Question 1

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. 
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.

Question 2

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. 
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.

Question 3

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 4

The supply of labor in a particular labor market can change as a result of changes in wage rates in other labor markets.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is false ?

Accepted Answer

A) The value marginal product is a measure of the value that each factor unit adds to the firm's product. 
B) For a monopolist, value marginal product equals marginal revenue product. 
C) A change in the price of the product labor produces or a change in the marginal physical product of labor (reflect in a shift in the MPP curve)will shift the demand curve for labor. 
D) For a perfectly competitive firm, value marginal product equals marginal revenue product. 
A) The value marginal product is a measure of the value that each factor unit adds to the firm's product. 
B) For a monopolist, value marginal product equals marginal revenue product. 
C) A change in the price of the product labor produces or a change in the marginal physical product of labor (reflect in a shift in the MPP curve)will shift the demand curve for labor. 
D) For a perfectly competitive firm, value marginal product equals marginal revenue product.

Question 6

A firm's factor demand curve is also its _______________________ curve.

Accepted Answer

A) average physical product 
B) marginal physical product 
C) average revenue product 
D) marginal revenue product 
A) average physical product 
B) marginal physical product 
C) average revenue product 
D) marginal revenue product

Question 7

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

Accepted Answer

A) MRP 
B) MRP > MFC. 
C) VMP 
D) MC > MR. 
A) MRP 
B) MRP > MFC. 
C) VMP 
D) MC > MR.

Question 8

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 searcher. 
D) the additional revenue generated by employing an additional factor unit. 
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 searcher. 
D) the additional revenue generated by employing an additional factor unit.

Question 9

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 10

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 11

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm)will maximize its profits by hiring factors up to the point at which

Accepted Answer

A) MRP > MFC. 
B) VMP > MFC. 
C) MRP = MFC. 
D) VMP = MFC. 
A) MRP > MFC. 
B) VMP > MFC. 
C) MRP = MFC. 
D) VMP = MFC.

Question 12

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. The output produced per $1 of cost in the U.S. is

Accepted Answer

A) 0.80 units of good X. 
B) 1.25 units of good X. 
C) 180 units of good X. 
D) 3 units of good X. 
A) 0.80 units of good X. 
B) 1.25 units of good X. 
C) 180 units of good X. 
D) 3 units of good X.

Question 13

Which of the following can bring about an increase in the demand for labor?

Accepted Answer

A) an increase in the demand for the product that labor produces 
B) a decrease in the marginal physical product of labor 
C) a decrease in the price of labor (wage rate) 
D) an increase in the price of labor (wage rate) 
A) an increase in the demand for the product that labor produces 
B) a decrease in the marginal physical product of labor 
C) a decrease in the price of labor (wage rate) 
D) an increase in the price of labor (wage rate)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

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. 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.

Question 17

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 18

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 19

A firm that is a price taker in a factor market faces a(n)__________ supply curve of factors.

Accepted Answer

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

Question 20

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.

Marginal productivity theory states that

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

For a factor price taker, the marginal factor cost curve

The supply of labor in a particular labor market can change as a result of changes in wage rates in other labor markets.

Which of the following statements is false ?

A firm's factor demand curve is also its _______________________ curve.

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

Marginal factor cost (MFC)is

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

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

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm)will maximize its profits by hiring factors up to the point at which

Which of the following can bring about an increase in the demand for labor?

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

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.

Which of the following statements is false?

A firm that is a price taker in a factor market faces a(n)__________ supply curve of factors.

A factor price taker faces

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

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

Marginal productivity theory states that

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

For a factor price taker, the marginal factor cost curve

The supply of labor in a particular labor market can change as a result of changes in wage rates in other labor markets.

Which of the following statements is false ?

A firm's factor demand curve is also its _______________________ curve.

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

Marginal factor cost (MFC)is

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

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

A product price searcher (monopolist, oligopolist, or monopolistic competitive firm)will maximize its profits by hiring factors up to the point at which

Which of the following can bring about an increase in the demand for labor?

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

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.

Which of the following statements is false?

A firm that is a price taker in a factor market faces a(n)__________ supply curve of factors.

A factor price taker faces

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