Question 1

Given an 8 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus ,

Accepted Answer

A) there are likely fewer substitutes for labor in firm B than firm A. 
B) there are likely fewer substitutes for labor in firm A than firm B. 
C) sunk costs are greater for firm A than firm B. 
D) the demand for the product that firm A produces is likely less elastic than the product that firm B produces. 
A) there are likely fewer substitutes for labor in firm B than firm A. 
B) there are likely fewer substitutes for labor in firm A than firm B. 
C) sunk costs are greater for firm A than firm B. 
D) the demand for the product that firm A produces is likely less elastic than the product that firm B produces.

Question 2

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 3

When a firm decides whether or not to relocate its production to another country, they must consider both the pay of the workers and the marginal productivity of the workers.

Accepted Answer

A) True 
 B)False

Question 4

The wage rate increases 8 percent, and the quantity demanded of labor falls by 14 percent. The absolute value of the elasticity of demand for labor is

Accepted Answer

A) 0.57. 
B) 1.75. 
C) 0.25. 
D) 5.00. 
A) 0.57. 
B) 1.75. 
C) 0.25. 
D) 5.00.

Question 5

Suppose there are two labor markets, A and B, and labor is homogeneous between markets. The wage rate in labor market A falls relative to the wage rate in labor market B. What happens in labor market B?

Accepted Answer

A) The supply curve of labor shifts leftward. 
B) The supply curve of labor shifts rightward. 
C) The demand curve for labor shifts leftward. 
D) The demand curve for labor shifts rightward. 
A) The supply curve of labor shifts leftward. 
B) The supply curve of labor shifts rightward. 
C) The demand curve for labor shifts leftward. 
D) The demand curve for labor shifts rightward.

Question 6

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 7

If a firm is a factor price taker in the labor market,

Accepted Answer

A) it must pay higher wages in order to hire additional workers. 
B) it can hire all the workers it wants to at the going wage rate. 
C) it must hire all workers who apply for a job. 
D) it will continue to hire workers as long as MFC > MRP. 
A) it must pay higher wages in order to hire additional workers. 
B) it can hire all the workers it wants to at the going wage rate. 
C) it must hire all workers who apply for a job. 
D) it will continue to hire workers as long as MFC > MRP.

Question 8

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. 
A) 19 and 20. 
B) 4.58 and 4.07. 
C) 10 and 11. 
D) 6 and 3.

Question 9

Exhibit 26-4 ​
 
Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

Accepted Answer

A) the second worker. 
B) the fourth worker. 
C) labor up to the point where MRP equals the market price of the input. 
D) labor up to the point where MRP = MFC. 
A) the second worker. 
B) the fourth worker. 
C) labor up to the point where MRP equals the market price of the input. 
D) labor up to the point where MRP = MFC.

Question 10

The firm's factor demand curve is the

Accepted Answer

A) MRP curve if the firm is a price taker (perfectly competitive firm). 
B) MFC curve if the firm is a price taker (perfectly competitive firm). 
C) VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
D) MFC curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
A) MRP curve if the firm is a price taker (perfectly competitive firm). 
B) MFC curve if the firm is a price taker (perfectly competitive firm). 
C) VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). 
D) MFC curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist).

Question 11

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 Mexico is

Accepted Answer

A) 12.0 units of good X. 
B) 1.0 units of good X. 
C) 1.33 units of good X. 
D) 0.75 units of good X. 
A) 12.0 units of good X. 
B) 1.0 units of good X. 
C) 1.33 units of good X. 
D) 0.75 units of good X.

Question 12

For a product price searcher (such as a monopolist),

Accepted Answer

A) P > MR, therefore VMP 
B) P = MR, therefore VMP = MRP. 
C) P > MR, therefore VMP > MRP. 
D) P 
A) P > MR, therefore VMP 
B) P = MR, therefore VMP = MRP. 
C) P > MR, therefore VMP > MRP. 
D) P

Question 13

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 14

Which of the following statements is true?

Accepted Answer

A) Employers are not concerned with determining a potential employee's productivity because they know that with experience the employee's output will increase. 
B) Employers are not concerned with determining a potential employee's productivity because they realize that they cannot accurately determine it beforehand. 
C) Employers are not concerned with determining a potential employee's productivity because they know that they can train the employee after he's hired. 
D) Employers are concerned with determining a potential employee's productivity due to the high costs of training new employees. 
A) Employers are not concerned with determining a potential employee's productivity because they know that with experience the employee's output will increase. 
B) Employers are not concerned with determining a potential employee's productivity because they realize that they cannot accurately determine it beforehand. 
C) Employers are not concerned with determining a potential employee's productivity because they know that they can train the employee after he's hired. 
D) Employers are concerned with determining a potential employee's productivity due to the high costs of training new employees.

Question 15

Which of the following will cause a firm's factor demand curve to shift to the left?

Accepted Answer

A) a decrease in factor costs 
B) an increase in factor costs 
C) a decrease in marginal physical product 
D) an increase in marginal physical product 
A) a decrease in factor costs 
B) an increase in factor costs 
C) a decrease in marginal physical product 
D) an increase in marginal physical product

Question 16

The least-cost rule states that a firm minimizes costs by buying factors in the combination at which the MRP-to-price ratio for each is the same.

Accepted Answer

A) True 
 B)False

Question 17

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

Accepted Answer

A) the demand curve of its product to the left. 
B) the demand curve of its product to the right. 
C) its MRP curve to the left. 
D) its MRP curve to the right. 
A) the demand curve of its product to the left. 
B) the demand curve of its product to the right. 
C) its MRP curve to the left. 
D) its MRP curve to the right.

Question 18

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. 
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.

Question 19

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

Accepted Answer

A) $160 
B) $96 
C) $48 
D) $35 
A) $160 
B) $96 
C) $48 
D) $35

Question 20

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Accepted Answer

A) $22.00. 
B) $29.00. 
C) $0.53. 
D) $114. 
E) There is not enough information to answer the question. 
A) $22.00. 
B) $29.00. 
C) $0.53. 
D) $114. 
E) There is not enough information to answer the question.

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

Given an 8 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus ,

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.

When a firm decides whether or not to relocate its production to another country, they must consider both the pay of the workers and the marginal productivity of the workers.

The wage rate increases 8 percent, and the quantity demanded of labor falls by 14 percent. The absolute value of the elasticity of demand for labor is

Suppose there are two labor markets, A and B, and labor is homogeneous between markets. The wage rate in labor market A falls relative to the wage rate in labor market B. What happens in labor market B?

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

If a firm is a factor price taker in the labor market,

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 26-4 ​ Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

The firm's factor demand curve is the

For a product price searcher (such as a monopolist),

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

Which of the following statements is true?

Which of the following will cause a firm's factor demand curve to shift to the left?

The least-cost rule states that a firm minimizes costs by buying factors in the combination at which the MRP-to-price ratio for each is the same.

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

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

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

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

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 26-4 Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire