Question 1

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

When there are more substitute inputs available, it is easier for firms to switch to other inputs in response to changes in their prices, leading to a more elastic input demand curve.

Question 2

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

An increase in demand for electricians in the construction industry will result in a shift of labor towards the construction industry, leading to a reduction in the employment of electricians in other industries. This is because electricians cannot be in two places at the same time, and there is a limited supply of electricians in the economy. Therefore, an increase in demand in one sector will cause a shift in supply towards that sector, reducing the employment of electricians in other industries.

Question 3

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 4

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

When the demand for the final product is relatively elastic, it means that consumers are sensitive to changes in the price of the final product. This, in turn, can put pressure on the firms to keep their costs low, including the cost of inputs. As a result, the input demand curve is likely to be relatively more elastic, as firms will be more responsive to changes in input prices.

Question 5

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 6

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 supply curve of labor confronting any particular industry will be elastic because labor can shift easily from one industry to another.

Question 7

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 8

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 means that the demand for an input is derived from the demand for the final product. In other words, the demand for the input depends on the demand for the output it helps to produce. This makes choice A the correct answer. Choice B is incorrect because the industry's input demand curve may differ from the firm's input demand curve due to differences in market structure or technological considerations. Choice C is also incorrect because the demand for an input is not derived from the supply of other inputs, but rather from the demand for the final product. Finally, choice D is incorrect because the industry's input demand curve is not necessarily the same as the marginal product curve of the input, which reflects the productivity of additional units of the input.

Question 9

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 10

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 11

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 elasticity of the industry labor demand curve is influenced by the supply elasticity of other inputs. When the supply elasticity of other inputs is low, firms have less flexibility to substitute away from labor when its price increases, making the labor demand curve less elastic. This is because firms cannot easily replace labor with other inputs if those inputs cannot be readily adjusted.

Question 12

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 the revenue generated per unit of output. Since the marginal value product of labor is dependent on the price of the output, a decrease in the price would lower the marginal value product of labor, causing each firm's labor demand curve to shift downward. This reflects a reduced willingness to pay for labor at each level of employment, given the lower revenue from selling the product.

Question 13

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 the quantity demanded of the output is not very responsive to changes in price. This implies that firms in the industry have limited ability to adjust the quantity of output produced in response to changes in the wage rate or other input costs. Therefore, a change in the wage rate is unlikely to have a substantial impact on the industry's demand for labor, making it relatively inelastic. An increase in the use of the fixed input (A) or a reduction in the price of output (D) could potentially affect the industry's demand for labor, but these factors do not necessarily lead to a more or less elastic demand curve for labor.

Question 14

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 15

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 demand for labor in a competitive industry is derived from the demand for the product it produces. If the demand for the product increases, the demand for labor will also increase, shifting the labor demand curve in the same direction.

Question 16

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 supply curve of labor is most inelastic for all industries in the economy because the total labor supply is fixed in the short run, and workers cannot easily switch between different types of jobs or industries.

Question 17

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 18

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

When the supply curves of other inputs are relatively inelastic, it means that there are limited substitutes for that input. In this situation, firms cannot easily switch to other inputs in response to changes in the price of the input in question. As a result, the quantity demanded of the input will not change much in response to changes in its price, making the demand curve relatively inelastic.

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 demand for welders is derived from the demand curve for widgets faced by the firm because the firm needs welders to produce widgets, and the demand for these widgets determines how many welders are needed.

Question 20

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 but expand output using variable inputs. This means that they will increase their utilization of inputs such as labor and raw materials to produce more chairs. This will result in an increase in the quantity of chairs supplied, but not an increase in the number of firms in the market or the size of their plants. As a result, the price of chairs will increase until the market reaches a new equilibrium.

Quiz 16: Employment and Pricing of Inputs

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

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:

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

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

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

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?

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

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

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

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

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?

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

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

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

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:

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

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?