Question 1

The labor market for teachers in a small, isolated community that has one school district would be best described as a(n)

Accepted Answer

In this scenario, there is only one employer (the school district) in the area, which means it has significant power to influence the wages and working conditions of teachers, and there are limited alternative job opportunities. This situation is known as a monopsony, where there is only one buyer in the labor market.

Question 2

A firm that hires labor and sells its product both in purely competitive markets will

Accepted Answer

A firm that hires labor in a purely competitive market will face a perfectly elastic supply of labor, meaning the firm can hire all the labor it wants at the going wage rate. However, the firm's demand for labor will still be downward sloping as it seeks to hire additional units of labor as long as the marginal cost of labor is less than the marginal revenue product of labor. On the other hand, the firm's product will also face a downward-sloping demand curve as it operates in a competitive market where consumers have substitutes for the product.

Question 3

If the wage rate in a purely competitive labor market increases, it will cause the

Accepted Answer

In a purely competitive labor market, an increase in the wage rate means that the cost of hiring an additional unit of labor (marginal resource cost) increases for a single competitive firm, causing the marginal resource cost curve to shift up.

Question 4

The individual firm that hires labor under competitive conditions faces a labor supply curve that

Accepted Answer

In a competitive labor market, an individual firm is a wage taker and faces a perfectly elastic labor supply curve at the market wage rate.

Question 5

Which of the following is characteristic of a labor market that is a monopsony?

Accepted Answer

In a monopsony, the firm is the sole or dominant employer in the labor market, so it faces an upward-sloping labor supply curve. This means that to hire additional workers, the firm must pay a higher wage rate, which varies directly with the number of workers it employs.

Question 6

A firm finds that it must increase wages to attract extra workers. The firm will hire labor up to the point where the marginal

Accepted Answer

A firm will hire labor up to the point where the marginal revenue product (MRP) equals the marginal cost of hiring an extra worker, which is the wage rate. This ensures that the cost of hiring an additional worker is justified by the revenue generated by that worker.

Question 7

Given the table for a competitive firm that is maximizing profits, if the marginal revenue product of the last worker hired is $150 and three workers are employed per day, the price of a unit of output must be $\begin{array}{|c|c|}
\hline \text { Number of Workers }\
\text { Employed Per Day } & \text { Total Firm Output Per } \
&\text { Day }\
\hline 1 & 0 \
\hline 2 & 5 \
\hline 3 & 20 \
\hline 4 & 35 \
\hline 5 & 38\
\hline 
\end{array}$

Accepted Answer

The answer of Given the table for a competitive firm...

Question 8

Suppose two workers can harvest $46 worth of apples per day and three workers can harvest $60 worth. On the basis of this information, we can say that the

Accepted Answer

To find the marginal revenue product of each worker, we need to first determine the total product of two workers and three workers. Let x represent the marginal product of each of the first two workers, and y represent the marginal product of the third worker.

2x = $46
x = $23

3x + y = $60
Substitute x with $23
3($23) + y = $60
y = $14

Therefore, the marginal revenue product of the third worker is $14. Hiring the third worker would increase total revenue by $14, so it would be beneficial to hire them.

Question 9

A market where there is only a single buyer is called a(n)

Accepted Answer

A market where there is only a single buyer is called a monopsony. Monopsony is the opposite of a monopoly, where there is only a single seller in the market. Oligopoly refers to a market structure where a small number of firms dominate the market, while dominant firm refers to a situation where there is a leading firm in the market with a significant market share.

Question 10

Professional sports leagues, like the NFL and the NBA, are good examples of monopsony because

Accepted Answer

Monopsony refers to a market situation where there is only a single buyer of a good or service. In the case of professional sports leagues like the NFL and the NBA, they are the only employers of professional athletes in their respective sports. As a result, they have significant bargaining power over the athletes, and the athletes may have limited bargaining power due to the lack of alternative employers. Therefore, the correct answer is B.

Question 11

The reason that the supply curve for labor in a purely competitive market slopes upward is because

Accepted Answer

The law of supply states that as the price of a good or service increases, the quantity supplied of that good or service will increase as well. In the case of labor, the "price" is the wage rate. As higher wages are offered, more workers are willing to supply their labor. Additionally, as the number of workers in a certain industry or job increases, the opportunity cost of leaving that job to work elsewhere becomes greater. Therefore, employers must offer higher wages to entice workers away from their current jobs. This means that the supply curve for labor in a purely competitive market will slope upward because higher wages are required to encourage additional labor supply.

Question 12

The monopsonistic power of a firm in a labor market tends to be enhanced by

Accepted Answer

An increasing immobility of workers to other jobs or locations can enhance the monopsonistic power of a firm in a labor market because workers have fewer alternatives to seek employment elsewhere, which can allow the firm to have more control over setting wages.

Question 13

For a monopsonist in the labor market, the marginal resource cost of labor is

Accepted Answer

In a monopsony, the firm is the sole buyer of labor, so it must increase wages to attract additional workers. This means the marginal resource cost (MRC) of hiring an additional worker is higher than the wage rate, as it includes the higher wages paid to all workers.

Question 14

A firm's resource input, total output of labor, and product price schedules are given in the table. If labor is the only variable input, how much labor should the firm employ if the wage rate is $15 per day? $\begin{array} { | c | c | c| }

\hline\text { Urits of Lab or } &\text { Total } &\text { Price of Good }\
&\text { Output/Day }& ( \$ ) \
\hline 2 & 20 & \$ 10 \
\hline 3 & 30 & 9 \
\hline 4 & 38 & 8 \
\hline 5 & 46 & 7 \
\hline 6 & 54 & 6 \
\hline 7 & 62 & 5 \
\hline
\end{array}$

Accepted Answer

The answer of A firm's resource input, total output of...

Question 15

If the supply of labor in a purely competitive labor market increases, then the product

Accepted Answer

In a purely competitive labor market, individual employers are wage takers, meaning they have no control over the wage rate and must accept the market wage. As the supply of labor increases, the market wage will decrease, resulting in lower labor costs for the employer. This incentivizes employers to hire more workers, which means the supply curve for a single employer will shift to the right, as they will be willing to hire more workers at a lower wage.

Question 16

A firm pays the same wage rate to all its workers. At present, 10 workers are employed at $50 per day. Wages are subsequently raised to $55 per day in order to attract an extra worker. Thus, the marginal labor cost per day is

Accepted Answer

The marginal labor cost is the additional cost incurred by hiring one more worker. Initially, the total wage cost for 10 workers is $500 (10 workers x $50). After hiring the 11th worker at $55 per day, the total wage cost becomes $605 (11 workers x $55). The marginal labor cost is the increase in total wage cost, which is $605 - $500 = $105.

Question 17

A firm operating in a purely competitive labor market has the marginal revenue product schedule shown in the table. $\begin{array}{l}

\begin{array} { | c | c | } 
\hline\text { Warkers}& \text {MRP }\
\hline 1 & \$ 24 \
\hline 2 & 22 \
\hline 3 & 20 \
\hline 4 & 18 \
\hline 5 & 16 \
\hline 6 & 14 \
\hline 7 & 12 \
\hline
\end{array}
\end{array}$ If the wage rate decreases from $17 to $13, by how much will the firm expand employment?

Accepted Answer

The firm will hire workers until the marginal revenue product (MRP) equals the wage rate. At a wage rate of $17, the firm hires 4 workers (MRP = $18). When the wage rate decreases to $13, the firm hires 6 workers (MRP = $14). Thus, the firm expands employment by 2 workers.

Question 18

The marginal cost of a productive resource is equal to the price of the resource if a firm is

Accepted Answer

The marginal cost of a productive resource is equal to the price of the resource in a perfectly competitive market, where firms are price takers in the resource market. This is because in a perfectly competitive market, the price of a resource is determined by the intersection of the supply and demand curves, and each firm takes the price as given. Therefore, the firm's decision to use an additional unit of the resource (i.e. the marginal cost) is equal to the market price of the resource itself.

Question 19

A profit-maximizing firm operates in purely competitive product and resource markets, with the resource and production schedules shown in the table. $\begin{array} { | c | c |} 
\hline\text { Workers } & \begin{array} { c } 
\text { Total } \
\text { Production }
\end{array} \
\hline 8 & 440 \
\hline 7 & 410 \
\hline 6 & 370 \
\hline 5 & 320 \
\hline 4 & 260 \
\hline 3 & 180 \
\hline 2 & 110 \
\hline 1 & 55 \
\hline
\end{array}$ The product price is $10 per unit and the cost per worker is $540. How many workers will the firm employ?

Accepted Answer

The answer of A profit-maximizing firm operates in purely competitive...

Question 20

In a certain labor market, workers are required to have a certain skill-set. There are many workers who have the skill-set, but they can only find employment in one company. That one company is called a

Accepted Answer

A monopsony occurs when there is only one buyer in a market, and in this case, the one company is the only employer for workers with the required skill-set. This gives the company significant control over the wages and working conditions offered to these workers. A pure monopoly occurs when there is only one seller in a market, which is not the case here since there may be other companies in the market that do not require the specific skill-set. A monopolistic competitor occurs when there are many firms in a market selling similar but differentiated products, and a natural monopoly occurs when one company can produce at a lower cost than any potential rivals due to large economies of scale. Neither of these scenarios describes the situation described in the question.

Quiz 17: Wage Determination