Question 1

Which of the following statements is true of the industry demand for labor?
A)The lesser the elasticity of the final product,the higher the elasticity of the industry labor demand curve.
B)The longer the time period allowed for adjustment,the lesser the elasticity of the industry labor demand curve.
C)The lower the substitutability of inputs,the higher the elasticity of the industry labor demand curve.
D)The lower the supply elasticity of other inputs,the lesser the elasticity of the industry labor demand curve.

Accepted Answer

The labor demand curve of an industry becomes less elastic when the supply elasticity of other inputs, such as capital and technology, become less elastic. This means that if the industry has limited options to substitute other inputs for labor, then the labor demand curve becomes more inelastic, as the industry will have to continue to demand the same amount of labor regardless of changes in wages or other inputs.

Question 2

Which of the following would be a consequence of a fall in the price of the final product in a competitive industry?
A)Each firm's labor demand curve will shift downward.
B)The marginal value product of labor is higher for each firm.
C)The marginal cost curve for each firm will shift outward away from the origin.
D)The employment of labor in the industry will increase.

Accepted Answer

A fall in the price of the final product in a competitive industry would lead to a decrease in revenue for each firm, which would then lead them to reduce their level of output. This would result in a decrease in the demand for labor, which would shift downward along each firm's labor demand curve. As a result, the quantity of labor demanded by each firm would decrease, leading to a decrease in employment in the industry.

Question 3

Electricians are employed in multiple industries in an economy.Given other things unchanged,an increase in the demand for electricians in the construction industry will lead to:
A)a reduction in the employment of electricians in other industries.
B)a reduction in the employment of plumbers and architects in the construction industry.
C)a downward sloping labor supply curve in the construction industry.
D)an decrease in the total number of electricians in the economy.

Accepted Answer

When the demand for electricians in the construction industry increases, it is likely that electricians will shift from other industries to meet the demand. This will result in a reduction in the employment of electricians in other industries.

Question 4

For a competitive industry,the market input demand curve for labor is:
A)the same as the individual firm's input demand curve.
B)obtained by vertically aggregating the individual firms' input demand curves.
C)the horizontal summation of the various industry demand curves for the input.
D)more inelastic the higher the substitutability between inputs.

Accepted Answer

The answer of For a competitive industry,the market input demand...

Question 5

The shape of a competitive firm's input demand curve when all inputs are variable implies that:
A)the output effect of an input price change outweighs the substitution effect of an input price change leading to lower employment at a lower price.
B)the substitution effect of an input price change outweighs the output effect leading to a lower employment at a lower price.
C)the substitution and output effect of an input price change both lead to higher employment at a lower price.
D)the substitution and output effect of an input price change both lead to higher employment at a higher price.

Accepted Answer

The substitution effect occurs when a firm substitutes cheaper inputs for more expensive ones, increasing employment of the cheaper input. The output effect happens when lower input prices reduce production costs, leading to increased output and higher demand for all inputs, including the now cheaper input. Both effects together imply higher employment of an input when its price decreases.

Question 6

Which of the following will lead to a relatively inelastic industry demand for labor?
A)An increase in the use of the fixed input
B)An increase in the wage rate
C)A relatively inelastic demand for the output
D)A reduction in the price of output

Accepted Answer

A relatively inelastic demand for the output means that changes in the price of the output have little effect on the quantity demanded, which in turn leads to a relatively inelastic industry demand for labor as the quantity of labor demanded is also unaffected by changes in price. The other options are not related to the elasticity of demand for labor. An increase in the use of the fixed input (A) may lead to a higher demand for labor in the short run but not necessarily in the long run. An increase in the wage rate (B) may lead to a decrease in demand for labor as firms seek to substitute cheaper inputs, but this depends on the elasticity of demand for labor. A reduction in the price of output (D) may lead to an increase in the quantity demanded and therefore an increase in demand for labor, but again this depends on the elasticity of demand for labor.

Question 7

Assume that there is an outward shift in the demand for chairs.Which of the following best describes the short-run response within the competitive market for chairs?
A)Existing firms and new firms will expand output by using more of all inputs.
B)Existing firms will keep fixed inputs unchanged and expand output using the variable inputs.
C)Existing firms will increase their profits by producing the same output at a higher price.
D)Existing firms cannot increase production in the short-run so the price of chairs will increase.

Accepted Answer

In the short-run, existing firms will keep their fixed inputs unchanged, such as their size of factory or number of workers, and will expand their output by using more variable inputs, such as more materials or more labor. This will allow them to increase the quantity of chairs supplied to the market in response to the increase in demand. Option A is incorrect because it implies that all firms will expand their output by using more of all inputs, including fixed inputs which cannot be changed in the short-run. Option C is incorrect because higher prices will attract new firms to enter the market, reducing the profits of existing firms in the long-run. Option D is incorrect because if existing firms cannot increase their production, there will be a shortage of chairs, which will result in an even higher price for chairs.

Question 8

Suppose the labor supply curve facing all industries in an economy is a vertical line.Given this,which of the following statements about the supply curve of labor confronting any particular industry is true?
A)The supply curve of labor confronting any particular industry will also be vertical because the aggregate supply curve is a horizontal summation of industry supply curves.
B)The supply curve of labor confronting any particular industry will also be inelastic because the stock of labor in the economy is fixed in the short-run.
C)The supply curve of labor confronting any particular industry will be elastic because labor can shift easily from one industry to another.
D)The supply curve of labor confronting any particular industry will be elastic because labor and capital are perfectly substitutable in the short-run.

Accepted Answer

The answer of Suppose the labor supply curve facing all...

Question 9

The long-run industry demand for labor is likely to be the most elastic when:
A)wages form a significant portion of total costs.
B)firms in the industry face L-shaped isoquants.
C)the supply of other inputs is elastic.
D)the product demand curve is inelastic.

Accepted Answer

The answer of The long-run industry demand for labor is...

Question 10

For which of the following is the supply curve of labor likely to be the most inelastic?
A)All industries in the economy
B)A single industry
C)An individual firm
D)A monopolist

Accepted Answer

The answer of For which of the following is the...

Question 11

Which of the following is least likely to influence the price elasticity of demand for an input?
A)The input price ratio
B)The price elasticity of demand for the output
C)The rate of substitution of one input for the other
D)The elasticity of supply of other inputs

Accepted Answer

The answer of Which of the following is least likely...

Question 12

The input demand curve of an industry is relatively inelastic when:
A)the demand for the final product is relatively elastic.
B)the marginal rate of technical substitution is lower.
C)the supply curves of other inputs is relatively inelastic.
D)price of the input is higher than the price of other inputs.

Accepted Answer

The elasticity of input demand depends on the elasticity of demand for the final product and the elasticity of supply of other inputs. When the supply curves of other inputs are relatively inelastic, it becomes difficult for firms in the industry to substitute away from the input in question, making the demand for the input relatively inelastic.

Question 13

The input demand curve is likely to be relatively more elastic when:
A)the demand for the final product is relatively elastic.
B)it is difficult to substitute the input for another input in production.
C)the supply of other inputs is relatively inelastic.
D)demand for the input is measured over a short time period.

Accepted Answer

If the demand for the final product is relatively elastic, it means that consumers are highly sensitive to changes in its price. As a result, firms producing that product will have less pricing power and be more likely to change their input demands in response to changes in input prices. This makes the input demand curve more elastic.

Question 14

For a competitive firm,with a change in the price of labor,_____ demand curve for labor.
A)the substitution effect reinforces the output effect,leading to a downward-sloping
B)the substitution effect reinforces the output effect,leading to an upward-sloping
C)the substitution effect offsets the output effect,leading to a downward-sloping
D)the output effect offsets the substitution effect,leading to an upward-sloping

Accepted Answer

A change in the price of labor will lead to both a substitution effect and an output effect. The substitution effect is the decision to use more or less labor in response to the change in the wage rate relative to the price of other inputs. The output effect is the impact of the wage rate on the firm's output level. In the case of a competitive firm, the substitution effect reinforces the output effect, leading to a downward-sloping demand curve for labor. This is because when the wage rate increases, the firm substitutes away from labor and toward other inputs, reducing the quantity of labor demanded. Similarly, a decrease in the wage rate would lead firms to substitute toward labor and increase the quantity of labor demanded.

Question 15

Which of the following is true of a competitive industry's labor demand curve?
A)The industry labor demand curve is a horizontal summation of the individual firm's demand curves for labor.
B)The industry labor demand curve is less elastic than the individual firm's demand curves for labor.
C)The industry labor demand curve is a vertical summation of the individual firm's demand curves for labor.
D)The industry demand curve shows that at a lower price,less of the input is employed in the industry.

Accepted Answer

The answer of Which of the following is true of...

Question 16

Which of the following conditions would be associated with a more elastic input demand curve?
A)A less elastic demand for the final product
B)A higher ease of input substitution in the production process
C)A less elastic supply curve for other inputs
D)A shorter time period

Accepted Answer

A higher ease of input substitution in the production process means that it is easier for the firm to switch to a different input if the price of the current input increases. This means that the firm's demand for the current input is more elastic, as it is easier for them to adjust their input usage in response to price changes.

Question 17

Which of the following will not determine the elasticity of demand for bank tellers,which is a competitive input industry?
A)The elasticity of demand for banking services
B)The availability of automated teller machines (ATMs)
C)The marginal product of ATM technicians
D)The elasticity of supply for computers used to record banking transactions

Accepted Answer

The marginal product of ATM technicians does not directly determine the elasticity of demand for bank tellers, as it relates more to the productivity of individuals servicing ATMs rather than the factors influencing the demand for bank tellers themselves.

Question 18

The industry demand for an input is called derived demand because:
A)the demand for the input is derived from the demand for the final product.
B)the industry's input demand curve is the same as the firm's input demand curve.
C)the demand for the input is derived from the supply of other inputs.
D)the industry's input demand curve coincides with the marginal product curve of the input.

Accepted Answer

Derived demand refers to the demand for an input that is derived from the demand for the final product. In other words, the demand for the input is driven by the production of the final product. For example, the demand for steel is derived from the demand for cars, buildings, and other steel-using products.

Question 19

Suppose that a firm that produces widgets employs welders as the labor input for production.The demand for welders is:
A)derived from the total industry output of widgets.
B)represented by the marginal value product curve if the firm is monopolist in the output market.
C)derived from the demand curve for widgets faced by the firm.
D)represented by the marginal revenue product curve if the firm is competitive.

Accepted Answer

The answer of Suppose that a firm that produces widgets...

Question 20

Which of the following is true of a competitive industry's demand curve for labor?
A)The demand curve for labor will shift in the same direction as the demand for the product.
B)The industry demand is found by summing each firm's marginal value product.
C)The industry demand for labor is generally more elastic than the individual demand for labor.
D)The demand curve for labor is upward-sloping due to diminishing marginal returns.

Accepted Answer

The answer of Which of the following is true of...

Quiz 16: Employment and Pricing of Inputs

Which of the following statements is true of the industry demand for labor?

Which of the following would be a consequence of a fall in the price of the final product in a competitive industry?

Electricians are employed in multiple industries in an economy.Given other things unchanged,an increase in the demand for electricians in the construction industry will lead to:

For a competitive industry,the market input demand curve for labor is:

The shape of a competitive firm's input demand curve when all inputs are variable implies that:

Which of the following will lead to a relatively inelastic industry demand for labor?

Assume that there is an outward shift in the demand for chairs.Which of the following best describes the short-run response within the competitive market for chairs?

Suppose the labor supply curve facing all industries in an economy is a vertical line.Given this,which of the following statements about the supply curve of labor confronting any particular industry is true?

The long-run industry demand for labor is likely to be the most elastic when:

For which of the following is the supply curve of labor likely to be the most inelastic?

Which of the following is least likely to influence the price elasticity of demand for an input?

The input demand curve of an industry is relatively inelastic when:

The input demand curve is likely to be relatively more elastic when:

For a competitive firm,with a change in the price of labor,_____ demand curve for labor.

Which of the following is true of a competitive industry's labor demand curve?

Which of the following conditions would be associated with a more elastic input demand curve?

Which of the following will not determine the elasticity of demand for bank tellers,which is a competitive input industry?

The industry demand for an input is called derived demand because:

Suppose that a firm that produces widgets employs welders as the labor input for production.The demand for welders is:

Which of the following is true of a competitive industry's demand curve for labor?