Question 1

An increase in labor productivity would cause a rightward shift of the labor demand curve.

Accepted Answer

A) True 
 B)False

Question 2

The demand for ________ is a ʺderived demand.ʺ

Accepted Answer

A)  ice cream cones on a hot day 
B)  tax-free municipal bonds 
C)  a hair stylist by a salon owner 
D)  a birthday cake for your brother 
A)  ice cream cones on a hot day 
B)  tax-free municipal bonds 
C)  a hair stylist by a salon owner 
D)  a birthday cake for your brother

Question 3

MPL multiplied by PX is the ________ while the wage rate is the ________, where L denotes labor and X denotes output.

Accepted Answer

A)  cost of a marginal unit of labor; value of labor's marginal product 
B)  value of labor's marginal product; cost of a marginal unit of labor 
C)  marginal revenue of a unit of output; marginal cost of a unit of output 
D)  marginal cost of a unit of output; marginal revenue of a unit of output 
A)  cost of a marginal unit of labor; value of labor's marginal product 
B)  value of labor's marginal product; cost of a marginal unit of labor 
C)  marginal revenue of a unit of output; marginal cost of a unit of output 
D)  marginal cost of a unit of output; marginal revenue of a unit of output

Question 4

When wages increase, the net effect on the level of capital used depends on the relative magnitudes of the factor substitution and output effects.

Accepted Answer

A) True 
 B)False

Question 5

According to the output effect of a labor price decrease, when supply of labor increases, firms eventually increase output and demand for all inputs.

Accepted Answer

A) True 
 B)False

Question 6

Sally's Sandwiches produces sandwiches using one variable input-labor. Sally's Sandwiches is a ________ in the labor market and a ________ in the sandwich market.

Accepted Answer

A)  producer; consumer 
B)  consumer; producer 
C)  consumer; consumer 
D)  producer; producer 
A)  producer; consumer 
B)  consumer; producer 
C)  consumer; consumer 
D)  producer; producer

Question 7

If the MRP of land is less than its price, a firm should

Accepted Answer

A)  use more land. 
B)  use less land. 
C)  try to decrease the productivity of land. 
D)  increase the price it is willing to pay for land. 
A)  use more land. 
B)  use less land. 
C)  try to decrease the productivity of land. 
D)  increase the price it is willing to pay for land.

Question 8

Productivity of an input is the amount of output produced per unit of input.

Accepted Answer

A) True 
 B)False

Question 9

A decrease in the wage rate will change

Accepted Answer

A)  only the amount of labor hired. 
B)  the amount of labor employed, and it may also change the amount of other inputs employed. 
C)  the price the firm charges for the product, but it will not affect the demand for any of the inputs. 
D)  the firm's profit-maximizing level output, but not its usage of inputs. 
A)  only the amount of labor hired. 
B)  the amount of labor employed, and it may also change the amount of other inputs employed. 
C)  the price the firm charges for the product, but it will not affect the demand for any of the inputs. 
D)  the firm's profit-maximizing level output, but not its usage of inputs.

Question 10

When a firm substitutes away from a factor whose price has risen and toward a factor whose price has fallen, it is an example of the

Accepted Answer

A)  output effect of a factor price decrease. 
B)  factor substitution effect. 
C)  factor complementary effect. 
D)  output substitution effect. 
A)  output effect of a factor price decrease. 
B)  factor substitution effect. 
C)  factor complementary effect. 
D)  output substitution effect.

Question 11

The marginal cost of a unit of labor in a perfectly competitive labor market is

Accepted Answer

A)  its average MRP. 
B)  equal to product price. 
C)  the market wage rate. 
D)  equal to MRP. 
A)  its average MRP. 
B)  equal to product price. 
C)  the market wage rate. 
D)  equal to MRP.

Question 12

Refer to the information provided in Figure 10.1 below to answer the questions that follow.   Figure 10.1
-Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

Accepted Answer

A)  do nothing because it is maximizing profits. 
B)  reduce employment to 15 workers to increase profits. 
C)  reduce employment to 14 workers to increase profits. 
D)  increase employment to 17 workers to increase profits. 
A)  do nothing because it is maximizing profits. 
B)  reduce employment to 15 workers to increase profits. 
C)  reduce employment to 14 workers to increase profits. 
D)  increase employment to 17 workers to increase profits.

Question 13

Labor is a firm's only variable input. The firm should hire additional units of labor as long as the wage is less than or equal to the marginal revenue product of that additional unit of labor.

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 baseball game at the stadium is $20. Which of the following is true?

Accepted Answer

A)  Football games must be more expensive to produce than baseball games. 
B)  The demand for baseball games must be more elastic than the demand for football games. 
C)  The supply of baseball games must be less elastic than the supply of football games. 
D)  The demand for each baseball game must be lower than the demand for each football game. 
A)  Football games must be more expensive to produce than baseball games. 
B)  The demand for baseball games must be more elastic than the demand for football games. 
C)  The supply of baseball games must be less elastic than the supply of football games. 
D)  The demand for each baseball game must be lower than the demand for each football game.

Question 15

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. The firm currently employs 4 workers at the market wage of $120 per worker per day. If the firm wants to maximize its profits, it should

Accepted Answer

A)  hire fewer workers 
B)  hire more workers. 
C)  make no adjustments as it is already employing the profit maximizing number of workers. 
D)  shut down since it is incurring a loss. 
A)  hire fewer workers 
B)  hire more workers. 
C)  make no adjustments as it is already employing the profit maximizing number of workers. 
D)  shut down since it is incurring a loss.

Question 16

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. Marginal revenue product of the ________ worker is $250.

Accepted Answer

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

Question 17

Pure rent is the return to any factor of production that is in fixed supply.

Accepted Answer

A) True 
 B)False

Question 18

If land becomes more valuable in residential use than in commercial use,

Accepted Answer

A)  the supply of land available for commercial use should decrease and the supply of land for residential use should increase. 
B)  there can be no change in the allocation of land because land is fixed in supply. 
C)  there will be no change in the allocation of land, as there is no responsiveness to price changes by suppliers of land. 
D)  the supply of land for commercial use will become perfectly elastic, and the supply of land for residential use will become perfectly inelastic. 
A)  the supply of land available for commercial use should decrease and the supply of land for residential use should increase. 
B)  there can be no change in the allocation of land because land is fixed in supply. 
C)  there will be no change in the allocation of land, as there is no responsiveness to price changes by suppliers of land. 
D)  the supply of land for commercial use will become perfectly elastic, and the supply of land for residential use will become perfectly inelastic.

Question 19

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. Marginal revenue product of the ________ worker is $120.

Accepted Answer

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

Question 20

An increase in the productivity of a factor of production will

Accepted Answer

A)  shift its marginal revenue product curve to the right. 
B)  shift its marginal revenue product curve to the left. 
C)  cause a firm to move down the marginal revenue product curve. 
D)  cause a firm to move up the marginal revenue product curve. 
A)  shift its marginal revenue product curve to the right. 
B)  shift its marginal revenue product curve to the left. 
C)  cause a firm to move down the marginal revenue product curve. 
D)  cause a firm to move up the marginal revenue product curve.

An increase in labor productivity would cause a rightward shift of the labor demand curve.

The demand for ________ is a ʺderived demand.ʺ

MPL multiplied by PX is the while the wage rate is the , where L denotes labor and X denotes output.

When wages increase, the net effect on the level of capital used depends on the relative magnitudes of the factor substitution and output effects.

According to the output effect of a labor price decrease, when supply of labor increases, firms eventually increase output and demand for all inputs.

Sally's Sandwiches produces sandwiches using one variable input-labor. Sally's Sandwiches is a in the labor market and a in the sandwich market.

If the MRP of land is less than its price, a firm should

Productivity of an input is the amount of output produced per unit of input.

A decrease in the wage rate will change

When a firm substitutes away from a factor whose price has risen and toward a factor whose price has fallen, it is an example of the

The marginal cost of a unit of labor in a perfectly competitive labor market is

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

Labor is a firm's only variable input. The firm should hire additional units of labor as long as the wage is less than or equal to the marginal revenue product of that additional unit of labor.

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 baseball game at the stadium is $20. Which of the following is true?

Pure rent is the return to any factor of production that is in fixed supply.

If land becomes more valuable in residential use than in commercial use,

An increase in the productivity of a factor of production will

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

An increase in labor productivity would cause a rightward shift of the labor demand curve.

The demand for ________ is a ʺderived demand.ʺ

MPL multiplied by PX is the ________ while the wage rate is the ________, where L denotes labor and X denotes output.

When wages increase, the net effect on the level of capital used depends on the relative magnitudes of the factor substitution and output effects.

According to the output effect of a labor price decrease, when supply of labor increases, firms eventually increase output and demand for all inputs.

Sally's Sandwiches produces sandwiches using one variable input-labor. Sally's Sandwiches is a ________ in the labor market and a ________ in the sandwich market.

If the MRP of land is less than its price, a firm should

Productivity of an input is the amount of output produced per unit of input.

A decrease in the wage rate will change

When a firm substitutes away from a factor whose price has risen and toward a factor whose price has fallen, it is an example of the

The marginal cost of a unit of labor in a perfectly competitive labor market is

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

Labor is a firm's only variable input. The firm should hire additional units of labor as long as the wage is less than or equal to the marginal revenue product of that additional unit of labor.

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 baseball game at the stadium is $20. Which of the following is true?

Pure rent is the return to any factor of production that is in fixed supply.

If land becomes more valuable in residential use than in commercial use,

An increase in the productivity of a factor of production will

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

MPL multiplied by PX is the while the wage rate is the , where L denotes labor and X denotes output.

Sally's Sandwiches produces sandwiches using one variable input-labor. Sally's Sandwiches is a in the labor market and a in the sandwich market.