Question 1

Which is the following is most likely to be a derived demand?

Accepted Answer

A) the demand for new clothes to wear to a party 
B) the demand for a house to live in 
C) the demand for oranges that will be used to produce and sell orange juice 
D) the demand for oranges to eat 
A) the demand for new clothes to wear to a party 
B) the demand for a house to live in 
C) the demand for oranges that will be used to produce and sell orange juice 
D) the demand for oranges to eat

Question 2

The MPP of labor divided by its (labor's) price is greater than the MPP of capital divided by its (capital's) price. Costs can be minimized by

Accepted Answer

A) buying more capital and less labor. 
B) buying more labor and less capital. 
C) maintaining the current MPP/P ratios. 
D) buying twice as much labor as capital. 
E) none of the above 
A) buying more capital and less labor. 
B) buying more labor and less capital. 
C) maintaining the current MPP/P ratios. 
D) buying twice as much labor as capital. 
E) none of the above

Question 3

The elasticity of demand for labor measures the percentage change in quantity demanded of labor that occurs as a result of a percentage change in the wage rate.

Accepted Answer

A) True 
 B)False

Question 4

A factor price taker faces

Accepted Answer

A) a perfectly elastic demand curve for the product it sells. 
B) a downward-sloping demand curve for the product it sells. 
C) a perfectly elastic supply curve of factors. 
D) an upward-sloping supply curve of factors. 
E) a perfectly inelastic supply curve of factors. 
A) a perfectly elastic demand curve for the product it sells. 
B) a downward-sloping demand curve for the product it sells. 
C) a perfectly elastic supply curve of factors. 
D) an upward-sloping supply curve of factors. 
E) a perfectly inelastic supply curve of factors.

Question 5

For a factor price taker, the marginal factor cost curve

Accepted Answer

A) and the factor supply curve both slope upward, but are not identical. 
B) and the factor supply curve are identical and horizontal. 
C) is horizontal, but the factor supply curve slopes upward. 
D) slopes upward, but the factor supply curve is horizontal. 
E) and the factor supply curve are identical and slope upward. 
A) and the factor supply curve both slope upward, but are not identical. 
B) and the factor supply curve are identical and horizontal. 
C) is horizontal, but the factor supply curve slopes upward. 
D) slopes upward, but the factor supply curve is horizontal. 
E) and the factor supply curve are identical and slope upward.

Question 6

According to the substitution effect, as the wage rate rises the monetary reward from working increases and workers will want to work more.

Accepted Answer

A) True 
 B)False

Question 7

The percentage change in the quantity demanded of labor divided by the percentage change in the wage rate is called the

Accepted Answer

A) marginal revenue product of labor. 
B) elasticity of demand for labor. 
C) elasticity of supply of labor. 
D) marginal factor cost of labor. 
A) marginal revenue product of labor. 
B) elasticity of demand for labor. 
C) elasticity of supply of labor. 
D) marginal factor cost of labor.

Question 8

Exhibit 26-2
​
  
-Refer to Exhibit 26-2. What type of firm are we dealing with?

Accepted Answer

A) definitely a product price searcher (monopolist, oligopolist, etc.) 
B) definitely a product price taker (perfectly competitive firm) 
C) definitely a factor price taker 
D) definitely a factor price searcher 
A) definitely a product price searcher (monopolist, oligopolist, etc.) 
B) definitely a product price taker (perfectly competitive firm) 
C) definitely a factor price taker 
D) definitely a factor price searcher

Question 9

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 labor is costlessly mobile between the markets, which of the following pairs of shifts of the respective labor supply curves is to be expected?

Accepted Answer

A) S1 to S5 and S2 to S6 
B) S1 to S5 and S2 to S4 
C) S1 to S3 and S2 to S6 
D) S1 to S3 and S2 to S4 
A) S1 to S5 and S2 to S6 
B) S1 to S5 and S2 to S4 
C) S1 to S3 and S2 to S6 
D) S1 to S3 and S2 to S4

Question 10

The value of marginal product (VMP) is

Accepted Answer

A) equal to the product price multiplied by the marginal physical product of the factor. 
B) equal to marginal revenue product for a product price taker. 
C) the firm's factor demand curve if the firm is a product price taker. 
D) a measure of the value that each factor unit adds to the firm's product. 
E) all of the above 
A) equal to the product price multiplied by the marginal physical product of the factor. 
B) equal to marginal revenue product for a product price taker. 
C) the firm's factor demand curve if the firm is a product price taker. 
D) a measure of the value that each factor unit adds to the firm's product. 
E) all of the above

Question 11

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

Accepted Answer

A) MRP > MFC. 
B) VMP > MFC. 
C) MRP > VMP. 
D) VMP = MFC. 
E) a and b 
A) MRP > MFC. 
B) VMP > MFC. 
C) MRP > VMP. 
D) VMP = MFC. 
E) a and b

Question 12

Marginal revenue product (MRP) is

Accepted Answer

A) equal to marginal revenue multiplied by marginal physical product. 
B) the additional revenue generated by employing an additional factor unit. 
C) the additional output generated by employing an additional factor unit. 
D) a and b 
E) a and c 
A) equal to marginal revenue multiplied by marginal physical product. 
B) the additional revenue generated by employing an additional factor unit. 
C) the additional output generated by employing an additional factor unit. 
D) a and b 
E) a and c

Question 13

As the wage rate rises,

Accepted Answer

A) the supply of labor rises. 
B) the quantity demanded of labor rises. 
C) the quantity supplied of labor rises. 
D) the demand for labor falls. 
E) a and d 
A) the supply of labor rises. 
B) the quantity demanded of labor rises. 
C) the quantity supplied of labor rises. 
D) the demand for labor falls. 
E) a and d

Question 14

Given a 10 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus,

Accepted Answer

A) firm A likely has a higher labor cost-total cost ratio than firm B. 
B) firm B likely has a higher labor cost-total cost ratio than firm A. 
C) the elasticity of demand for labor is likely higher for firm B than firm A. 
D) firm B likely has higher fixed costs than firm A. 
E) firm A likely has higher per-unit costs than firm B. 
A) firm A likely has a higher labor cost-total cost ratio than firm B. 
B) firm B likely has a higher labor cost-total cost ratio than firm A. 
C) the elasticity of demand for labor is likely higher for firm B than firm A. 
D) firm B likely has higher fixed costs than firm A. 
E) firm A likely has higher per-unit costs than firm B.

Question 15

Suppose wages for construction workers are higher in Hawaii than in Florida. This could be because the

Accepted Answer

A) moving costs between Florida and Hawaii are so high that construction workers in Florida do not relocate to Hawaii. 
B) product price of what construction workers in Hawaii produce is higher than the product price of what construction workers in Florida produce and the moving costs between Florida and Hawaii are zero. 
C) moving costs between Florida and Hawaii are zero. 
D) marginal physical product of construction workers in Hawaii is higher than the marginal physical product of construction workers in Florida and the moving costs between Florida and Hawaii are zero. 
E) b and d 
A) moving costs between Florida and Hawaii are so high that construction workers in Florida do not relocate to Hawaii. 
B) product price of what construction workers in Hawaii produce is higher than the product price of what construction workers in Florida produce and the moving costs between Florida and Hawaii are zero. 
C) moving costs between Florida and Hawaii are zero. 
D) marginal physical product of construction workers in Hawaii is higher than the marginal physical product of construction workers in Florida and the moving costs between Florida and Hawaii are zero. 
E) b and d

Question 16

Situation 26-2
A company is trying to decide whether it should produce good Y in the U.S. or in Mexico. Suppose a U.S. worker earns $12 per hour and a worker in Mexico earns $4 per hour. Also suppose that the marginal physical product (MPP) of the U.S. worker is 10 units of good Y and the MPP of the Mexican worker is 5 units of good Y.
-Refer to Situation 26-2. If good Y is produced in the United States, the output per $1 of cost would be ___________________ than if good Y were produced in Mexico, thus it would be best to produce good Y in ____________________.

Accepted Answer

A) higher; Mexico. 
B) lower; Mexico. 
C) higher; the United States. 
D) lower; the United States. 
A) higher; Mexico. 
B) lower; Mexico. 
C) higher; the United States. 
D) lower; the United States.

Question 17

When deciding whether a person is "worth" a certain salary, economists will want to compare a person's __________ with his or her wage or salary.

Accepted Answer

A) marginal physical product 
B) marginal revenue product 
C) marginal factor cost 
D) derived demand 
E) none of the above 
A) marginal physical product 
B) marginal revenue product 
C) marginal factor cost 
D) derived demand 
E) none of the above

Question 18

The lower the elasticity of demand for a product,

Accepted Answer

A) the higher the ratio of labor costs to total costs. 
B) the lower the ratio of labor costs to total costs. 
C) the lower the elasticity of demand for the labor that produces the product. 
D) the higher the elasticity of demand for the labor that produces the product. 
E) none of the above 
A) the higher the ratio of labor costs to total costs. 
B) the lower the ratio of labor costs to total costs. 
C) the lower the elasticity of demand for the labor that produces the product. 
D) the higher the elasticity of demand for the labor that produces the product. 
E) none of the above

Question 19

Exhibit 26-5
   ​
-Refer to Exhibit 26-5. Marginal physical product of the fourth unit of labor

Accepted Answer

A) equals 1,000. 
B) equals 250. 
C) equals 200. 
D) equals 180. 
E) cannot be determined. 
A) equals 1,000. 
B) equals 250. 
C) equals 200. 
D) equals 180. 
E) cannot be determined.

Question 20

Situation 26-2
A company is trying to decide whether it should produce good Y in the U.S. or in Mexico. Suppose a U.S. worker earns $12 per hour and a worker in Mexico earns $4 per hour. Also suppose that the marginal physical product (MPP) of the U.S. worker is 10 units of good Y and the MPP of the Mexican worker is 5 units of good Y.
-Refer to Situation 26-2. The output produced per $1 of cost in the Mexico. is

Accepted Answer

A) 1.25 units of good Y. 
B) 0.80 units of good Y. 
C) 9.0 units of good Y. 
D) 1.0 units of good Y. 
A) 1.25 units of good Y. 
B) 0.80 units of good Y. 
C) 9.0 units of good Y. 
D) 1.0 units of good Y.

Exam 26: Factor Markets With Emphasis on the Labor Market

Which is the following is most likely to be a derived demand?

The MPP of labor divided by its (labor's) price is greater than the MPP of capital divided by its (capital's) price. Costs can be minimized by

The elasticity of demand for labor measures the percentage change in quantity demanded of labor that occurs as a result of a percentage change in the wage rate.

A factor price taker faces

For a factor price taker, the marginal factor cost curve

According to the substitution effect, as the wage rate rises the monetary reward from working increases and workers will want to work more.

The percentage change in the quantity demanded of labor divided by the percentage change in the wage rate is called the

Exhibit 26-2 ​ -Refer to Exhibit 26-2. What type of firm are we dealing with?

The value of marginal product (VMP) is

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

Marginal revenue product (MRP) is

As the wage rate rises,

Given a 10 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus,

Suppose wages for construction workers are higher in Hawaii than in Florida. This could be because the

When deciding whether a person is "worth" a certain salary, economists will want to compare a person's __________ with his or her wage or salary.

The lower the elasticity of demand for a product,

Exhibit 26-5 ​ -Refer to Exhibit 26-5. Marginal physical product of the fourth unit of labor

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 26-2 -Refer to Exhibit 26-2. What type of firm are we dealing with?

Exhibit 26-5 -Refer to Exhibit 26-5. Marginal physical product of the fourth unit of labor