Question 1

A firm obeys the least-cost rule for factors X and Y by equating

Accepted Answer

The least-cost rule for combining factors of production (like X and Y) is achieved by equating the marginal physical product per dollar spent on each factor. This is represented by the formula MPPx/Px = MPPy/Py, where MPP is the marginal physical product of the factor, and P is the price of the factor. This ensures that the firm is allocating its resources in a way that the last dollar spent on each input provides the same amount of additional output, thus minimizing cost for a given level of output.

Question 2

Firm X is a monopolistic competitive firm and a factor price taker. For this firm at the profit-maximizing factor quantity,

Accepted Answer

The answer of Firm X is a monopolistic competitive firm...

Question 3

Value marginal product (VMP) equals

Accepted Answer

Value Marginal Product (VMP) is calculated as the price of the product (P) multiplied by the marginal physical product (MPP), which is the additional output generated by employing one more unit of input.

Question 4

For a perfectly competitive firm,

Accepted Answer

In a perfectly competitive firm, the Value of Marginal Product (VMP) equals the Marginal Revenue Product (MRP) because the price of the product is constant for all units sold.

Question 5

Applying the least-cost rule to two factors, a firm will

Accepted Answer

The least-cost rule for combining factors of production states that to minimize costs, a firm should employ factors in such a way that the ratio of the marginal physical product (MPP) of a factor to its price is equal across all factors. This ensures the most efficient allocation of resources.

Question 6

For a product price searcher (such as a monopolist),

Accepted Answer

For a monopolist, price (P) is greater than marginal revenue (MR) because they face a downward-sloping demand curve. This implies that the value of the marginal product (VMP) is greater than the marginal revenue product (MRP).

Question 7

Value marginal product (VMP) is

Accepted Answer

Value marginal product (VMP) is defined as the price of the product multiplied by the additional output resulting from an additional factor unit employed. This measures the additional revenue a firm earns by employing one more unit of input, assuming the price of the product remains constant.

Question 8

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve __________, while its VMP of labor curve __________.

Accepted Answer

In a perfectly competitive firm, both the Marginal Revenue Product (MRP) of labor and the Value of Marginal Product (VMP) of labor curves shift to the right when the price of the product it sells rises. This is because both MRP and VMP are directly related to the price of the product.

Question 9

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

Accepted Answer

Elasticity of demand for labor is defined as the percentage change in the quantity demanded of labor divided by the percentage change in the wage rate. It measures how sensitive the demand for labor is to changes in wages.

Question 10

A measure of the value that one unit of a factor adds to the firm's output is value __________ product.

Accepted Answer

Marginal product measures the additional output generated by adding one more unit of a factor, reflecting the value added by that unit to the firm's output.

Question 11

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

Accepted Answer

In a perfectly competitive market, a decrease in the product price would not shift the firm's demand curve since the firm is a price taker and faces a perfectly elastic demand at the market price. However, it would shift the Marginal Revenue Product (MRP) curve to the left because the MRP is dependent on the product price, and a lower price means each additional unit of output generates less revenue.

Question 12

The firm's factor demand curve is the

Accepted Answer

The firm's factor demand curve is represented by the Marginal Revenue Product (MRP) curve in both competitive and non-competitive markets (choices A and B), and by the Value of Marginal Product (VMP) curve in a perfectly competitive market (choice C).

Question 13

The market demand curve for labor is

Accepted Answer

The answer of The market demand curve for labor is
...

Question 14

The wage rate increases 8 percent, and the quantity demanded of labor falls by 14 percent. The absolute value of the elasticity of demand for labor is

Accepted Answer

The elasticity of demand for labor is calculated as the percentage change in quantity demanded divided by the percentage change in wage rate. Here, it is |(-14%)/(8%)| = 1.75.

Question 15

Exhibit 26-2
​
 
-Refer to Exhibit 26-2. What type of firm are we dealing with?

Accepted Answer

The answer of Exhibit 26-2
​
 
-Refer to Exhibit 26-2. What...

Question 16

Which of the following can bring about an increase in the demand for labor?

Accepted Answer

An increase in the demand for the product that labor produces (A) and an increase in the marginal physical product of labor (B) both lead to an increase in the demand for labor. A decrease in the price of labor (C) would not increase demand for labor; it would increase the quantity of labor demanded.

Question 17

If a firm is a factor price taker in the labor market,

Accepted Answer

A factor price taker in the labor market can hire as many workers as it needs at the prevailing market wage without having to pay more for additional workers.

Question 18

Exhibit 26-2
​
 
-Refer to Exhibit 26-2. What factor quantity should the firm purchase?

Accepted Answer

The firm should purchase the factor quantity where marginal cost equals marginal revenue, which is typically represented by Q₂ in economic models.

Question 19

If the MPP of the last unit of labor hired equals 6 and the MPP of the last unit of capital hired equals 8, and the price of labor is $4 per unit and the price of capital is $4 per unit, then the firm

Accepted Answer

The answer of If the MPP of the last unit...

Question 20

Which of the following will cause a firm's factor demand curve to shift to the left?

Accepted Answer

A decrease in marginal physical product reduces the additional output from using an extra unit of the factor, leading to a lower demand for that factor.

Quiz 26: Factor Markets With Emphasis on the Labor Market

A firm obeys the least-cost rule for factors X and Y by equating

Firm X is a monopolistic competitive firm and a factor price taker. For this firm at the profit-maximizing factor quantity,

Value marginal product (VMP) equals

For a perfectly competitive firm,

Applying the least-cost rule to two factors, a firm will

For a product price searcher (such as a monopolist) ,

Value marginal product (VMP) is

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve , while its VMP of labor curve .

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

A measure of the value that one unit of a factor adds to the firm's output is value __________ product.

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

The firm's factor demand curve is the

The market demand curve for labor is

The wage rate increases 8 percent, and the quantity demanded of labor falls by 14 percent. The absolute value of the elasticity of demand for labor is

Exhibit 26-2 -Refer to Exhibit 26-2. What type of firm are we dealing with?

Which of the following can bring about an increase in the demand for labor?

If a firm is a factor price taker in the labor market,

Exhibit 26-2 -Refer to Exhibit 26-2. What factor quantity should the firm purchase?

If the MPP of the last unit of labor hired equals 6 and the MPP of the last unit of capital hired equals 8, and the price of labor is $4 per unit and the price of capital is $4 per unit, then the firm

Which of the following will cause a firm's factor demand curve to shift to the left?

Quiz 26: Factor Markets With Emphasis on the Labor Market

A firm obeys the least-cost rule for factors X and Y by equating

Firm X is a monopolistic competitive firm and a factor price taker. For this firm at the profit-maximizing factor quantity,

Value marginal product (VMP) equals

For a perfectly competitive firm,

Applying the least-cost rule to two factors, a firm will

For a product price searcher (such as a monopolist) ,

Value marginal product (VMP) is

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve __________, while its VMP of labor curve __________.

Elasticity of demand for labor measures the percentage change in quantity demanded of labor that is brought about by a percentage change in the

A measure of the value that one unit of a factor adds to the firm's output is value __________ product.

For a perfectly competitive firm, a decrease in the price of the product it sells will shift

The firm's factor demand curve is the

The market demand curve for labor is

The wage rate increases 8 percent, and the quantity demanded of labor falls by 14 percent. The absolute value of the elasticity of demand for labor is

Exhibit 26-2 ​ -Refer to Exhibit 26-2. What type of firm are we dealing with?

Which of the following can bring about an increase in the demand for labor?

If a firm is a factor price taker in the labor market,

Exhibit 26-2 ​ -Refer to Exhibit 26-2. What factor quantity should the firm purchase?

If the MPP of the last unit of labor hired equals 6 and the MPP of the last unit of capital hired equals 8, and the price of labor is $4 per unit and the price of capital is $4 per unit, then the firm

Which of the following will cause a firm's factor demand curve to shift to the left?

For a perfectly competitive firm, when the price of the product it sells rises, its MRP of labor curve , while its VMP of labor curve .

Exhibit 26-2 -Refer to Exhibit 26-2. What type of firm are we dealing with?

Exhibit 26-2 -Refer to Exhibit 26-2. What factor quantity should the firm purchase?