Question 1

The production and use of capital

Accepted Answer

A)  reduces the productivity of labor and decreases wages. 
B)  reduces the productivity of labor and drives up wages. 
C)  enhances the productivity of labor and drives up wages. 
D)  enhances the productivity of labor and decreases wages. 
A)  reduces the productivity of labor and decreases wages. 
B)  reduces the productivity of labor and drives up wages. 
C)  enhances the productivity of labor and drives up wages. 
D)  enhances the productivity of labor and decreases wages. C

Question 2

A firm will continue hiring labor as long as the MRP of labor ________ the market wage rate.

Accepted Answer

A)  is greater than or equal to 
B)  is less than 
C)  is equal to 
D)  determines 
A)  is greater than or equal to 
B)  is less than 
C)  is equal to 
D)  determines A

Question 3

Refer to the data provided in Table 10.1 below to answer the following questions.
Table 10.1 $\begin{array}{l}
\begin{array}{cccc}
\text { Total Labor Units}& \text {Total Product}&\text { Marginal Product of }&\text {Price per }\
\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \
\hline 0 & 0 & -- & -- \
1 & 20 & 20 & \$ 5 \
2 & 50 & 30 & 5 \
3 & 75 & 25 & 5 \
4 & 95 & 20 & 5 \
5 & 110 & 15 & 5
\end{array}
\end{array}$
-Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is maximizing profits if he will hire ________ employee(s).

Accepted Answer

A)  one 
B)  two 
C)  four 
D)  five 
A)  one 
B)  two 
C)  four 
D)  five C

Question 4

To get a profit maximizing firm in a perfectly competitive labor market to hire another worker, the firm will need to

Accepted Answer

A)  lower the wage rate paid to that last worker hired and also to all previous workers hired. 
B)  raise the wage rate paid to that last worker hired and also to all previous workers hired. 
C)  lower the wage rate paid to the last worker hired only. 
D)  raise the wage rate paid to the last worker hired only. 
A)  lower the wage rate paid to that last worker hired and also to all previous workers hired. 
B)  raise the wage rate paid to that last worker hired and also to all previous workers hired. 
C)  lower the wage rate paid to the last worker hired only. 
D)  raise the wage rate paid to the last worker hired only.

Question 5

If a firm could increase profits by hiring less labor and more capital, then

Accepted Answer

A)  the last dollar spent on labor must yield a smaller increase in output than the last dollar spent on capital. 
B)  the last dollar spent on labor must yield a larger increase in output than the last dollar spent on capital. 
C)  the price of labor exceeds the price of capital. 
D)  the optimal production technique must be capital intensive. 
A)  the last dollar spent on labor must yield a smaller increase in output than the last dollar spent on capital. 
B)  the last dollar spent on labor must yield a larger increase in output than the last dollar spent on capital. 
C)  the price of labor exceeds the price of capital. 
D)  the optimal production technique must be capital intensive.

Question 6

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 10 bushels. What would you advise this farmer to do?

Accepted Answer

A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is less than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal. 
A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is less than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal.

Question 7

An increase in technology will cause a marginal revenue product of labor curve to

Accepted Answer

A)  be unaffected because the productivity of labor has not changed. 
B)  shift to the left. 
C)  shift to the right 
D)  become more inelastic. 
A)  be unaffected because the productivity of labor has not changed. 
B)  shift to the left. 
C)  shift to the right 
D)  become more inelastic.

Question 8

Labor and capital are substitutes in production. If labor becomes more educated, then, ceteris paribus,

Accepted Answer

A)  capital is substituted for labor. 
B)  labor is substituted for capital. 
C)  output decreases as does the rental rate. 
D)  output increases as does the price of the output. 
A)  capital is substituted for labor. 
B)  labor is substituted for capital. 
C)  output decreases as does the rental rate. 
D)  output increases as does the price of the output.

Question 9

If the supply of labor decreases, which of the following events will occur?

Accepted Answer

A)  The wage rate will fall and firms will increase employment up until the point where MRP equals the new wage rate. 
B)  The wage rate will fall and firms will decrease employment to the point where MRP equals the new wage rate. 
C)  The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate. 
D)  The wage rate will increase and firms will increase employment up until the point where MRP equals the new wage rate. 
A)  The wage rate will fall and firms will increase employment up until the point where MRP equals the new wage rate. 
B)  The wage rate will fall and firms will decrease employment to the point where MRP equals the new wage rate. 
C)  The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate. 
D)  The wage rate will increase and firms will increase employment up until the point where MRP equals the new wage rate.

Question 10

The Package Store hires workers to wrap packages. The store sells this service for $5. The marginal revenue product of this store's fifth worker is $50. The marginal product of the fifth worker is

Accepted Answer

A)  0.01 package. 
B)  1 package. 
C)  10 packages. 
D)  indeterminate from this information. 
A)  0.01 package. 
B)  1 package. 
C)  10 packages. 
D)  indeterminate from this information.

Question 11

Demand for the services of Derek Jeter is

Accepted Answer

A)  horizontal. 
B)  unrelated to his true productivity. 
C)  an output demand. 
D)  derived from the demand for Yankees tickets when Jeter plays. 
A)  horizontal. 
B)  unrelated to his true productivity. 
C)  an output demand. 
D)  derived from the demand for Yankees tickets when Jeter plays.

Question 12

Related to the Economics in Practice on page 217: According to the Economics in Practice, firms where managers had more extensive training experienced

Accepted Answer

A)  increasing wage rates. 
B)  a decrease in the marginal product of labor. 
C)  increased productivity. 
D)  a decrease in the marginal revenue product of labor. 
A)  increasing wage rates. 
B)  a decrease in the marginal product of labor. 
C)  increased productivity. 
D)  a decrease in the marginal revenue product of labor.

Question 13

The value of land is determined in part by what firms and households are willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 14

The number of seats available in a stadium is fixed at 80,000. The equilibrium price for a ticket to a football game at the stadium is $30. The equilibrium price for a ticket to a soccer match at the stadium is $10. Which of the following is true?

Accepted Answer

A)  Football games must be more expensive to produce than a soccer match. 
B)  The demand for each football game must be more than the demand for each soccer match. 
C)  The supply of soccer matches must be less elastic than the supply of football games. 
D)  The demand for each soccer game must be greater than the demand for each football game. 
A)  Football games must be more expensive to produce than a soccer match. 
B)  The demand for each football game must be more than the demand for each soccer match. 
C)  The supply of soccer matches must be less elastic than the supply of football games. 
D)  The demand for each soccer game must be greater than the demand for each football game.

Question 15

The return to a factor that is in fixed supply is a pure rent.

Accepted Answer

A) True 
 B)False

Question 16

Salaries of NFL quarterbacks, like Tom Brady, are

Accepted Answer

A)  too high. 
B)  related to the additional revenues team owners expect to enjoy as a result of having them on the team roster. 
C)  the result of perfectly competitive markets. 
D)  All of the above are correct. 
A)  too high. 
B)  related to the additional revenues team owners expect to enjoy as a result of having them on the team roster. 
C)  the result of perfectly competitive markets. 
D)  All of the above are correct.

Question 17

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } 
\begin{array} { c } 
\text { Total Labor Units } \
\text { (employees) }
\end{array} & \begin{array} { c } 
\text { Total Product } \
\text { (frames per day) }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { Frame }
\end{array} \
\hline 0 & 0 & \$ 10 \
1 & 10 & \$ 10 \
2 & 30 & \$ 10 \
3 & 55 & \$ 10 \
4 & 70 & \$ 10 \
5 & 82 & \$ 10
\end{array}$$
-Refer to Table 10.2. Diminishing returns to labor start with the ________ worker.

Accepted Answer

A)  second 
B)  third 
C)  fourth 
D)  fifth 
A)  second 
B)  third 
C)  fourth 
D)  fifth

Question 18

Suppose the supply of labor schedule increases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit maximizing representative firm will

Accepted Answer

A)  hire more workers. 
B)  hire fewer workers. 
C)  hire the same number of workers. 
D)  substitute capital for labor. 
A)  hire more workers. 
B)  hire fewer workers. 
C)  hire the same number of workers. 
D)  substitute capital for labor.

Question 19

Complements and substitutes exist for outputs, but not for inputs.

Accepted Answer

A) True 
 B)False

Question 20

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, and the farmer employs five workers. If the farmer is maximizing his profits, then the marginal product of the fifth worker is ________.

Accepted Answer

A)  0.2 bushels 
B)  5 bushels 
C)  20 bushels 
D)  indeterminate from the given information. 
A)  0.2 bushels 
B)  5 bushels 
C)  20 bushels 
D)  indeterminate from the given information.

The production and use of capital

A firm will continue hiring labor as long as the MRP of labor ________ the market wage rate.

To get a profit maximizing firm in a perfectly competitive labor market to hire another worker, the firm will need to

If a firm could increase profits by hiring less labor and more capital, then

An increase in technology will cause a marginal revenue product of labor curve to

Labor and capital are substitutes in production. If labor becomes more educated, then, ceteris paribus,

If the supply of labor decreases, which of the following events will occur?

The Package Store hires workers to wrap packages. The store sells this service for $5. The marginal revenue product of this store's fifth worker is $50. The marginal product of the fifth worker is

Demand for the services of Derek Jeter is

Related to the Economics in Practice on page 217: According to the Economics in Practice, firms where managers had more extensive training experienced

The value of land is determined in part by what firms and households are willing to pay for it.

The number of seats available in a stadium is fixed at 80,000. The equilibrium price for a ticket to a football game at the stadium is $30. The equilibrium price for a ticket to a soccer match at the stadium is $10. Which of the following is true?

The return to a factor that is in fixed supply is a pure rent.

Salaries of NFL quarterbacks, like Tom Brady, are

Suppose the supply of labor schedule increases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit maximizing representative firm will

Complements and substitutes exist for outputs, but not for inputs.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Exam 10: Input Demand: the Labor and Land Markets

The production and use of capital

A firm will continue hiring labor as long as the MRP of labor ________ the market wage rate.

To get a profit maximizing firm in a perfectly competitive labor market to hire another worker, the firm will need to

If a firm could increase profits by hiring less labor and more capital, then

An increase in technology will cause a marginal revenue product of labor curve to

Labor and capital are substitutes in production. If labor becomes more educated, then, ceteris paribus,

If the supply of labor decreases, which of the following events will occur?

The Package Store hires workers to wrap packages. The store sells this service for $5. The marginal revenue product of this store's fifth worker is $50. The marginal product of the fifth worker is

Demand for the services of Derek Jeter is

Related to the Economics in Practice on page 217: According to the Economics in Practice, firms where managers had more extensive training experienced

The value of land is determined in part by what firms and households are willing to pay for it.

The number of seats available in a stadium is fixed at 80,000. The equilibrium price for a ticket to a football game at the stadium is $30. The equilibrium price for a ticket to a soccer match at the stadium is $10. Which of the following is true?

The return to a factor that is in fixed supply is a pure rent.

Salaries of NFL quarterbacks, like Tom Brady, are

Suppose the supply of labor schedule increases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit maximizing representative firm will

Complements and substitutes exist for outputs, but not for inputs.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters