Question Factor Markets

29 Jun Question Factor Markets

Question
Factor Markets

1. What causes the labor demand curve to shift?

(i) changes in productivity

(ii) changes in wages

(iii) changes in output prices

a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. All of the above are correct.

2. If consumers demand more genetically engineered foods, then the value of genetic engineers’

marginal product of labor will

a. rise. b. fall. c. remain unchanged. d. rise or fall; either is possible.

3. Charles owns one of the many bakeries in New York City. Which of the following events will lead

to a decrease in Charles’s demand for the services of bakers?

a. Hollywood glamorization of a new movie about a baker leads hundreds of high-school

students in New York City to apply for a job at Dan’s.

b. The price of baked goods falls.

c. The local bakers form a union.

d. All of the above are correct.

4. Aurora Custom Cabinets produces and sells custom kitchen cabinets. The firm has determined that if

it hires 10 workers, it can produce 4 sets of cabinets per day. If it hires 11 workers, it can

produce 4.2 sets of cabinets per day. It sells each set of cabinets for $2,000, and it pays each of

its workers $200 per day.

a. For the 11th worker, the value of the marginal product of labor is $500.

b. For the 11th worker, the marginal revenue product is $400.

c. The firm is maximizing its profit.

d. If the firm is employing 11 workers, then its profit would increase if it cut back to 10

workers.

5. For a competitive, profit-maximizing firm, the demand curve for labor will shift in response to a

change in the

a. wage rate. b. quantity of labor demanded.

c. price of the product that the firm sells. d. All of the above are correct.

6. Suppose that eight workers can manufacture 70 radios per day, and nine workers can manufacture

90 radios per day. If radios can be sold for $10 each, the value of marginal product of the ninth

worker is

a. 20 radios. b. 90 radios. c. $200. d. $900.

7. When labor is the only input a firm uses, the marginal cost of a unit of output can be defined as

a. marginal revenue multiplied by wage.

b. marginal product of labor multiplied by wage.

c. wage divided by marginal product of labor.

d. marginal product of labor divided by wage.

8. Sally runs a hair styling salon. Sally is a profit-maximizing owner whose firm operates in a

competitive market. The marginal cost of a haircut is $7. What is the maximum wage that Sally

will pay her stylists?

a. less than $7 per haircut

b. $7 per haircut

c. more than $7 haircut

d. There is insufficient information to answer this question.

9. If the wage exceeds the value of the marginal product of labor, then hiring another worker

a. decreases the firm’s total revenue. b. increases the firm’s profit.

c. increases the firm’s total cost. d. All of the above are correct.

10. What does an upward-sloping labor supply curve mean?

a. It means that workers prefer to buy more leisure time when their incomes increase.

b. It means that workers prefer to supply less labor when wages are high.

c. It means that an increase in the opportunity cost of leisure leads workers to increase the

quantity of labor they supply.

d. All of the above are correct.

11. If workers respond to an increase in the opportunity cost of leisure by taking less leisure, then their

labor supply curve is

a. horizontal. b. vertical. c. downward sloping. d. upward sloping.

12. If workers respond to an increase in the opportunity cost of leisure by taking more leisure, then

their labor supply curve is

a. upward sloping. b. downward sloping. c. horizontal. d. vertical.

13. Which of the following statements is correct? An individual worker’s labor supply curve

a. can never slope downward.

b. slopes downward if that person responds to a higher wage by taking fewer hours of leisure

per week.

c. slopes downward if that person responds to a higher opportunity cost of leisure by working

fewer hours per week.

d. slopes upward if that person works the same number of hours per week, regardless of the

opportunity cost of leisure.

14. The following table shows the number of calculators that can be assembled per week by various

numbers of workers. If the price per calculator in a perfectly competitive product market is $20,

how many workers would the firm employ if the weekly wage rate is $1000?

Quantity of Number of Calculators

Labor Per Week

0 0