Question 1

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. Therefore, the value of the marginal product (VMP) is greater than the marginal revenue product (MRP).

Question 2

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 formula for the elasticity of demand is:

Elasticity of Demand = Percent Change in Quantity Demanded / Percent Change in Price

We are given that the wage rate (which is the price of labor) increases by 8%, and as a result, the quantity demanded of labor falls by 14%. Therefore:

Percent Change in Quantity Demanded = -14%
Percent Change in Price = 8%

Plugging these values into the formula for elasticity, we get:

Elasticity of Demand = (-14% / 8%) = -1.75

Since we are asked to find the absolute value of the elasticity of demand, we take the absolute value of -1.75, which is 1.75.

Therefore, the answer is B, 1.75.

Question 3

Value marginal product (VMP)equals

Accepted Answer

Value marginal product (VMP) equals the product price (P) multiplied by marginal physical product (MPP).

Question 4

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

Accepted Answer

A decrease in the price of the product reduces the marginal revenue product (MRP) because MRP is the product of marginal product and price.

Question 5

Value marginal product (VMP)is

Accepted Answer

Value marginal product (VMP) is the additional revenue generated by using an additional unit of a factor of production, such as labor or capital, multiplied by the price of the product. Therefore, option B is the correct definition of VMP.

Question 6

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 measures the response of the quantity of labor demanded to a change in the wage rate, hence choice D is the correct answer. Choices A, B, C, and E may have an impact on the demand for labor, but they are not directly related to elasticity of demand for labor.

Question 7

Exhibit 26-2 ​

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

Accepted Answer

The answer of Exhibit 26-2 ​

Refer to Exhibit 26-2. What...

Question 8

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

Accepted Answer

As a monopolistic competitive firm, Firm X has some market power to set its price, but it still faces competition from other firms. This means that it is a price maker for its product, but a price taker for its factors of production. At the profit-maximizing factor quantity, Firm X should produce where VMP (value of the marginal product) equals MFC (marginal factor cost). Since it is a factor price taker, the factor price will be equal to MFC. Therefore, if VMP is greater than MRP (marginal revenue product), the firm should hire more factors of production to increase its profits. However, if VMP is less than MRP, the firm should decrease its usage of factors to maximize its profits. In this case, since the firm is a monopolistic competitor and has some market power, it is likely that VMP will be greater than MRP, but the factor price will still be equal to MFC. Therefore, the correct answer is C: VMP > MRP = MFC = factor price.

Question 9

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

Accepted Answer

A firm that is a factor price taker in the labor market can hire all the workers it wants to at the going wage rate, meaning it has no market power to negotiate lower wages. Therefore, the firm must accept the going wage rate in order to hire the desired amount of workers.

Question 10

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 means that for each unit of input, the output produced decreases. This means that the firm will need less of that input to produce the same level of output, resulting in a shift of the factor demand curve to the left.

Question 11

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 12

The firm's factor demand curve is the

Accepted Answer

The factor demand curve represents the amount of a factor that a firm is willing and able to hire at different factor prices, while the marginal revenue product (MRP) curve represents the additional output revenue that a firm can generate from hiring an additional unit of a factor. Therefore, the factor demand curve is the same as the MRP curve.

Question 13

The market demand curve for labor is

Accepted Answer

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

Question 14

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 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

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 firm should hire more capital and less labor because the marginal product per dollar spent on capital (8/4 = 2) is greater than the marginal product per dollar spent on labor (6/4 = 1.5). This indicates that capital is more productive per dollar spent, so reallocating resources towards capital will minimize costs.

Question 17

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 will lead to an increase in the demand for labor as firms will need to hire more workers to produce more of the product to meet the increased demand. A decrease in the marginal physical product of labor (B) will lead to a decrease in the demand for labor as firms will need fewer workers to produce the same amount of output. A decrease in the price of labor (C) will not necessarily lead to an increase in the demand for labor as firms may substitute capital for labor due to the lower cost of labor, resulting in a decrease in the demand for labor. An increase in the price of labor (D) may lead to a decrease in the demand for labor as firms may substitute capital for labor due to the higher cost of labor, resulting in a decrease in the demand for labor.

Question 18

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

Accepted Answer

The least-cost rule for factors X and Y is achieved when the marginal product per dollar spent on each input is equal. Therefore, the firm should equate MPPx\Px (marginal product of X divided by its price) to MPPy\Py (marginal product of Y divided by its price). This ensures that the firm is getting the most output per dollar spent on each input, which minimizes costs.

Question 19

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

Accepted Answer

The measure of the value that one unit of a factor adds to the firm's output is known as marginal product. Marginal product is the change in total output resulting from a one-unit change in the input. It helps in determining the optimal level of input based on its contribution to the firm's output. Therefore, the correct choice is B) marginal.

Question 20

For a perfectly competitive firm,

Accepted Answer

In a perfectly competitive market, a firm takes the market price as given and is a price taker. Therefore, the marginal revenue product (MRP) is equal to the value of marginal product (VMP), as every additional unit of labor hired will add the same amount to total revenue. Thus, the correct answer is VMP = MRP.

Quiz 13: Factor Markets: With Emphasis on the Labor Market

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

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

Value marginal product (VMP) equals

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

Value marginal product (VMP) is

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

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

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

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

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

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

The firm's factor demand curve is the

The market demand curve for labor 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 .

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

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 can bring about an increase in the demand for labor?

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

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,

Quiz 13: Factor Markets: With Emphasis on the Labor Market

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

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

Value marginal product (VMP) equals

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

Value marginal product (VMP) is

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

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

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

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

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

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

The firm's factor demand curve is the

The market demand curve for labor 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 __________.

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

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 can bring about an increase in the demand for labor?

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

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,

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

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?