Question 1

What happens to the MPP of labor when the price of the good produced increases?

Accepted Answer

The Marginal Physical Product (MPP) of labor is a measure of the additional output produced by an additional unit of labor, independent of the price of the good. Therefore, changes in the price of the good do not directly affect the MPP of labor.

Question 2

If the price of a motorcycle is $5,000, and workers who make motorcycles earn a wage rate of $50, how many workers will be hired when the labor market is in equilibrium?

Accepted Answer

The answer of If the price of a motorcycle is...

Question 3

The marginal physical product of labor increases when more laborers are added to production, although it eventually falls as laborers are continually added. The explanation for the initial increase is the

Accepted Answer

The initial increase in the marginal physical product of labor when more laborers are added can be attributed to the gains from the division of labor and specialization. This allows workers to focus on specific tasks, improving efficiency and productivity until a point of diminishing returns is reached.

Question 4

Marginal physical product is measured in terms of

Accepted Answer

Marginal physical product refers to the additional output (units of product) that results from the use of one more unit of a variable input, such as labor, while keeping other inputs constant. It is not measured in terms of labor, total output ratios, total value, or monetary terms, but rather in the additional units of output produced.

Question 5

To determine the marginal physical product of labor, you must

Accepted Answer

Marginal physical product of labor refers to the additional output produced by one more unit of labor, with all other factors of production held constant. This means calculating how much extra output (not revenue) an additional worker contributes, assuming everything else in the production process remains unchanged.

Question 6

If the MPP of labor is positive, the total revenue will grow with each additional worker hired. Yet firms stop hiring before MPP reaches zero because

Accepted Answer

Firms stop hiring before the marginal physical product (MPP) of labor reaches zero because they aim to maximize their gains from hiring, which occurs when the marginal revenue product (MRP) equals the wage rate. This point of optimization does not coincide with MPP reaching zero.

Question 7

What is the relationship between the MRP and MPP of labor?

Accepted Answer

MRP (Marginal Revenue Product) is calculated by multiplying the MPP (Marginal Physical Product) of labor by the price of the good. This reflects the additional revenue generated from hiring one more unit of labor.

Question 8

Which of the following would cause the demand for labor to change?

Accepted Answer

Changes in the price of the good can affect the demand for labor because if the price of the good increases, firms may demand more labor to produce more of the good, shifting the demand curve for labor.

Question 9

The number of workers hired by a firm at a specific wage rate can be determined if you know the

Accepted Answer

The answer of The number of workers hired by a...

Question 10

If every worker earns the same wage rate, then

Accepted Answer

In a competitive labor market, firms hire workers up to the point where the marginal revenue product (MRP) of the last worker hired equals the wage rate. This means only the last worker hired generates an MRP equal to the wage rate.

Question 11

In the late 1970s, people feared that the introduction of computers into the workplace would create enormous unemployment because secretaries and data entry clerks would be unemployed. This was a baseless fear, at least for the long run, because

Accepted Answer

Technologies that enhance productivity, like computers, tend to increase the demand for labor in the long run by creating new job opportunities and sectors, despite initial fears of unemployment.

Question 12

Suppose workers at the bakery discover that a new firm making baseballs came to town and is offering higher wage rates. What will happen in the labor market for bakers?

Accepted Answer

When a new firm offers higher wages, workers may leave their current jobs for the new opportunities, reducing the supply of labor in their original jobs (in this case, bakers). This is represented by a leftward shift in the labor supply curve for bakers.

Question 13

George is a kitchen designer at Home Depot. What might cause George's supply curve of labor to shift to the left?

Accepted Answer

If George wins the lottery, he may choose to work less or not at all, causing his supply curve of labor to shift to the left as he no longer needs to work for income.

Question 14

A noncompeting labor market is best illustrated by the market for

Accepted Answer

A noncompeting labor market refers to a situation where the skills required for jobs are so specialized that the workers do not directly compete with each other for positions. Concert violinists represent a highly specialized skill set, making their labor market noncompeting compared to the more generalized skills required in the other options.

Question 15

A violation of the W = MRP ethic occurs when

Accepted Answer

The W = MRP (Wage equals Marginal Revenue Product) ethic suggests that wages should be determined by the economic value of the worker's contribution to the production process. A violation occurs when wages are determined by factors unrelated to economic contribution, such as discrimination based on gender or race, as indicated in option E.

Question 16

When road construction crews work at less than 100 percent of effort during their work days in order to create overtime work for themselves, they are creating what economists describe as a

Accepted Answer

The answer of When road construction crews work at less...

Question 17

A principal-agent problem occurs when

Accepted Answer

A principal-agent problem arises when there is a conflict of interest between a principal (such as an employer) and an agent (such as an employee), where the agent may pursue personal interests that do not align with the principal's goals, potentially undermining market efficiency.

Question 18

Some careers, such as flight attendants, nurses, and primary school teachers, used to be considered "women's jobs." Other jobs, such as airline pilots, physicians, and school principals, were traditionally considered to be "men's jobs" and were not generally open to women. If women are allowed increased access to the jobs that had traditionally been considered to be "men's," explain the effects on wage rates.

Accepted Answer

The answer of Some careers, such as flight attendants, nurses,...

Question 19

Give an example of someone who works in a noncompeting labor market. Explain yourchoice.

Accepted Answer

The answer of Give an example of someone who works...

Question 20

Will the imposing of a minimum wage lead to a larger increase in the unemployment rate if the laborsupply curve is relatively price elastic or relatively price inelastic?

Accepted Answer

The answer of Will the imposing of a minimum wage...

Quiz 15: Wage Rates in Competitive Labor Markets