Question 1

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

The MPP (marginal physical product) is the additional output produced by adding one more unit of labor.

To find the MPP of the 5th laborer, we can use the following formula:

MPP = Change in output / Change in labor

When going from 4 to 5 laborers, the change in output is 25 - 18 = 7 cabinets. 
When going from 5 to 6 laborers, the change in output is 36 - 25 = 11 cabinets.

Therefore, the MPP of the 5th laborer is: 
MPP = 7 / (5 - 4) = 7 cabinets

The best choice is B.

Question 2

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

Accepted Answer

The demand for labor is determined by the marginal revenue product (MRP), which represents the additional revenue generated by hiring one more unit of labor. The firm will only hire as long as the MRP is greater than or equal to the wage rate (which is equal to the marginal factor cost). Therefore, B is the correct answer. A is incorrect because total revenue product is not a measure of demand for labor. C is incorrect because marginal factor cost is not the same as demand for labor. D is incorrect because marginal wage is not a measure of demand for labor.

Question 3

The demand for labor is

Accepted Answer

The demand for labor is derived from the demand for the final product of the firm. As the output demand increases, the firm needs to hire more workers to produce the goods or services, hence resulting in an increase in labor demand. This is the reason why labor demand is said to be a derived demand.

Question 4

The demand curve for labor will shift whenever

Accepted Answer

The demand for labor is derived from the demand for the final product. Therefore, any change in the demand for the final product will lead to a shift in the demand curve for labor. Changes in the wage rate, marginal factor cost, or supply of labor will not necessarily shift the demand curve for labor.

Question 5

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 6

The downward sloping marginal revenue product of labor is

Accepted Answer

The marginal revenue product of labor is the additional revenue a firm generates by hiring one more unit of labor. The downward sloping marginal revenue product of labor reflects the law of diminishing marginal returns, which states that as a firm hires more and more workers, the marginal product of labor eventually begins to decline. This means that each additional worker is adding less and less to the firm's total revenue, and so the firm will be willing to pay less for each additional worker. The marginal revenue product of labor, therefore, represents the firm's short-run demand for labor.

Question 7

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, it becomes more profitable for Ajax to hire additional workers. As a result, they will hire more widget makers, which will increase the productivity of labor and thus the marginal revenue product for labor.

Question 8

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

Accepted Answer

Derived demand means that the demand for the input is determined by the demand for the final product being produced. Therefore, the demand curve for the input is derived from the demand for the final product.

Question 9

The marginal physical product (MPP) is calculated by

Accepted Answer

The marginal physical product (MPP) is the additional output resulting from one more unit of input (usually labor). It is calculated by dividing the change in total physical product by the change in the input. Therefore, option B is the correct answer.

Question 10

-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 11

-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 12

An increase in the marginal factor cost of labor will

Accepted Answer

A higher marginal factor cost of labor means that it is more expensive for a firm to hire additional workers. Therefore, the firm will likely hire fewer workers to keep costs down.

Question 13

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

MPP (Marginal Physical Product) is the addition to the total physical product, when one more unit of a variable input is employed, keeping all other inputs constant.

To find out the MPP of the 6th laborer, we can use the following formula:

MPP = Change in Total Product / Change in Labor

From the given data, we can see that:

- With 4 laborers, Sam produced 18 cabinets.
- With 5 laborers, he produced 25 cabinets.
- With 6 laborers, he produced 36 cabinets.

So, the change in total product when Sam added the 6th laborer is:

36 - 25 = 11 cabinets

And, the change in labor (from 5 to 6) is:

6 - 5 = 1

Therefore, the MPP of the 6th laborer is:

MPP = 11 / 1 = 11 cabinets

So, the correct answer is (A) 11 cabinets.

Question 14

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 does not change but the firm hires fewer workers, it means that the marginal revenue product of the last worker hired is less than the wage rate. This could be due to a decrease in demand for the product or a reduction in labor productivity. Therefore, the answer is C. The other choices are incorrect because there is no information suggesting that the price of the product increased, that technical change occurred, or that marginal factor cost increased.

Question 15

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 known as the marginal physical product. It measures the additional output produced by one more unit of labor.

Question 16

-Refer to the above figure.  represents

Accepted Answer

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

Question 17

An increase in the productivity of labor induces

Accepted Answer

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

Question 18

A decrease in the marginal factor cost of labor will

Accepted Answer

When the marginal factor cost of labor decreases, it becomes cheaper for the firm to hire additional workers. This will induce the firm to hire more workers in order to maximize profits.

Question 19

An increase in product price implies that

Accepted Answer

The answer of An increase in product price implies that
...

Question 20

Marginal revenue product is

Accepted Answer

Marginal revenue product is the additional revenue generated by hiring one more unit of a factor of production, such as labor. It is calculated by multiplying the marginal physical product of the factor by the marginal revenue generated by the output produced by that factor. Therefore, the correct choice is B, which states that marginal revenue product is equal to marginal physical product times marginal revenue.

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