Deck 15: The Labor Market: Demand, supply and Outsourcing

Question 1

Derived demand means

A)the labor demand curve will be upward sloping.
B)labor demand is derived from demand for the product it produces.
C)labor demand will shift about in a random fashion.
D)labor demand is determined by the supply of labor.

Answer 1

labor demand is derived from demand for the product it produces.

Question 2

Suppose at the current level of labor used,MRP = $100 and MFC = $150.To maximize profits,the firm should

A)hire more labor.
B)reduce the level of labor.
C)maintain the current level of labor.
D)expand production.

Answer 2

reduce the level of labor.

Question 3

The additional revenue earned from hiring one more worker is known as the

A)marginal physical product of labor.
B)marginal revenue product of labor.
C)marginal factor cost of labor.
D)marginal utility of labor.

Answer 3

marginal revenue product of labor.

Question 4

Marginal revenue product is

A)marginal physical product multiplied by marginal revenue.
B)marginal physical product multiplied by average variable cost of the product.
C)the price of the product.
D)the total revenue from the sale of the product sales.

Question 5

The additional production resulting from hiring one more worker is

A)marginal physical product.
B)marginal cost.
C)marginal production.
D)additional production.

Question 6

A firm's marginal factor cost describes

A)the increase in the firm's total revenue as one more unit of output is sold.
B)the change in total fixed cost that results from hiring one more unit of input.
C)the change in total variable cost that results from the production of an extra unit of output.
D)the change in total cost that results from using one more unit of an input.

Question 7

Suppose at the current level of labor used,MRP = $100 and MFC = $50.To maximize profits,the firm should

A)hire more labor.
B)reduce the level of labor.
C)maintain the current level of labor.
D)shut down.

Question 8

When market wages increase in a perfectly competitive market,then

A)the marginal factor cost increases.
B)the marginal product increases.
C)the marginal factor cost decreases.
D)the marginal product decreases.

Question 9

We assume that when a firm hires additional workers,the marginal physical product of labor will

A)increase because more workers can always get more work done.
B)decrease because the new workers are likely to be less able than the previously hired ones.
C)decrease because each worker now has less capital and other resources to work with.
D)increase because large firms are more efficient.

Question 10

For a perfectly competitive firm,the value of the marginal product of labor falls as more workers are hired because of the diminishing

A)output price.
B)marginal physical product of labor.
C)price of labor.
D)marginal cost of production.

Question 11

If a firm is a perfectly competitive purchaser of factor inputs and the wage rate is $5,the marginal factor cost for labor is

A)greater than $5.
B)less than $5.
C)$5.
D)indeterminate.

Question 12

The change in total output due to the change in one variable input,while holding all other inputs constant,is the

A)marginal revenue product.
B)derived demand for labor.
C)marginal physical product.
D)market demand curve for labor.

Question 13

The contribution to total revenues coming from the next worker hired is

A)marginal product.
B)marginal revenue product.
C)total product.
D)total revenues.

Question 14

The marginal physical product of labor is the

A)total output divided by the number of labor employed.
B)wage that must be paid to labor.
C)value of sales divided by additional labor used.
D)change in output generated by a unit change in labor.

Question 15

The additional cost associated with the hiring of one more unit of labor is known as the

A)marginal physical product of labor.
B)marginal revenue product of labor.
C)marginal factor cost of labor.
D)marginal utility of labor.

Question 16

As more workers are hired,the marginal physical product of labor eventually declines because

A)less efficient workers are hired as the number of workers increases.
B)workers do not work well together when the number of workers increases.
C)the amount of capital each worker has to work with declines as the number of workers increases.
D)of diseconomies of scale.

Question 17

If a firm employs an extra unit of labor,the additional product generated by employing the extra unit of labor is

A)the marginal physical product of labor.
B)the diminished marginal product.
C)the outside edge.
D)total product.

Question 18

The marginal revenue product is

A)the change in total output resulting from a one-unit change in variable output.
B)the change in marginal output resulting from a one-unit change in variable input.
C)the change in total revenue resulting from a one-unit change in variable input.
D)the change in marginal revenue resulting from a one-unit change in variable input.

Question 19

Holding other things constant,an increase in the use of capital in production would

A)increase the marginal productivity of labor.
B)decrease,but not proportionately,the marginal productivity of labor.
C)not change the marginal productivity of labor.
D)decrease proportionately the marginal productivity of labor.

Question 20

Suppose at the current level of labor used,MRP = $100 and MFC = $100.To maximize profits,the firm should

A)hire more labor.
B)reduce the level of labor.
C)maintain the current level of labor.
D)shut down.

Question 21

The marginal revenue product of labor is

A)the marginal physical product multiplied by marginal revenue.
B)the marginal revenue of output multiplied by the price of the input.
C)total sales divided by total labor employed.
D)total labor employed divided by total sales.

Question 22

The market demand curve for labor

A)slopes downward.
B)slopes upward.
C)is vertical at the existing supply of labor.
D)is horizontal at the going wage rate.

Question 23

When MFC > MRP,a firm in a competitive market will

A)stop hiring.
B)hire more workers.
C)earn additional profits.
D)layoff workers.

Question 24

A profit-maximizing firm in a competitive market will continue to hire more workers when

A)the marginal factor cost exceeds the marginal revenue product of the additional workers.
B)the marginal factor cost equals the marginal revenue product of the additional workers.
C)the marginal factor cost is less than the marginal revenue product of the additional workers.
D)the marginal factor cost is less than zero.

Question 25

When MFC = MRP,a firm in a competitive market will

A)stop hiring.
B)hire more workers.
C)earn additional profits.
D)layoff workers.

Question 26

When the marginal productivity of labor decreases,the demand curve for labor in a perfectly competitive market

A)does not change.
B)becomes flatter.
C)shifts to the right.
D)shifts to the left.

Question 27

The marginal revenue product curve shifts when

A)wages fall.
B)there is a change in the product price workers are producing.
C)wages rise.
D)the wages paid exceed the price.

Question 28

When the price of a product decreases,the marginal revenue product curve in a perfectly competitive market

A)does not change.
B)becomes flatter.
C)shifts to the right.
D)shifts to the left.

Question 29

When increased demand raises the price of the product,the

A)marginal revenue product will also increase.
B)marginal revenue product will fall.
C)marginal revenue product will remain unchanged.
D)sales will fall.

Question 30

The firm's demand curve for labor is

A)the marginal revenue product curve for labor.
B)the demand curve for the good produced divided by the price of the good.
C)the marginal physical product curve for labor divided by the price of the good.
D)the marginal physical product curve for labor multiplied by the price of labor.

Question 31

Marginal factor cost is

A)the change in the value of output from using an additional unit of the factor.
B)the cost of an additional unit of output.
C)the total value of factor cost divided by the one cost that is being held constant.
D)the cost of using an additional unit of an input.

Question 32

A firm will not hire additional workers once

A)it earns accounting profits.
B)the additional cost of a worker equals the additional revenue from the worker.
C)total product is rising.
D)the company reaches its breakeven output level.

Question 33

When 4 units of labor are employed,total product is 6 units; when 5 units of labor are employed,total product is 9 units of output.If the price of output is $5 per unit,what is the marginal revenue product of the 5th unit of labor?

A)$3
B)$5
C)$15
D)$45

Question 34

When MFC < MRP,a firm in a competitive market will

A)stop hiring.
B)hire more workers.
C)earn fewer profits.
D)layoff workers.

Question 35

The demand for labor is

A)derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money.
B)derived from the demand for the final product being produced.
C)derived from a utility maximizing process similar to that used to derive the demand curve for goods and services.
D)totally unrelated to the demand curve for the final product.

Question 36

A firm's marginal revenue product of labor curve is also

A)its labor demand curve.
B)its marginal cost curve.
C)its total revenue line.
D)its long-run input cost function.

Question 37

When 5 units of labor are employed,total product is 9 units; when 6 units of labor are employed,total product is 11 units of output.If the price of output is $5 per unit,what is the marginal revenue product of the 6th unit of labor?

A)$10
B)$5
C)$15
D)$55

Question 38

Which of the following statements about a perfectly competitive market are true?
I.The perfectly competitive industry faces an upward sloping labor supply curve.
II.The individual firm in a perfectly competitive industry faces a perfectly elastic labor supply curve.

A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question 39

When the price of a product increases,the marginal revenue product curve in a perfectly competitive market

A)does not change.
B)becomes flatter.
C)shifts to the right.
D)shifts to the left.

Question 40

The marginal revenue product represents

A)the marginal physical product of labor divided by the price of the good produced.
B)the worker's contribution to the firm's total revenues.
C)the worker's contribution to the firm's output.
D)the value of each additional unit of output.

Question 41

For a worker to be potentially available,he or she must

A)know about the jobs available at a particular firm.
B)be in the relevant geographic market and be willing to work for minimum wage.
C)have most of the skills required by the firm only.
D)have the skills required by the firm and be in the relevant geographic market.

Question 42

The marginal physical product of labor is

A)the output of the firm divided by the number of workers.
B)the change in total revenues resulting from the addition of one more worker,while increasing one other factor of production.
C)the change in output resulting from the addition of one more worker,holding other factors of production constant.
D)the change in output resulting from the addition of one more worker,adjusting the level of the capital stock accordingly.

Question 43

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the good produced is $8,the marginal revenue product of the 12th worker is

A)$720
B)$800
C)$5520
D)$560

Question 44

A firm is a price taker in the labor market if

A)the skills of available workers do not match the requirements for the job.
B)there is a scarcity of labor in the market.
C)the hiring of more workers will drive the existing wage rate up.
D)the hiring of more workers will leave the existing wage rate unchanged.

Question 45

A firm in a competitive input market can

A)hire workers at the going wage.
B)hire additional workers only by raising wages.
C)hire additional workers at lower wages because those who are still unemployed are anxious to work.
D)hire additional workers only after a long search process.

Question 46

As a firm hires more workers,holding the amounts of capital and other inputs constant,

A)output increases at a decreasing rate.
B)output increases at a constant rate.
C)output increases for a while and then decreases.
D)output increases,but we can't be certain whether output increases at an increasing or a decreasing rate.

Question 47

The increase in output that results when one more unit of a variable input is hired is called

A)total physical product.
B)marginal physical product.
C)average physical product.
D)marginal revenue.

Question 48

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the good produced is $7,the marginal revenue product of the 11th worker is

A)$700
B)$4200
C)$630
D)$3500

Question 49

An outward shift in the consumer demand for wheat will

A)raise the price of wheat and shift inward the marginal revenue product of labor producing wheat.
B)lead to more capital and less labor used in producing wheat.
C)raise the price of wheat and shift out the marginal revenue product of labor producing wheat.
D)lead to downward pressure on the wages of those producing wheat.

Question 50

The demand for labor is considered a derived demand since it depends on

A)the supply of labor.
B)the market for capital.
C)the consumer demand for the output produced.
D)competitive markets.

Question 51

A decrease in demand for a product,holding other things constant,will

A)increase the marginal revenue product of labor.
B)decrease the marginal revenue product of labor.
C)not change the marginal revenue product of labor.
D)have an undetermined effect upon the marginal revenue product of labor.

Question 52

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.What does the marginal physical product equal when the amount of labor goes from 11 to 12 units?

A)600
B)90
C)100
D)690

Question 53

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.What does the marginal physical product equal when the amount of labor goes from 10 to 11 units?

A)600
B)500
C)100
D)54.5

Question 54

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the

A)marginal revenue product of labor.
B)marginal factor cost of labor.
C)price of the extra output produced.
D)average physical product of labor.

Question 55

As a firm hires more workers,holding capital and other factors constant,the marginal physical product of labor declines because

A)there are diseconomies of scale.
B)less efficient workers are hired as the number of workers increase.
C)workers don't perform well in teams.
D)the amount of other inputs each worker has to work with declines as the number of workers increases.

Question 56

Other things held constant,after some point hiring additional units of labor will cause the marginal physical product of labor to decline because

A)the firm is a price taker.
B)the wage rate increases when additional workers are hired.
C)of the law of diminishing marginal product.
D)the supply of labor is perfectly elastic.

Question 57

For a firm in a perfectly competitive labor market,the supply curve of labor is

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

Question 58

If the supply of labor to a firm is perfectly elastic at the going wage rate established by the forces of supply and demand then

A)the firm is price taker.
B)the firm can only hire additional units of labor by driving the wage rate up.
C)the wage rate has been decreasing.
D)full employment exists in the labor market.

Question 59

The marginal physical product of labor for the most recent worker hired by Ajax is 286.If Ajax were to hire an additional worker we would expect the marginal physical product of labor to

A)remain at 286.
B)be below 286.
C)be above 286 by a small amount.
D)be above 286 by a large amount.

Question 60

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.What does the marginal physical product equal when the amount of labor goes from 12 to 13 units?

A)58.5
B)70
C)690
D)760

Question 61

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.For each level of employment of labor shown

A)marginal product declines.
B)marginal product holds constant.
C)marginal product rises.
D)marginal product falls for all employees beyond the 10th unit of labor.

Question 62

$$\begin{array} { c c c c } \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Total } \\\text { Output }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Total } \\\text { Output }\end{array} \\\hline 0 & 0 & 6 & 945 \\1 & 200 & 7 & 1000 \\2 & 420 & 8 & 1025 \\3 & 620 & 9 & 1035 \\4 & 770 & 10 & 1040 \\5 & 870 & &\\\hline\end{array}$$

-Refer to the above table.If the price of the good produced is $5,the marginal revenue product of the 7th worker is

A)$125.
B)$385.
C)$5000.
D)$55.

Question 63

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the product is $1.50,and the marginal factor cost of an additional unit of an input is $135,how many units of labor should be hired?

A)11
B)12
C)13
D)14

Question 64

If a firm hires 312 workers it will produce 4,522 units of output.If it hires 313 workers it will produce 4,786 units of output.The marginal physical product of labor equals

A)4,786
B)313
C)264
D)1

Question 65

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.Suppose the price of the good sold is $10 and the marginal factor cost of labor is $700,how many units of labor will the firm hire?

A)10
B)11
C)12
D)13

Question 66

The addition to revenue obtained from firing an additional unit of labor is

A)total product.
B)marginal revenue product.
C)marginal factor cost.
D)marginal physical product of labor.

Question 67

$$\begin{array} { c c c c } \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Total } \\\text { Output }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Total } \\\text { Output }\end{array} \\\hline 0 & 0 & 6 & 945 \\1 & 200 & 7 & 1000 \\2 & 420 & 8 & 1025 \\3 & 620 & 9 & 1035 \\4 & 770 & 10 & 1040 \\5 & 870 & &\\\hline\end{array}$$

-Refer to the above table.If the price of the good produced is $5,the marginal revenue product of the 5th worker is

A)$3350.
B)$670.
C)$500.
D)$100.

Question 68

For a perfectly competitive firm,the value of the marginal product is

A)the same thing as marginal factor cost.
B)the same thing as marginal physical product.
C)marginal physical product times the product price.
D)marginal physical product times the wage rate.

Question 69

If a firm hires 312 workers it produces 4,522 computers.If it hires 313 workers it produces 4,786 computers.If computers sell at a constant price of $1 and labor is hired at a constant wage rate of $65 per worker

A)the firm should hire and retain the additional worker.
B)the marginal factor cost of labor is $65.
C)the marginal revenue product of the added worker is $264.
D)all of the above
E)the additional employee brings into the firm a NET revenue of $112.

Question 70

The marginal revenue product of labor declines as the number of workers increases because

A)firms hire the most efficient workers first and the least efficient workers last.
B)firms must lower prices for the final product when they want to sell more units.
C)of the law of diminishing marginal product.
D)of diseconomies of scale.

Question 71

The additional revenue obtained by a firm when it hires an additional worker,holding other inputs constant,is

A)the marginal physical product of labor.
B)the marginal revenue product of labor.
C)the marginal cost of labor.
D)equal to total revenue divided by the number of workers.

Question 72

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the good produced is $9,the marginal revenue product of the 13th worker is

A)$810
B)$360
C)$6840
D)$630

Question 73

$$\begin{array} { c c c c } \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Total } \\\text { Output }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Total } \\\text { Output }\end{array} \\\hline 0 & 0 & 6 & 945 \\1 & 200 & 7 & 1000 \\2 & 420 & 8 & 1025 \\3 & 620 & 9 & 1035 \\4 & 770 & 10 & 1040 \\5 & 870 & &\\\hline\end{array}$$

-Refer to the above table.Suppose the marginal revenue product of the 7th worker is $1100.This implies that

A)the price of the good is $1.
B)the price of the good is $8.
C)the price of the good is $20.
D)we cannot tell what the price of the good is without more information.

Question 74

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the product is $1.50,and the marginal factor cost of an additional unit of an input is $105,how many units of labor should be hired?

A)11
B)12
C)13
D)14

Question 75

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the product is $1.50,what is the marginal revenue product of the 11th worker?

A)$1.50
B)$13.64
C)$150
D)$900

Question 76

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.Which of the following statements is correct?

A)The table follows economic principles because in an increasing cost industry,increases in a variable input will lead to increase in output.
B)The table does not follow economic principles because in an increasing cost industry,increases in a variable input will lead to decrease in output.
C)The table follows economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to a decrease in the marginal physical product.
D)The table does not follow economic principles because the law of diminishing marginal product predicts that increase in a variable input will eventually lead to an increase in the marginal physical product.

Question 77

$$\begin{array} { c c } \begin{array} { c } \text { Labor Input } \\\text { (workers/day) }\end{array} & \begin{array} { c } \text { Total Physical Product } \\\text { (output/day) }\end{array} \\\hline 10 & 500 \\11 & 600 \\12 & 690 \\13 & 760 \\14 & 800\\\hline\end{array}$$

-Refer to the above table.If the price of the product is $1.50,what is the marginal revenue product of the 12th worker?

A)$1035
B)$135
C)$90
D)$1.50

Question 78

The marginal revenue product

A)represents the incremental contribution to the firm's total revenues obtained from an increase in a variable input.
B)always increases when there is an increase in a variable input.
C)gives the increase in cost when there is an increase in a variable input.
D)gives the change in total product when an additional unit of a good is hired.

Question 79

If a firm hires 215 workers it will produce 3,016 units of output.If it hires 216 workers it will produce 3,128 units of output.The marginal physical product of labor equals

A)1
B)112
C)216
D)3,128

Question 80

The marginal revenue product gives

A)the change in total product for an additional unit of a variable input.
B)the amount that other inputs must increase by when labor increase by one unit.
C)the additions to total cost when an additional unit of a variable input is hired.
D)the additional revenue obtained when an additional unit of a variable input is hired.