Question 1

If the value of the marginal product of labor exceeds the wage,then hiring another worker increases the firm's

Accepted Answer

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Question 2

If the value of the marginal product of labor is less than the wage,then the firm could

Accepted Answer

If the value of the marginal product of labor is less than the wage, it means that the firm is paying more for each additional worker than the worker is adding to the firm's revenue. In this case, hiring additional labor would not increase profits, but would rather lead to losses. The best choice for the firm would be to reduce the amount of labor hired, thus lowering the wage bill and increasing profits.

Question 3

Which of the following statements is correct?

Accepted Answer

All of the statements are correct. The value of the marginal product curve shows the additional output that can be produced from hiring an additional unit of labor, and this curve is also the labor demand curve for competitive, profit-maximizing firms. These firms hire workers up to the point where the value of the marginal product of labor equals the wage, which ensures that they are maximizing their profits. At this point, the firm is also producing where price equals marginal cost, which is the efficient outcome in a competitive market.

Question 4

If the wage exceeds the value of the marginal product of labor,then hiring another worker

Accepted Answer

If the wage exceeds the value of the marginal product of labor, the firm is paying more for the worker than what they are contributing to the production process. Hiring another worker in this scenario would increase the firm's cost without providing a corresponding increase in revenue. Therefore, it would decrease the firm's profit.

Question 5

Diane's Auto World installs tires on automobiles,light trucks,and sport utility vehicles.She is a profit-maximizing business owner whose firm operates in a competitive market.The marginal cost of installing a tire is $10.The marginal productivity of the last worker that Diane hired was 2 tires per hour.What is the maximum hourly wage that Diane was willing to pay the last worker hired?

Accepted Answer

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Question 6

When a firm experiences diminishing marginal product,what is the shape of the curve that represents the value of the marginal product of labor?

Accepted Answer

When a firm experiences diminishing marginal product, the curve that represents the value of the marginal product of labor has a downward sloping shape. This means that as the firm hires more labor, the additional output produced by each additional unit of labor decreases, leading to a decrease in the value of the marginal product of labor.

Question 7

Sally runs a hair styling salon.Sally is a profit-maximizing owner whose firm operates in a competitive market.The marginal cost of a haircut is $11.What is the maximum wage that Sally will pay her stylists?

Accepted Answer

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Question 8

The value of the marginal product of labor is equal to the change in

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Question 9

Paul is the owner of Paul's Popcorn Palace.Paul is a profit-maximizing owner whose firm operates in a competitive market.An additional worker costs Paul $200 and has a marginal productivity of 40 canisters of popcorn.Assuming no other variable costs,what is the marginal cost of a popcorn?

Accepted Answer

The marginal cost of popcorn can be calculated by dividing the additional cost of adding one worker ($200) by their marginal productivity (40 canisters of popcorn). Therefore, the marginal cost of a popcorn canister is $5.

Question 10

The negative slope of the value of marginal product curve is most easily explained by

Accepted Answer

The negative slope of the value of marginal product curve is a result of diminishing marginal product, meaning that as more units of labor are added, the additional output (marginal product) decreases. This is due to factors such as limited space, equipment or resources. As a result, the value of additional output (marginal product) that a worker contributes declines, resulting in a negative slope for the curve.

Question 11

Abdul is trying to convince the owner of a sandwich shop to hire him.He argues that he could help the shop sell an additional five sandwiches per day at the market price of $8 each.If the facts are not in dispute,but the owner does not hire him,then

Accepted Answer

If Abdul can help sell an additional five sandwiches per day at $8 each, he would generate an additional revenue of $40 per day. Therefore, if the owner does not hire him, it might be because the wage rate Abdul is demanding is more than $40 per day. This means that the cost of hiring Abdul is greater than the additional revenue he would generate, making it unprofitable for the owner. Hence, the correct answer is C, the wage rate must be more than $40 per day.

Question 12

To maximize profit,a competitive firm hires workers up to the point of intersection of the

Accepted Answer

Hiring workers up to the point where the value of the marginal product curve intersects with the wage line will ensure that the firm is paying workers the exact amount that their contribution to the production process is worth, and will therefore maximize profits. Hiring workers beyond this point would result in paying workers more than their contribution is worth, reducing profits. Hiring fewer workers would mean the firm is not producing at its maximum potential, also reducing profits.

Question 13

A worker's contribution to a firm's revenue is measured directly by the worker's

Accepted Answer

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Question 14

Value of marginal product is defined as the additional

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Question 15

If the value of the marginal product of labor exceeds the wage,then the firm could

Accepted Answer

If the value of the marginal product of labor exceeds the wage, it means that each additional worker hired will generate more revenue than the cost of their wage. This will increase the firm's profit, so the best choice would be to hire additional labor to increase output and revenue.

Question 16

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the

Accepted Answer

The value of the marginal product of an input represents the additional revenue earned by the firm from using one more unit of that input. Therefore, it is dependent on the market price of the output being produced. Choice D is the only option that includes the market price of the output, making it the correct choice.

Question 17

Suppose that eight workers can manufacture 70 radios per day and that nine workers can manufacture 90 radios per day.If radios can be sold for $10 each,the value of marginal product of the ninth worker is

Accepted Answer

The marginal product of labor is the additional output a firm can produce by adding one more worker. In this case, the marginal product of the ninth worker can be calculated as follows:

Marginal product of the ninth worker = Total output with nine workers - Total output with eight workers
Marginal product of the ninth worker = 90 radios - 70 radios
Marginal product of the ninth worker = 20 radios

The value of marginal product of labor is the additional revenue a firm can generate by adding one more worker. In this case, since each radio can be sold for $10, the value of marginal product of the ninth worker is:

Value of marginal product of the ninth worker = Marginal product of the ninth worker x Price
Value of marginal product of the ninth worker = 20 radios x $10/radio
Value of marginal product of the ninth worker = $200

Therefore, the best choice is C, $200, as this is the value of the marginal product of the ninth worker.

Question 18

Linda's Autoplex performs oil changes on automobiles,light trucks,and sport utility vehicles.She is a profit-maximizing business owner whose firm operates in a competitive market.The marginal cost of an oil change is $20.The marginal productivity of the last worker that Linda hired was 1.5 oil changes per hour.What is the maximum hourly wage that Linda was willing to pay the last worker hired?

Accepted Answer

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Question 19

For a profit-maximizing,competitive firm,the value of the marginal product of labor

Accepted Answer

The value of the marginal product of labor represents the additional revenue generated by hiring one more unit of labor. For a profit-maximizing, competitive firm, the firm's demand for labor is equal to the value of the marginal product of labor, which represents the maximum amount the firm is willing to pay for an additional unit of labor. Therefore, choice B is correct. Choices A and C are incorrect because the value of the marginal product of labor is not affected by the price of output or the wage rate.

Question 20

When deciding whether to hire an additional worker,firms need only consider how the additional worker would affect

Accepted Answer

When deciding whether to hire an additional worker, firms should consider how the additional worker would affect their profit. Hiring an additional worker would increase the firm's costs, but it could also increase their output and revenue. Ultimately, the decision to hire an additional worker should be based on whether the potential increase in profit outweighs the additional cost of hiring.

Quiz 18: The Market for the Factors of Production