Deck 10: Input Demand: the Labor and Land Markets

Question 1

A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur?

A) Capital will be substituted for labor.
B) Labor will be substituted for capital.
C) Output increases as do the prices of capital and labor.
D) Output decreases as does the price of cars.

Answer 1

A

Question 2

Factors of production that can be used together to enhance the other's productivity are

A) substitutable inputs.
B) complementary inputs.
C) duplicate inputs.
D) proportionate inputs.

Answer 2

B

Question 3

If labor and capital are complementary in production and a technological advance increases the productivity of capital, then, ceteris paribus,

A) labor productivity is likely to fall.
B) labor productivity is likely to rise.
C) wages are likely to fall.
D) Both A and C are correct.

Answer 3

B

Question 4

Demand for the services of Derek Jeter is

A) horizontal.
B) unrelated to his true productivity.
C) an output demand.
D) derived from the demand for Yankees tickets when Jeter plays.

Question 5

Salaries of NFL quarterbacks, like Tom Brady, are

A) too high.
B) related to the additional revenues team owners expect to enjoy as a result of having them on the team roster.
C) the result of perfectly competitive markets.
D) All of the above are correct.

Question 6

The Ernie Egg Store hires workers to paint eggs. The store sells the eggs for $3. The marginal revenue product of this store's fifth worker is $21. The marginal product of the fifth worker is

A) 0.14 eggs.
B) 7 eggs.
C) 36 eggs.
D) indeterminate from this information.

Question 7

The demand for inputs is a derived demand because

A) it does not come from competitive markets.
B) it depends on the demand for outputs.
C) it is derived from nature.
D) it is derived from production.

Question 8

If a pet grooming salon hires an additional groomer, that worker can groom 4 additional pets per day. The average grooming fee is $25. The most the salon would be willing to pay that groomer is

A) $4 per day.
B) $25 per day.
C) $100 per day.
D) indeterminate with the given information.

Question 9

A decrease in the wage rate will change

A) only the amount of labor hired.
B) the amount of labor employed, and it may also change the amount of other inputs employed.
C) the price the firm charges for the product, but it will not affect the demand for any of the inputs.
D) the firm's profit-maximizing level output, but not its usage of inputs.

Question 10

If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10, the firm's marginal revenue product is

A) $1.00.
B) $10.00.
C) $100.00.
D) $1,000.00.

Question 11

The Package Store hires workers to wrap packages. The store sells this service for $5. The marginal revenue product of this store's fifth worker is $50. The marginal product of the fifth worker is

A) 0.01 package.
B) 1 package.
C) 10 packages.
D) indeterminate from this information.

Question 12

The marginal revenue product

A) is the product of the marginal product of labor and the price of the output.
B) eventually increases as labor input increases.
C) measures the benefit to the firm from hiring an additional unit of labor.
D) Both A and C are correct.

Question 13

Refer to the data provided in Table 10.1 below to answer the following questions.
Table 10.1 $\begin{array}{l}\begin{array}{cccc}\text { Total Labor Units}& \text {Total Product}&\text { Marginal Product of }&\text {Price per }\\\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \\\hline 0 & 0 & -- & -- \\1 & 20 & 20 & \$ 5 \\2 & 50 & 30 & 5 \\3 & 75 & 25 & 5 \\4 & 95 & 20 & 5 \\5 & 110 & 15 & 5\end{array}\end{array}$

-Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is maximizing profits if he will hire ________ employee(s).

A) one
B) two
C) four
D) five

Question 14

Labor and capital are substitutes in production. If labor becomes more educated, then, ceteris paribus,

A) capital is substituted for labor.
B) labor is substituted for capital.
C) output decreases as does the rental rate.
D) output increases as does the price of the output.

Question 15

The idea that the demand for auto workers stems from the demand for automobiles is

A) the value of the marginal product of auto workers.
B) derived demand.
C) indirect demand.
D) output demand.

Question 16

Refer to the data provided in Table 10.1 below to answer the following questions.
Table 10.1 $\begin{array}{l}\begin{array}{cccc}\text { Total Labor Units}& \text {Total Product}&\text { Marginal Product of }&\text {Price per }\\\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \\\hline 0 & 0 & -- & -- \\1 & 20 & 20 & \$ 5 \\2 & 50 & 30 & 5 \\3 & 75 & 25 & 5 \\4 & 95 & 20 & 5 \\5 & 110 & 15 & 5\end{array}\end{array}$

-Refer to Table 10.1. The marginal revenue product of the ________ worker is $150.

A) second
B) third
C) fourth
D) fifth

Question 17

The demand for ________ is a ʺderived demand.ʺ

A) ice cream cones on a hot day
B) tax-free municipal bonds
C) a hair stylist by a salon owner
D) a birthday cake for your brother

Question 18

The marginal revenue product of labor is

A) the additional revenue a firm earns by employing one additional unit of labor.
B) the additional profit a firm earns by employing one additional unit of labor.
C) the marginal product of capital times the price of labor.
D) the additional revenue the firm makes by selling one unit of labor.

Question 19

When a large amount of output is produced per unit of the input, the input is said to exhibit

A) high productivity.
B) low productivity.
C) marginal productivity.
D) derived productivity.

Question 20

Refer to the data provided in Table 10.1 below to answer the following questions.
Table 10.1 $\begin{array}{l}\begin{array}{cccc}\text { Total Labor Units}& \text {Total Product}&\text { Marginal Product of }&\text {Price per }\\\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \\\hline 0 & 0 & -- & -- \\1 & 20 & 20 & \$ 5 \\2 & 50 & 30 & 5 \\3 & 75 & 25 & 5 \\4 & 95 & 20 & 5 \\5 & 110 & 15 & 5\end{array}\end{array}$

-Refer to Table 10.1. The marginal revenue product of the fourth worker is

A) $5.
B) $20.
C) $100.
D) $475.

Question 21

Tony's Lawn Service uses only one variable input, fertilizer. The firm's demand curve for fertilizer in the short run is the input's

A) total product curve.
B) marginal product curve.
C) marginal revenue product curve.
D) total cost curve.

Question 22

If the supply of labor decreases, which of the following events will occur?

A) The wage rate will fall and firms will increase employment up until the point where MRP equals the new wage rate.
B) The wage rate will fall and firms will decrease employment to the point where MRP equals the new wage rate.
C) The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate.
D) The wage rate will increase and firms will increase employment up until the point where MRP equals the new wage rate.

Question 23

If the price of the product produced by labor increases, the marginal revenue product of labor curve will

A) be unaffected because productivity of labor has not changed.
B) shift to the left.
C) shift to the right.
D) become more elastic.

Question 24

A firm will continue hiring labor as long as the MRP of labor ________ the market wage rate.

A) is greater than or equal to
B) is less than
C) is equal to
D) determines

Question 25

You have been hired by a data processing firm to provide economic advice. The owner of the firm tells you that the firm's only variable input is the number of data-entry operators. The hourly wage for data-entry operators is $15.00. The marginal revenue product curve for data-entry operators reaches its maximum at three workers with a marginal revenue product of $12.00. What advice would you give this firm?

A) Hire three data-entry operators so as to minimize the amount of money the firm will lose.
B) Shut down immediately, as the firm is not able to cover all of its variable costs.
C) Increase the wage rate paid to data-entry operators so that their marginal revenue product will increase.
D) Produce as much as possible so as to maximize the difference between the wage paid to data-entry operators and their marginal revenue product.

Question 26

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } \begin{array} { c } \text { Total Labor Units } \\\text { (employees) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (frames per day) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Frame }\end{array} \\\hline 0 & 0 & \$ 10 \\1 & 10 & \$ 10 \\2 & 30 & \$ 10 \\3 & 55 & \$ 10 \\4 & 70 & \$ 10 \\5 & 82 & \$ 10\end{array}$$

-Refer to Table 10.2. The most firms would be willing to pay per worker and hire three total workers is

A) $120.
B) $150.
C) $200.
D) $250.

Question 27

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } \begin{array} { c } \text { Total Labor Units } \\\text { (employees) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (frames per day) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Frame }\end{array} \\\hline 0 & 0 & \$ 10 \\1 & 10 & \$ 10 \\2 & 30 & \$ 10 \\3 & 55 & \$ 10 \\4 & 70 & \$ 10 \\5 & 82 & \$ 10\end{array}$$

-Refer to Table 10.2. Diminishing returns to labor start with the ________ worker.

A) second
B) third
C) fourth
D) fifth

Question 28

If the supply of labor increases, which of the following events will occur?

A) The wage rate will fall and firms will increase employment up until the point where MRP equals the new wage rate.
B) The wage rate will fall and firms will decrease employment to the point where MRP equals the new wage rate.
C) The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate.
D) The wage rate will increase and firms will increase employment up until the point where MRP equals the new wage rate.

Question 29

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } \begin{array} { c } \text { Total Labor Units } \\\text { (employees) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (frames per day) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Frame }\end{array} \\\hline 0 & 0 & \$ 10 \\1 & 10 & \$ 10 \\2 & 30 & \$ 10 \\3 & 55 & \$ 10 \\4 & 70 & \$ 10 \\5 & 82 & \$ 10\end{array}$$

-Refer to Table 10.2. If workers are paid $150 per day, then the firm is profit maximizing when it hires ________ workers.

A) two
B) three
C) four
D) five

Question 30

Firms will employ an input up to the point where

A) the wage rate equals the productivity of capital.
B) its marginal cost equals its marginal product.
C) the input's price equals its marginal revenue product.
D) the input's price equals its marginal product.

Question 31

Refer to the data provided in Table 10.1 below to answer the following questions.
Table 10.1 $\begin{array}{l}\begin{array}{cccc}\text { Total Labor Units}& \text {Total Product}&\text { Marginal Product of }&\text {Price per }\\\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \\\hline 0 & 0 & -- & -- \\1 & 20 & 20 & \$ 5 \\2 & 50 & 30 & 5 \\3 & 75 & 25 & 5 \\4 & 95 & 20 & 5 \\5 & 110 & 15 & 5\end{array}\end{array}$

-Refer to Table 10.1. The maximum payment to labor per day that this profit-maximizing T-shirt manufacturer would be willing to pay to hire three workers per day is

A) $15.
B) $75.
C) $125.
D) $200.

Question 32

You have been hired by a data processing firm to provide economic advice. The owner of the firm tells you that the firm's only variable input is the number of data-entry operators. The hourly wage for data-entry operators is $10.00. The marginal revenue product curve for data-entry operators reaches its maximum at three workers with a marginal revenue product of $12.00. What advice would you give this firm?

A) Hire three data-entry operators so as to maximize profits.
B) Shut down immediately, as the firm is not able to cover all of its variable costs.
C) Decrease the wage rate paid to data-entry operators so that their marginal revenue product will decrease.
D) Hire data-entry operators until the marginal revenue product is equal to the wage-which will occur when more than three operators are employed.

Question 33

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } \begin{array} { c } \text { Total Labor Units } \\\text { (employees) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (frames per day) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Frame }\end{array} \\\hline 0 & 0 & \$ 10 \\1 & 10 & \$ 10 \\2 & 30 & \$ 10 \\3 & 55 & \$ 10 \\4 & 70 & \$ 10 \\5 & 82 & \$ 10\end{array}$$

-Refer to Table 10.2. Marginal revenue product of the ________ worker is $120.

A) second
B) third
C) fourth
D) fifth

Question 34

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } \begin{array} { c } \text { Total Labor Units } \\\text { (employees) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (frames per day) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Frame }\end{array} \\\hline 0 & 0 & \$ 10 \\1 & 10 & \$ 10 \\2 & 30 & \$ 10 \\3 & 55 & \$ 10 \\4 & 70 & \$ 10 \\5 & 82 & \$ 10\end{array}$$

-Refer to Table 10.2. Marginal revenue product of the ________ worker is $250.

A) second
B) third
C) fourth
D) fifth

Question 35

The formula for the marginal revenue product of labor (L is for labor, X is the output) is

A) MPL/PX.
B) PX/MPL.
C) (MPL)(MRX).
D) MPL + PX.

Question 36

The marginal cost of a unit of labor in a perfectly competitive labor market is

A) its average MRP.
B) equal to product price.
C) the market wage rate.
D) equal to MRP.

Question 37

Sally's Sandwiches produces sandwiches using one variable input-labor. Sally's Sandwiches is a ________ in the labor market and a ________ in the sandwich market.

A) producer; consumer
B) consumer; producer
C) consumer; consumer
D) producer; producer

Question 38

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1
Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should

A) do nothing because it is maximizing profits.
B) reduce employment to 15 workers to increase profits.
C) reduce employment to 14 workers to increase profits.
D) increase employment to 17 workers to increase profits.

Question 39

Liu's Potato Chips is a perfectly competitive firm currently employing 30 workers. The marginal revenue product of the 30th worker is $7.00 per hour. The wage rate is $8.00 per hour. To increase profits, this firm should

A) decrease employment until the MRP of labor equals $8.00.
B) increase employment until the MRP of labor equals $8.00.
C) continue hiring 30 workers because the firm earns a surplus of $1.00 on each worker hired.
D) increase the price of potato chips so that the marginal revenue product increases to $8.00 per hour.

Question 40

Refer to the data provided in Table 10.2 below to answer the following questions.
Table 10.2 $$\begin{array} { c c c } \begin{array} { c } \text { Total Labor Units } \\\text { (employees) }\end{array} & \begin{array} { c } \text { Total Product } \\\text { (frames per day) }\end{array} & \begin{array} { c } \text { Price per } \\\text { Frame }\end{array} \\\hline 0 & 0 & \$ 10 \\1 & 10 & \$ 10 \\2 & 30 & \$ 10 \\3 & 55 & \$ 10 \\4 & 70 & \$ 10 \\5 & 82 & \$ 10\end{array}$$

-Refer to Table 10.2. The firm currently employs 4 workers at the market wage of $120 per worker per day. If the firm wants to maximize its profits, it should

A) hire fewer workers
B) hire more workers.
C) make no adjustments as it is already employing the profit maximizing number of workers.
D) shut down since it is incurring a loss.

Question 41

The law of ________ explains why a marginal revenue product schedule eventually declines.

A) diminishing marginal opportunity costs
B) increasing marginal returns
C) increasing marginal opportunity costs
D) diminishing marginal returns

Question 42

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 10 bushels. What would you advise this farmer to do?

A) Do nothing because the wage rate and the marginal product of the last worker hired are equal.
B) Reduce employment because the wage paid is less than the marginal revenue product.
C) Increase employment because the wage paid is less than the marginal revenue product.
D) Reduce the product price so that the wage and marginal revenue product will be equal.

Question 43

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, and the farmer employs five workers. If the farmer is maximizing his profits, then the marginal product of the fifth worker is ________.

A) 0.2 bushels
B) 5 bushels
C) 20 bushels
D) indeterminate from the given information.

Question 44

Refer to the information provided in Figure 10.3 below to answer the questions that follow. Figure 10.3
Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1; after the firm is fully able to adjust all inputs, the firm will hire ________ units of labor to maximize profits.

A) I0
B) I1
C) I2
D) I3

Question 45

To get a profit maximizing firm in a perfectly competitive labor market to hire another worker, the firm will need to

A) lower the wage rate paid to that last worker hired and also to all previous workers hired.
B) raise the wage rate paid to that last worker hired and also to all previous workers hired.
C) lower the wage rate paid to the last worker hired only.
D) raise the wage rate paid to the last worker hired only.

Question 46

If the wage rate is less than the marginal revenue product of labor, the firm should ________ to maximize profits.

A) hire less labor and produce less output
B) hire less labor and produce more output
C) hire more labor and produce less output
D) hire more labor and produce more output

Question 47

Suppose the supply of labor schedule increases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit maximizing representative firm will

A) hire more workers.
B) hire fewer workers.
C) hire the same number of workers.
D) substitute capital for labor.

Question 48

Refer to the information provided in Figure 10.4 below to answer the questions that follow. Figure 10.4
Refer to Figure 10.4. Firms will

A) hire 175 units of labor at a market wage of $15.
B) hire 100 units of labor at a market wage of $15 and have a surplus of $5 per unit of labor.
C) hire 100 workers at a wage of $25.
D) indeterminate from the given information.

Question 49

Refer to the information provided in Figure 10.3 below to answer the questions that follow. Figure 10.3
Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1, if the firm does not change the amount of capital it employs, the firm will move to Point ________ to maximize profits.

A) B
B) C
C) E
D) F

Question 50

Assume that labor is the only variable input and that the payment made to labor is denoted as W. The marginal product of labor can be stated as

A) (W) × (MC).
B) W/MC.
C) MC/W.
D) TC/W.

Question 51

If Tie-Dyed T-Shirts is currently employing labor so that the wage is less than the marginal revenue product of labor, it must also be true that

A) total revenues would be greater than total costs.
B) the wage is greater than marginal cost.
C) the price of the product must be less than marginal cost.
D) the price of the product must be greater than marginal cost.

Question 52

An increase in technology will cause a marginal revenue product of labor curve to

A) be unaffected because the productivity of labor has not changed.
B) shift to the left.
C) shift to the right
D) become more inelastic.

Question 53

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2
Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1 A profit-maximizing firm should ________ the amount of output produced and ________ its demand for labor.

A) increase; increase
B) increase; decrease
C) decrease; decrease
D) keep constant; increase

Question 54

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 3 bushels. What would you advise this farmer to do?

A) Do nothing because the wage rate and the marginal product of the last worker hired are equal.
B) Reduce employment because the wage paid is more than the marginal revenue product.
C) Increase employment because the wage paid is less than the marginal revenue product.
D) Reduce the product price so that the wage and marginal revenue product will be equal.

Question 55

Refer to the information provided in Figure 10.3 below to answer the questions that follow. Figure 10.3
Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1. The firm's MRPL curve will shift from MRPL at K1 to MRPL at K2 because

A) the factor substitution effect will cause the firm to substitute capital for the higher-priced labor.
B) the supply of labor decreased, and therefore the productivity of labor decreased.
C) the output effect led to a decrease in the demand for capital, which in turn decreased the productivity of labor.
D) the firm is no longer maximizing profits.

Question 56

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2
Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1. A likely explanation for this is that

A) the productivity of a variable input declined.
B) the price of a variable input decreased.
C) the demand for the firm's product decreased.
D) the supply of a variable input decreased.

Question 57

A firm competing in a perfectly competitive labor market desires to maximize ________.

A) marginal profit, not total profit
B) total profit, not marginal profit
C) marginal profit, not average profit
D) average profit, not marginal profit

Question 58

The demand for any factor of production in a competitive industry depends on

A) its productivity and upon the value of its output in the marketplace.
B) its productivity and the productivity of all other inputs.
C) the productivity of all the other inputs and how these inputs are valued in the marketplace.
D) the amount of the factor that is used and the amounts of all the other factors that are used.

Question 59

Refer to the information provided in Figure 10.3 below to answer the questions that follow. Figure 10.3
Refer to Figure 10.3. If labor supply is given by S0 and the firm is using K1 units of capital, this firm should hire ________ units of labor to maximize profit.

A) I0
B) I1
C) I2
D) I3

Question 60

If capital and labor are complementary inputs and the firm increases the amount of capital employed in production, the marginal revenue product of labor will

A) decrease.
B) increase.
C) remain constant because the amount of labor was not changed.
D) either increase, decrease or remain constant depending on how complementary labor and capital are in production.

Question 61

Productivity of an input is the amount of output produced per unit of input.

Question 62

A firm's marginal cost curve in a perfectly competitive product market is the same as its ________ curve. Similarly, a firm's marginal revenue product curve in a perfectly competitive labor market is the same as its ________ curve.

A) demand; supply
B) supply; demand
C) demand; demand
D) supply; supply

Question 63

A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $1 a bushel, the wage rate is $12, the farmer employs six workers and the marginal product of the sixth worker is 10. What would you advise this farmer to do?

A) Do nothing because the wage rate and the marginal product of the last worker hired are equal.
B) Reduce employment because the wage paid is greater than the marginal revenue product.
C) Increase employment because the wage paid is less than the marginal revenue product.
D) Reduce the product price so that the wage and marginal revenue product will be equal.

Question 64

The return to any factor of production that is in fixed supply is

A) pure profit.
B) pure rent.
C) producer surplus.
D) factor surplus.

Question 65

The marginal revenue product of labor curve will always shift to the right if

A) the wage rate rises.
B) product demand decreases and product price decreases.
C) product demand increases and product price increases.
D) the price of capital rises.

Question 66

In the product market, changes in technology affect the marginal ________ of a unit of output. In the labor market, changes in technology affect the marginal ________ of a unit of labor input.

A) cost; cost
B) revenue; revenue
C) revenue product; cost
D) cost; revenue product

Question 67

The price of any factor of production in a competitive market depends on the value of the final product it is used to produce.

Question 68

To produce one unit of output, a firm can use either one unit of capital or one unit of labor. In this case, capital and labor are

A) complementary inputs.
B) substitutable inputs.
C) both complementary and substitutable inputs.
D) unrelated inputs.

Question 69

If product demand increases and product price increases,

A) the marginal revenue product curve will shift to the right.
B) the marginal revenue product curve will shift to the left.
C) the firm will move up the marginal revenue product curve and hire fewer units of the input.
D) the firm will move down the marginal revenue product curve and hire more units of the input.

Question 70

Related to the Economics in Practice on page 217: According to the Economics in Practice, firms where managers had more extensive training experienced

A) increasing wage rates.
B) a decrease in the marginal product of labor.
C) increased productivity.
D) a decrease in the marginal revenue product of labor.

Question 71

Assuming that labor is the only variable input if society values a good ________ it costs firms to hire the workers to produce that good, the good ________ be produced.

A) more than; will
B) less than; will
C) more than; will not
D) equal to what; will not

Question 72

Input demand is derived demand in the sense that it is dependent upon the productivity of the input.

Question 73

MPL multiplied by PX is the ________ while the wage rate is the ________, where L denotes labor and X denotes output.

A) cost of a marginal unit of labor; value of labor's marginal product
B) value of labor's marginal product; cost of a marginal unit of labor
C) marginal revenue of a unit of output; marginal cost of a unit of output
D) marginal cost of a unit of output; marginal revenue of a unit of output

Question 74

Assuming labor is the only variable factor of production, production of a good will occur

A) as long as the marginal revenue product of labor is positive.
B) if society values a good more than it costs firms to hire the workers to produce the good.
C) as long as the product's price is greater than the marginal revenue product of labor.
D) if the marginal cost of a unit of output equals the marginal revenue product of labor.

Question 75

At its current level of production and input employment, a firm's marginal products of labor and capital are 5 units of output. The market wage is $10 per unit of labor and the price per unit of capital is $25. The firm could increase its profits by

A) hiring more labor and less capital.
B) hiring more capital and less labor.
C) hire less capital and less labor.
D) making no changes since it is already employing the profit maximizing combination of inputs.

Question 76

Assume that automobiles are a normal good. An increase in income will

A) shift the marginal revenue product curve of auto workers to the left.
B) move a firm down the marginal revenue product curve of auto workers.
C) shift the marginal revenue product curve of auto workers to the right.
D) have no effect on the marginal revenue product curve of auto workers.

Question 77

If a firm could increase profits by hiring less labor and more capital, then

A) the last dollar spent on labor must yield a smaller increase in output than the last dollar spent on capital.
B) the last dollar spent on labor must yield a larger increase in output than the last dollar spent on capital.
C) the price of labor exceeds the price of capital.
D) the optimal production technique must be capital intensive.

Question 78

If a product's demand decreases as its supply simultaneously increases, the marginal revenue product curve will

A) shift to the right.
B) shift to the left.
C) remain unchanged.
D) either shift to the left, shift to the right, or remain unchanged depending upon what happens to product price.

Question 79

Households will supply labor as long as the wage they receive is less than the value of their leisure time.

Question 80

The price of a good will be demand determined if

A) the demand for the good is unit elastic.
B) the demand for the good is perfectly inelastic.
C) the supply of the good is perfectly elastic.
D) the supply of the good is perfectly inelastic.