Download Slide 1

Question 1
• Although horses were once a very important factor of
production, the development of automobiles and other
machinery reduced the demand for their use. This is an
example of:
– A. Lower prices of substitute factors shifting demand for horses
to the left.
– B. Higher marginal costs for horses, shifting demand for horses
to the right.
– C. Technological progress shifting the demand for horses to the
right.
– D. Higher marginal costs for horses, having no impact on the
demand for horses.
– E. Technological progress shifting the demand for horses to the
left.
Question 1
• Although horses were once a very important factor of
production, the development of automobiles and other
machinery reduced the demand for their use. This is an
example of:
– A. Lower prices of substitute factors shifting demand for horses
to the left.
– B. Higher marginal costs for horses, shifting demand for horses
to the right.
– C. Technological progress shifting the demand for horses to the
right.
– D. Higher marginal costs for horses, having no impact on the
demand for horses.
– E. Technological progress shifting the demand for horses to the
left.
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
2. Debbie owns a bakery and can hire workers to produce cakes selling in a
competitive output market at $10 each. The table shows the relationship
between the number of workers and the number of cakes produced. What is
the value of the marginal product for the fourth worker?
a. Five cakes
b. $50
c. $210
d. 21 cakes
e. $250
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
2. Debbie owns a bakery and can hire workers to produce cakes selling in a
competitive output market at $10 each. The table shows the relationship
between the number of workers and the number of cakes produced. What is
the value of the marginal product for the fourth worker?
a. Five cakes
b. $50
c. $210
d. 21 cakes
e. $250
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
3. Debbie must pay each worker a competitive market wage of $45 per day. How
many workers will she hire to maximize profit?
a. Two
b. Three
c. Four
d. Five
e. Six
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
3. Debbie must pay each worker a competitive market wage of $45 per day. How
many workers will she hire to maximize profit?
a. Two
b. Three
c. Four
d. Five
e. Six
4. Sarah owns a small flower shop and the industry is
perfectly competitive. She is considering whether or
not to hire an additional worker. The wage rate for
the worker is $500 per week; the marginal product of
the additional worker would be 100 units per week;
and the price of the units produced is $10 per unit.
What should Sarah do?
a. Hire the additional worker because the value of the
marginal product exceeds the wage.
b. Not hire the additional worker because the value of the
marginal product exceeds the wage.
c. Raise the price of the flower arrangements that she sells.
d. Hire the additional worker because the value of the
marginal product is below the wage.
e. Not hire the additional worker because the value of the
marginal product is below the wage.
4. Sarah owns a small flower shop and the industry is
perfectly competitive. She is considering whether or
not to hire an additional worker. The wage rate for
the worker is $500 per week; the marginal product of
the additional worker would be 100 units per week;
and the price of the units produced is $10 per unit.
What should Sarah do?
a. Hire the additional worker because the value of the
marginal product exceeds the wage.
b. Not hire the additional worker because the value of the
marginal product exceeds the wage.
c. Raise the price of the flower arrangements that she sells.
d. Hire the additional worker because the value of the
marginal product is below the wage.
e. Not hire the additional worker because the value of the
marginal product is below the wage.
5. In the figure, if the market wage rate increases:
a.
b.
c.
d.
The VMPL curve would shift to the right.
The profit-maximizing quantity of labor will increase.
The VMPL curve would shift to the left.
The profit-maximizing quantity of labor will
decrease.
e. There will be no change to the profit-maximizing
quantity of labor.
5. In the figure, if the market wage rate increases:
a.
b.
c.
d.
The VMPL curve would shift to the right.
The profit-maximizing quantity of labor will increase.
The VMPL curve would shift to the left.
The profit-maximizing quantity of labor will
decrease.
e. There will be no change to the profit-maximizing
quantity of labor.
6. Assume that the market wage rate for bricklayers is
$100. For a profit-maximizing firm at the equilibrium
level of output, the VMPLbricklayers is:
a.
b.
c.
d.
e.
$200.
Equal to the market wage rate.
Irrelevant, since the firm is a price-taker.
Six units of labor.
Equal to zero.
6. Assume that the market wage rate for bricklayers is
$100. For a profit-maximizing firm at the equilibrium
level of output, the VMPLbricklayers is:
a.
b.
c.
d.
e.
$200.
Equal to the market wage rate.
Irrelevant, since the firm is a price-taker.
Six units of labor.
Equal to zero.
7. If there is a decrease in another factor of production that
bricklayers use, then the value of the 8th worker will be
_____ the current value of _____.
a. Less than; $80
b. Greater than; $100
c. Less than; $60
d. Greater than; $80
e. Equal to; $80
7. If there is a decrease in another factor of production that
bricklayers use, then the value of the 8th worker will be
_____ the current value of _____.
a. Less than; $80
b. Greater than; $100
c. Less than; $60
d. Greater than; $80
e. Equal to; $80
Droids and Moisture Output
Number of Droids
Output of Moisture (barrels per month)
0
0
1
25
2
45
3
60
4
70
5
75
8. Luke Skywalker operates a moisture farm on the planet Tatooine. The moisture
farm utilizes droids. Luke’s production function is given in the table. A barrel of
moisture sells for 10 Republic Credits. A droid costs 65 Republic Credits per month
to rent. How many droids should Luke rent?
a. One
b. Two
c. Three
d. Four
e. Five
Droids and Moisture Output
Number of Droids
Output of Moisture (barrels per month)
0
0
1
25
2
45
3
60
4
70
5
75
8. Luke Skywalker operates a moisture farm on the planet Tatooine. The moisture
farm utilizes droids. Luke’s production function is given in the table. A barrel of
moisture sells for 10 Republic Credits. A droid costs 65 Republic Credits per month
to rent. How many droids should Luke rent?
a. One
b. Two
c. Three
d. Four
e. Five
9. Suppose the competitive labor market for
plumbers is currently in equilibrium. Which of
the following might decrease the wage for
plumbers?
A. An economic boom increases the demand for new
homes.
B. The plumbers union creates a rigorous certification
test that is difficult for aspiring plumbers to pass.
C. A shortage of plumbers currently exists in the
market.
D. A minimum wage is imposed on the market for
plumbers.
E. Unemployed manufacturing workers attend technical
schools to learn the plumbing trade.
9. Suppose the competitive labor market for
plumbers is currently in equilibrium. Which of
the following might decrease the wage for
plumbers?
A. An economic boom increases the demand for new
homes.
B. The plumbers union creates a rigorous certification
test that is difficult for aspiring plumbers to pass.
C. A shortage of plumbers currently exists in the
market.
D. A minimum wage is imposed on the market for
plumbers.
E. Unemployed manufacturing workers attend technical
schools to learn the plumbing trade.
10.John is an entrepreneur who runs his own auto
body repair shop. Suppose that John’s business
is booming and his salary is rising. John’s labor
supply curve will be:
A. Upward-sloping if the substitution effect is smaller
than the income effect.
B. Downward-sloping if the substitution effect is
smaller than the income effect.
C. Horizontal if the substitution effect is equal to the
income effect.
D. Vertical if the substitution effect is less than the
income effect.
E. Horizontal if the substitution effect is greater than
the income effect.
10.John is an entrepreneur who runs his own auto
body repair shop. Suppose that John’s business
is booming and his salary is rising. John’s labor
supply curve will be:
A. Upward-sloping if the substitution effect is smaller
than the income effect.
B. Downward-sloping if the substitution effect is
smaller than the income effect.
C. Horizontal if the substitution effect is equal to the
income effect.
D. Vertical if the substitution effect is less than the
income effect.
E. Horizontal if the substitution effect is greater than
the income effect.
11.An increase in wealth will cause the labor
supply curve to:
A. Become less elastic but still upward-sloping.
B. Be downward-sloping if the substitution effect
dominates the income effect.
C. Be upward-sloping if leisure is an inferior good.
D. Be backward-bending if the income effect
outweigh the substitution effect of a change in
wealth, and leisure is a normal good.
E. Shift leftward if leisure is a normal good.
11.An increase in wealth will cause the labor
supply curve to:
A. Become less elastic but still upward-sloping.
B. Be downward-sloping if the substitution effect
dominates the income effect.
C. Be upward-sloping if leisure is an inferior good.
D. Be backward-bending if the income effect
outweigh the substitution effect of a change in
wealth, and leisure is a normal good.
E. Shift leftward if leisure is a normal good.
12.The price of an extra hour of leisure is:
A. $1.
B. The hourly wage rate.
C. The price of a movie ticket.
D. The total utility of labor.
E. The marginal product.
12.The price of an extra hour of leisure is:
A. $1.
B. The hourly wage rate.
C. The price of a movie ticket.
D. The total utility of labor.
E. The marginal product.
13.Which of the following will not shift the labor
supply curve?
a.
b.
c.
d.
e.
A change in preferences and social norms.
Changes in wealth.
Changes in opportunities.
A change in the wage rate.
A change in the population.
13.Which of the following will not shift the labor
supply curve?
a.
b.
c.
d.
e.
A change in preferences and social norms.
Changes in wealth.
Changes in opportunities.
A change in the wage rate.
A change in the population.
14. In the table, if the
price of a bushel of
wheat is $10, then the
value of the marginal
product of the third
worker is:
A.
B.
C.
D.
E.
$15.
$150.
$170.
$510.
$10.
14. In the table, if the
price of a bushel of
wheat is $10, then the
value of the marginal
product of the third
worker is:
A.
B.
C.
D.
E.
$15.
$150.
$170.
$510.
$10.
15. In the table, if the price
of a bushel of wheat is
$5 and the price of labor
(wage) is $40, then the
profit-maximizing
quantity of labor is:
A.
B.
C.
D.
E.
One.
Three.
Six.
Eight.
Seven.
15. In the table, if the price
of a bushel of wheat is
$5 and the price of labor
(wage) is $40, then the
profit-maximizing
quantity of labor is:
A.
B.
C.
D.
E.
One.
Three.
Six.
Eight.
Seven.
16.Which of the following statements is true?
A.
B.
C.
D.
E.
If W < VMPL, the firm should hire more labor.
If W > VMPL, the firm should hire more labor.
If W = VMPL, the firm should hire more labor.
If W > 0, the firm should shut down.
If W < P, the firm should hire more labor.
16.Which of the following statements is true?
A.
B.
C.
D.
E.
If W < VMPL, the firm should hire more labor.
If W > VMPL, the firm should hire more labor.
If W = VMPL, the firm should hire more labor.
If W > 0, the firm should shut down.
If W < P, the firm should hire more labor.