Deck 3: The Short Run Demand for Labor

Question 1

Which of the following statements is true?

A) A perfectly competitive firm operates in a market where marginal revenues are greater than the price.
B) A perfectly competitive firm operates in a market where marginal revenues are less than the price.
C) A monopolist operates in a market where marginal revenues are greater than the price.
D) A monopolist operates in a market where marginal revenues are less than the price.
E) A monopolist operates in a market where marginal revenues are equal to the price.

Answer 1

D

Question 2

If one seller can set the price in the market,

A) the seller has monopolist power.
B) the seller has monopsony power.
C) the seller is a price taker.
D) the seller is operating in a perfectly competitive market.
E) the seller is operating in an oligopoly.

Answer 2

A

Question 3

If wages are $3,the number of workers the firm will hire to maximize profits is

A) 1
B) 2
C) 3
D) 4
E) 5

Answer 3

D

Question 4

The marginal product of labor tells us

A) which workers are least efficient.
B) the additional output an additional worker will add.
C) the increase in average output an additional worker will contribute.
D) the effect an additional worker will have on a firm's accounting profits.
E) the effect an additional worker will have on a firm's economic profits.

Question 5

Suppose labor and capital are gross substitutes.If the capital stock increases,what happens to the marginal product of labor curve and the equilibrium level of employment?

A) The marginal product of labor will shift to the right,and employment will increase.
B) The marginal product of labor will shift to the right,and employment will decrease.
C) The marginal product of labor will shift to the left,and employment will increase.
D) The marginal product of labor will shift to the left,and employment will decrease.
E) The marginal product of labor will shift to the right,and employment will remain the same.

Question 6

A monopolist's short run labor demand curve

A) is always equal to the firm's long run labor demand curve.
B) is above the marginal product of labor curve.
C) is below the marginal product of labor curve.
D) equals the marginal product of labor curve.
E) is always half the firm's long run labor demand curve.

Question 7

Which of the following is not a constraint for McDonald's?

A) The federal government increases the minimum wage.
B) Each store needs a deep fryer to cook French fries.
C) A news report increases awareness of childhood obesity,which decreases the number of fast food patrons.
D) The CEO decides to add an additional store in New York City.
E) Like many companies,there is an information asymmetry when hiring a new employee.

Question 8

What is the marginal product of labor of the third worker?

A) 3
B) 4
C) 6
D) 8
E) 14

Question 9

A firm sells its output in the market and buys its inputs from the and markets.

A) capital equipment,product,labor
B) labor,product,factor
C) factor,product,labor
D) factor,capital equipment,labor
E) product,capital equipment,labor

Question 10

A monopolist in the product market will most likely

A) hire the same number of workers as the competitive market at the same wage.
B) hire the same number of workers as the competitive market at a lower wage.
C) hire the same number of workers as the competitive market at a higher wage.
D) hire fewer workers than the competitive market.
E) hire more workers than the competitive market.

Question 11

A competitive firm's short run labor demand curve

A) is always equal to the firm's long run labor demand curve.
B) is above the marginal product of labor curve.
C) is below the marginal product of labor curve.
D) equals the marginal product of labor curve.
E) is always half the firm's long run labor demand curve.

Question 12

Which of the following statements is true?

A) In terms of the real wage,a competitive firm's MP of labor is less than its labor demand.
B) In terms of the real wage,a competitive firm's MP of labor is greater than its labor demand.
C) In terms of the real wage,a competitive firm's MP of labor is equal to its labor demand.
D) In terms of the nominal wage,a monopolist's MRP of labor is equal to its labor demand.
E) In terms of the nominal wage,a monopolist's MRP of labor is greater than its labor demand.

Question 13

The short run production function is concave because

A) hiring more employees is always more efficient for the firm.
B) the best employees are hired first,so the quality of employees decreases as more workers are added.
C) it is harder for a firm to manage a higher level of capital.
D) the level of capital can be adjusted.
E) hiring more workers,holding capital fixed,leads to overcrowding.

Question 14

The difference between a firm's revenues and its total costs,including forgoing the next best alternative,is called

A) accounting profits.
B) economic profits.
C) opportunity costs.
D) normal profits.
E) economic rent.

Question 15

In the short run,

A) firms can adjust level capital and labor.
B) firms can adjust the level of capital but not labor.
C) firms can adjust the level of labor but not capital.
D) firms can not adjust capital or labor.
E) wages and product prices cannot change.

Question 16

Suppose there is a perfectly competitive firm that has hired 200 workers.Suppose wages equal $15 per hour and the marginal revenue product of labor is $20.What should the firm do in order to reach the profit-maximizing level of production?

A) Hire more workers till MRP = MC.
B) Keep the same number of workers.
C) Fire workers until MRP = MC.
D) Lay off the less efficient workers.
E) C and D

Question 17

If a firm is producing at the level of output where the marginal product of labor is greater than the marginal cost of labor (the wage),then

A) profits will increase if the firm hires more workers.
B) profits will increase if the firm fires some workers.
C) the firm always has negative economic rent.
D) the accounting profits are always greater than the economic profits.
E) the firm is maximizing profits.

Question 18

Which of the following is a feasible choice variable,in the short run,for a grocery store?

A) increasing the price of bananas to $50 a pound
B) hiring 50 workers who are 10 years old,in violation of federal child labor laws
C) laying off 5 cashiers
D) building an addition to the store to add 10 more aisles
E) adding a bakery,which requires buying ovens and other equipment

Question 19

When a firm moves to a lower isoquant,it is always true that

A) the utility of the owner decreases.
B) the utility of the workers decreases.
C) the firm produces less output.
D) the firm produces more output.
E) the firm uses less capital.

Question 20

Which of the following is not true about a monopolist?

A) A monopolist earns economic rents or supernormal profits.
B) A monopolist's accounting profits are greater than its normal profits.
C) A monopolist demands less labor than a competitive firm.
D) A monopolist pays its workers more than the competitive wage rate.
E) A monopolist pays its workers the competitive wage rate.

Question 21

What is the firm's marginal-revenue product of labor?

A)
B)
C)
D) MRP = 3/L
E) MRP = 20

Question 22

What is the equilibrium wage rate for a monopsonist?

A) $20
B) $30
C) $50
D) $80
E) $90

Question 23

Imposing a minimum wage

A) will always increase the monopsonist's employment level.
B) will always increase the wage a monopsonist pays.
C) will always reduce the marginal cost of labor for a monopsonist.
D) will always increase the wage in a competitive market.
E) can reduce the monopsonist's demand for labor if the wage is set too high.

Question 24

What is the restaurant's accounting profit?

A) $50
B) $150
C) $200
D) $300
E) $350

Question 25

Suppose the firm operates in a competitive market.What is the equilibrium level of employment?

A) 20 workers
B) 40 workers
C) 80 workers
D) 90 workers
E) 100 workers

Question 26

A monopsonist's optimal employment level and wage rate are such that

A) MRP of labor equals the MC of labor,where the MC of labor is the elastically set wage.
B) MRP of labor is greater than the MC of labor,where the MC of labor is the elastically set wage.
C) MRP of labor equals the MC of labor,and that optimal level of labor is plugged into the wage requirement schedule to calculate the optimal wage.
D) MRP of labor is greater than the MC of labor,and that optimal level of labor is plugged into the wage requirement schedule to calculate the optimal wage.
E) none of the above

Question 27

What is the restaurant's economic profit?

A) $50
B) $150
C) $200
D) $300
E) $350

Question 28

Monopsony power may occur when:

A) the supply of labor is perfectly elastic.
B) there are psychic costs of moving across locations.
C) workers have perfect information about employment opportunities.
D) workers can switch employers instantly.
E) workers have full information about wages offered by all employers.

Question 29

What would be the optimal level of employment if a union came in and set a minimum wage at $30?

A) 30 workers
B) 50 workers
C) 60 workers
D) 80 workers
E) 90 workers

Question 30

What is the equilibrium level of employment for a monopsonist?

A) 30 workers
B) 50 workers
C) 60 workers
D) 80 workers
E) 90 workers

Question 31

If the marginal product of labor is ,then output will as labor increases.

A) negative,decreases
B) positive,decreases
C) positive,stay the same
D) negative,stay the same
E) negative,increases

Question 32

What would be the optimal level of employment if a union came in and set a minimum wage at $60?

A) 30 workers.
B) 50 workers.
C) 60 workers.
D) 80 workers.
E) 90 workers.