Question 1

Elasticity of demand for labor is affected by the

Accepted Answer

The elasticity of demand for labor is influenced by several factors, including the price elasticity of demand for the product that labor produces, the availability of substitute (nonlabor) factors, and the ratio of labor cost to total cost. These factors affect how sensitive the demand for labor is to changes in the wage rate.

Question 2

When a perfectly competitive firm (that sells its good for $20 per unit) hires 1 unit of factor X it produces 70 units of output and when it hires 2 units of factor X it produces 85 units of output. Marginal revenue product of the second unit of factor X is equal to

Accepted Answer

The answer of When a perfectly competitive firm (that sells...

Question 3

Exhibit 26-6
​
 
-Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

Accepted Answer

A monopolist maximizes profit by employing a factor quantity where the marginal factor cost (MFC) equals the value of the marginal product (VMP or AA).

Question 4

If all the individuals had the same innate and learned skills and abilities, applied the same degree of effort on the job, and worked with the same amount and quality of other factors of production,

Accepted Answer

If everyone had the same skills, abilities, and effort levels, and worked with the same resources, differences in wages across different jobs would decrease because these factors contribute to wage differentiation.

Question 5

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Accepted Answer

The marginal revenue product requires information on the price at which the output is sold, which is not provided.

Question 6

Promoting from within should __________ be regarded as an act of discrimination because the information costs of inside versus outside employees are __________.

Accepted Answer

Promoting from within is not always discriminatory because it often reflects the lower information costs associated with evaluating internal candidates compared to external ones. Employers have more information on the performance and capabilities of their current employees than they do on external candidates.

Question 7

"Screening" is the process by which

Accepted Answer

Screening is a strategy used by firms to increase the likelihood of hiring competent and suitable employees by assessing their skills, knowledge, and overall fit for the position.

Question 8

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. This firm is a

Accepted Answer

When a firm faces a constant price for factors of production regardless of the quantity it purchases, it is considered a factor price taker. This means the firm has no influence over the price of inputs and takes the market price as given.

Question 9

Exhibit 26-6
​
 
-Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

Accepted Answer

The answer of Exhibit 26-6
​
 
-Refer to Exhibit 26-6. Let...

Question 10

If there are two factors used in producing a good, the least-cost rule specifies that costs have been minimized when

Accepted Answer

The least-cost rule states that costs are minimized when the ratio of the marginal physical product (MPP) of a factor to its price is equal across all factors used in production. This ensures that the last dollar spent on each input yields the same amount of additional output, optimizing resource allocation.

Question 11

If the market supply of labor increases, the total wage income will increase if the

Accepted Answer

When the demand for labor is elastic, an increase in the supply of labor leads to a proportionally smaller decrease in wages, resulting in an increase in total wage income because the percentage increase in employment is greater than the percentage decrease in wage rate.

Question 12

Marginal revenue product is

Accepted Answer

Marginal revenue product (MRP) is the additional revenue generated by employing an additional unit of a factor of production. It is a key concept in the theory of the firm, indicating how much extra revenue a firm can expect when it increases the quantity of a factor, such as labor or capital, by one unit, holding all other factors constant.

Question 13

An increase in the demand for a good will lead to a

Accepted Answer

An increase in the demand for a good increases the marginal revenue product (MRP) of labor because each additional unit of labor contributes to producing more of a now higher-demanded (and likely higher-priced) good. This increases the value of the marginal product of labor, shifting the MRP curve to the right.

Question 14

The percentage change in the quantity demanded of labor divided by the percentage change in the wage rate is called the

Accepted Answer

The elasticity of demand for labor measures the responsiveness of the quantity demanded of labor to a change in the wage rate, which is exactly described by the percentage change in the quantity demanded of labor divided by the percentage change in the wage rate.

Question 15

Which is the following is most likely to be a derived demand?

Accepted Answer

Derived demand refers to the demand for goods and services that arises from the demand for another good or service. In this case, the demand for oranges to produce and sell orange juice is a derived demand because it is directly linked to the demand for orange juice itself.

Question 16

A profit maximizing firm that is a price taker in both product and factor markets will hire a factor up to the point at which

Accepted Answer

A profit-maximizing firm in a competitive market will hire additional units of a factor until the value of the marginal product (VMP) of the last unit hired equals the factor's cost. The VMP is the additional revenue the firm earns from hiring one more unit of the factor, which is equivalent to the marginal product of the factor times the price of the output (thus, it's the marginal revenue product, MRP). Since the firm is a price taker in both product and factor markets, the condition for profit maximization is when the MRP equals the wage rate (or the cost of the factor). Therefore, all the statements A, B, and C describe the same condition using different terminologies, making D correct.

Question 17

Exhibit 26-7 Market A Market B -Refer to Exhibit 26-7. The exhibit shows two markets in which labor of identical skills is employed. Assume that both markets are in equilibrium with Q₁ and Q₂ quantities of labor employed at the respective prices of $4 and $6 per unit. If labor is costlessly mobile between the markets, which of the following pairs of shifts of the respective labor supply curves is to be expected?

Accepted Answer

The answer of Exhibit 26-7
​
  Market A Market B
-Refer...

Question 18

Exhibit 26-7 Market A Market B -Refer to Exhibit 26-7. The exhibit shows two markets in which labor of identical skills is employed. Assume that both markets are in equilibrium with Q₁ and Q₂ quantities of labor employed at the respective prices of $4 and $6 per unit. If this equilibrium persists in the long run, an economist would suspect that

Accepted Answer

The answer of Exhibit 26-7
​
  Market A Market B
-Refer...

Question 19

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. For this firm,

Accepted Answer

Marginal factor cost being constant implies a perfectly competitive factor market, but it doesn't directly relate to the relationships between VMP, MRP, or MPP.

Question 20

The MPP of labor divided by its (labor's) price is greater than the MPP of capital divided by its (capital's) price. Costs can be minimized by

Accepted Answer

Costs can be minimized by buying more of the input (labor in this case) that has a higher marginal product per unit cost (MPP/P). Since the MPP of labor divided by its price is greater than the MPP of capital divided by its price, it is more cost-effective to buy more labor and less capital.

Quiz 26: Factor Markets With Emphasis on the Labor Market

Elasticity of demand for labor is affected by the

When a perfectly competitive firm (that sells its good for $20 per unit) hires 1 unit of factor X it produces 70 units of output and when it hires 2 units of factor X it produces 85 units of output. Marginal revenue product of the second unit of factor X is equal to

Exhibit 26-6 -Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

If all the individuals had the same innate and learned skills and abilities, applied the same degree of effort on the job, and worked with the same amount and quality of other factors of production,

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Promoting from within should be regarded as an act of discrimination because the information costs of inside versus outside employees are .

"Screening" is the process by which

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. This firm is a

Exhibit 26-6 -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

If there are two factors used in producing a good, the least-cost rule specifies that costs have been minimized when

If the market supply of labor increases, the total wage income will increase if the

Marginal revenue product is

An increase in the demand for a good will lead to a

The percentage change in the quantity demanded of labor divided by the percentage change in the wage rate is called the

Which is the following is most likely to be a derived demand?

A profit maximizing firm that is a price taker in both product and factor markets will hire a factor up to the point at which

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. For this firm,

The MPP of labor divided by its (labor's) price is greater than the MPP of capital divided by its (capital's) price. Costs can be minimized by

Quiz 26: Factor Markets With Emphasis on the Labor Market

Elasticity of demand for labor is affected by the

When a perfectly competitive firm (that sells its good for $20 per unit) hires 1 unit of factor X it produces 70 units of output and when it hires 2 units of factor X it produces 85 units of output. Marginal revenue product of the second unit of factor X is equal to

Exhibit 26-6 ​ -Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

If all the individuals had the same innate and learned skills and abilities, applied the same degree of effort on the job, and worked with the same amount and quality of other factors of production,

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Promoting from within should __________ be regarded as an act of discrimination because the information costs of inside versus outside employees are __________.

"Screening" is the process by which

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. This firm is a

Exhibit 26-6 ​ -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

If there are two factors used in producing a good, the least-cost rule specifies that costs have been minimized when

If the market supply of labor increases, the total wage income will increase if the

Marginal revenue product is

An increase in the demand for a good will lead to a

The percentage change in the quantity demanded of labor divided by the percentage change in the wage rate is called the

Which is the following is most likely to be a derived demand?

A profit maximizing firm that is a price taker in both product and factor markets will hire a factor up to the point at which

For a given firm, marginal factor cost is the same dollar amount no matter what quantity of a factor it purchases. For this firm,

The MPP of labor divided by its (labor's) price is greater than the MPP of capital divided by its (capital's) price. Costs can be minimized by

Exhibit 26-6 -Refer to Exhibit 26-6. Let AA and MFC represent the value of marginal product curve and the marginal factor cost curve of a monopolist, respectively. Which of the following is a possible profit-maximizing factor quantity the monopolist will employ?

Promoting from within should be regarded as an act of discrimination because the information costs of inside versus outside employees are .

Exhibit 26-6 -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?