Deck 12: Factor Markets

Question 1

If the price of an input is constant, the marginal cost of the input is equal to its price.

Answer 1

True

Question 2

The marginal revenue product of input a is equal to the marginal revenue received from selling the additional units of output the firm can produce by adding one more unit of input a multiplied by the marginal product of input
a.
False

Answer 2

False

Question 3

In a monopsonistic input market, the firm buying the input knows that the price of the input will be determined by the quantity that it purchases.

Answer 3

True

Question 4

The marginal product of input a is the additional output that the firm can produce by adding one more unit of input a multiplied by the marginal revenue of input
a.
False

Question 5

The profit-maximizing rule for employment of a variable input is to employ that input until its marginal revenue product is equal to the marginal cost of the input, as long as the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a greater quantity of the input.

Question 6

The marginal cost of an input is equal to the increase in the firm's total cost that results from employing one more unit of the input.

Question 7

The profit-maximizing rule for employment of a variable input is to employ that input until its marginal revenue product is less than the marginal cost of the input, as long as the marginal cost of the input would be less than or at most equal to the marginal revenue product of the input for a greater quantity of the input.

Question 8

Oligopsony is the term we use to describe a market structure where there are few buyers, or a few dominant buyers of some particular product or service.

Question 9

In a monopsonistic input market the marginal cost of another unit of an input is greater than its price because it is assumed that the firm has to pay a higher price to get an additional unit of input per time period.

Question 10

The marginal product of input a is the additional output that the firm can produce by adding one more unit of input
a.
True

Question 11

The net marginal revenue of input a is equal to the marginal revenue received from selling one more unit of output less the cost of raw materials and intermediate products required for it.

Question 12

The marginal revenue product of input a is equal to the net marginal revenue of input a multiplied by the marginal product of input
a.
True

Question 13

The net marginal revenue of input a is equal to the marginal revenue received from selling one more unit of output.

Question 14

The profit-maximizing rule for employment of a variable input in a monopsonistic input market is to employ that input until its marginal revenue product is equal to its marginal cost.

Question 15

Monopsony is the label we attach to a market structure that is characterized by one buyer of some particular product or service.

Question 16

Monopsonistic competition is the term we use to describe a market structure where there are many buyers of a differentiated product.

Question 17

The marginal revenue product of input a is equal to the gross marginal revenue of input a multiplied by the marginal product of input
a.
False

Question 18

A bilateral monopoly is a market where there is only one buyer and one seller of an input.

Question 19

In a monopsonistic input market the marginal cost of another unit of an input is equal to its price because it is assumed that as the firm has to pay a higher price for one more unit of input, it must pay the same price for all units of input.

Question 20

The marginal cost of an input is equal to the change in the firm's total cost that results from employing the number of units of the input necessary to produce one more unit of output.

Question 21

The increase in the firm's total cost as a result of employing one more unit of input a is equal to the:

A) marginal revenue product of input "a"
B) marginal product of input "a"
C) net marginal revenue of input "a"
D) marginal cost of input "a"
E) net marginal cost of input "a"

Question 22

Using the following information, complete questions 12 - 15
A manufacturer of inexpensive toys operates in a city that offers significant tax benefits in order to entice new businesses to set up shop. The firm has the relationship between the number of workers per hour and the total product per hour shown in the following table. The relationship between output produced and per hour and the price at which it can be sold is also given. Assume that the cost of materials used in each toy is $.05. Because of local tax credits resulting from operating in this specific city, the firm's effect wage rate is $2.00 per hour.
Given the above information, what is the firm's Arc Marginal Revenue Product of Labor?

A) 58.50, 14, 2.25, 1.00, .25
B) 58.50, 16, 3.75, 1.50, .75
C) 38.50, 24, 1.50, 1.00, .5
D) 38.50, 14, 2.25, 1.00, .25
E) none of the above

Question 23

The additional output that the firm can produce by adding one more unit of input "a" is equal to the:

A) marginal revenue product of input "a"
B) marginal product of input "a"
C) net marginal revenue of input "a"
D) marginal cost of input "a"
E) net marginal cost of input "a"

Question 24

Using the following information to complete questions 8 - 11.
Top-It-Off Inc. produces gold pen and pencil sets for executives' desks. Revenue and labor productivity data are given in the following table. The components cost $15.00. The wage rate is constant at $7.50 per hour.
Given the above information, what is the Net Marginal Revenue?

A) 62.5, 44.5, 22.5, 15, 2.5, -1
B) 70, 52, 30 22.50, 10, 6.5
C) 77.5, 59.5, 37.5, 30, 17.5, 14
D) 85, 67, 45, 37.50, 25, 21.50
E) 90, 45, 28, 26.5, 10, 2.6

Question 25

If more than one input is variable and changes in the quantity utilized of one will affect the productivity of the other inputs then these inputs are:

A) complementary.
B) related.
C) substitutes.
D) equal.
E) constant.

Question 26

Using the following information, complete questions 12 - 15
A manufacturer of inexpensive toys operates in a city that offers significant tax benefits in order to entice new businesses to set up shop. The firm has the relationship between the number of workers per hour and the total product per hour shown in the following table. The relationship between output produced and per hour and the price at which it can be sold is also given. Assume that the cost of materials used in each toy is $.05. Because of local tax credits resulting from operating in this specific city, the firm's effect wage rate is $2.00 per hour.
Given the above information, what is the firm's Net Marginal Revenue?

A) 1.90, .65, .10, .05, 0
B) 1.95, .70, .15, .10, .05
C) 2.00, .75, .20, .15, .10
D) 2.05, .80, .25, .20, .15
E) 2.10, .85, .30, .25, .20

Question 27

The general profit-maximizing rule for employment of a variable input is to employ that input until its marginal revenue product is equal to the marginal cost of the input, as long as:

A) the marginal cost of the input would be less than or at most equal to the marginal revenue product of the input for a greater quantity of the input.
B) the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a greater quantity of the input.
C) the marginal cost of the input would be at least equal to or below the marginal revenue product of the input for a greater quantity of the input.
D) the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a lower quantity of the input.
E) the marginal cost of the input would be at least equal to the marginal revenue product of the input for a greater quantity of the input.

Question 28

If two variable inputs are related and utilizing more of one increases the marginal product of the other, then these inputs are:

A) equal.
B) substitutes.
C) complementary.
D) variable.
E) constant.

Question 29

The marginal revenue received from selling one more unit of output less the cost of raw materials and intermediate products required for it is equal to the:

A) marginal revenue product of input "a"
B) marginal product of input "a"
C) net marginal revenue of input "a"
D) marginal cost of input "a"
E) net marginal cost of input "a"

Question 30

Using the following information to complete questions 8 - 11.
Top-It-Off Inc. produces gold pen and pencil sets for executives' desks. Revenue and labor productivity data are given in the following table. The components cost $15.00. The wage rate is constant at $7.50 per hour.
Given the above information, how many workers should Top-It-Off employ?

A) 10
B) 15
C) 20
D) 25
E) 30

Question 31

When the price of an input is constant:

A) the marginal cost of the input is equal to its price.
B) the marginal cost of the input is increasing.
C) the marginal cost of the input is variable.
D) the marginal cost of the input is decreasing.
E) the marginal cost of the input decreases over the initial range of output and then becomes and remains constant.

Question 32

Using the following information, complete questions 12 - 15
A manufacturer of inexpensive toys operates in a city that offers significant tax benefits in order to entice new businesses to set up shop. The firm has the relationship between the number of workers per hour and the total product per hour shown in the following table. The relationship between output produced and per hour and the price at which it can be sold is also given. Assume that the cost of materials used in each toy is $.05. Because of local tax credits resulting from operating in this specific city, the firm's effect wage rate is $2.00 per hour.
Given the above information, how many workers should the toy company employ?

A) 10
B) 20
C) 30
D) 40
E) 50

Question 33

Using the following information, complete questions 12 - 15
A manufacturer of inexpensive toys operates in a city that offers significant tax benefits in order to entice new businesses to set up shop. The firm has the relationship between the number of workers per hour and the total product per hour shown in the following table. The relationship between output produced and per hour and the price at which it can be sold is also given. Assume that the cost of materials used in each toy is $.05. Because of local tax credits resulting from operating in this specific city, the firm's effect wage rate is $2.00 per hour.
Given the above information, what is the firm's Arc Marginal Product of Labor?

A) 30, 20, 15, 10, 5
B) 30, 25, 20, 15, 10
C) 25, 20, 15, 10, 5
D) 25, 15, 10, 5, 0
E) 20, 15, 10, 5, 0

Question 34

When a firm is buying an input in a perfectly competitive market, it accepts:

A) that the input price is given.
B) that the input price equals the input's marginal cost.
C) that the supply curve of the input to the firm is horizontal.
D) all of the above
E) a and b

Question 35

Using the following information to complete questions 8 - 11.
Top-It-Off Inc. produces gold pen and pencil sets for executives' desks. Revenue and labor productivity data are given in the following table. The components cost $15.00. The wage rate is constant at $7.50 per hour.
Given the above information, what is the Marginal Revenue Product of Labor?

A) 250, 222.5, 67.5, 30, 2.5, 4
B) 280, 260, 90, 45, 10, 2.60
C) 310, 297.5, 112.5, 60, 17.5, -56
D) 340, 335, 135, 75, 25, -86
E) 360, 225, 84, 53, 10, -10

Question 36

Using the following information to complete questions 8 - 11.
Top-It-Off Inc. produces gold pen and pencil sets for executives' desks. Revenue and labor productivity data are given in the following table. The components cost $15.00. The wage rate is constant at $7.50 per hour.
Given the above information, how much output should the firm produce and at what price?

A) Q = 85, P = 20
B) Q = 85, P = 45
C) Q = 75, P = 45
D) Q = 75, P = 60
E) None of the Above

Question 37

If two variable inputs are related and utilizing more of one decreases the marginal product of the other, then these inputs are:

A) equal.
B) substitutes.
C) complementary.
D) variable.
E) constant.

Question 38

The net marginal revenue of input "a" multiplied by the marginal product of input "a" is equal to the:

A) marginal revenue product of input "a"
B) marginal product of input "a"
C) net marginal revenue of input "a"
D) marginal cost of input "a"
E) net marginal cost of input "a"

Question 39

The net marginal revenue of an input is equal to the marginal revenue received from selling one more unit of output:

A) reduced by the cost of raw materials required for its production.
B) reduced by the cost of component parts required for its production.
C) reduced by the cost of intermediate products required for its production.
D) all of the above.
E) a and c

Question 40

The term which is used to describe a market structure that is characterized by one buyer of some particular product or service is:

A) monopsony
B) oligopsony
C) monopsonistic competition
D) bilateral monopoly
E) unilateral monopsony

Question 41

The Box Shop, Inc produces corrugated boxes for the do-it-yourself moving market. It wholesales these boxes to firms such as Ryder and U-Haul and sells them only by the case. Revenue and labor productivity data for the most common size they sell are given in the following table. The price shown is for a case of this size box. The component cost per case is $.50. The wage rate is constant at $4.50 per hour.
a. Complete the table.
b. How many workers should the Box Shop employ? Why?
c. How much output should the Box Shop produce and what price should they charge?

Question 42

In a monopsonistic input market, the firm buying the input knows that the price of the input will be determined by:

A) the quantity of output that it produces.
B) the marginal revenue product of the input.
C) the net marginal revenue of the input.
D) the quantity that it purchases.
E) the marginal cost of the input.

Question 43

The following table shows worker, quantity of output, and output price information for a mechanical pencil manufacturer. The cost of materials used in each mechanical pencil $1.50.
a. Complete the following table
b. How many mechanical pencils should the firm produce to maximize profits if the wage rate is $7.50 per hour? Why?

Question 44

A firm has the following short run total product curve:

where labor, L, is the only variable input and TP_L is the total output produced per day.
a. If the firm is operating in the short run with K fixed at K = 5, the average price for a unit of its output is $5.00, and average raw materials cost per unit is $3.00, what is the equation for the marginal revenue product of input L?
b. If the firm must pay a market-determined wage rate of $90.00 per day for each unit of labor hired, how much labor should it employ?
c. How many units of output will be produced per day? Fractional units are not permitted - round UP to the next whole unit.)
d. If the firm's daily fixed costs total $118.00, what will be its total profit per day?

Question 45

In a monopsonistic input market the marginal cost of another unit of an input is greater than its price because it is assumed that:

A) the firm pays a constant price to get an additional unit of input per time period.
B) the firm has to pay a higher price to get an additional unit of input per time period.
C) the firm pays a lower price for each additional unit of input per time period.
D) the firm has to pay a higher price to get a lower number of units of input per time period.
E) the firm has to pay a constant price to get a constant number of units of input per time period.

Question 46

A sunglasses manufacturer has the relationship between the number of workers per hour and the total product per hour shown in the following table. The relationship between output produced per hour and the price at which it can be sold is also given. Assume that the cost of materials used in each pair is $1.50.
a. Complete the table.
b. If the wage rate is $9.00 per hour, how many workers should the firm hire to maximize profits? Why?

Question 47

Suppose that the total product of labor per Day) for a firm is given by:
TP_L = 88L - 7.5L²
a. Find the MP_L function.
b. How many workers should the firm employ if the wage rate is $156.00 per day and the NMR_L is $12.00?

Question 48

Suppose that the total product of labor per Hour) for a firm is given by:
TP_L = 30L - .3L²
a. Find the MP_L function.
b. How many workers should the firm employ if the wage rate is $24.00 per hour and the NMR_L is $40.00?

Question 49

Suppose that the total product of labor per hour) for a restaurant is given by
TP_L = 77L - 2.5L².
a. Find the MP_L function.
b. How many workers should the restaurant employ if the wage rate is $10.00 per hour, the average price of a meal is $8.00, and the average cost per meal of the food ingredients is $3.00? Why?

Question 50

A commercial scissors manufacture has the relationship between the number of workers per hour and the total product per hour shown in the following table. The relationship between output produced per hour and the price at which it can be sold is also given. Assume that the cost of materials used in each pair is $.50.
a. Complete the table
b. If the wage rate is $3.50 per hour, how many workers should the firm hire to maximize profits? Why?

Question 51

A firm has the following short run total product curve:
TP_L = Q = 10.5L + 1.5L² - .0625L³
where labor, L, is the only variable input and TP_L is the total output produced per day. Assume the firm faces a fixed price of $16.00 per unit for its output. Also assume that only whole units of output are possible.
a. If the firm must pay a market-determined wage rate of $60.00 per day for each unit of labor hired, how much labor should it employ?
b. If the firm's daily fixed costs total $1000.00, what will be its total profit per day?

Question 52

Cool Breezes, Inc. produces small, personal, battery operated fans. Revenue and labor productivity data are given in the following table. The components cost $1.75. The wage rate is constant at $7.00 per hour.
a. Complete the table.
b. How many workers should Cool Breezes, Inc. employ? Why?
c. How much output should Cool Breezes produce and what price should they charge?

Question 53

Suppose that the total product of labor per Hour) for a firm is given by:
TP_L = 26L - .5L²
a. Find the MP_L function.
b. How many workers should the firm employ if the wage rate is $25.00 per hour and the NMR_L is $25.00?

Question 54

The following table shows worker, quantity of output, and output price information for a manufacturer of 10-key calculators. The cost of materials used in each is $4.00.
a. Complete the following table.
b. How many calculators should the firm produce to maximize profits if the wage rate is $6.00 per hour? Why?

Question 55

The profit-maximizing rule for employment of a variable input in a monopsonistic input market is to employ that input until:

A) its marginal revenue product is equal to the marginal cost.
B) its net marginal revenue is equal to the marginal cost.
C) its marginal revenue product is greater than the marginal cost.
D) its net marginal revenue is greater than the marginal cost.
E) its marginal revenue product is less than the marginal cost.

Question 56

The term which is used to describe a market structure where there is only one buyer and one seller of an input is:

A) monopsony
B) oligopsony
C) monopsonistic competition
D) bilateral monopoly
E) unilateral monopsony

Question 57

Suppose that the total product of labor per hour) for a firm manufacturing small calculators is given by
TP_L = 144L - 1.5L².
a. Find the MP_L function.
b. How many workers should the restaurant employ if the wage rate is $18.00 per hour, the average price of a calculator is $8.00, and the average cost per calculator of the raw materials is $2.00? Why?

Question 58

The term which is used to describe a market structure where there are many buyers of a differentiated product is:

A) monopsony
B) oligopsony
C) monopsonistic competition
D) bilateral monopoly
E) unilateral monopsony

Question 59

The term which is used to describe a market structure where there are few buyers, or a few dominant buyers of some particular product or service is:

A) monopsony
B) oligopsony
C) monopsonistic competition
D) bilateral monopoly
E) unilateral monopsony