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Deck 11: Markets for Factors of Production
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the marginal product of labor when the third worker is hired?
A) 36
B) 72
C) 18
D) 9
Refer to the scenario above.What is the marginal product of labor when the third worker is hired?
A) 36
B) 72
C) 18
D) 9
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.If the wage rate in this market is equal to $6,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
Refer to the scenario above.If the wage rate in this market is equal to $6,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.If the wage rate in this market is equal to $9,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
Refer to the scenario above.If the wage rate in this market is equal to $9,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
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The following figure shows the production function for a perfectly competitive firm.
Refer to the figure above.The slope of the production function between ________ and ________ indicates negative returns to labor.
A) Point B; Point C
B) Point A; Point C
C) Point A; Point B
D) the origin; Point A
Refer to the figure above.The slope of the production function between ________ and ________ indicates negative returns to labor.
A) Point B; Point C
B) Point A; Point C
C) Point A; Point B
D) the origin; Point A
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the value of the value of marginal product of labor when the third worker is hired?
A) $36
B) $72
C) $18
D) $9
Refer to the scenario above.What is the value of the value of marginal product of labor when the third worker is hired?
A) $36
B) $72
C) $18
D) $9
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.If the wage rate in this market is equal to $18,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
Refer to the scenario above.If the wage rate in this market is equal to $18,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the marginal product of labor when the second worker is hired?
A) 27
B) 56
C) 12
D) 24
Refer to the scenario above.What is the marginal product of labor when the second worker is hired?
A) 27
B) 56
C) 12
D) 24
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.The marginal product of labor for this firm is ________.
A) increasing
B) decreasing
C) constant
D) at first increasing and then constant
Refer to the scenario above.The marginal product of labor for this firm is ________.
A) increasing
B) decreasing
C) constant
D) at first increasing and then constant
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The following figure shows the production function for a perfectly competitive firm.
Refer to the figure above.Which of the following statements is true?
A) The slope of the production function between Points B and C indicates positive returns to labor.
B) The slope of the production function between Points A and B indicates increasing returns to labor.
C) The slope of the production function between Points A and B indicates decreasing returns to labor.
D) The slope of the production function between Points A and C indicates increasing returns to labor.
Refer to the figure above.Which of the following statements is true?
A) The slope of the production function between Points B and C indicates positive returns to labor.
B) The slope of the production function between Points A and B indicates increasing returns to labor.
C) The slope of the production function between Points A and B indicates decreasing returns to labor.
D) The slope of the production function between Points A and C indicates increasing returns to labor.
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Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the value of the marginal product of labor when the first worker is hired?
A) $15
B) $30
C) $18
D) $9
Refer to the scenario above.What is the value of the marginal product of labor when the first worker is hired?
A) $15
B) $30
C) $18
D) $9
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The following figure depicts the labor markets of two different firms.
Refer to the figure above.If firm B wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
Refer to the figure above.If firm B wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
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The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $30 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $30 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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The following figure depicts the labor markets of two different firms.
Refer to the figure above.If firm A wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
Refer to the figure above.If firm A wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
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The following figure depicts the labor markets of two different firms.
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If firm A hires 8 employees at a wage of $12 and firm B hires 2 employees at a wage of $18,what is the ratio PA/PB?
A) 3
B) 2
C)
D)
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If firm A hires 8 employees at a wage of $12 and firm B hires 2 employees at a wage of $18,what is the ratio PA/PB?
A) 3
B) 2
C)
D)
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The following figure depicts the labor markets of two different firms.
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If both firms hire 4 employees at a wage of $8,what is the ratio PA/PB?
A) 2
B)
C)
D)
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If both firms hire 4 employees at a wage of $8,what is the ratio PA/PB?
A) 2
B)
C)
D)
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The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $10 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $10 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.Now suppose that new apple-picking baskets increase the productivity of apple pickers,as noted in the following table.The new profit-maximizing number of workers to hire is ________.
A) 5
B) 10
C) 12
D) 14
Refer to the scenario above.Now suppose that new apple-picking baskets increase the productivity of apple pickers,as noted in the following table.The new profit-maximizing number of workers to hire is ________.
A) 5
B) 10
C) 12
D) 14
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The following figure shows the value of the marginal product of labor curve for a perfectly competitive firm.
Refer to the figure above.If the profit-maximizing quantity of labor hired by the firm is 40 hours,the market wage rate must be ________.
A) $2 per hour
B) $5 per hour
C) $7 per hour
D) $8 per hour
Refer to the figure above.If the profit-maximizing quantity of labor hired by the firm is 40 hours,the market wage rate must be ________.
A) $2 per hour
B) $5 per hour
C) $7 per hour
D) $8 per hour
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Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.Now suppose that apple pickers have the same productivity as they did initially,but the price of apples rises to $1.25 per pound.The profit-maximizing number of workers the orchard should hire is ________.
A) 5
B) 10
C) 11
D) 14
Refer to the scenario above.Now suppose that apple pickers have the same productivity as they did initially,but the price of apples rises to $1.25 per pound.The profit-maximizing number of workers the orchard should hire is ________.
A) 5
B) 10
C) 11
D) 14
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Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.In the table above,the marginal product of labor for the tenth worker is ________.
A) 910
B) 91
C) 50
D) 4.64
Refer to the scenario above.In the table above,the marginal product of labor for the tenth worker is ________.
A) 910
B) 91
C) 50
D) 4.64
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Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.What is the value of the marginal product of labor for hiring the tenth worker?
A) $910
B) $91
C) $50
D) $0
Refer to the scenario above.What is the value of the marginal product of labor for hiring the tenth worker?
A) $910
B) $91
C) $50
D) $0
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The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If it is optimal for the firm to hire 2 workers in the short run,then the wage per worker must be ________.
A) five times the price of output per unit
B) three times the price of output per unit
C) twice the price of output per unit
D) equal to the price of output per unit
Refer to the figure above.If it is optimal for the firm to hire 2 workers in the short run,then the wage per worker must be ________.
A) five times the price of output per unit
B) three times the price of output per unit
C) twice the price of output per unit
D) equal to the price of output per unit
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The following figure shows the value of the marginal product of labor curve for a perfectly competitive firm.
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $4 per hour?
A) 10 hours
B) 20 hours
C) 50 hours
D) 70 hours
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $4 per hour?
A) 10 hours
B) 20 hours
C) 50 hours
D) 70 hours
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The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $9.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $9.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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The following figure shows the value of the marginal product of labor curve for a perfectly competitive firm.
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $6 per hour?
A) 10 hours
B) 30 hours
C) 60 hours
D) 90 hours
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $6 per hour?
A) 10 hours
B) 30 hours
C) 60 hours
D) 90 hours
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Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.What is the profit-maximizing number of workers the orchard should hire?
A) 5
B) 10
C) 12
D) 14
Refer to the scenario above.What is the profit-maximizing number of workers the orchard should hire?
A) 5
B) 10
C) 12
D) 14
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The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $11.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $11.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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Suppose the market for labor consists of only three workers: Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Refer to the table above.What is the market supply of labor per week when the wage rate is $50?
A) 12 hours
B) 30 hours
C) 50 hours
D) 71 hours
Refer to the table above.What is the market supply of labor per week when the wage rate is $50?
A) 12 hours
B) 30 hours
C) 50 hours
D) 71 hours
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The following figure depicts an individual's supply of labor.
Refer to the figure above.The income effect dominates the substitution effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
Refer to the figure above.The income effect dominates the substitution effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
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Consider a printing press that operates in a perfectly competitive market.Also,assume that the market for printing press workers is competitive.The following table shows the employment levels and the daily output of notebooks manufactured by the printing press.
a)Calculate the marginal product of the employees.If the price at which a notebook is sold is $2,calculate the value of the marginal product of the employees.
b)If the market wage rate is $80,how many employees should the firm hire?
c)If the market wage rate is $46,how many employees should the firm hire?
a)Calculate the marginal product of the employees.If the price at which a notebook is sold is $2,calculate the value of the marginal product of the employees.
b)If the market wage rate is $80,how many employees should the firm hire?
c)If the market wage rate is $46,how many employees should the firm hire?
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Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
Refer to the scenario above.If the hourly wage is $1.00,how many hours would Paul choose to work? How many buttons would he buy?
A) 6 hours; 6 buttons
B) 3 hours; 3 buttons
C) 2 hours; 2 buttons
D) 0 hours; 0 buttons
Refer to the scenario above.If the hourly wage is $1.00,how many hours would Paul choose to work? How many buttons would he buy?
A) 6 hours; 6 buttons
B) 3 hours; 3 buttons
C) 2 hours; 2 buttons
D) 0 hours; 0 buttons
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The following figure depicts an individual's supply of labor.
Refer to the figure above.The substitution effect dominates the income effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
Refer to the figure above.The substitution effect dominates the income effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
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Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
Refer to the scenario above.If the hourly wage is $1.60,what is the maximum possible number of buttons Paul can afford?
A) 16 buttons
B) 12 buttons
C) 8 buttons
D) 4 buttons
Refer to the scenario above.If the hourly wage is $1.60,what is the maximum possible number of buttons Paul can afford?
A) 16 buttons
B) 12 buttons
C) 8 buttons
D) 4 buttons
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Suppose the market for labor consists of only three workers: Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Refer to the table above.What is the market supply of labor per week when the wage rate is $75?
A) 28 hours
B) 50 hours
C) 71 hours
D) 94 hours
Refer to the table above.What is the market supply of labor per week when the wage rate is $75?
A) 28 hours
B) 50 hours
C) 71 hours
D) 94 hours
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Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
Refer to the scenario above.If the hourly wage is $1.00,what is the maximum possible number of buttons Paul can afford?
A) 8 buttons
B) 6 buttons
C) 4 buttons
D) 2 buttons
Refer to the scenario above.If the hourly wage is $1.00,what is the maximum possible number of buttons Paul can afford?
A) 8 buttons
B) 6 buttons
C) 4 buttons
D) 2 buttons
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Suppose the market for labor consists of only three workers: Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Refer to the table above.If the market supply of labor per week when the wage rate is $100 is 125 hours,the labor supplied by Jim per month at the market wage rate is ________.
A) 12 hours
B) 30 hours
C) 50 hours
D) 75 hours
Refer to the table above.If the market supply of labor per week when the wage rate is $100 is 125 hours,the labor supplied by Jim per month at the market wage rate is ________.
A) 12 hours
B) 30 hours
C) 50 hours
D) 75 hours
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The table below lists salary and "productivity" data for two Major League Baseball pitchers,Sandy Koufax and Clayton Kershaw.The players are not contemporaries; their careers were roughly a half-century apart.Nonetheless,each pitcher is/was considered the dominant pitcher of his era.Comparing productivity for Koufax's 1963 season to Kershaw's 2016 season,Koufax was more productive (in terms of wins,complete games,innings pitched and strikeouts),yet Kershaw's salary was 126 times Koufax's salary,adjusting for inflation.What is the most likely explanation for the salary differential between Koufax and Kershaw?
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Deck 11: Markets for Factors of Production
1
Which of the following is true of the market for labor?
A) Workers are the suppliers of labor.
B) Workers are the demanders of labor.
C) The labor supply curve is perfectly elastic.
D) The labor demand curve is perfectly elastic.
A) Workers are the suppliers of labor.
B) Workers are the demanders of labor.
C) The labor supply curve is perfectly elastic.
D) The labor demand curve is perfectly elastic.
Workers are the suppliers of labor.
2
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the marginal product of labor when the third worker is hired?
A) 36
B) 72
C) 18
D) 9
Refer to the scenario above.What is the marginal product of labor when the third worker is hired?
A) 36
B) 72
C) 18
D) 9
9
3
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.If the wage rate in this market is equal to $6,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
Refer to the scenario above.If the wage rate in this market is equal to $6,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
5
4
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.If the wage rate in this market is equal to $9,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
Refer to the scenario above.If the wage rate in this market is equal to $9,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
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5
The following figure shows the production function for a perfectly competitive firm.
Refer to the figure above.The slope of the production function between ________ and ________ indicates negative returns to labor.
A) Point B; Point C
B) Point A; Point C
C) Point A; Point B
D) the origin; Point A
Refer to the figure above.The slope of the production function between ________ and ________ indicates negative returns to labor.
A) Point B; Point C
B) Point A; Point C
C) Point A; Point B
D) the origin; Point A
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6
Which of the following statements is true?
A) Firms are the demanders in the market for labor as well as in the market for consumer goods.
B) Firms are the suppliers in the market for labor as well as in the market for consumer goods.
C) Firms are the demanders in the market for labor, whereas they are the suppliers in the market for consumer goods.
D) Firms are the suppliers in the market for labor, whereas they are the demanders in the market for consumer goods.
A) Firms are the demanders in the market for labor as well as in the market for consumer goods.
B) Firms are the suppliers in the market for labor as well as in the market for consumer goods.
C) Firms are the demanders in the market for labor, whereas they are the suppliers in the market for consumer goods.
D) Firms are the suppliers in the market for labor, whereas they are the demanders in the market for consumer goods.
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7
The value of the marginal product of labor for a firm is the ________.
A) firm's product price multiplied by the marginal product of labor
B) wage facing the firm multiplied by the marginal product of labor
C) firm's average total cost multiplied by the marginal product of labor
D) firm's product price multiplied by its marginal revenue
A) firm's product price multiplied by the marginal product of labor
B) wage facing the firm multiplied by the marginal product of labor
C) firm's average total cost multiplied by the marginal product of labor
D) firm's product price multiplied by its marginal revenue
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8
Which of the following correctly identifies the difference between the demand for factors of production and the demand for final goods?
A) The demand for factors of production is fixed over time, whereas the demand for final goods changes with changes in tastes and preferences.
B) The demand for final goods is fixed over time, whereas the demand for factors of production changes with changes in tastes and preferences.
C) The demand for final goods is derived from the demand for labor, whereas the demand for factors of production is independent of the demand for final goods.
D) The demand for factors of production is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for factors of production.
A) The demand for factors of production is fixed over time, whereas the demand for final goods changes with changes in tastes and preferences.
B) The demand for final goods is fixed over time, whereas the demand for factors of production changes with changes in tastes and preferences.
C) The demand for final goods is derived from the demand for labor, whereas the demand for factors of production is independent of the demand for final goods.
D) The demand for factors of production is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for factors of production.
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9
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the value of the value of marginal product of labor when the third worker is hired?
A) $36
B) $72
C) $18
D) $9
Refer to the scenario above.What is the value of the value of marginal product of labor when the third worker is hired?
A) $36
B) $72
C) $18
D) $9
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10
What is a factor of production? Why are the factors of production said to have a derived demand?
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11
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.If the wage rate in this market is equal to $18,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
Refer to the scenario above.If the wage rate in this market is equal to $18,this firm will hire ________ workers.
A) 2
B) 3
C) 4
D) 5
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12
Labor demand is described as a derived demand because ________.
A) it is derived from the demand for capital equipment
B) it is derived from the demand for land
C) perfectly competitive firms determine what price to charge for their product and then determine how much labor to hire
D) perfectly competitive firms determine how much output to produce and then determine how much labor to hire
A) it is derived from the demand for capital equipment
B) it is derived from the demand for land
C) perfectly competitive firms determine what price to charge for their product and then determine how much labor to hire
D) perfectly competitive firms determine how much output to produce and then determine how much labor to hire
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13
A factor of production refers to any good or service that is ________.
A) produced by the government
B) produced in a competitive market
C) used to produce other goods and services
D) produced using scarce economic resources
A) produced by the government
B) produced in a competitive market
C) used to produce other goods and services
D) produced using scarce economic resources
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14
The value of the marginal product of labor is the ________.
A) firm's marginal cost schedule
B) firm's marginal revenue schedule
C) firm's labor demand schedule
D) labor supply schedule facing the firm
A) firm's marginal cost schedule
B) firm's marginal revenue schedule
C) firm's labor demand schedule
D) labor supply schedule facing the firm
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15
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the marginal product of labor when the second worker is hired?
A) 27
B) 56
C) 12
D) 24
Refer to the scenario above.What is the marginal product of labor when the second worker is hired?
A) 27
B) 56
C) 12
D) 24
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16
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.The marginal product of labor for this firm is ________.
A) increasing
B) decreasing
C) constant
D) at first increasing and then constant
Refer to the scenario above.The marginal product of labor for this firm is ________.
A) increasing
B) decreasing
C) constant
D) at first increasing and then constant
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17
Which of the following is NOT an example of a factor of production?
A) Coal
B) Tractors
C) Cigarettes
D) College graduates
A) Coal
B) Tractors
C) Cigarettes
D) College graduates
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18
Which of the following is an example of a factor of production?
A) Land
B) Cell phones
C) Canned soup
D) Television sets
A) Land
B) Cell phones
C) Canned soup
D) Television sets
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19
The following figure shows the production function for a perfectly competitive firm.
Refer to the figure above.Which of the following statements is true?
A) The slope of the production function between Points B and C indicates positive returns to labor.
B) The slope of the production function between Points A and B indicates increasing returns to labor.
C) The slope of the production function between Points A and B indicates decreasing returns to labor.
D) The slope of the production function between Points A and C indicates increasing returns to labor.
Refer to the figure above.Which of the following statements is true?
A) The slope of the production function between Points B and C indicates positive returns to labor.
B) The slope of the production function between Points A and B indicates increasing returns to labor.
C) The slope of the production function between Points A and B indicates decreasing returns to labor.
D) The slope of the production function between Points A and C indicates increasing returns to labor.
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20
Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
Refer to the scenario above.What is the value of the marginal product of labor when the first worker is hired?
A) $15
B) $30
C) $18
D) $9
Refer to the scenario above.What is the value of the marginal product of labor when the first worker is hired?
A) $15
B) $30
C) $18
D) $9
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21
Given that the market wage rate is $50 and both the labor and the goods market are perfectly competitive,a profit-maximizing firm should hire an additional worker if ________.
A) the marginal product of the worker is 50 units
B) the value of the marginal product of the worker is at least $50
C) the marginal product of the worker is less than 50 units
D) the value of the marginal product of the worker is less than $50
A) the marginal product of the worker is 50 units
B) the value of the marginal product of the worker is at least $50
C) the marginal product of the worker is less than 50 units
D) the value of the marginal product of the worker is less than $50
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22
The following figure depicts the labor markets of two different firms.
Refer to the figure above.If firm B wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
Refer to the figure above.If firm B wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
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23
The negative slope of the labor demand curve can be attributed to ________.
A) Moore's Law
B) the Law of Accelerating Returns
C) the Law of Diminishing Marginal Utility
D) the Law of Diminishing Marginal Returns
A) Moore's Law
B) the Law of Accelerating Returns
C) the Law of Diminishing Marginal Utility
D) the Law of Diminishing Marginal Returns
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24
The value of the marginal product of labor is the ________.
A) value of the output produced by all the workers in a firm
B) contribution of an additional unit of labor to a firm's revenue
C) extra output that is produced by hiring an additional unit of labor
D) amount of output produced by the first unit of labor hired by a firm
A) value of the output produced by all the workers in a firm
B) contribution of an additional unit of labor to a firm's revenue
C) extra output that is produced by hiring an additional unit of labor
D) amount of output produced by the first unit of labor hired by a firm
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25
If the market for labor is perfectly competitive,the wage rate for labor equals the ________.
A) average cost of hiring labor
B) value of the marginal product of labor
C) marginal product of the last unit of the labor employed
D) price of the product that the firm produces using labor
A) average cost of hiring labor
B) value of the marginal product of labor
C) marginal product of the last unit of the labor employed
D) price of the product that the firm produces using labor
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26
If the marginal product of a worker is 10 units and each unit of the good is sold for $5,the value of the marginal product of the worker is ________.
A) $2
B) $5
C) $10
D) $50
A) $2
B) $5
C) $10
D) $50
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27
The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $30 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $30 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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28
The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is that the value of the ________.
A) marginal product of the worker should be equal to or greater than the wage rate
B) marginal product of the worker should be equal to or less than the wage rate
C) average product of the worker being hired should be equal to the wage rate
D) average product of the worker being hired should be less than the wage rate
A) marginal product of the worker should be equal to or greater than the wage rate
B) marginal product of the worker should be equal to or less than the wage rate
C) average product of the worker being hired should be equal to the wage rate
D) average product of the worker being hired should be less than the wage rate
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29
Suppose the market wage facing a firm in the perfectly competitive candle-making industry is $20 per hour,and the firm sells its candles for $2 each.Given this information,the firm should hire workers until the marginal product of labor equals ________.
A) 10 candles per hour
B) 18 candles per hour
C) 20 candles per hour
D) 22 candles per hour
A) 10 candles per hour
B) 18 candles per hour
C) 20 candles per hour
D) 22 candles per hour
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30
The following figure depicts the labor markets of two different firms.
Refer to the figure above.If firm A wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
Refer to the figure above.If firm A wants to hire 6 employees and pay a wage of $6,what is the market price of its output?
A) $ 0.5
B) $ 1
C) $ 2
D) $ 3
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31
Suppose a firm sells its product in a competitive market.If the ongoing wage rate in a competitive labor market is $30 and the market price of a firm's product is $2,then which of the following statements is true?
A) The firm should continue to hire workers until the marginal product of the last worker hired is 2 units.
B) The firm should continue to hire workers until the marginal product of the last worker hired is 5 units.
C) The firm should continue to hire workers until the marginal product of the last worker hired is 10 units.
D) The firm should continue to hire workers until the marginal product of the last worker hired is 15 units.
A) The firm should continue to hire workers until the marginal product of the last worker hired is 2 units.
B) The firm should continue to hire workers until the marginal product of the last worker hired is 5 units.
C) The firm should continue to hire workers until the marginal product of the last worker hired is 10 units.
D) The firm should continue to hire workers until the marginal product of the last worker hired is 15 units.
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32
The value of the marginal product of labor is given by ________.
A) the ratio of the marginal product of labor to the wage rate
B) the product of the marginal product of labor and the wage rate
C) the ratio of the marginal product of labor to the price of the final good produced
D) the product of the marginal product of labor and the price of the final good produced
A) the ratio of the marginal product of labor to the wage rate
B) the product of the marginal product of labor and the wage rate
C) the ratio of the marginal product of labor to the price of the final good produced
D) the product of the marginal product of labor and the price of the final good produced
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33
The firm's value of marginal product of labor schedule slopes downward due to declining ________.
A) marginal revenue
B) marginal cost
C) product price
D) marginal product of labor
A) marginal revenue
B) marginal cost
C) product price
D) marginal product of labor
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34
When a firm hires 10 units of labor,20 pens are produced.When it hires another unit of labor,the total output increases to 23 pens.If the price of one pen is $2,the value of the marginal product of the eleventh unit of labor is ________.
A) $1.50
B) $2
C) $4
D) $6
A) $1.50
B) $2
C) $4
D) $6
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35
The profit-maximizing rule for a competitive firm is to hire labor until ________.
A) Price = Wage
B) Marginal product of labor = Wage
C) Value of marginal product of labor = Wage
D) Marginal revenue = Wage
A) Price = Wage
B) Marginal product of labor = Wage
C) Value of marginal product of labor = Wage
D) Marginal revenue = Wage
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36
The following figure depicts the labor markets of two different firms.
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If firm A hires 8 employees at a wage of $12 and firm B hires 2 employees at a wage of $18,what is the ratio PA/PB?
A) 3
B) 2
C)
D)
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If firm A hires 8 employees at a wage of $12 and firm B hires 2 employees at a wage of $18,what is the ratio PA/PB?
A) 3
B) 2
C)
D)
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37
The following figure depicts the labor markets of two different firms.
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If both firms hire 4 employees at a wage of $8,what is the ratio PA/PB?
A) 2
B)
C)
D)
Refer to the figure above.Let the price of A's output be PA and the price of B's output be PB.If both firms hire 4 employees at a wage of $8,what is the ratio PA/PB?
A) 2
B)
C)
D)
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38
If the value of the marginal product of a worker is $40 and the marginal product of the worker is 8 units,the market price of the good he produces is ________.
A) $2
B) $5
C) $8
D) $10
A) $2
B) $5
C) $8
D) $10
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39
If the value of the marginal product of a worker is $20 and the market price of the good she produces is $5,her marginal product is ________.
A) 4 units
B) 10 units
C) 25 units
D) 100 units
A) 4 units
B) 10 units
C) 25 units
D) 100 units
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40
The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $10 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $5.00 per unit and the wage is $10 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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41
Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.Now suppose that new apple-picking baskets increase the productivity of apple pickers,as noted in the following table.The new profit-maximizing number of workers to hire is ________.
A) 5
B) 10
C) 12
D) 14
Refer to the scenario above.Now suppose that new apple-picking baskets increase the productivity of apple pickers,as noted in the following table.The new profit-maximizing number of workers to hire is ________.
A) 5
B) 10
C) 12
D) 14
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42
The following figure shows the value of the marginal product of labor curve for a perfectly competitive firm.
Refer to the figure above.If the profit-maximizing quantity of labor hired by the firm is 40 hours,the market wage rate must be ________.
A) $2 per hour
B) $5 per hour
C) $7 per hour
D) $8 per hour
Refer to the figure above.If the profit-maximizing quantity of labor hired by the firm is 40 hours,the market wage rate must be ________.
A) $2 per hour
B) $5 per hour
C) $7 per hour
D) $8 per hour
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43
Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.Now suppose that apple pickers have the same productivity as they did initially,but the price of apples rises to $1.25 per pound.The profit-maximizing number of workers the orchard should hire is ________.
A) 5
B) 10
C) 11
D) 14
Refer to the scenario above.Now suppose that apple pickers have the same productivity as they did initially,but the price of apples rises to $1.25 per pound.The profit-maximizing number of workers the orchard should hire is ________.
A) 5
B) 10
C) 11
D) 14
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44
Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.In the table above,the marginal product of labor for the tenth worker is ________.
A) 910
B) 91
C) 50
D) 4.64
Refer to the scenario above.In the table above,the marginal product of labor for the tenth worker is ________.
A) 910
B) 91
C) 50
D) 4.64
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45
Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.What is the value of the marginal product of labor for hiring the tenth worker?
A) $910
B) $91
C) $50
D) $0
Refer to the scenario above.What is the value of the marginal product of labor for hiring the tenth worker?
A) $910
B) $91
C) $50
D) $0
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46
Assume that both the goods and the labor market are perfectly competitive.If at equilibrium,the wage rate is $20 per hour and the marginal product of labor is 4 units,the firm's marginal cost must be equal to ________.
A) $5
B) $24
C) $40
D) $80
A) $5
B) $24
C) $40
D) $80
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47
Consider a firm that is competitive in both the product and the resource markets.The firm incurs a marginal cost of $5.If the marginal product of an additional worker is 20 units,what is the maximum wage that should be offered to the worker?
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48
Assume that both the goods and the labor market are perfectly competitive.If at equilibrium,the marginal cost faced by a firm is $3 and the market wage rate is $6,the marginal product of the last unit of labor hired by the firm must be ________.
A) 0.5 units
B) 2 units
C) 9 units
D) 18 units
A) 0.5 units
B) 2 units
C) 9 units
D) 18 units
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49
Assume that a perfectly competitive firm hires workers from a perfectly competitive market for labor.The marginal product of a worker is 10 units per day.If the good that the worker produces is sold for $5,what is the maximum daily wage that should be offered to the worker?
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50
Assume that both the goods and the labor market are perfectly competitive.If at equilibrium,the marginal cost faced by a firm is $6 and the marginal product of the last unit of labor hired by the firm is 2 units,the market wage rate must be ________.
A) $3
B) $6
C) $12
D) $18
A) $3
B) $6
C) $12
D) $18
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51
The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If it is optimal for the firm to hire 2 workers in the short run,then the wage per worker must be ________.
A) five times the price of output per unit
B) three times the price of output per unit
C) twice the price of output per unit
D) equal to the price of output per unit
Refer to the figure above.If it is optimal for the firm to hire 2 workers in the short run,then the wage per worker must be ________.
A) five times the price of output per unit
B) three times the price of output per unit
C) twice the price of output per unit
D) equal to the price of output per unit
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52
The following figure shows the value of the marginal product of labor curve for a perfectly competitive firm.
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $4 per hour?
A) 10 hours
B) 20 hours
C) 50 hours
D) 70 hours
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $4 per hour?
A) 10 hours
B) 20 hours
C) 50 hours
D) 70 hours
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53
If both the goods and the labor market are perfectly competitive,a firm hires labor up to the point where the value of the marginal product of labor equals the wage rate and produces at a point where price is ________.
A) equal to average cost
B) equal to marginal cost
C) less than marginal cost
D) higher than marginal cost
A) equal to average cost
B) equal to marginal cost
C) less than marginal cost
D) higher than marginal cost
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54
In 1986,Roger Clemens pitched 254 innings and finished with a 24-4 record during the regular season.He struck out 238 batters,recorded an earned run average of 2.148 and a WHIP (walks plus hits per inning pitched)of 0.969.He earned $340,000,which converts to $644,998 in 2007 dollars.In 2007,Roger Clemens pitched 99 innings and finished with a record of 6-6 during the regular season.He recorded 68 strikeouts,an ERA of 4.18 and a WHIP of 1.33.He was paid $17,690,413 for the 2007 season.Which of the following is the most likely explanation for the increase in Clemens' salary from 1986 to 2007?
A) The marginal revenue associated with an additional win in baseball increased.
B) The marginal revenue associated with an additional win in baseball decreased.
C) The quantity demanded of baseball players decreased.
D) Clemens' marginal product of labor increased.
A) The marginal revenue associated with an additional win in baseball increased.
B) The marginal revenue associated with an additional win in baseball decreased.
C) The quantity demanded of baseball players decreased.
D) Clemens' marginal product of labor increased.
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55
The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $9.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $9.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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56
The following figure shows the value of the marginal product of labor curve for a perfectly competitive firm.
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $6 per hour?
A) 10 hours
B) 30 hours
C) 60 hours
D) 90 hours
Refer to the figure above.What is the equilibrium quantity of labor hired by the firm when the wage rate is $6 per hour?
A) 10 hours
B) 30 hours
C) 60 hours
D) 90 hours
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57
In Major League Baseball,a player's WAR (wins above replacement)is a rough measure of the player's marginal product of labor.Specifically,WAR measures how many additional wins a player's performance would register for the team above the performance of the average player at his position.For 2015,center fielder Mike Trout of the Los Angeles Angels had a war of 7.55.(Assume that Trout's performance in 2016 is expected to be exactly the same as in 2015.)Suppose an additional win is worth $1.7 million to the Angels in 2016.What is Trout's value of marginal product of labor in 2016? Explain your answer.
A) $1.7 million
B) $7.55 million
C) $12.84 million
D) $17 million
A) $1.7 million
B) $7.55 million
C) $12.84 million
D) $17 million
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58
Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
Refer to the scenario above.What is the profit-maximizing number of workers the orchard should hire?
A) 5
B) 10
C) 12
D) 14
Refer to the scenario above.What is the profit-maximizing number of workers the orchard should hire?
A) 5
B) 10
C) 12
D) 14
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59
The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $11.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $11.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
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60
The demand for labor curve is derived from the ________.
A) total product of labor
B) supply curve of labor
C) average product of labor
D) value of the marginal product of labor
A) total product of labor
B) supply curve of labor
C) average product of labor
D) value of the marginal product of labor
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61
Suppose the market for labor consists of only three workers: Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Refer to the table above.What is the market supply of labor per week when the wage rate is $50?
A) 12 hours
B) 30 hours
C) 50 hours
D) 71 hours
Refer to the table above.What is the market supply of labor per week when the wage rate is $50?
A) 12 hours
B) 30 hours
C) 50 hours
D) 71 hours
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62
Although the marginal productivity of hair stylists has remained roughly constant since the 1960s,the real wages (wages adjusted for inflation)of hair stylists have increased significantly.Assume that the labor market for hair stylists and the market for hair-styling services are perfectly competitive.What best explains this finding? Explain your answer.
A) The marginal cost of hair styling services has decreased.
B) The supply of hair styling services has increased.
C) The demand for hair styling services has increased.
D) None of the above
A) The marginal cost of hair styling services has decreased.
B) The supply of hair styling services has increased.
C) The demand for hair styling services has increased.
D) None of the above
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63
The following figure depicts an individual's supply of labor.
Refer to the figure above.The income effect dominates the substitution effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
Refer to the figure above.The income effect dominates the substitution effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
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64
If workers are optimizing their total benefit,they will consume leisure until their ________.
A) marginal product of labor equals their wage
B) value of marginal product of labor equals their wage
C) marginal cost of leisure equals their wage
D) marginal benefit of leisure equals their wage
A) marginal product of labor equals their wage
B) value of marginal product of labor equals their wage
C) marginal cost of leisure equals their wage
D) marginal benefit of leisure equals their wage
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65
Non-paying activities in economics are referred to as ________.
A) relief
B) leisure
C) free time
D) unemployment
A) relief
B) leisure
C) free time
D) unemployment
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66
Meryl works 10 hours a day in an hourly job that pays $15 per hour.Suppose her wage rate increases to a really high rate of $10,000 per hour.In this case,Meryl will ________.
A) supply more than 10 hours of work, because her wage rate is much higher
B) supply less than 10 hours of work, because she can now afford the time off
C) at first supply more, and then supply less than 10 hours of work
D) both A and B apply at the same time, and Meryl's supply will depend of their relative strengths
A) supply more than 10 hours of work, because her wage rate is much higher
B) supply less than 10 hours of work, because she can now afford the time off
C) at first supply more, and then supply less than 10 hours of work
D) both A and B apply at the same time, and Meryl's supply will depend of their relative strengths
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67
Consider a printing press that operates in a perfectly competitive market.Also,assume that the market for printing press workers is competitive.The following table shows the employment levels and the daily output of notebooks manufactured by the printing press.
a)Calculate the marginal product of the employees.If the price at which a notebook is sold is $2,calculate the value of the marginal product of the employees.
b)If the market wage rate is $80,how many employees should the firm hire?
c)If the market wage rate is $46,how many employees should the firm hire?
a)Calculate the marginal product of the employees.If the price at which a notebook is sold is $2,calculate the value of the marginal product of the employees.
b)If the market wage rate is $80,how many employees should the firm hire?
c)If the market wage rate is $46,how many employees should the firm hire?
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68
Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
Refer to the scenario above.If the hourly wage is $1.00,how many hours would Paul choose to work? How many buttons would he buy?
A) 6 hours; 6 buttons
B) 3 hours; 3 buttons
C) 2 hours; 2 buttons
D) 0 hours; 0 buttons
Refer to the scenario above.If the hourly wage is $1.00,how many hours would Paul choose to work? How many buttons would he buy?
A) 6 hours; 6 buttons
B) 3 hours; 3 buttons
C) 2 hours; 2 buttons
D) 0 hours; 0 buttons
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69
The following figure depicts an individual's supply of labor.
Refer to the figure above.The substitution effect dominates the income effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
Refer to the figure above.The substitution effect dominates the income effect only between ________.
A) the origin and point A
B) the origin and point B
C) the origin and point C
D) point B and point C
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70
The price of non-work activities is ________.
A) zero
B) equal to the opportunity cost of those activities
C) less than the opportunity cost of those activities
D) greater than the opportunity cost of those activities
A) zero
B) equal to the opportunity cost of those activities
C) less than the opportunity cost of those activities
D) greater than the opportunity cost of those activities
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71
Meryl works 10 hours a day in an hourly job that pays $15 per hour.Suppose Meryl's wage rate increases to a really high rate of $10,000 per hour.Your friend argues that Meryl will supply more than 10 hours of work,because her wage rate is much higher.You argue than Meryl will supply less than 10 hours of work,because she can now afford the time off.Your friend is referring to the ________,and you are referring to the ________ of Meryl's wage increase.
A) substitution effect; income effect
B) leisure effect; wage effect
C) income effect; substitution effect
D) wage effect; leisure effect
A) substitution effect; income effect
B) leisure effect; wage effect
C) income effect; substitution effect
D) wage effect; leisure effect
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72
If leisure is a normal good,how will an increase in the wage rate affect an individual's desired quantity supplied of hours worked?
A) It will increase, because the income and substitution effects work in the same direction for normal goods.
B) It will increase, because the opportunity cost of leisure has increased.
C) It may increase or decrease, depending on the relative magnitudes of the income and substitution effects.
D) It will decrease because of the income effect.
A) It will increase, because the income and substitution effects work in the same direction for normal goods.
B) It will increase, because the opportunity cost of leisure has increased.
C) It may increase or decrease, depending on the relative magnitudes of the income and substitution effects.
D) It will decrease because of the income effect.
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73
Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
Refer to the scenario above.If the hourly wage is $1.60,what is the maximum possible number of buttons Paul can afford?
A) 16 buttons
B) 12 buttons
C) 8 buttons
D) 4 buttons
Refer to the scenario above.If the hourly wage is $1.60,what is the maximum possible number of buttons Paul can afford?
A) 16 buttons
B) 12 buttons
C) 8 buttons
D) 4 buttons
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74
The market supply curve of labor in a perfectly competitive labor market ________.
A) is horizontal or perfectly elastic
B) is vertical or perfectly inelastic
C) can be derived by vertically adding the individual supply curves of labor
D) can be derived by horizontally adding the individual supply curves of labor
A) is horizontal or perfectly elastic
B) is vertical or perfectly inelastic
C) can be derived by vertically adding the individual supply curves of labor
D) can be derived by horizontally adding the individual supply curves of labor
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75
Suppose the market for labor consists of only three workers: Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Refer to the table above.What is the market supply of labor per week when the wage rate is $75?
A) 28 hours
B) 50 hours
C) 71 hours
D) 94 hours
Refer to the table above.What is the market supply of labor per week when the wage rate is $75?
A) 28 hours
B) 50 hours
C) 71 hours
D) 94 hours
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76
Suppose you are a worker and the unemployment rate in your labor market is 25 percent.What is the opportunity cost of leisure in this case?
A) The market wage
B) Greater than the market wage
C) Less than the market wage
D) Cannot determine given the information provided
A) The market wage
B) Greater than the market wage
C) Less than the market wage
D) Cannot determine given the information provided
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77
The condition determining the optimal amount of leisure is that the ________.
A) average benefit of leisure should equal zero
B) total benefit of leisure should equal the wage rate
C) average benefit of leisure should equal the wage rate
D) marginal benefit of leisure should equal the wage rate
A) average benefit of leisure should equal zero
B) total benefit of leisure should equal the wage rate
C) average benefit of leisure should equal the wage rate
D) marginal benefit of leisure should equal the wage rate
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78
Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
Refer to the scenario above.If the hourly wage is $1.00,what is the maximum possible number of buttons Paul can afford?
A) 8 buttons
B) 6 buttons
C) 4 buttons
D) 2 buttons
Refer to the scenario above.If the hourly wage is $1.00,what is the maximum possible number of buttons Paul can afford?
A) 8 buttons
B) 6 buttons
C) 4 buttons
D) 2 buttons
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79
Suppose the market for labor consists of only three workers: Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Refer to the table above.If the market supply of labor per week when the wage rate is $100 is 125 hours,the labor supplied by Jim per month at the market wage rate is ________.
A) 12 hours
B) 30 hours
C) 50 hours
D) 75 hours
Refer to the table above.If the market supply of labor per week when the wage rate is $100 is 125 hours,the labor supplied by Jim per month at the market wage rate is ________.
A) 12 hours
B) 30 hours
C) 50 hours
D) 75 hours
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80
The table below lists salary and "productivity" data for two Major League Baseball pitchers,Sandy Koufax and Clayton Kershaw.The players are not contemporaries; their careers were roughly a half-century apart.Nonetheless,each pitcher is/was considered the dominant pitcher of his era.Comparing productivity for Koufax's 1963 season to Kershaw's 2016 season,Koufax was more productive (in terms of wins,complete games,innings pitched and strikeouts),yet Kershaw's salary was 126 times Koufax's salary,adjusting for inflation.What is the most likely explanation for the salary differential between Koufax and Kershaw?
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