Deck 13: Factor Markets

Question 1

(Figure: Budget Constraint I) If Aleksandra was getting paid $20 per hour, then received a raise of $10 per hour, which graph would best illustrate her new budget constraint?

A) (a)
B) (b)
C) (c)
D) (d)

Answer 1

B

Question 2

Table (Baristas Labor I). Suppose that the wage rate for baristas is $9 per hour and the average price of cappuccino is $4.45. Suppose the productivity of workers increases by 10% compared to the output shown in the table. The profit-maximizing quantity of labor would now be ____.

A) 2
B) 3
C) 4
D) 5

Answer 2

D

Question 3

A union faces a labor demand curve given by MRP_L = 100 - 5L. If the union wishes to maximize the total wages of its membership, members will earn an average wage of $____.

A) 70
B) 60
C) 50
D) 40

Answer 3

C

Question 4

A monopsony has a marginal revenue product curve of MRP_L = 100 - l and faces a labor supply curve of W = 1.5l. How many workers will the monopsony hire?

A) 100
B) 50
C) 25
D) 40

Question 5

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_L = 55 - 5L, where L is the number of workers. The average price of a pizza in this highly competitive market is $10. The shop can hire workers at the market wage of $300 per week. The marginal product of labor for the fourth worker is ____.

A) 55
B) 45
C) 35
D) 25

Question 6

Suppose the demand faced by a labor monopsony is W = 20,000 - 50l, where W is the annual wage and l is the number of workers hired. The labor supply is given by W = 5,000 + 75l. The monopsony will pay a wage equal to:

A) $14,000.
B) $10,625.
C) $16,250.
D) $20,000.

Question 7

(Figure: Labor Union Wages I) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize profit, how many workers will it supply?

A) 2,750
B) 4,000
C) 5,000
D) 8,000

Question 8

(Figure: Marginal Productivity of Apple Pickers I) Assume that the marginal productivity of apple pickers has increased. Which graph best illustrates this change?

A) (a)
B) (b)
C) (c)
D) (d)

Question 9

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_L = 55 - 5L, where L is the number of workers. The average price of a pizza in this highly competitive market is $10. The shop can hire workers at the market wage of $300 per week. There is a diminishing marginal product of labor when worker number ____ is hired.

A) 2
B) 3
C) 4
D) 5

Question 10

Which of the following statement(s) is (are) true?
I) A labor union can choose to maximize profit, maximize total wages of its members, or accept the competitive wage.
II) The number of workers employed when a union is present is generally greater than the number employed in a perfectly competitive labor market.
III) The wage rate paid to union workers typically exceeds that of workers in a competitive market.

A) I, II, and III
B) III
C) I and III
D) II and III

Question 11

(Figure: Budget Constraints and Indifference Curves I) The figure shows budget constraints and indifference curves for a representative individual. Identify the substitution effect of the increase in the wage rate in the associated graph.

A) C to B
B) B to A
C) A to C
D) A to B

Question 12

A monopsony has a marginal revenue product curve of MRP_L = 100 - l and faces a labor supply curve of W = 1.5l. How many workers will the price taker hire?

A) 100
B) 50
C) 25
D) 40

Question 13

(Figure: Budget Constraints and Indifference Curves I) The figure shows budget constraints and indifference curves for a representative individual. Identify the income effect of the increase in the wage rate in the associated graph.

A) C to B
B) B to C
C) A to C
D) A to B

Question 14

Which of the following is NOT a goal of a labor union?

A) profit maximization
B) job security
C) competitive market wage
D) total wage maximization

Question 15

(Figure: Budget Constraint I) If Jude gets paid $20 per hour, which graph best illustrates their budget constraint?

A) (a)
B) (b)
C) (c)
D) (d)

Question 16

Assume that the labor market is in equilibrium. An increase in the availability of public transportation would shift labor __________ the equilibrium wage and _____ the amount of labor employed.

A) demand to the right, increasing; increasing
B) supply to the right, decreasing; increasing
C) demand to the left, decreasing; decreasing
D) supply to the left, increasing; decreasing

Question 17

Table (Baristas Labor I). Suppose that the wage rate for baristas is $9 per hour and the average price of cappuccino is $3. The profit-maximizing quantity of labor is ____.

A) 2
B) 3
C) 4
D) 5

Question 18

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_L = 55 - 5L, where L is the number of workers. The average price of a pizza in this highly competitive market is $10. The shop can hire workers at the market wage of $300 per week. The marginal product of labor for the second worker is ____.

A) 55
B) 45
C) 35
D) 25

Question 19

Assume there is a decrease in the demand for soda, some of which comes in aluminum cans. In the market for bauxite, the main mineral source of aluminum, the equilibrium price would _____ and the equilibrium quantity would _____.

A) rise; fall
B) fall; fall
C) rise; rise
D) fall; rise

Question 20

(Figure: Budget Constraint I) If Katarina earns $20 per hour but can work only 4 hours per day, which graph best illustrates her budget constraint?

A) (a)
B) (b)
C) (c)
D) (d)

Question 21

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm. Assuming the firm sells its output for $20 per unit, the marginal revenue product of labor for the second worker is ____.

A) 600
B) 480
C) 370
D) 320

Question 22

(Figure: Monopsony Employment I) The monopsony will offer a wage of:

A) $52.50.
B) $60.
C) $75.
D) $37.50.

Question 23

Table (Baristas Labor I). Suppose that the wage rate for baristas is $12 per hour and the average price of cappuccino is $9. The profit-maximizing quantity of labor is ____.

A) 2
B) 3
C) 4
D) 5

Question 24

(Figure: Labor Union Wages II) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize profit, the deadweight loss will be:

A) C + E + F + H + I.
B) F + I.
C) C + E + F.
D) B + D + G.

Question 25

When examining the labor market in the short run, which of the following is assumed to be constant?

A) marginal productivity of labor
B) quantity of capital
C) the wage rate
D) labor supply

Question 26

For a given labor demand curve, which of the following is NOT held constant?

A) the price of the output
B) the production function
C) the productivity of labor
D) the price of labor

Question 27

If a monopsony faces an elasticity of labor supply of 3 and a marginal expenditure of $120, it will offer a wage of:

A) 100.
B) 50.
C) 25.
D) 40.

Question 28

If MRP_L = W, then the firm:

A) should hire more labor.
B) should reduce the amount of labor it uses.
C) should not change the amount of labor it uses, since the amount is optimal now.
D) should reconsider how much capital it uses.

Question 29

(Figure: Monopsony Employment I) The price taker will offer a wage of:

A) $100.
B) $50.
C) $40.
D) $60.

Question 30

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm. Assuming the firm sells its output for $20 per unit, the marginal revenue product of labor for the third worker is ____.

A) 600
B) 480
C) 370
D) 320

Question 31

The marginal product of labor curve for Coast to Coast, a standup paddle board outfitter, is MRP_L = 500 -100L, where L is the number of guides hired per week and MRP_L is dollars earned per guide per week. The prevailing market wage is $200 per week. The optimal number of labor for Coast to Coast to hire is ____.

A) 2
B) 3
C) 4
D) 5

Question 32

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_l = 55 - 5L, where L is the number of workers. The current average price of a pizza in this highly competitive market is $10. The shop, a monopsonist, faces labor supply of W = 100 + 40l, where W is the wage per week and L is the number of workers. The pizza shop will hire ____ workers when the price of a pizza is $10.

A) 5.00
B) 3.46
C) 2.67
D) 1.89

Question 33

(Figure: Labor Union Wages I) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize total wages, how many workers will it supply?

A) 2,750
B) 4,000
C) 5,000
D) 8,000

Question 34

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_l = 55 - 5L, where L is the number of workers. The current average price of a pizza in this highly competitive market is $10. The shop, a monopsonist, faces labor supply of W = 100 + 40l, where W is the wage per week and L is the number of workers. The pizza shop will hire ____ workers when the price of a pizza is $15.

A) 4.68
B) 6.30
C) 2.67
D) 1.89

Question 35

The marginal product of labor curve for Coast to Coast, a standup paddle board outfitter, is MRP_L = 500 -100L, where L is the number of guides hired per week and MRP_L is dollars earned per guide per week. The prevailing market wage is $200 per week. The choke wage for Coast to Coast is $____.

A) 200
B) 300
C) 400
D) 500

Question 36

(Figure: Monopsony Employment I) The deadweight loss associated with the monopsony equals:

A) $701.75.
B) $562.50.
C) $400.
D) $312.25.

Question 37

(Figure: Monopsony Employment I) A price taker will choose to employ _____ workers.

A) 60
B) 50
C) 40
D) 25

Question 38

(Table: Demand for Labor I) If the market wage is $25, the firm should hire _____ workers.

A) 5
B) 4
C) 3
D) 6

Question 39

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm. The marginal product of labor for the second worker is ____.

A) 30
B) 24
C) 18
D) 16

Question 40

(Table: Labor Hours Supplied I) The table shows the number of labor hours supplied per worker for various hourly wage rates. The total amount of labor hours supplied at $20 per hour is:

A) 20.
B) 30.
C) 90.
D) 100.

Question 41

A labor market monopsony faces a(n):

A) horizontal labor supply curve.
B) vertical labor supply curve.
C) upward-sloping labor supply curve.
D) downward-sloping labor supply curve.

Question 42

(Table: Demand for Labor I) The choke wage is:

A) 40.
B) 45.
C) 30.
D) 50.

Question 43

Table (Baristas Labor I). Suppose that the wage rate for baristas is $9 per hour and the average price of cappuccino is $4.50. The profit-maximizing quantity of labor is ____.

A) 2
B) 3
C) 4
D) 5

Question 44

The government offers subsidies to homeowners for the purchase and installation of solar energy generating equipment. Given that silicon (derived from silicate minerals) is the main input in the production of solar panels, how will the subsidy affect the market for silicon?

A) Demand will rise, leading to an increase in the equilibrium price and quantity.
B) Supply will rise, leading to an increase in the equilibrium quantity and decrease in price.
C) Demand will fall, leading to a decrease in the equilibrium price and quantity.
D) Supply will fall, leading to an increase in the equilibrium price and decrease in quantity.

Question 45

A union faces a labor demand curve given by MRP_L = 100 - 5L. If the union wishes to maximize the total wages of its membership, ____ members will be employed.

A) 20
B) 10
C) 8
D) 6

Question 46

If the labor supply curve faced by a monopsony is given by l = -800 + 50W, then the correct marginal expenditure curve will be:

A) l = -800 + 100W.
B) W = 16 - 0.02l.
C) l = -800 + 25W.
D) W = 16 - 0.04l.

Question 47

Assume that the labor market for house painters is in equilibrium. An increase in the price of painting a house would:

A) shift labor demand to the right, increasing the equilibrium wage and number of painters employed.
B) shift labor supply to the right, decreasing the equilibrium wage and increasing the number of painters employed.
C) shift labor demand to the left, decreasing the equilibrium wage and number of painters employed.
D) shift labor supply to the left, increasing the equilibrium wage and decreasing the number of painters employed.

Question 48

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm. Assuming the firm sells its output for $20 per unit and workers earn a market wage of $160 per day, the firm should hire ____ workers.

A) 8
B) 7
C) 6
D) 5

Question 49

If the marginal cost of labor curve lies above the labor supply curve, the firm is likely a(n):

A) monopsony.
B) bilateral monopoly.
C) oligopoly.
D) monopoly.

Question 50

Suppose the demand faced by a labor monopsony is W = 40,000 - 100l, where W is the annual wage and L is the number of workers hired. The labor supply is given by W = 10,000 + 100l. The marginal expenditure equation is W = ____.

A) 80,000 - 100l
B) 40,000 - 200l
C) 10,000 + 200l
D) 20,000 + 100l

Question 51

Compass Rose Landscaping operates in a very competitive market. It charges $80 per hour and pays the going market wage of $20 per hour to its workers. At its current level of employment, it has 3 workers, with the marginal product of the third worker equal to 5. Compass Rose should:

A) continue to use 3 workers.
B) hire more than 3 workers.
C) hire fewer workers.
D) The question cannot be answered with the information provided.

Question 52

(Figure: Labor Union Wages II) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize total wages, the deadweight loss will be:

A) C + E + F + H + I.
B) F + I.
C) C + E + F.
D) B + D + G.

Question 53

(Table: Labor Hours Supplied I) The table shows the number of labor hours supplied per worker for various hourly wage rates. The correct market-level labor supply curve is:

A)
B)
C)
D)

Question 54

(Figure: Monopsony Employment I) The monopsony will hire _____ workers.

A) 100
B) 50
C) 25
D) 40

Question 55

(Table: Demand for Labor I) The table shows the quantity of labor demanded at different wage rates. Which of the following statements is TRUE?
I) When the market wage is $25 and the firm hires 7 workers, the benefit of hiring the seventh worker is greater than the costs of hiring the seventh worker.
II) When the market wage is $25 and the firm hires 4 workers, the benefit of hiring the fourth worker is less than the costs of hiring the fourth worker.
III) When the market wage is $25 and the firm hires 5 workers, the benefit of hiring the fifth worker on the margin equals the costs on the margin of hiring the fifth worker.

A) I
B) I and II
C) III
D) I and III

Question 56

Suppose the demand faced by a labor monopsony is W = 20,000 - 50l, where W is the annual wage and l is the number of workers hired. The labor supply is given by W = 5,000 + 75l. What is the deadweight loss associated with this monopsony, rounded to the nearest dollar?

A) $105,502
B) $120,356
C) $126,563
D) $130,000

Question 57

Suppose the demand faced by a labor monopsony is W = 40,000 - 100l, where W is the annual wage and L is the number of workers hired. The labor supply is given by W = 10,000 + 100l. The monopsonist would pay a wage of $____.

A) 40,000
B) 30,000
C) 20,000
D) 10,000

Question 58

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm. Assuming the firm sells its output for $20 per unit and workers earn a market wage of $80 a day, the firm should hire ____ workers.

A) 8
B) 7
C) 6
D) 5

Question 59

A firm sells bagels for 50 cents each. With 10 workers the firm produces 100 dozen per hour, and with 12 workers it produces 123 dozen per hour. If the firm has 12 workers at the competitive equilibrium, the workers are earning $____ per hour assuming an average 8-hour shift per worker.

A) 8.63
B) 8.23
C) 7.94
D) 7.74

Question 60

In the market for unimproved land, supply would best be described as:

A) elastic.
B) inelastic.
C) perfectly elastic.
D) perfectly inelastic.

Question 61

Suppose the demand faced by a labor monopsony is W = 40,000 - 100l, where W is the annual wage and L is the number of workers hired. The labor supply is given by W = 10,000 + 100l. The monopsonist would hire ____ workers.

A) 400
B) 300
C) 200
D) 100

Question 62

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_L = 55 - 5L, where L is the number of workers. The average price of a pizza in this highly competitive market is $10. The shop can hire workers at the market wage of $300 per week. The pizza shop should hire ____ workers.

A) 2
B) 3
C) 4
D) 5

Question 63

Use your understanding of marginal revenue product of labor, along with the appropriate graph, to explain one reason the average salary of National Football League players is higher than the average salary of college professors.

Question 64

Assume that the initial short-run labor demand curve is given by MRP_L1 = 800 - 50l, where l is the quantity of labor demanded. The market wage rate is $200 per week. Graphically explain why long-run labor demand is flatter than short-run labor demand.

Question 65

(Figure: Marginal Productivity of Apple Pickers I) Assume that the price per pound of apples has increased. Which graph best illustrates this change?

A) (a)
B) (b)
C) (c)
D) (d)

Question 66

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm. The marginal product of labor for the third worker is ____.

A) 30
B) 24
C) 18
D) 16

Question 67

Assume that there has been an increase in the marginal productivity of construction workers building new housing. How might this affect the market for new housing?

A) Demand for new housing will rise, leading to an increase in the equilibrium price and quantity of new housing.
B) Supply of new housing will rise, leading to an increase in the equilibrium quantity and decrease in the price of new housing.
C) Demand for new housing will fall, leading to a decrease in the equilibrium price and quantity of new housing.
D) Supply of new housing will fall, leading to an increase in the equilibrium price and decrease in the quantity of new housing.

Question 68

A backward-bending labor supply curve occurs when:

A) the substitution effect of a wage increase is greater than the income effect.
B) the income effect of a wage increase is greater than the substitution effect.
C) the substitution effect of a wage increase equals the income effect.
D) a negatively sloped labor supply curve is not possible.

Question 69

If the marginal expenditure for a monopsony is $75 and it is paying a wage of $50, the elasticity of labor supply is:

A) 0.5.
B) 2.
C) 0.
D) 1.

Question 70

(Figure: Marginal Productivity of Apple Pickers I) Assume that there is a decrease in the wage paid to apple pickers. Which graph best illustrates this change?

A) (a)
B) (b)
C) (c)
D) (d)

Question 71

(Figure: Market for Labor I)
a. Determine the MRP_L, l^S_, and ME equations.
b. Calculate and then illustrate the equilibrium outcome for the monopsonist.
c. Calculate and then illustrate the equilibrium outcome if the employer were a perfect competitor.
d. Complete the following table.

Question 72

A union faces a labor demand curve given by MRP_L = 100 - 5L. If the union wishes to maximize the total wages of its membership, how many members will be employed and what will be the average wage?

Question 73

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_L = 55 - 5L, where L is the number of workers. The average price of a pizza in this highly competitive market is $10. The shop can hire workers at the market wage of $300 per week.
a. What is the marginal product of labor for the second worker?
b. Does the law of diminishing marginal productivity apply in this scenario? If so, at what quantity level does it occur?
c. How many workers will the pizza shop hire?

Question 74

In the long run, a firm's decision about hiring labor is _____ compared to the short run.

A) less responsive
B) equally responsive
C) more responsive
D) unresponsive

Question 75

The marginal revenue product of labor is equal to:

A) MP_K × MR.
B) MP_L × MR.
C) MP_L × W.
D) MP_K × R.

Question 76

Table (Baristas Labor I). Suppose that the wage rate for baristas is $9 per hour and the average price of cappuccino is $3.
a. Find the profit-maximizing quantity of labor.
b. What would be the new profit-maximizing quantity of labor if the market wage increased $12 per hour, ceteris paribus?
c. What would be the new profit-maximizing quantity of labor if the market wage remained at $9 per hour but the price of cappuccino increased to $4.50, ceteris paribus?
d. What would be the new profit-maximizing quantity of labor if the market wage remained at $9 per hour and the price of cappuccino at $3 but baristas all became 10% more productive because of an improvement in the way cappuccinos are made?

Question 77

(Figure: Labor Union Wages I) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize total wages, the equilibrium wage will be:

A) $75.
B) $63.
C) $100.
D) $130.

Question 78

Which of the following may affect a person's willingness to work?

A) age
B) health
C) family circumstances
D) All of the answers are correct.

Question 79

Suppose the demand faced by a labor monopsony is W = 20,000 - 50l, where W is the annual wage and l is the number of workers hired. The labor supply is given by W = 5,000 + 75l. How many workers will the firm hire?

A) 50
B) 75
C) 60
D) 80

Question 80

(Figure: Marginal Productivity of Apple Pickers I) There is a decrease in total factor productivity. Which graph best illustrates this change?

A) (a)
B) (b)
C) (c)
D) (d)