000.

Question 10

If for a firm MRP > MFC, then the firm

Accepted Answer

A) is maximizing profits and should continue producing its current output. 
B) is minimizing factor costs and therefore is maximizing profits. 
C) should produce more output by increasing the quantity of factors employed. 
D) should produce less output by decreasing the quantity of factors employed. 
A) is maximizing profits and should continue producing its current output. 
B) is minimizing factor costs and therefore is maximizing profits. 
C) should produce more output by increasing the quantity of factors employed. 
D) should produce less output by decreasing the quantity of factors employed.

Question 11

If for a given individual, between a wage rate of $20 and $25 the ____________________ effect outweighs the ________________ effect, the individual's supply curve of labor curve between those two wages will be _________________.

Accepted Answer

A) substitution; income; vertical 
B) substitution; income; upward sloping 
C) substitution; income; downward sloping 
D) income; substitution; vertical 
E) ​income; substitution; upward sloping 
A) substitution; income; vertical 
B) substitution; income; upward sloping 
C) substitution; income; downward sloping 
D) income; substitution; vertical 
E) ​income; substitution; upward sloping

Question 12

Which of the following statements is true?

Accepted Answer

A) The market demand for labor is the horizontal "addition" of the firms' demand curves for labor. 
B) The elasticity of demand for labor is the percentage change in quantity demanded of labor divided by the percentage change in wage rate. 
C) The factor demand curve will shift to the right if the price rises for the good the factor goes to produce. 
D) b and c 
E) a, b, and c 
A) The market demand for labor is the horizontal "addition" of the firms' demand curves for labor. 
B) The elasticity of demand for labor is the percentage change in quantity demanded of labor divided by the percentage change in wage rate. 
C) The factor demand curve will shift to the right if the price rises for the good the factor goes to produce. 
D) b and c 
E) a, b, and c

Question 13

When the owners of a professional sports team pay an athlete a very high salary, it must be true that

Accepted Answer

A) the nonpecuniary aspects of the job are very low. 
B) the owners expect the MRP of that athlete to be greater than the amount the player is paid. 
C) the owners expect the MFC of that athlete to be greater than the amount the player is paid. 
D) b and c 
E) all of the above 
A) the nonpecuniary aspects of the job are very low. 
B) the owners expect the MRP of that athlete to be greater than the amount the player is paid. 
C) the owners expect the MFC of that athlete to be greater than the amount the player is paid. 
D) b and c 
E) all of the above

Question 14

Which of the following statements is false?

Accepted Answer

A) A firm minimizes costs by buying factors in the combination at which the MPP-to-price ratio for each is the same. 
B) Marginal productivity theory states that firms in competitive or perfect product and factor markets pay factors their marginal revenue products. 
C) Marginal factor cost equals the wage rate for a factor price taker. 
D) The lower the elasticity of demand for the product labor produces, the higher the elasticity of demand for labor. 
A) A firm minimizes costs by buying factors in the combination at which the MPP-to-price ratio for each is the same. 
B) Marginal productivity theory states that firms in competitive or perfect product and factor markets pay factors their marginal revenue products. 
C) Marginal factor cost equals the wage rate for a factor price taker. 
D) The lower the elasticity of demand for the product labor produces, the higher the elasticity of demand for labor.

Question 15

Which of the following can cause an increase in real wages?

Accepted Answer

A) a technological advance that increases the quality of the capital goods used by labor. 
B) higher demand for labor. 
C) an increase in the price level. 
D) a and b 
E) all of the above 
A) a technological advance that increases the quality of the capital goods used by labor. 
B) higher demand for labor. 
C) an increase in the price level. 
D) a and b 
E) all of the above

Question 16

"Screening" is the process by which

Accepted Answer

A) wages tend to be equalized as workers move from one labor market to another. 
B) firms calculate the point of MRP = MFC. 
C) firms try to increase the probability of hiring good employees. 
D) discrimination is claimed to be an "information problem." 
A) wages tend to be equalized as workers move from one labor market to another. 
B) firms calculate the point of MRP = MFC. 
C) firms try to increase the probability of hiring good employees. 
D) discrimination is claimed to be an "information problem."

Question 17

Why does the marginal revenue product (MRP) curve slope downward for a perfectly competitive firm?

Accepted Answer

A) Because MRP = MR x MPP.After some point, as more of a factor is employed, the lower its MPP is; thus MRP declines. 
B) Because MRP = MFC x MPP.After some point, as more of a factor is employed, the lower its MFC is; thus MRP declines. 
C) Because MRP = MR x MPP.After some point, MR declines for a product price taker; thus, MRP declines. 
D) Because MRP = MFC x MR.After some point, MFC and MR decline; thus, MRP declines. 
A) Because MRP = MR x MPP.After some point, as more of a factor is employed, the lower its MPP is; thus MRP declines. 
B) Because MRP = MFC x MPP.After some point, as more of a factor is employed, the lower its MFC is; thus MRP declines. 
C) Because MRP = MR x MPP.After some point, MR declines for a product price taker; thus, MRP declines. 
D) Because MRP = MFC x MR.After some point, MFC and MR decline; thus, MRP declines.

Question 18

Marginal productivity theory states that

Accepted Answer

A) firms in price searcher product markets pay factors their marginal factor cost. 
B) firms in perfect factor markets pay factors their equilibrium wages. 
C) firms that are more productive, earn higher profits. 
D) firms in perfect product and factor markets pay factors their marginal revenue products. 
E) none of the above 
A) firms in price searcher product markets pay factors their marginal factor cost. 
B) firms in perfect factor markets pay factors their equilibrium wages. 
C) firms that are more productive, earn higher profits. 
D) firms in perfect product and factor markets pay factors their marginal revenue products. 
E) none of the above

Question 19

Which of the following is a reason why wage rates differ?

Accepted Answer

A) In the short run, demand conditions are not the same in all labor markets. 
B) Some jobs have special nonpecuniary aspects. 
C) Labor is not homogeneous. 
D) b and c 
E) a, b, and c 
A) In the short run, demand conditions are not the same in all labor markets. 
B) Some jobs have special nonpecuniary aspects. 
C) Labor is not homogeneous. 
D) b and c 
E) a, b, and c

Question 20

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

Accepted Answer

A) demand for the product produced by labor. 
B) price of the product. 
C) quantity supplied of labor. 
D) wage rate. 
E) price of substitute factors. 
A) demand for the product produced by labor. 
B) price of the product. 
C) quantity supplied of labor. 
D) wage rate. 
E) price of substitute factors.

Exam 26: Factor Markets With Emphasis on the Labor Market

The MPP/Price ratio for labor is 25/$5 and the MPP/Price ratio for capital is 30/$6. A firm that employs both labor and capital will likely

Exhibit 26-8 -Refer to Exhibit 26-8. The marginal physical product of the second and third units of factor X, respectively [blanks (A) and (B)], are,

Exhibit 26-5 ​ -Refer to Exhibit 26-5. The marginal revenue product of the first unit of labor is

Marginal revenue product is equal to marginal revenue multiplied by

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. This firm is a

The marginal productivity theory states that

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm) will hire more factor units as long as

Firm A has a higher labor cost-total cost ratio than Firm B. If both firms employ the same type of labor, and the wage rate rises by $1, then Firm A's product price will most likely ____________ than Firm B's product price.

Exhibit 26-5 ​ -Refer to Exhibit 26-5. The marginal revenue product of the second unit of labor is

If for a firm MRP > MFC, then the firm

If for a given individual, between a wage rate of $20 and $25 the ____________________ effect outweighs the ________________ effect, the individual's supply curve of labor curve between those two wages will be _________________.

Which of the following statements is true?

When the owners of a professional sports team pay an athlete a very high salary, it must be true that

Which of the following statements is false?

Which of the following can cause an increase in real wages?

"Screening" is the process by which

Why does the marginal revenue product (MRP) curve slope downward for a perfectly competitive firm?

Marginal productivity theory states that

Which of the following is a reason why wage rates differ?

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

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Exhibit 26-5 -Refer to Exhibit 26-5. The marginal revenue product of the first unit of labor is

Exhibit 26-5 -Refer to Exhibit 26-5. The marginal revenue product of the second unit of labor is

If for a given individual, between a wage rate of $20 and $25 the ____ effect outweighs the effect, the individual's supply curve of labor curve between those two wages will be _.