Question 1

Which of the following is least likely to influence the price elasticity of demand for an input?

Accepted Answer

A) The input price ratio 
B) The price elasticity of demand for the output 
C) The rate of substitution of one input for the other 
D) The elasticity of supply of other inputs

Question 2

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQS1U1B11S1U1B0 and IQS1U1B12S1U1B0,for a competitive firm.

-Refer to Figure 16-1.Which of the following is true at point C?

Accepted Answer

A) At point C,the marginal product of labor and capital is maximized. 
B) Point C identifies the level of output that gives the firm the highest marginal revenue. 
C) Point C identifies the least cost method of producing output Q1. 
D) Point C shows that the firm operates with constant returns to scale.

Question 3

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 4

Use the following figure  to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market.

-Refer to Figure 16-2.When the monopsonist is in equilibrium,the level of labor employed is _____.

Accepted Answer

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

Question 5

Suppose that a firm that produces widgets employs welders as the labor input for production.The demand for welders is:

Accepted Answer

A) derived from the total industry output of widgets. 
B) represented by the marginal value product curve if the firm is monopolist in the output market. 
C) derived from the demand curve for widgets faced by the firm. 
D) represented by the marginal revenue product curve if the firm is competitive.

Question 6

The input demand curve is likely to be relatively more elastic when:

Accepted Answer

A) the demand for the final product is relatively elastic. 
B) it is difficult to substitute the input for another input in production. 
C) the supply of other inputs is relatively inelastic. 
D) demand for the input is measured over a short time period.

Question 7

When a competitive labor market is in equilibrium:

Accepted Answer

A) the marginal product of labor equals the wage rate paid to labor. 
B) workers are paid their marginal value product. 
C) the labor employed by each firm is equal. 
D) the marginal revenue is equal to the wage rate.

Question 8

When all inputs are variable,a competitive firm's labor demand curve is:

Accepted Answer

A) more inelastic than the short-run input demand curve. 
B) a vertical line with a zero slope. 
C) derived keeping the prices of other inputs constant. 
D) the same as the marginal value product curve.

Question 9

Which of the following is true for a firm that has a monopoly in the output market?

Accepted Answer

A) The marginal revenue product and marginal value product for the monopolist are equal. 
B) The demand curve for an input is the same as the marginal value product curve. 
C) The slope of the input demand curve is the same for a monopolist and a competitive firm. 
D) Employment of an input is lower under monopoly than under perfect competition.

Question 10

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 11

If a competitive firm hires workers to a point where the wage exceeds the MVPL:

Accepted Answer

A) reducing the level of employment will increase profits. 
B) the wage rate needs to be increased to maximize profits. 
C) the total cost must be greater than total revenue. 
D) the firm is maximizing its profits.

Question 12

Use the following figure  to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market.

-Refer to Figure 16-2.When the monopsonist is in equilibrium,the wage rate paid to labor is _____.

Accepted Answer

A) P1 
B) P2 
C) P3 
D) 0

Question 13

Use the following table to answer the question : Table 16-2 : shows the number of bread loaves that can be produced per hour at various levels of labor use.The bakery is a perfectly competitive firm.

-Refer to Table 16-2.If the price of bread is $2 per loaf and the wage rate is $20 per hour,how many workers will the profit maximizing firm hire?

Accepted Answer

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

Question 14

Which of the following correctly describes a monopsony?

Accepted Answer

A) A monopsony firm is the sole supplier of an input. 
B) In a monopsony market,two or more firms set output assuming the other's output is constant. 
C) A monopsony firm is the sole buyer in an input market. 
D) In a monopsony market,a group of firms collude to set prices.

Question 15

Assume that the marginal product of labor employed by a competitive firm is 2 units and that the wage rate is $10.To maximize profits,the firm will hire an extra unit of labor to the point where the product price is equal to _____.

Accepted Answer

A) $10 
B) $3 
C) $4 
D) $5

Question 16

The monopsonist's marginal input cost is greater than its average input cost because:

Accepted Answer

A) the firm must increase the price it is willing to pay,to increase employment of an input. 
B) the monopsonist does not have discretion over the price of the input. 
C) the marginal revenue product of labor increases as the number of workers hired increases. 
D) the monopsonist faces a downward-sloping input demand curve.

Question 17

Given that other inputs are kept fixed,the input demand curve for an output market monopolist is equal to the:

Accepted Answer

A) marginal value product curve. 
B) marginal revenue product curve. 
C) marginal cost curve. 
D) marginal product curve.

Question 18

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 19

The marginal value product of labor curve for a competitive firm is:

Accepted Answer

A) upward-sloping because marginal product of labor and capital are diminishing. 
B) downward-sloping because marginal product of labor is diminishing. 
C) upward-sloping because marginal product of labor and marginal revenue are diminishing. 
D) downward-sloping because average product of labor is diminishing.

Question 20

Assume that a car manufacturing plant in a small town in Michigan in the U.S.is a monopsonist employer of heavy machinery operators.The marginal value product of labor is given by w = 1100 - 20Q where w is the wage rate and Q is the number of heavy machinery operators.The supply of heavy machinery operators is given by w = 200 + 5Q.What is the profit-maximizing level of employment and wage for the car manufacturer? Assume that the plant is perfectly competitive in the output market.

Accepted Answer

The answer of Assume that a car manufacturing plant in...

Exam 16: Employment and Pricing of Inputs

Which of the following is least likely to influence the price elasticity of demand for an input?

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.Which of the following is true at point C?

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

Use the following figure to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. -Refer to Figure 16-2.When the monopsonist is in equilibrium,the level of labor employed is _____.

Suppose that a firm that produces widgets employs welders as the labor input for production.The demand for welders is:

The input demand curve is likely to be relatively more elastic when:

When a competitive labor market is in equilibrium:

When all inputs are variable,a competitive firm's labor demand curve is:

Which of the following is true for a firm that has a monopoly in the output market?

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:

If a competitive firm hires workers to a point where the wage exceeds the MVP_L:

Use the following figure to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. -Refer to Figure 16-2.When the monopsonist is in equilibrium,the wage rate paid to labor is _____.

Which of the following correctly describes a monopsony?

Assume that the marginal product of labor employed by a competitive firm is 2 units and that the wage rate is $10.To maximize profits,the firm will hire an extra unit of labor to the point where the product price is equal to _____.

The monopsonist's marginal input cost is greater than its average input cost because:

Given that other inputs are kept fixed,the input demand curve for an output market monopolist is equal to the:

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

The marginal value product of labor curve for a competitive firm is:

Exam 16: Employment and Pricing of Inputs

Which of the following is least likely to influence the price elasticity of demand for an input?

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ1 and IQ2,for a competitive firm. -Refer to Figure 16-1.Which of the following is true at point C?

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

Use the following figure to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. -Refer to Figure 16-2.When the monopsonist is in equilibrium,the level of labor employed is _____.

Suppose that a firm that produces widgets employs welders as the labor input for production.The demand for welders is:

The input demand curve is likely to be relatively more elastic when:

When a competitive labor market is in equilibrium:

When all inputs are variable,a competitive firm's labor demand curve is:

Which of the following is true for a firm that has a monopoly in the output market?

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:

If a competitive firm hires workers to a point where the wage exceeds the MVPL:

Use the following figure to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. -Refer to Figure 16-2.When the monopsonist is in equilibrium,the wage rate paid to labor is _____.

Which of the following correctly describes a monopsony?

Assume that the marginal product of labor employed by a competitive firm is 2 units and that the wage rate is $10.To maximize profits,the firm will hire an extra unit of labor to the point where the product price is equal to _____.

The monopsonist's marginal input cost is greater than its average input cost because:

Given that other inputs are kept fixed,the input demand curve for an output market monopolist is equal to the:

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

The marginal value product of labor curve for a competitive firm is:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.Which of the following is true at point C?

If a competitive firm hires workers to a point where the wage exceeds the MVP_L: