Question 1

Exhibit 26-1   Refer to Exhibit 26-1. For this firm, the demand curve for factor X is

Accepted Answer

A) downward-sloping. 
B) upward-sloping. 
C) vertical. 
D) horizontal. 
E) There is not enough information given to determine the shape of the factor X demand curve. 
A) downward-sloping. 
B) upward-sloping. 
C) vertical. 
D) horizontal. 
E) There is not enough information given to determine the shape of the factor X demand curve.

Question 2

The market supply curve of labor

Accepted Answer

A) slopes downward, indicating that as the wage rate falls, the quantity supplied of labor rises. 
B) slopes upward, indicating that as the wage rate rises, the quantity supplied of labor rises. 
C) is vertical, indicating that the quantity supplied of labor is independent of the wage rate. 
D) slopes upward, indicating that as the wage rate falls, the quantity supplied of labor rises. 
A) slopes downward, indicating that as the wage rate falls, the quantity supplied of labor rises. 
B) slopes upward, indicating that as the wage rate rises, the quantity supplied of labor rises. 
C) is vertical, indicating that the quantity supplied of labor is independent of the wage rate. 
D) slopes upward, indicating that as the wage rate falls, the quantity supplied of labor rises.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 5

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. 
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.

Question 6

Situation 26-1 A company is trying to decide whether it should produce good X in the U.S. or in Mexico.  Suppose a U.S. worker earns $15 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 12 units of good X and the MPP of the Mexican worker is 3 units of good X.
Refer to Situation 26-1. If good X is produced in the U.S. the output per $1 of cost would be ___________________ than if good X were produced in Mexico, thus it would be best to produce good X 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 7

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 8

What is the relationship between the elasticity of demand for a product and the elasticity of demand for labor (that is used in producing the product)?

Accepted Answer

A) The higher the price of the product, the higher the elasticity of demand for labor. 
B) The higher the price of the product, the lower the elasticity of demand for labor. 
C) The higher the elasticity of demand for the product, the lower the elasticity of demand for the product. 
D) The lower the elasticity of demand for the product, the lower the elasticity of demand for the product. 
E) There is not enough information to answer the question. 
A) The higher the price of the product, the higher the elasticity of demand for labor. 
B) The higher the price of the product, the lower the elasticity of demand for labor. 
C) The higher the elasticity of demand for the product, the lower the elasticity of demand for the product. 
D) The lower the elasticity of demand for the product, the lower the elasticity of demand for the product. 
E) There is not enough information to answer the question.

Question 9

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. 
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.

Question 10

If there are two factors used in producing a good, the least-cost rule specifies that costs have been minimized when

Accepted Answer

A) the MPP of the first factor divided by its price is equal to the MPP of the second factor divided by its price. 
B) the MPP of the first factor multiplied by its price is equal to the MPP of the second factor minus its price. 
C) the MPP of the first factor divided by the price of the second factor is equal to the MPP of the second factor divided by the price of the first factor. 
D) the MPP of the second factor minus the MPP of the first factor is equal to the price of the second factor minus the price of the first factor. 
A) the MPP of the first factor divided by its price is equal to the MPP of the second factor divided by its price. 
B) the MPP of the first factor multiplied by its price is equal to the MPP of the second factor minus its price. 
C) the MPP of the first factor divided by the price of the second factor is equal to the MPP of the second factor divided by the price of the first factor. 
D) the MPP of the second factor minus the MPP of the first factor is equal to the price of the second factor minus the price of the first factor.

Question 11

Factor X is used in the production of good Y. Which of the following will increase the demand for factor X?

Accepted Answer

A) a decrease in the demand for Y 
B) a rise in the MPP of factor X 
C) a fall in the price of good Y 
D) a fall in the cost of employing factor X 
A) a decrease in the demand for Y 
B) a rise in the MPP of factor X 
C) a fall in the price of good Y 
D) a fall in the cost of employing factor X

Question 12

Alex Rodriguez was the highest played baseball player in 2012, earning about $32 million playing for the New York Yankees. Explain the economic justification for the owners paying such a high salary; be sure to incorporate the concept of marginal revenue product (MRP)into your answer.

Accepted Answer

When a professional athlete is paid a ve

Question 13

For a product price taker, VMP equals MR.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) VMP = MRP. 
B) VMP > MRP. 
C) MRP > VMP. 
D) MPP necessarily declines beginning with the first factor unit. 
A) VMP = MRP. 
B) VMP > MRP. 
C) MRP > VMP. 
D) MPP necessarily declines beginning with the first factor unit.

Question 15

Exhibit 26-3 ​
 
Refer to Exhibit 26-3. The firm must be a

Accepted Answer

A) price taker in the product market. 
B) price searcher in the product market. 
C) price taker in the factor market. 
D) price searcher in the factor market. 
A) price taker in the product market. 
B) price searcher in the product market. 
C) price taker in the factor market. 
D) price searcher in the factor market.

Question 16

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 17

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 18

Applying the least-cost rule to two factors, a firm will

Accepted Answer

A) maximize profits at the output at which MRP = MFC. 
B) minimize costs when the MPP of factor A equals the MPP of factor B. 
C) minimize costs when the MRP of factor A equals the MRP of factor B. 
D) minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B. 
A) maximize profits at the output at which MRP = MFC. 
B) minimize costs when the MPP of factor A equals the MPP of factor B. 
C) minimize costs when the MRP of factor A equals the MRP of factor B. 
D) minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B.

Question 19

For a perfectly competitive firm,

Accepted Answer

A) VMP > MRP. 
B) VMP 
C) VMP = MRP. 
D) There is not enough information to answer the question. 
A) VMP > MRP. 
B) VMP 
C) VMP = MRP. 
D) There is not enough information to answer the question.

Question 20

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.

Exam 13: Factor Markets: With Emphasis on the Labor Market

Exhibit 26-1 Refer to Exhibit 26-1. For this firm, the demand curve for factor X is

The market supply curve of labor

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

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

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

What is the relationship between the elasticity of demand for a product and the elasticity of demand for labor (that is used in producing the product)?

The lower the elasticity of demand for a product,

If there are two factors used in producing a good, the least-cost rule specifies that costs have been minimized when

Factor X is used in the production of good Y. Which of the following will increase the demand for factor X?

Alex Rodriguez was the highest played baseball player in 2012, earning about $32 million playing for the New York Yankees. Explain the economic justification for the owners paying such a high salary; be sure to incorporate the concept of marginal revenue product (MRP)into your answer.

For a product price taker, VMP equals MR.

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

Exhibit 26-3 ​ Refer to Exhibit 26-3. The firm must be a

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.

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

Applying the least-cost rule to two factors, a firm will

For a perfectly competitive firm,

Which of the following statements is false ?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Wages, Union, 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 26-3 Refer to Exhibit 26-3. The firm must be a