Deck 26: Input Markets and the Origins of Class Conflict

Question 1

Monopsonistic exploitation occurs in any situation in which a factor of production is paid the same as the value of its MRP.

Answer 1

False

Question 2

A market with only one seller and one buyer is a bilateral monopoly.

Answer 2

True

Question 3

A typical labor supply curve shows that, as the wage rate ____________, a worker will choose to devote _______ hours to labor.

A) increases, less
B) increases, more
C) decreases, more

Answer 3

increases, more

Question 4

Refer to Exhibit 26-1. Which point represents no consumption in the present, saving everything for the future?

A) A
B) B
C) C

Question 5

The MPP curve tells us how much extra output, in physical units, will be produced as the firm adds more and more units of labor.

Question 6

A firm with 3 workers produces 8 units of output. When the firm hires 1 additional worker, output increases to 12 units of output. MPP is equal to

A) 4 units
B) 12 units
C) 1 unit

Question 7

A firm's marginal physical product the new workers will produce times the marginal revenue the additional units of output will earn is known as marginal revenue product.

Question 8

Compared to the interest that an entrepreneur must pay on a loan or the opportunity cost of using her or his own funds, the entrepreneur's return on capital must be

A) less
B) greater than or equal to
C) greater

Question 9

The return on a factor above the amount necessary to entice that factor into the production process is called rent.

Question 10

Demand for labor comes from individual

A) workers
B) firms
C) consumers

Question 11

Total expenditure is the change in a firm's total wage bill that results from its hiring of one additional unit of labor.

Question 12

The skills of labor are called human capital.

Question 13

For most firms, the revenues the firms earn are _______________ the total wages the firms pay their workers.

A) greater than
B) less than
C) equal to

Question 14

The optimal quantity of labor rule indicates that a profit-maximizing firm will hire labor up to the point at which the MRP it receives from the last unit of labor hired is _______________ the MC of labor.

A) equal to
B) greater than
C) less than

Question 15

The optimal quantity of labor rule indicates that a profit-maximizing firm will hire labor up to the point at which the marginal revenue product it receives from the last unit of labor hired is equal to one half the marginal cost of labor.

Question 16

The sum of the individual supply curves for all the people who have savings available for investment is the

A) market supply curve for loanable funds
B) market supply curve for labor
C) MRS between consumption today and tomorrow

Question 17

The demand curve for labor at a single firm is the same as the firm's marginal

A) physical product curve
B) cost curve
C) revenue product curve

Question 18

Demand for labor that is derived from the process of profit maximization is called derived demand.

Question 19

An alternating offer sequential bargaining institution is a structured method of bargaining where each bargainer takes turns making offers. If an offer is accepted, the bargaining stops. If the offer is not accepted, the bargaining proceeds to the next round but, due to the delay, the value of what is being bargained over shrinks.

Question 20

If entrepreneur Anita Matsumi invests her own money to build capital equipment for her jam-making business, that investment incurs

A) an opportunity cost
B) no cost
C) only a small filing fee

Question 21

Demand for loanable funds arises from

A) current or potential producers who need the funds to purchase capital goods
B) individual consumers who save a portion of their income and deposit that portion in a bank
C) Both answers are correct

Question 22

The change in a firm's total wage bill that results from its hiring of one additional unit of labor is called

A) marginal expenditure
B) total expenditure
C) average expenditure

Question 23

Describe the two ways that an entrepreneur can obtain funds to build capital equipment and how the entrepreneur decides whether or not to invest.

Question 24

Why might workers and owners disagree about the fraction of revenues that should be paid to workers as wages?

Question 25

How is the equilibrium labor market wage determined?

Question 26

Why is the price of land entirely determined by the demand curve?

Question 27

When a bilateral monopoly exists, the actual market wage will depend on the

A) intersection of supply and demand
B) marginal expenditure and marginal revenue
C) intangible bargaining power of the two parties

Question 28

A monopsony is a market with a single

A) seller
B) buyer
C) firm

Question 29

Let C = the cost of capital investment today and R₁ = the return in one year. The rate of return on the investment equals

A) (R₁ /C) - 1
B) R₁
C) R₁ /(1 + π)

Question 30

Marginal productivity theory states how free-market economies determine the returns on the factors of production, whereby each factor is paid its marginal

A) revenue product
B) revenue
C) physical product

Question 31

The distribution across the factors of production is called the

A) Pareto-optimal distribution of income
B) functional distribution of income
C) marginal distribution of income

Question 32

At the equilibrium of the market for loanable funds, the marginal rate of return is just equal to the

A) rate of return on the last profitable project undertaken by society
B) market rate of interest
C) Both answers are correct

Question 33

Evaluate the alternating offer sequential bargaining institution.

Question 34

In the real world, all markets __________ perfectly competitive.

A) are
B) are not
C) must be

Question 35

The total wage a monopsonist pays for labor is known as

A) marginal expenditure
B) total expenditure
C) average expenditure

Question 36

A firm not paying the same wage rate on all units of labor it employs is known as

A) smart business operations
B) wage discrimination
C) illegal behavior

Question 37

One interpretation of the Neelin, Sonnenschein, Spiegel experiment is that the subjects were able to perform backward induction when the horizon of a game was only

A) five periods
B) two periods
C) three periods

Question 38

When the total number of periods in the alternating offer sequential bargaining game is finite, there is a unique subgame perfect equilibrium in which the first offer made is accepted. The equilibrium offer is equal to the sum of the decrements in the pie when the first player makes her or his offer. This description is the

A) pie exhaustion theorem
B) alternating offer sequential bargaining equilibrium theorem
C) marginal productivity theorem

Question 39

According to the product exhaustion theorem, when all the factors of production are paid the value of what they produce, then at the long-run equilibrium of a perfectly competitive economy, the sum of their shares of the value of the socially produced pie must equal

A) 100
B) 1/3
C) 1

Question 40

Monopsonistic exploitation occurs in any situation in which a factor of production is paid ______________ the value of its MRP.

A) the same as
B) less than
C) more than