Question 1

A firm that maximizes profits also

Accepted Answer

A)   is inefficient.
B)   cuts corners in production processes so that its products are made too cheaply.
C)   uses the least-cost combination of resources.
D)   pays input prices lower than other firms do.E) A) and C)
F) A) and D)

Question 2

We would expect unions to have a more difficult time negotiating higher wages for their members when

Accepted Answer

A)   labor represents a small portion of total costs.
B)   the product produced makes up a small portion of families' budgets.
C)   the product produced has several close substitutes.
D)   there are not good substitutes for labor in the production process.E) C) and D)
F) B) and C)

Question 3

-Refer to the above figure.  represents

Accepted Answer

A)   the supply curve for the product.
B)   the supply curve for labor.
C)   the demand curve for the product.
D)   the demand curve for labor.E) C) and D)
F) B) and D)

Question 4

A single firm in a competitive labor market has a labor supply curve that is

Accepted Answer

A)   upward sloping.
B)   perfectly inelastic.
C)   perfectly elastic.
D)   downward sloping.E) A) and B)
F) All of the above

Question 5

There are a number of reasons why labor supply curves will shift in a particular industry. Which one of the following is NOT one of them?

Accepted Answer

A)   Changes in working conditions in an industry affect the labor supply curve.
B)   Job flexibility that determines the position of the labor supply curve.
C)   There is a change in the market wage rate.
D)   Taxes on labor affect the labor supply curve.E) B) and D)
F) A) and B)

Question 6

The demand for DVD's increases. As a result,

Accepted Answer

A)   the wage rate in the DVD industry increases and the quantity demanded of workers increases.
B)   the wage rate in the DVD industry increases and the quantity supplied of workers increases.
C)   the demand for labor increases and the supply of labor also increases, leaving wages unchanged.
D)   the demand for labor increases, but since the supply curve of labor is perfectly elastic, the wage rate does not change.E) None of the above
F) B) and C)

Question 7

Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would

Accepted Answer

A)   cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
B)   cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor.
C)   cause the demand for unskilled labor to decrease and the demand for skilled labor to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor.
D)   cause the demand for both kinds of labor to decrease. Wages rates of both kinds of labor would decrease too.E) None of the above
F) C) and D)

Question 8

Suppose the market for autoworkers is initially in equilibrium, but then suppose the automakers improve working conditions at the plants. What happens in the market for autoworkers?

Accepted Answer

A)   The equilibrium wage rate will increase and the equilibrium quantity of labor will decrease.
B)   The equilibrium wage rate and the equilibrium quantity of labor will both increase.
C)   The equilibrium wage rate and the equilibrium quantity of labor will both decrease.
D)   The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase.E) All of the above
F) A) and B)

Question 9

The following table depicts both the product and labor markets for imported coffee. What is the total revenue when 15 workers per day are hired?

Accepted Answer

A)   $5,000
B)   $6,750
C)   $7,350
D)   $7,500E) None of the above
F) A) and B)

Question 10

The price elasticity of demand for labor will be greater, the

Accepted Answer

A)   smaller is the price elasticity of demand for the final product.
B)   easier it is to employ substitute inputs in production.
C)   smaller is the proportion of wage costs in the total cost of production.
D)   shorter is the time period under examination.E) A) and B)
F) A) and C)

Question 11

-Refer to the above table. Suppose the firm hires 4 workers and the price of the good sold is $4. The marginal factor cost of labor must be

Accepted Answer

A)   $4.
B)   $150.
C)   $3080.
D)   $600.E) B) and C)
F) A) and D)

Question 12

Explain the efficiency wage theory.

Accepted Answer

The efficiency wage theory says that fir...

Question 13

For a firm that uses land, labor and capital as inputs, how should the inputs be utilized in order to minimize total costs?

Accepted Answer

Given a particular rate of production, t...

Question 14

When a firm has maximized profits,

Accepted Answer

A)   it has also minimized total costs.
B)   the marginal product of each input is also maximized.
C)   the marginal physical product is greater than the input price for all inputs.
D)   its marginal cost is zero.E) B) and C)
F) All of the above

Question 15

The price elasticity of demand for labor equals

Accepted Answer

A)   the percentage change in the price of labor divided by the percentage change in the supply of labor.
B)   the change in the quantity demanded of labor divided by the change in the price of labor.
C)   the slope of the demand curve for labor.
D)   the percentage change in the quantity demanded of labor divided by the percentage change in the price of labor.E) C) and D)
F) B) and D)

Question 16

The wage rate found by the intersection of the market demand and supply curves for labor then determines the

Accepted Answer

A)   firm's demand curve for labor.
B)   firm's supply curve for labor.
C)   labor's supply curve of labor.
D)   labor's demand curve for jobs.E) A) and B)
F) All of the above

Question 17

Suppose there are four industries. Labor costs are 20 percent of total costs in A, 40 percent in B, 60 percent in C, and 80 percent in D. A ten percent increase in the price of labor will cause industry ________ to reduce quantity demanded of labor by the largest proportion.

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and B)
F) None of the above

Question 18

Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajax do?

Accepted Answer

A)   Leave the level of production unchanged.
B)   Increase the amount produced.
C)   Reduce the amount produced.
D)   Collect more information before making a decision.E) A) and B)
F) A) and C)

Question 19

Profit-maximizing employment is the quantity of labor at which

Accepted Answer

A)   marginal revenue product is equal to marginal factor cost.
B)   marginal revenue product is equal to product price.
C)   marginal factor cost is equal to marginal revenue.
D)   marginal factor product is equal to product price.E) None of the above
F) A) and B)

Question 20

-Refer to the above table. Suppose the price of the good sold is $4 and the marginal factor cost of labor is $600, how many units of labor will the firm hire?

Accepted Answer

A)   4.
B)   5.
C)   6.
D)   3.E) A) and D)
F) A) and C)

Exam 28: The Labor Market: Demand, Supply and Outsourcing

Explain the efficiency wage theory.

Correct AnswerverifiedThe efficiency wage theory says that fir...View AnswerShow Answer

Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would

Correct AnswerverifiedShow Answer

Profit-maximizing employment is the quantity of labor at which

Correct AnswerverifiedShow Answer

There are a number of reasons why labor supply curves will shift in a particular industry. Which one of the following is NOT one of them?

Correct AnswerverifiedShow Answer

A single firm in a competitive labor market has a labor supply curve that is

Correct AnswerverifiedShow Answer

When a firm has maximized profits,

Correct AnswerverifiedShow Answer

The demand for DVD's increases. As a result,

Correct AnswerverifiedShow Answer

The price elasticity of demand for labor will be greater, the

Correct AnswerverifiedShow Answer

Suppose there are four industries. Labor costs are 20 percent of total costs in A, 40 percent in B, 60 percent in C, and 80 percent in D. A ten percent increase in the price of labor will cause industry ________ to reduce quantity demanded of labor by the largest proportion.

Correct AnswerverifiedShow Answer

-Refer to the above table. Suppose the price of the good sold is $4 and the marginal factor cost of labor is $600, how many units of labor will the firm hire?

Correct AnswerverifiedShow Answer

-Refer to the above figure. represents

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A firm that maximizes profits also

Correct AnswerverifiedShow Answer

-Refer to the above table. Suppose the firm hires 4 workers and the price of the good sold is $4. The marginal factor cost of labor must be

Correct AnswerverifiedShow Answer

Suppose the market for autoworkers is initially in equilibrium, but then suppose the automakers improve working conditions at the plants. What happens in the market for autoworkers?

Correct AnswerverifiedShow Answer

The following table depicts both the product and labor markets for imported coffee. What is the total revenue when 15 workers per day are hired?

Correct AnswerverifiedShow Answer

The wage rate found by the intersection of the market demand and supply curves for labor then determines the

Correct AnswerverifiedShow Answer

The price elasticity of demand for labor equals

Correct AnswerverifiedShow Answer

For a firm that uses land, labor and capital as inputs, how should the inputs be utilized in order to minimize total costs?

Correct AnswerverifiedGiven a particular rate of production, t...View AnswerShow Answer

Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajax do?

Correct AnswerverifiedShow Answer

We would expect unions to have a more difficult time negotiating higher wages for their members when

Correct AnswerverifiedShow Answer

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The efficiency wage theory says that fir...
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Given a particular rate of production, t...
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Correct Answer
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