Question 1

Which of the following is true of a profit-maximizing output market monopolist?

Accepted Answer

A) The monopolist equates the wage rate with the marginal revenue product. 
B) The monopolist faces a downward-sloping supply curve for an input. 
C) As compared to a competitive firm,an output market monopolist pays a higher price for inputs. 
D) The ratio of capital to labor is higher for an output market monopolist than a competitive firm.

Question 2

In order to maximize profits,an output market monopoly will:

Accepted Answer

A) pay less than the going wage rate. 
B) pay a wage equal to the marginal value product of labor. 
C) pay a wage that is less than marginal value product of labor. 
D) pay workers a higher-than-competitive wage rate.

Question 3

Which of the following will not determine the elasticity of demand for bank tellers,which is a competitive input industry?

Accepted Answer

A) The elasticity of demand for banking services 
B) The availability of automated teller machines (ATMs) 
C) The marginal product of ATM technicians 
D) The elasticity of supply for computers used to record banking transactions

Question 4

Suppose the labor supply curve facing all industries in an economy is a vertical line.Given this,which of the following statements about the supply curve of labor confronting any particular industry is true?

Accepted Answer

A) The supply curve of labor confronting any particular industry will also be vertical because the aggregate supply curve is a horizontal summation of industry supply curves. 
B) The supply curve of labor confronting any particular industry will also be inelastic because the stock of labor in the economy is fixed in the short-run. 
C) The supply curve of labor confronting any particular industry will be elastic because labor can shift easily from one industry to another. 
D) The supply curve of labor confronting any particular industry will be elastic because labor and capital are perfectly substitutable in the short-run.

Question 5

The input demand curve for an output market monopolist slopes downward because:

Accepted Answer

A) as the price of the input increases,a higher quantity of the input is employed. 
B) marginal product of the input increases as more input is employed. 
C) marginal revenue declines as more of the input is employed. 
D) price and marginal revenue are inversely related.

Question 6

Given that labor is on the horizontal axis,_____ represents the substitution effect of an increase in the wage rate.

Accepted Answer

A) an upward movement along an isoquant 
B) a downward movement along an isoquant 
C) a downward movement along an expansion path 
D) an upward shift of the expansion path

Question 7

For a profit-maximizing firm that is a price taker in the output market and a wage taker in the labor market,which of the following will be true?

Accepted Answer

A) The marginal revenue product will be higher than the marginal value product. 
B) The marginal cost of labor must be lesser than the price of output. 
C) The marginal value product of labor will equal the wage rate. 
D) The marginal revenue from an extra unit sold will be higher than price.

Question 8

Mines located in rural mountain towns in Kentucky and West Virginia are often the only employers in the area.In other words,a mining company in Kentucky would be considered:

Accepted Answer

A) a monopolist in the labor market. 
B) a monopsonist in the labor market. 
C) an output-market monopoly. 
D) a profit-maximizing competitive firm.

Question 9

The following table shows the total number of pizzas produced by 7 workers.
Table 16-1 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { workers }
\end{array} & \begin{array} { c } 
\text { Total number of pizzas } \
\text { produced per day }
\end{array} \
\hline 0 & 0 \
\hline 1 & 6 \
\hline 2 & 13 \
\hline 3 & 18 \
\hline 4 & 21 \
\hline 5 & 23 \
\hline 6 & 22 \
\hline 7 & 20 \
\hline
\end{array}$$
-Refer to Table 16-1.If the pizza industry is competitive and the price of a pizza is $10,then which of the following is correct?

Accepted Answer

A) The total revenue from the sale of 4 pizzas is $30. 
B) The marginal value product of the fifth worker is $20. 
C) The marginal product of the fourth worker is 2 pizzas. 
D) The marginal revenue from selling the fifth pizza is $-10.

Question 10

The following table shows the total number of pizzas produced by 7 workers.
Table 16-1 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { workers }
\end{array} & \begin{array} { c } 
\text { Total number of pizzas } \
\text { produced per day }
\end{array} \
\hline 0 & 0 \
\hline 1 & 6 \
\hline 2 & 13 \
\hline 3 & 18 \
\hline 4 & 21 \
\hline 5 & 23 \
\hline 6 & 22 \
\hline 7 & 20 \
\hline
\end{array}$$
-In Table 16-1,marginal returns from labor diminishes from the _____ worker.

Accepted Answer

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

Question 11

Using a graph,show the welfare effects of a monopsony input market compared to a perfectly competitive input market.Assume upward sloping cost curves.

Accepted Answer

The answer of Using a graph,show the welfare effects of...

Question 12

Assume that there is an outward shift in the demand for chairs.Which of the following best describes the short-run response within the competitive market for chairs?

Accepted Answer

A) Existing firms and new firms will expand output by using more of all inputs. 
B) Existing firms will keep fixed inputs unchanged and expand output using the variable inputs. 
C) Existing firms will increase their profits by producing the same output at a higher price. 
D) Existing firms cannot increase production in the short-run so the price of chairs will increase.

Question 13

For a monopsony buyer of labor,the marginal cost of hiring one more worker is:

Accepted Answer

A) equal to the wage rate. 
B) less than the wage rate. 
C) greater than the wage rate. 
D) the same as the average cost.

Question 14

A monopsony differs from a monopoly in that:

Accepted Answer

A) the market capitalization of a monopsony firm is smaller than a monopoly firm. 
B) the input price under a monopsony is higher than the input price in a monopoly. 
C) a monopsony has market power in the input market while a monopoly has market power in the product market. 
D) a monopsony faces a downward-sloping input demand curve while a monopoly faces an upward-sloping input demand curve.

Question 15

The input demand curve of an industry is relatively inelastic when:

Accepted Answer

A) the demand for the final product is relatively elastic. 
B) the marginal rate of technical substitution is lower. 
C) the supply curves of other inputs is relatively inelastic. 
D) price of the input is higher than the price of other inputs.

Question 16

The reserve clause in Major League Baseball (MLB),which allowed baseball players to negotiate salary only with the first team that signed them,was removed in 1975.The dismantling of the reserve clause was undertaken to:

Accepted Answer

A) ensure that players got more playing time. 
B) break up the MLB owner's monopoly power. 
C) break up the MLB owner's monopsony power. 
D) allow players to hire their own agents.

Question 17

Two inputs,labor and capital,are considered complements if:

Accepted Answer

A) a fall in the price of labor leads to a fall in the price of capital. 
B) they can replace each other in the production process. 
C) a fall in the price of labor leads to an increase in the price of capital. 
D) increasing the quantity of labor increases the marginal product of capital.

Question 18

Which of the following is true of a competitive industry's demand curve for labor?

Accepted Answer

A) The demand curve for labor will shift in the same direction as the demand for the product. 
B) The industry demand is found by summing each firm's marginal value product. 
C) The industry demand for labor is generally more elastic than the individual demand for labor. 
D) The demand curve for labor is upward-sloping due to diminishing marginal returns.

Question 19

"The fact that a college professor who has a higher marginal product earns a lower wage than a football coach,is proof that sports is valued more than education." Assuming that the markets for professors and coaches are competitive,one can conclude that this conclusion is essentially:

Accepted Answer

A) accurate because the higher average wage shows that the demand for football coaches is higher than the demand for a faculty member. 
B) accurate because a higher marginal product indicates that college professors are more productive than football coaches and yet earn a lower wage. 
C) faulty because the number of professors employed is higher than the number of football coaches employed. 
D) faulty because wages depend not only on the marginal product of the worker but also on the price of the final product.

Exam 16: Employment and Pricing of Inputs