Question 1

Monopsonistic exploitation occurs in any situation in which a factor of production is paid the same as the value of its MRP.

Accepted Answer

Monopsonistic exploitation occurs when a factor of production is paid less than its MRP, not the same amount.

Question 2

A market with only one seller and one buyer is a bilateral monopoly.

Accepted Answer

Bilateral monopoly occurs when there is only one seller and one buyer in a market. This situation can result in a lack of competition, which can lead to market inefficiencies and higher prices.

Question 3

A typical labor supply curve shows that, as the wage rate ____________, a worker will choose to devote _______ hours to labor.

Accepted Answer

According to the law of supply, as the price of a good or service increases, the quantity supplied will also increase. Similarly, as the wage rate (price of labor) increases, workers are more willing to supply their labor and will choose to work more hours, resulting in an upward sloping labor supply curve.

Question 4

Exhibit 26-1

-Refer to Exhibit 26-1. Which point represents no consumption in the present, saving everything for the future?

Accepted Answer

Point B represents no consumption in the present, saving everything for the future. Points A and C represent a combination of present consumption and saving for the future.

Question 5

The MPP curve tells us how much extra output, in physical units, will be produced as the firm adds more and more units of labor.

Accepted Answer

The MPP (marginal physical product) curve shows the additional output produced as the firm hires more units of labor. Therefore, statement A is correct.

Question 6

A firm with 3 workers produces 8 units of output. When the firm hires 1 additional worker, output increases to 12 units of output. MPP is equal to

Accepted Answer

The Marginal Physical Product (MPP) is calculated as the change in total output resulting from a one-unit change in the input (in this case, labor). Here, the output increases from 8 units to 12 units with the addition of one worker, which is a change of 4 units. Therefore, the MPP is 4 units.

Question 7

A firm's marginal physical product the new workers will produce times the marginal revenue the additional units of output will earn is known as marginal revenue product.

Accepted Answer

Marginal revenue product is calculated by multiplying the marginal physical product of an additional unit of labor by the marginal revenue earned by that unit.

Question 8

Compared to the interest that an entrepreneur must pay on a loan or the opportunity cost of using her or his own funds, the entrepreneur's return on capital must be

Accepted Answer

The entrepreneur's return on capital must be greater than or equal to the interest that an entrepreneur must pay on a loan or the opportunity cost of using her or his own funds in order to make the investment worthwhile.

Question 9

The return on a factor above the amount necessary to entice that factor into the production process is called rent.

Accepted Answer

This statement is true. Rent is the return on a factor above the amount necessary to entice that factor into the production process, such as land or natural resources.

Question 10

Demand for labor comes from individual

Accepted Answer

Firms are the ones who demand labor in order to produce goods and services. Workers are the suppliers, while consumers are the ones who create demand for the final product, but not for labor itself.

Question 11

Total expenditure is the change in a firm's total wage bill that results from its hiring of one additional unit of labor.

Accepted Answer

Total expenditure refers to the total amount a firm spends on purchasing goods and services, including labor, but is not specifically defined as the change in a firm's total wage bill from hiring one additional unit of labor. The concept described is more accurately related to marginal cost or marginal expenditure on labor.

Question 12

The skills of labor are called human capital.

Accepted Answer

Human capital refers to the knowledge, skills, and abilities that workers possess, which can be seen as an asset or capital for both individuals and organizations.

Question 13

For most firms, the revenues the firms earn are _______________ the total wages the firms pay their workers.

Accepted Answer

This is because firms aim to make a profit, and revenue is the total amount of money a firm earns from selling its products or services. If the revenue is less than the total wages paid to workers, then the firm is operating at a loss. Therefore, the revenue earned by the firm should be greater than the wages paid to workers in order to make a profit.

Question 14

The optimal quantity of labor rule indicates that a profit-maximizing firm will hire labor up to the point at which the MRP it receives from the last unit of labor hired is _______________ the MC of labor.

Accepted Answer

At the optimal quantity of labor, the marginal revenue product (MRP) is equal to the marginal cost of labor (MC), therefore, hiring an additional unit of labor will not increase the firm's profits. If MRP is greater than MC for an additional unit of labor, the firm will still be able to increase its profits by hiring more labor. If MRP is less than MC for an additional unit of labor, the firm will be losing money by hiring additional labor. Therefore, the optimal choice is to hire labor up to the point where MRP equals MC.

Question 15

The optimal quantity of labor rule indicates that a profit-maximizing firm will hire labor up to the point at which the marginal revenue product it receives from the last unit of labor hired is equal to one half the marginal cost of labor.

Accepted Answer

The optimal quantity of labor rule states that a profit-maximizing firm will hire labor up to the point at which the marginal revenue product (MRP) it receives from the last unit of labor hired is equal to the marginal cost (MC) of labor, not one half the marginal cost.

Question 16

The sum of the individual supply curves for all the people who have savings available for investment is the

Accepted Answer

The market supply curve for loanable funds represents the total quantity of funds that individuals, businesses, and governments are willing and able to lend to borrowers for investment purposes. It is derived from the individual supply curves of all the people who have savings available for investment. The sum of these individual supply curves represents the total supply of loanable funds in the market.

Question 17

The demand curve for labor at a single firm is the same as the firm's marginal

Accepted Answer

The demand curve for labor at a single firm is the same as the firm's revenue product curve because the firm's demand for labor is determined by the marginal revenue product of labor, which is the additional revenue generated by hiring one additional unit of labor. This is represented by the firm's revenue product curve. The marginal physical product curve represents the additional physical output generated by hiring one additional unit of labor, while the cost curve represents the firm's costs of production.

Question 18

Demand for labor that is derived from the process of profit maximization is called derived demand.

Accepted Answer

Derived demand refers to the demand for a factor of production, such as labor, that is derived from the demand for the final product or service it contributes to producing. In other words, firms hire labor in response to the demand for their products or services, with the goal of maximizing their profits.

Question 19

An alternating offer sequential bargaining institution is a structured method of bargaining where each bargainer takes turns making offers. If an offer is accepted, the bargaining stops. If the offer is not accepted, the bargaining proceeds to the next round but, due to the delay, the value of what is being bargained over shrinks.

Accepted Answer

This is an accurate description of an alternating offer sequential bargaining institution.

Question 20

If entrepreneur Anita Matsumi invests her own money to build capital equipment for her jam-making business, that investment incurs

Accepted Answer

When an entrepreneur invests their own money into their business, there is an opportunity cost associated with it. This means that the entrepreneur is sacrificing the potential return that their money could have earned if invested elsewhere. Therefore, there is a cost to investing personal funds into a business.

Quiz 26: Input Markets and the Origins of Class Conflict