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Set 1
1. Economists say that the demand for labor is a derived demand, they mean that it
is:
_________________________________________________________
2. If the demand for airline pilots increases, what can be said about the product
market demand?
______________________________________________________
3. In the United States professional football players earn much higher incomes than
professional soccer players. Provide an economic reason to explain the income
disparity:
_______________________________________________________
Set 2
1. Marginal revenue product measures the:
A)amount by which the extra production of one more worker increases a firm's
total revenue.
B)decline in product price that a firm must accept to sell the extra output of one
more worker.
C)increase in total resource cost resulting from the hire of one extra unit of a
resource.
D)increase in total revenue resulting from the production of one more unit of a
product.
2. The purely competitive employer of resource A will maximize the
profits from A by equating the:
A)price of A with the MRP of A.
B)marginal productivity of A with the price of A.
C)marginal productivity of A with the MRC of A.
D)price of A with the MRC of A.
Set 3
1. Assume labor is the only variable input and that an
additional input of labor increases total output from 72 to 78
units. If the product sells for $6 per unit in a purely
competitive market, the MRP of this additional worker is:
A)
$6. B) $12. C) $36. D) $72.
2. Assuming a firm is selling its output in a purely competitive
market, its resource demand curve can be determined by:
A)
B)
C)
D)
multiplying total product by product price.
multiplying marginal product by product price.
dividing total revenue by marginal product.
comparing marginal product with various possible input prices.
Set 4
A farmer who has fixed amounts of land and capital finds that total product
is 24 for the first worker hired; 32 when two workers are hired; 37 when
three are hired; and 40 when four are hired. The farmer's product sells
for $3 per unit and the wage rate is $13 per worker.
1.
The marginal product of the second worker is:
2.
The marginal revenue product of the second worker is:
3.
How many workers should the farmer hire?
1. Other things equal, an increase in the price of
a complementary resource would cause
a(n):
A)
move from a to b on D1.
B)
shift from D3 to D2.
C)
shift from D2 to D3.
D)
move from b to a on D1.
2. Other things equal, an increase in the price of
substitute resource would cause a(n):
A)
shift from D2 to D3 assuming the
substitution effect exceeds the output effect.
B)
move from a to b on D1.
C)
move from b to a on D1.
D)
shift from D3 to D2 assuming the
substitution effect exceeds the output effect.
Wage rate
Set 5
a
b
D1
0
D2
Quantity of labor
D3
Set 6
Suppose the demand for strawberries rises sharply, resulting in an increased price of
strawberries. As it relates to strawberry pickers, we could expect the:
A)
MRP curve to shift to the right.
downward.
B)
MRP curve to shift to the left.D)
C)
MRC curve to shift
MP curve to shift downward.
Set 7
1. Assuming a competitive resource market, a firm is hiring several resources in the profit-maximizing
amounts when the:
A)
firm's total outlay on resources is minimized.
B)
marginal revenue product of each resource is equal to its price.
C)
price of each resource employed is the same.
D)
marginal revenue product of the last unit of each resource hired is the same.
2. Assume that an appliance manufacturer is employing variable resources X and Y in such amounts
that the MRPs of the last units of X and Y employed are $100 and $60 respectively. Resource X
can be hired at $50 per unit and resource Y at $20 per unit. The firm:
A)
should hire more of both X and Y.
B)
should hire more of Y and less of X.
C)
is producing with the least-costly combination of X and Y, but could increase its profits by
employing more of X and less of Y.
D)
is using the least-cost combination of X and Y, but could increase its profits by employing
less of both X and Y.
Set 8
Answer the next question(s) on the basis of the following marginal product
data for resources a and b. The output of these independent resources sells in
a purely competitive market at $1 per unit.
Inputs
of a
1
2
3
4
5
6
7
MPa
25
20
15
10
5
2
1
Inputs
of b
l
2
3
4
5
6
7
MPb
40
36
32
24
20
16
8
1. Assuming the prices of resources
a and b are $5 and $8
respectively, what is the least
costly combination of resources
for the firm to employ in
producing 192 units of output?
3A, 4B
2.
Assuming the prices of
resources a and b are $5 and $8
respectively, what is the profitmaximizing combination of
resources? 5A, 7B
Set 9
Quantity MP of MRP of Quantity MP of MRP of
of labor labor labor of capital capital capital
1
15
$45
1
8
$24
2
12
36
2
6
18
3
9
27
3
5
15
4
6
18
4
4
12
5
3
9
5
3
9
6
1
3
6
2
6
1. This firm is selling its product in:
A)
an imperfectly competitive market at
prices that decline as sales increase.
B)
a purely competitive market at $3 per
unit.
C)
a purely competitive market at $2 per
unit.
D)
an imperfectly competitive market at
$3 per unit.
2. If the prices of labor and capital are $9 and
$15 respectively, the firm will hire:
A)
5 units of labor and 3 of capital.
C)
4 units of labor and 4 of capital.
B)
5 units of labor and 2 of capital.
D)
3 units of labor and 4 of capital.
3. The firm's total output will be:
A)
38 units. B) 60 units. C) 64 units.
D) 27 units
Set 10
1. If the nominal wages of carpenters rose by 5 percent in 2000
and the price level increased by 3 percent, then the real
wages of carpenters:
A) decreased by 2 percent.
C)
increased by 3
percent.
B) increased by 2 percent.
D)
increased by 8
percent.
2. The real wage will rise if the nominal wage:
A) falls more rapidly than the general price level.
B) increases at the same rate as labor productivity.
C) increases more rapidly than the general price level.
D) falls more rapidly than the general price level.
Set 11
1. A firm that is hiring labor in a purely competitive
labor market and selling its product in a purely
competitive product market will maximize its
profit by hiring labor until:
A) marginal revenue product is zero.
B) marginal revenue product exceeds marginal
resource (labor) cost by the greatest amount.
C) marginal resource cost is zero.
D) marginal revenue product equals marginal
resource (labor) cost.
Set 12
1) W < MRP; W < MRC
2) W = MRP; W < MRC
3) W = MRP; W = MRC
4) W > MRP; W > MRC
1. The outcome in a purely competitive labor market is shown by:
A)
1. B) 2. C) 3. D) 4.
2. The outcome in a monopsony labor market is shown by:
A)
1. B) 2. C) 3. D) 4.
3. A monopsonist's wage cost in hiring an additional worker is the:
A)
worker's wage rate.
B)
worker's wage rate plus the wage increases paid to all workers already employed.
C)
worker's wage rate adjusted for the lower price that must be charged for the extra output.
D)
marginal wage cost less the wage rate.
Set 13
1. If the above diagram was relevant to an
individual firm, we could conclude that the firm
is:
A)
a pure competitor in the hire of labor.
B)
a monopsonist in the hire of labor.
C)
selling its product in an imperfectly
competitive market.
D)
selling its product in a purely
competitive market.
2. Refer to the above diagram. The MRC curve lies
above the labor supply curve because:
A)
any number of workers can be hired at
the going equilibrium wage rate.
B)
the firm must lower product price to
increase its sales.
C)
the higher wage needed to attract
additional workers must also be paid to the
workers already employed.
D)
there is an inverse relationship between
wage rate and the amount of labor employed.
Set 14
1. If this labor market is
purely competitive, the
wage rate and level of
employment respectively
will be: BG
2. If this labor market is
monopsonistic, the wage
rate and level of
employment respectively
will be: AF
Set 15
Q of Labor
1
2
3
4
5
6
MP of
Labor
15
12
9
6
3
1
MRP of
Labor
$45
36
27
18
9
3
Q of Capital
1
2
3
4
5
6
MP of
Capital
8
6
5
4
3
2
MRP of
Capital
$24
18
15
12
9
6
If the prices of labor and capital are $9 and $18 respectively, the firm will hire what
inputs to arrive at the profit maximization level of output:
Set 16
More college students are graduating with degrees in
communications. Given this trend we would expect the
wage of Communications labor, the employment of
Communications Labor, and the demand for public
speaking text books to change in which of the following
ways:
Communications
Speaking
Wages
Decrease
Decrease
Increase
Increase
Employment of
Demand for Public
Communications
Increase
Decrease
Decrease
Decrease
Text Books
Increase
Decrease
Decrease
Increase
Set 17
Units of Resource
Total Product
Marginal Product
1
2
3
4
5
8
14
18
21
23
8
6
4
3
2
If the firm can sell 8 units at a price of $1.50, 14
units at a price of $1.00, 18 units at a price of
$0.90, 21 units at a price of $0.70, the MRP of the
4th unit of resource is: 1.50