Question 1

Assume that labor and capital are the only two inputs used in production.Given that both inputs are variable,which of the following would lead to a movement along the labor demand curve?

Accepted Answer

A movement along the labor demand curve occurs due to a change in the price (wage rate) of labor. A change in the productivity of labor or an increase in the price of the final product would shift the labor demand curve. A decrease in the employment of capital would have an impact on the production function and shift the production function, but it would not directly lead to a movement along the labor demand curve.

Question 2

Which of the following will lead to an upward shift of a competitive firm's marginal value product curve for labor?

Accepted Answer

The marginal value product curve for labor will shift upward if the productivity of labor increases, which can happen through an increase in the amount of other inputs used. This makes each unit of labor more productive, thereby increasing the value of the marginal product of labor.

Question 3

Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,an increase in the price of capital would:

Accepted Answer

An increase in the price of capital would decrease the amount of capital the firm can afford for any given level of labor, thus decreasing the vertical intercept of the isocost line.

Question 4

Use the following figure  to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market.

-Refer to Figure 16-2.The firm will move from point B to point C when:

Accepted Answer

The answer of Use the following figure  to answer...

Question 5

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQS1U1B11S1U1B0 and IQS1U1B12S1U1B0,for a competitive firm.

-In Figure 16-1.The move from point A to point B represents the _____ of an input price change.

Accepted Answer

The move from point A to point B represents the substitution effect of an input price change because the firm has substituted one input for another in response to the change in relative input prices while maintaining the same level of output. The output level remains constant along the isoquant IQS1U1B0, so there is no output effect. The income effect is not relevant in the context of an input price change. The effect of diminishing returns is a long-run phenomenon related to the marginal productivity of inputs, whereas the substitution effect is a short-run phenomenon related to changes in relative input prices.

Question 6

When all inputs are variable,a competitive firm's labor demand curve is:

Accepted Answer

The answer of When all inputs are variable,a competitive firm's...

Question 7

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQS1U1B11S1U1B0 and IQS1U1B12S1U1B0,for a competitive firm.

-Refer to Figure 16-1.As compared to point B,the firm uses _____ at point A.

Accepted Answer

Moving from point B to point A, the isoquant curve shifts to the right, indicating an increase in output. Since the slope of the isoquant is negative, the firm must use more of one input (in this case, labor) and less of the other input (capital) to maintain the same level of output. Therefore, the firm uses more labor and less capital at point A than at point B.

Question 8

Given that labor is on the horizontal axis,_____ represents the substitution effect of an increase in the wage rate.

Accepted Answer

The answer of Given that labor is on the horizontal...

Question 9

Suppose the marginal value product curve of labor is drawn with wage on the vertical axis and quantity of labor on the horizontal axis.With an increase in the employment of other inputs,the marginal value product curve of labor will _____.

Accepted Answer

When other inputs are increased, the productivity of labor typically increases because labor can use these inputs to produce more output. This increase in productivity raises the value of the marginal product of labor, causing the marginal value product curve to shift upward.

Question 10

Given that w is the wage rate and MP_Lis the marginal product of labor (the only variable input),w/MP_L shows:

Accepted Answer

This expression represents the cost of hiring one more unit of labor, as it is the ratio of the wage rate to the marginal product of labor. It shows how much it costs to produce one more unit of output by hiring an additional worker, taking into account the worker's marginal productivity.

Question 11

Given that labor is on the vertical axis,_____ represents the output effect of an increase in the wage rate.

Accepted Answer

An increase in the wage rate makes labor more expensive relative to capital, leading firms to substitute labor with capital. This substitution effect is represented by a downward movement along the expansion path, as firms adjust their input mix to maintain production at a lower cost.

Question 12

Two inputs,labor and capital,are considered substitutes if:

Accepted Answer

When two inputs are considered substitutes, increasing the quantity of one input (labor, in this case) decreases the marginal product of the other input (capital). This is because the firm can substitute more of the cheaper input (labor) for the more expensive one (capital), reducing the reliance on and the effectiveness of the latter in production.

Question 13

"The fact that a college professor who has a higher marginal product earns a lower wage than a football coach,is proof that sports is valued more than education." Assuming that the markets for professors and coaches are competitive,one can conclude that this conclusion is essentially:

Accepted Answer

The statement overlooks other factors that influence wages, such as the price of the final product. College sports generate billions of dollars in revenue, and football coaches are key players in this industry. Higher demand from consumers for the sports industry generates higher revenue for football coaches, which is why they earn higher wages compared to college professors. However, this does not necessarily mean that sports are valued more than education.

Question 14

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQS1U1B11S1U1B0 and IQS1U1B12S1U1B0,for a competitive firm.

-Refer to Figure 16-1.The firm was initially at point A.It will move to point B if:

Accepted Answer

According to the figure, moving from point A to point B requires an increase in the amount of capital and a decrease in the amount of labor. This means the firm needs to substitute capital for labor. As a result, an increase in the wage rate (the price of labor) will encourage the firm to use less labor and more capital, which can lead to the movement from point A to point B. Therefore, the best choice is B.

Question 15

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQS1U1B11S1U1B0 and IQS1U1B12S1U1B0,for a competitive firm.

-Refer to Figure 16-1.Which of the following is true at point C?

Accepted Answer

Point C represents the least cost method of producing output Q₁ because it is the point where the isoquant (IQ₁) is tangent to the isocost line. This means that the firm is producing the desired amount of output while minimizing its total cost of production. Therefore, option C is the correct answer. Option A is incorrect because the maximum marginal product of labor and capital would be at the point where the isoquant is steepest, which is not at point C. Option B is incorrect because there is no information in the figure about marginal revenue. Option D is incorrect because the isoquant curves are not symmetric, indicating that the firm does not operate under constant returns to scale.

Question 16

Two inputs,labor and capital,are considered complements if:

Accepted Answer

In economics, two inputs are considered complements if using more of one input increases the productivity (marginal product) of the other input. Therefore, if increasing the quantity of labor increases the marginal product of capital, labor and capital are complements. This is because their use together in production is more productive than their use separately.

Question 17

If a competitive firm hires workers to a point where the wage exceeds the MVP_L:

Accepted Answer

If the wage paid by the firm exceeds the marginal value product of the last worker hired, it means that the firm is paying more than what it is receiving in return. This situation leads to a decrease in profits. Therefore, reducing the level of employment by firing one or more workers will increase profits because it will reduce the wage bill without significantly affecting total output.

Question 18

Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,a fall in the price of labor would:

Accepted Answer

A fall in the price of labor would increase the relative cost of capital, so to achieve the same level of output, the firm would need to use more capital and less labor. Therefore, the firm's isocost line would shift inward toward the origin, resulting in a decrease in the horizontal intercept of the line.

Question 19

Given that the rental rate of capital is $4,000 per month and the wage rate is $8,000 per month,what is the slope of the isocost line when labor is measured on the horizontal axis and capital on the vertical axis?

Accepted Answer

The slope of the isocost line is given by the ratio of the wage rate to the rental rate of capital, which is $8,000 / $4,000 = 2.

Question 20

Use the following figure  to answer the question : Figure 16-1 :shows the isoquants,IQS1U1B11S1U1B0 and IQS1U1B12S1U1B0,for a competitive firm.

-Refer to Figure 16-1.The move from point B to point C represents the _____ of an input price change.

Accepted Answer

The move from point B to point C represents the output effect of an input price change, as it indicates a change in the quantity of output produced due to a change in the cost of inputs.

Quiz 16: Employment and Pricing of Inputs

Assume that labor and capital are the only two inputs used in production.Given that both inputs are variable,which of the following would lead to a movement along the labor demand curve?

Which of the following will lead to an upward shift of a competitive firm's marginal value product curve for labor?

Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,an increase in the price of capital would:

Use the following figure to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. -Refer to Figure 16-2.The firm will move from point B to point C when:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -In Figure 16-1.The move from point A to point B represents the _____ of an input price change.

When all inputs are variable,a competitive firm's labor demand curve is:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.As compared to point B,the firm uses _____ at point A.

Given that labor is on the horizontal axis,_____ represents the substitution effect of an increase in the wage rate.

Suppose the marginal value product curve of labor is drawn with wage on the vertical axis and quantity of labor on the horizontal axis.With an increase in the employment of other inputs,the marginal value product curve of labor will _____.

Given that w is the wage rate and MP_Lis the marginal product of labor (the only variable input) ,w/MP_L shows:

Given that labor is on the vertical axis,_____ represents the output effect of an increase in the wage rate.

Two inputs,labor and capital,are considered substitutes if:

"The fact that a college professor who has a higher marginal product earns a lower wage than a football coach,is proof that sports is valued more than education." Assuming that the markets for professors and coaches are competitive,one can conclude that this conclusion is essentially:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.The firm was initially at point A.It will move to point B if:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.Which of the following is true at point C?

Two inputs,labor and capital,are considered complements if:

If a competitive firm hires workers to a point where the wage exceeds the MVP_L:

Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,a fall in the price of labor would:

Given that the rental rate of capital is $4,000 per month and the wage rate is $8,000 per month,what is the slope of the isocost line when labor is measured on the horizontal axis and capital on the vertical axis?

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.The move from point B to point C represents the _____ of an input price change.

Quiz 16: Employment and Pricing of Inputs

Assume that labor and capital are the only two inputs used in production.Given that both inputs are variable,which of the following would lead to a movement along the labor demand curve?

Which of the following will lead to an upward shift of a competitive firm's marginal value product curve for labor?

Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,an increase in the price of capital would:

Use the following figure to answer the question : Figure 16-2 :shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. -Refer to Figure 16-2.The firm will move from point B to point C when:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ1 and IQ2,for a competitive firm. -In Figure 16-1.The move from point A to point B represents the _____ of an input price change.

When all inputs are variable,a competitive firm's labor demand curve is:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ1 and IQ2,for a competitive firm. -Refer to Figure 16-1.As compared to point B,the firm uses _____ at point A.

Given that labor is on the horizontal axis,_____ represents the substitution effect of an increase in the wage rate.

Suppose the marginal value product curve of labor is drawn with wage on the vertical axis and quantity of labor on the horizontal axis.With an increase in the employment of other inputs,the marginal value product curve of labor will _____.

Given that w is the wage rate and MPL is the marginal product of labor (the only variable input) ,w/MPL shows:

Given that labor is on the vertical axis,_____ represents the output effect of an increase in the wage rate.

Two inputs,labor and capital,are considered substitutes if:

"The fact that a college professor who has a higher marginal product earns a lower wage than a football coach,is proof that sports is valued more than education." Assuming that the markets for professors and coaches are competitive,one can conclude that this conclusion is essentially:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ1 and IQ2,for a competitive firm. -Refer to Figure 16-1.The firm was initially at point A.It will move to point B if:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ1 and IQ2,for a competitive firm. -Refer to Figure 16-1.Which of the following is true at point C?

Two inputs,labor and capital,are considered complements if:

If a competitive firm hires workers to a point where the wage exceeds the MVPL:

Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,a fall in the price of labor would:

Given that the rental rate of capital is $4,000 per month and the wage rate is $8,000 per month,what is the slope of the isocost line when labor is measured on the horizontal axis and capital on the vertical axis?

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ1 and IQ2,for a competitive firm. -Refer to Figure 16-1.The move from point B to point C represents the _____ of an input price change.

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -In Figure 16-1.The move from point A to point B represents the _____ of an input price change.

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.As compared to point B,the firm uses _____ at point A.

Given that w is the wage rate and MP_Lis the marginal product of labor (the only variable input) ,w/MP_L shows:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.The firm was initially at point A.It will move to point B if:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.Which of the following is true at point C?

If a competitive firm hires workers to a point where the wage exceeds the MVP_L:

Use the following figure to answer the question : Figure 16-1 :shows the isoquants,IQ₁ and IQ₂,for a competitive firm. -Refer to Figure 16-1.The move from point B to point C represents the _____ of an input price change.