Question 1

Which of the following will not cause the marginal revenue product of labor curve for a firm to shift?

Accepted Answer

An increase in the wage rate will result in a movement along the marginal revenue product of labor curve but will not cause a shift in the curve. Only changes in factors that affect the productivity of labor or the demand for the product will shift the curve.

Question 2

-Refer to the above figure. The firm is operating using  . An increase in demand for the product has occurred. The relevant curve for the firm after the increase in price

Accepted Answer

The answer of 
-Refer to the above figure. The firm...

Question 3

The additional revenue associated with hiring one additional unit of some factor input, such as labor, is called

Accepted Answer

The additional revenue associated with hiring one additional unit of some factor input, such as labor, is called the marginal revenue product. This represents the increase in total revenue that results from employing one more unit of a factor input, such as labor. Marginal cost is the change in total cost resulting from a change in the level of output or input use, while marginal factor cost is the additional cost incurred by a firm to hire one more unit of a factor input. Marginal physical product refers to the additional output produced by one more unit of a factor input.

Question 4

The wage rate for widget makers is currently $25 per hour and Ajax hires 20 widget makers. If the wage rate were decreased to $20, what would happen to the marginal revenue product for labor at Ajax?

Accepted Answer

If the wage rate decreases to $20, Ajax would likely hire more workers since the cost of labor has decreased. This means that the marginal revenue product for labor would decrease since each additional worker is producing less marginal revenue.

Question 5

The demand for labor is

Accepted Answer

The demand for labor is derived from the demand for the final product of the firm since labor is a factor of production used in the production process. As the demand for the product increases, the firm needs more labor to be able to produce more of that product. Conversely, if the demand for the product decreases, the demand for labor also decreases as the firm needs fewer workers to produce less of the product.

Question 6

An increase in the productivity of labor induces

Accepted Answer

The answer of An increase in the productivity of labor...

Question 7

An increase in product price implies that

Accepted Answer

The answer of An increase in product price implies that
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Question 8

Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 5th laborer?

Accepted Answer

MPP (Marginal Physical Product) of a factor of production is the additional output produced by using one more unit of that factor, while keeping all other factors constant.

In this case, we need to find out the MPP of the 5th laborer. So, we can start by finding out the MPP of each laborer from the given data.

MPP of the 1st laborer = Number of cabinets produced with 1 laborer = (18 - 0) = 18
MPP of the 2nd laborer = Number of cabinets produced with 2 laborers - Number of cabinets produced with 1 laborer = (25 - 18) = 7
MPP of the 3rd laborer = Number of cabinets produced with 3 laborers - Number of cabinets produced with 2 laborers = (36 - 25) = 11
MPP of the 4th laborer = Number of cabinets produced with 4 laborers - Number of cabinets produced with 3 laborers = (18 - 36) = -18 (Note that the MPP is negative here because the output actually decreased with the addition of the 4th laborer)

Now, we can use the formula for MPP to find out the MPP of the 5th laborer:

MPP of the 5th laborer = Number of cabinets produced with 5 laborers - Number of cabinets produced with 4 laborers
= (25 - 18)
= 7

Therefore, the MPP of the 5th laborer is 7 cabinets. The best choice is B.

Question 9

-Refer to the above figure.  represents

Accepted Answer

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Question 10

Marginal revenue product is

Accepted Answer

Marginal revenue product is the additional revenue generated by each additional unit of input. It is calculated as the product of marginal physical product (MPP) and marginal revenue (MR). Therefore, B is the correct answer. A is incorrect because it multiplies MPP with marginal factor cost instead of MR. C is incorrect because it multiplies average physical product (APP) with MR instead of MPP. D is incorrect because it multiplies MPP with the wage rate instead of MR.

Question 11

Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 6th laborer?

Accepted Answer

The answer of Sam, who owns a carpentry shop, discovered...

Question 12

The downward sloping marginal revenue product of labor is

Accepted Answer

The downward sloping marginal revenue product of labor represents the additional revenue a firm generates by adding one more unit of labor which decreases as more labor is added. This is the firm's short-run demand for labor, as it shows the value the firm places on each additional unit of labor. Therefore, the correct answer is B.

Question 13

The demand curve for labor will shift whenever

Accepted Answer

The demand for labor is derived from the demand for the final product. If the demand for the final product changes, then the demand for labor will also change, shifting the demand curve for labor. A change in the wage rate (A) or the supply of labor (D) will cause a movement along the demand curve, but not a shift in the curve itself. Marginal factor cost (B) is important for the firm's decision on how much labor to hire, but it does not affect the overall demand for labor.

Question 14

The marginal physical product (MPP)is calculated by

Accepted Answer

Marginal physical product (MPP) is the change in total output that results from adding one more unit of input (such as labor). Therefore, the calculation of MPP involves dividing the change in total physical product by the change in the input, as stated in option B. Option A is incorrect because it divides total physical product by labor, which gives average physical product (APP) instead of MPP. Option C is incorrect because it calculates the marginal cost of production, not the MPP. Option D is irrelevant to the calculation of MPP because it compares the output of different types of workers.

Question 15

A firm's demand curve for labor is equal to the

Accepted Answer

The demand curve for labor is determined by the marginal revenue product (MRP) of labor, which represents the additional revenue generated by each additional unit of labor. Therefore, the best choice is B. Total revenue product (A) is not the same as MRP, as it measures the total revenue generated by all units of labor. Marginal factor cost (C) and marginal wage (D) are not used to determine the demand curve for labor.

Question 16

If the price of a product being sold in a perfectly competitive market increases,

Accepted Answer

The answer of If the price of a product being...

Question 17

-Refer to the above figure. The firm is operating using  . An increase in productivity has occurred. The relevant curve for the firm after the increase in productivity

Accepted Answer

The answer of 
-Refer to the above figure. The firm...

Question 18

The change in output resulting from the addition of one more worker is

Accepted Answer

The change in output resulting from the addition of one more worker is called marginal physical product (MPP). Marginal physical product represents the additional output produced by the last worker added to the production process.

Question 19

When the demand curve for an input is a derived demand this means that

Accepted Answer

When the demand curve for an input is a derived demand, it means that the demand for the input is derived from the demand for the final product being produced. In other words, the demand for the input is based on how much of the final product consumers want to buy. For example, if the demand for bicycles increases, the demand for bicycle parts such as tires, chains, and seats will also increase.

Question 20

If the wage rate doesn't change but a profit-maximizing competitive firm hires fewer workers, we know that

Accepted Answer

If the wage rate remains constant and the profit-maximizing competitive firm hires fewer workers, this suggests a reduction in demand for the product, which leads to a reduction in the quantity of labor demanded by the firm. Alternatively, there may have been a reduction in labor productivity, but it would still result in a decrease in the number of workers hired. Option A is incorrect because the wage rate didn't change, so there is no reason to believe that this led to a price increase. Option B is also incorrect because it states that technical change occurred which increased labor productivity, but this would lead to an increase in labor demand and not to a reduction in the number of workers hired. Option D is also incorrect because marginal factor cost only changes when there is a change in the wage rate.

Quiz 28: The Labor Market: Demand, Supply and Outsourcing