Question 1

Exhibit 26-3 ​
 
Refer to Exhibit 26-3. The marginal factor cost (MFC)of the fourth unit of labor is

Accepted Answer

A) greater than $10 if the firm expects to hire the fourth worker. 
B) the same as the MFC of the first unit. 
C) less than the wage rate. 
D) greater than the wage rate. 
A) greater than $10 if the firm expects to hire the fourth worker. 
B) the same as the MFC of the first unit. 
C) less than the wage rate. 
D) greater than the wage rate.

Question 2

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) decreased demand for labor. 
C) an increase in the price level. 
D) a technological decline that decreases the quality of the capital goods used by labor. 
A) a technological advance that increases the quality of the capital goods used by labor. 
B) decreased demand for labor. 
C) an increase in the price level. 
D) a technological decline that decreases the quality of the capital goods used by labor.

Question 3

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) the more substitutes for the factor. 
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) the more substitutes for the factor.

Question 4

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) the owners expect the player's MRP to be less than its MFC. 
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) the owners expect the player's MRP to be less than its MFC.

Question 5

A measure of the value that one unit of a factor adds to the firm's output is value __________ product.

Accepted Answer

A) average 
B) marginal 
C) variable 
D) fixed 
A) average 
B) marginal 
C) variable 
D) fixed

Question 6

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve __________, while its VMP of labor curve __________.

Accepted Answer

A) stays where it is; shifts to the right 
B) shifts to the right; shifts to the right 
C) shifts to the right; stays where it is 
D) shifts to the left; shifts to the left 
A) stays where it is; shifts to the right 
B) shifts to the right; shifts to the right 
C) shifts to the right; stays where it is 
D) shifts to the left; shifts to the left

Question 7

Exhibit 26-6 ​
 
Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist should employ?

Accepted Answer

A) QA 
B) QB 
C) QC 
D) There is not enough information provided to answer the question. 
A) QA 
B) QB 
C) QC 
D) There is not enough information provided to answer the question.

Question 8

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 9

Which of the following statements is true?

Accepted Answer

A) A person who chooses to work at a job that pays $40,000 a year instead of a job that pays $80,000 a year is considered (by economists)to be irrational. 
B) The wage rate paid in one labor market can affect the supply of labor in another labor market. 
C) The wage rate paid in one labor market cannot possibly affect the wage rate paid in another labor market. 
D) The demand for every type of labor is always the same. 
A) A person who chooses to work at a job that pays $40,000 a year instead of a job that pays $80,000 a year is considered (by economists)to be irrational. 
B) The wage rate paid in one labor market can affect the supply of labor in another labor market. 
C) The wage rate paid in one labor market cannot possibly affect the wage rate paid in another labor market. 
D) The demand for every type of labor is always the same.

Question 10

The firm's factor demand curve is the

Accepted Answer

A) same as its factor supply curve. 
B) same as its MRP curve. 
C) VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
D) same as its marginal factor cost curve. 
A) same as its factor supply curve. 
B) same as its MRP curve. 
C) VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
D) same as its marginal factor cost curve.

Question 11

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. 
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.

Question 12

Marginal productivity theory states that if a firm sells its product in a perfectly competitive product market it will necessarily pay its factors their VMP.

Accepted Answer

A) True 
 B)False

Question 13

A price searcher (monopolist, monopolistic competitor, etc.)definitely 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 demand curve for the product it sells. 
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 demand curve for the product it sells.

Question 14

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 U.S. is

Accepted Answer

A) 120 units of good Y. 
B) 0.83 units of good Y. 
C) 22 units of good Y. 
D) 2 units of good Y. 
A) 120 units of good Y. 
B) 0.83 units of good Y. 
C) 22 units of good Y. 
D) 2 units of good Y.

Question 15

Which of the following statements is true?

Accepted Answer

A) The higher the labor cost-total cost ratio, the lower the elasticity of demand for labor. 
B) The lower the labor cost-total cost ratio, the higher the elasticity of demand for labor. 
C) The more substitutes for labor, the higher the elasticity of demand for labor. 
D) The fewer substitutes for labor, the higher the elasticity of demand for labor. 
A) The higher the labor cost-total cost ratio, the lower the elasticity of demand for labor. 
B) The lower the labor cost-total cost ratio, the higher the elasticity of demand for labor. 
C) The more substitutes for labor, the higher the elasticity of demand for labor. 
D) The fewer substitutes for labor, the higher the elasticity of demand for labor.

Question 16

Marginal productivity theory implies that a worker will be paid an amount

Accepted Answer

A) equal to his or her contribution to the productive process. 
B) less than his or her contribution to the productive process. 
C) greater than his or her contribution to the productive process. 
D) determined by his or her individual bargaining. 
A) equal to his or her contribution to the productive process. 
B) less than his or her contribution to the productive process. 
C) greater than his or her contribution to the productive process. 
D) determined by his or her individual bargaining.

Question 17

Marginal revenue product is

Accepted Answer

A) the additional cost of employing a factor. 
B) the additional revenue generated by employing an additional factor unit. 
C) marginal revenue multiplied by price of the factor unit. 
D) price of the good that is sold multiplied by unit cost. 
A) the additional cost of employing a factor. 
B) the additional revenue generated by employing an additional factor unit. 
C) marginal revenue multiplied by price of the factor unit. 
D) price of the good that is sold multiplied by unit cost.

Question 18

As a firm buys more capital and less labor, the marginal physical product of capital __________ and the marginal physical product of labor __________, assuming the law of diminishing marginal returns has set in for each factor.

Accepted Answer

A) decreases; increases 
B) increases; increases 
C) decreases; decreases 
D) increases; remains constant 
E) remains constant; decreases 
A) decreases; increases 
B) increases; increases 
C) decreases; decreases 
D) increases; remains constant 
E) remains constant; decreases

Question 19

Which of the following conditions is not necessary for wage rates to be identical in every labor market in both the short run and the long run?

Accepted Answer

A) Demand for labor is different in each market. 
B) Nonpecuniary factors in each job are the same. 
C) All labor is homogeneous. 
D) All labor has zero costs of mobility. 
A) Demand for labor is different in each market. 
B) Nonpecuniary factors in each job are the same. 
C) All labor is homogeneous. 
D) All labor has zero costs of mobility.

Question 20

Marginal revenue product (MRP)is the

Accepted Answer

A) additional output generated by employing an additional factor unit. 
B) additional profit generated by employing an additional factor unit. 
C) additional revenue generated by employing an additional factor unit minus the additional cost. 
D) additional revenue generated by employing an additional factor unit. 
E) total revenue from the sale of a product divided by the total output of the product. 
A) additional output generated by employing an additional factor unit. 
B) additional profit generated by employing an additional factor unit. 
C) additional revenue generated by employing an additional factor unit minus the additional cost. 
D) additional revenue generated by employing an additional factor unit. 
E) total revenue from the sale of a product divided by the total output of the product.

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

Exhibit 26-3 ​ Refer to Exhibit 26-3. The marginal factor cost (MFC)of the fourth unit of labor is

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

The elasticity of demand for a factor is lower,

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

A measure of the value that one unit of a factor adds to the firm's output is value __________ product.

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve __________, while its VMP of labor curve __________.

Exhibit 26-6 ​ Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist should employ?

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

Which of the following statements is true?

The firm's factor demand curve is the

As the wage rate rises,

Marginal productivity theory states that if a firm sells its product in a perfectly competitive product market it will necessarily pay its factors their VMP.

A price searcher (monopolist, monopolistic competitor, etc.)definitely faces

Which of the following statements is true?

Marginal productivity theory implies that a worker will be paid an amount

Marginal revenue product is

As a firm buys more capital and less labor, the marginal physical product of capital __________ and the marginal physical product of labor __________, assuming the law of diminishing marginal returns has set in for each factor.

Which of the following conditions is not necessary for wage rates to be identical in every labor market in both the short run and the long run?

Marginal revenue product (MRP)is the

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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Exhibit 26-3 Refer to Exhibit 26-3. The marginal factor cost (MFC)of the fourth unit of labor is

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve , while its VMP of labor curve .

Exhibit 26-6 Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist should employ?

As a firm buys more capital and less labor, the marginal physical product of capital and the marginal physical product of labor , assuming the law of diminishing marginal returns has set in for each factor.