Question 1

An adverse supply shock,such as a reduced supply of raw materials,would
A)increase the marginal product of labor.
B)decrease the marginal product of labor.
C)decrease the marginal product of capital,but have no effect on the marginal product of labor.
D)not affect the marginal product of labor.

Accepted Answer

A reduced supply of raw materials would lead to a decrease in productivity, which would ultimately lead to a decrease in the marginal product of labor.

Question 2

Suppose the economy's production function is Y = AK^0.3N^0.7.Suppose K = 200,N = 2000,and A = 1. Calculate the marginal products of labor and capital.

Accepted Answer

The answer of Suppose the economy's production function is Y...

Question 3

The Widget Company has the following production function.  If widgets sell for $6 each and the wage rate is $33,how many workers will the company hire?
A)0
B)1
C)2
D)4

Accepted Answer

The answer of The Widget Company has the following production...

Question 4

Your boss wants to know if you should lay off any workers.You answer that you should lay off workers if the
A)marginal revenue product of labor is greater than the nominal wage rate.
B)marginal product of labor is greater than or equal to the real wage rate.
C)marginal revenue product of labor is equal to the nominal wage rate.
D)marginal product of labor is less than the real wage rate.

Accepted Answer

According to the marginal productivity theory of labor, a firm should lay off workers if the marginal product of labor is less than the real wage rate. This means that the additional output or revenue generated by hiring one more worker is less than the cost of employing them, which would result in a loss for the firm. Therefore, the firm should reduce its workforce to increase efficiency and cut costs.

Question 5

Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?
A)An increase in the real wage
B)A decrease in the real wage
C)A favorable supply shock such as a fall in the price of oil
D)An adverse supply shock,such as a reduced supply of raw materials

Accepted Answer

A favorable supply shock, such as a fall in the price of oil, would likely lead to an increase in productivity and, as a result, an increase in the marginal product of labor. Option A is incorrect because an increase in the real wage would likely lead to a decrease in the marginal product of labor due to diminishing returns to labor. Option B is incorrect for the same reason, as a decrease in the real wage would likely lead to an increase in the marginal product of labor. Option D is incorrect because an adverse supply shock would likely lead to a decrease in productivity and, therefore, a decrease in the marginal product of labor.

Question 6

Suppose a firm's hourly marginal product of labor is given by MPN = A (200 - N).
(a)If A = 0.2 and the real wage rate is $10 per hour,how much labor will the firm want to hire?
(b)Suppose the real wage rate rises to $20 per hour.How much labor will the firm want to hire?
(c)With the real wage rate at $10 per hour,how much labor will the firm want to hire if A rises to 0.5?

Accepted Answer

The answer of Suppose a firm's hourly marginal product of...

Question 7

Zowie! Surfboards has the following production function.  If surfboards sell for $30 and the nominal wage rate is $200,how many workers should the firm employ?
A)2
B)3
C)4
D)5

Accepted Answer

To determine the optimal level of labor, we need to find the point where the marginal product of labor (MPL) equals the nominal wage rate divided by the price of output (w/P). Using the production function provided, we can calculate the MPL for each level of labor as follows:
MPL = ∆Q/∆L = 6L^(2/3)
To find the labor level that maximizes profits, we need to compare the MPL to the ratio of the nominal wage rate to the price of output, which is (200/30) = 6.67. 
For 2 workers, MPL = 9.66
For 3 workers, MPL = 11.08
For 4 workers, MPL = 11.87
For 5 workers, MPL = 12.45

Thus, the optimal level of labor is 4 workers, since that is the first point where MPL exceeds the ratio of the nominal wage rate to the price of output. Therefore, the firm should employ 4 workers for profit maximization.

Question 8

A winter ice storm has paralyzed the entire east coast,reducing productivity sharply.This supply shock shifts the marginal product of labor curve
A)up and to the right,raising the quantity of labor demanded at any given real wage.
B)down and to the left,reducing the quantity of labor demanded at any given real wage.
C)up and to the right,reducing the quantity of labor demanded at any given real wage.
D)down and to the left,raising the quantity of labor demanded at any given real wage.

Accepted Answer

A negative supply shock, such as a winter ice storm, reduces productivity and shifts the marginal product of labor curve down and to the left. This results in a decrease in the quantity of labor demanded at any given real wage, leading to a reduction in employment and output. Therefore, choice B is the correct answer.

Question 9

An increase in the real wage rate will cause
A)the labor demand curve to shift to the right.
B)the labor demand curve to shift to the left.
C)the quantity of labor demanded to rise.
D)a movement along the labor demand curve.

Accepted Answer

An increase in the real wage rate only causes a movement along the labor demand curve, as employers will hire fewer workers due to the increased cost of labor. This movement is represented by a decrease in the quantity of labor demanded. The labor demand curve itself does not shift as a result of a change in the wage rate.

Question 10

Firms hire labor at the point where the
A)nominal wage rate equals the marginal product of labor.
B)real wage rate equals the marginal revenue product of labor.
C)nominal wage rate equals the marginal revenue product of labor.
D)real wage rate equals the marginal revenue product of capital.

Accepted Answer

Firms hire labor where the wage rate equals the additional revenue generated by the last unit of labor hired, which is the marginal revenue product of labor. However, since the wage rate is a monetary value, it is important to compare it to the marginal revenue product in nominal terms. Therefore, the nominal wage rate should equal the marginal revenue product of labor.

Question 11

Economists often treat the economy's capital stock as fixed because
A)labor is a more important factor of production than capital,so economists ignore capital.
B)it takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital.
C)there is very little capital in the economy compared with the amount of labor.
D)unless the interest rate changes,the capital stock doesn't change.

Accepted Answer

It takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital. Therefore, economists often assume that the economy's capital stock is fixed in the short run.

Question 12

A decrease in the number of workers hired by a firm could result from
A)an increase in the marginal product of labor.
B)an increase in the marginal revenue product of labor.
C)an increase in the real wage.
D)a decrease in the real wage.

Accepted Answer

An increase in the real wage means it costs more for a firm to hire each worker, potentially leading the firm to hire fewer workers to minimize costs.

Question 13

An increase in the number of workers hired by a firm could result from
A)a decrease in the marginal product of labor.
B)a decrease in the marginal revenue product of labor.
C)an increase in the real wage.
D)a decrease in the real wage.

Accepted Answer

When the real wage decreases, it becomes less expensive for firms to hire workers. This can lead to an increase in the number of workers hired as labor becomes a more attractive input for production.

Question 14

A technological breakthrough in using photons for computers will increase the productivity of those working with computers a hundredfold.You would expect this breakthrough to shift the
A)marginal product of labor curve up and to the right,raising the quantity of labor demanded at any given real wage.
B)marginal product of labor curve down and to the left,reducing the quantity of labor demanded at any given real wage.
C)labor supply curve up,reducing the quantity of labor demanded at any given real wage.
D)labor supply curve down,raising the quantity of labor demanded at any given real wage.

Accepted Answer

A technological breakthrough that increases productivity will shift the marginal product of labor (MPL) curve up and to the right. This means that for any given real wage, the MPL will be higher and the quantity of labor demanded will increase. Therefore, the answer is A.

Question 15

One reason that firms hire labor at the point where w = MPN is A)if w < MPN,the cost (w)of hiring additional workers exceeds the benefits (MPN)of hiring them,so they should hire fewer workers. B)if w > MPN,the cost (w)of hiring additional workers is less than the benefits (MPN)of hiring them,so they should hire more workers. C)if w < MPN,the cost (w)of hiring additional workers equals the benefits (MPN)of hiring them,so they have the right number of workers. D)if w > MPN,the cost (w)of hiring additional workers exceeds the benefits (MPN)of hiring them,so they should hire fewer workers.

Accepted Answer

Firms hire labor at the point where the wage rate (w) equals the marginal product of labor (MPN) because this ensures that the cost of hiring an additional worker is exactly equal to the additional revenue generated by that worker. If the wage rate is greater than the MPN (w > MPN), it means the cost of hiring an additional worker is more than the benefit derived from their work, indicating the firm should reduce its workforce to maximize efficiency and profit.

Question 16

Changes in the capital stock occur ________,and changes in the amount of labor that firms employ occur ________.
A)quickly; quickly
B)slowly; slowly
C)slowly; quickly
D)quickly; slowly

Accepted Answer

Changes in the capital stock occur slowly because it takes time for firms to invest in new equipment and machinery or to sell off existing equipment. Changes in the amount of labor that firms employ, on the other hand, can occur relatively quickly, as firms can hire or lay off workers as needed.

Question 17

A decrease in the real wage would result in a
A)movement along the labor demand curve,causing an increase in the number of workers hired by the firm.
B)shift of the labor demand curve,causing an increase in the number of workers hired by the firm.
C)movement along the labor demand curve,causing a decrease in the number of workers hired by the firm.
D)shift of the labor demand curve,causing a decrease in the number of workers hired by the firm.

Accepted Answer

A decrease in the real wage will make hiring workers less expensive for the firm, which will lead to a movement along the labor demand curve. This movement will result in an increase in the number of workers hired by the firm, as the firm will now demand more labor at the lower wage rate. Therefore, the correct answer is A.

Question 18

The marginal product of labor (measured in units of output)for Expando Corp.is given by MPN = A(400 - N)
Where A measures productivity and N is the number of labor hours used in production.Suppose the price of output is $3 per unit and A = 2.0.What will be the demand for labor if the nominal wage is $18?
A)57
B)107
C)197
D)397

Accepted Answer

The answer of The marginal product of labor (measured in...

Question 19

The Upstart Company has the following production function.  If the company hires 4 workers,which of the following could be the real wage rate?
A)2
B)4
C)6
D)8

Accepted Answer

The answer of The Upstart Company has the following production...

Question 20

What two factors should you equate in deciding how many workers to employ?
A)The marginal product of labor and the marginal product of capital
B)The marginal product of labor and the real wage rate
C)The marginal product of labor and the real interest rate
D)The marginal product of capital and the real wage rate

Accepted Answer

The optimal choice of how many workers to employ depends on comparing the marginal product of labor to the real wage rate. The marginal product of labor represents the additional output that can be produced by hiring an additional worker, while the real wage rate represents the cost of hiring that worker. As long as the marginal product of labor is greater than the real wage rate, it is profitable to hire additional workers. Once the two are equal, the optimal level of employment has been reached. Therefore, the correct factors to equate are the marginal product of labor and the real wage rate.

Quiz 3: Productivity, Output, and Employment

An adverse supply shock,such as a reduced supply of raw materials,would

Suppose the economy's production function is Y = AK^0.3N^0.7.Suppose K = 200,N = 2000,and A = 1. Calculate the marginal products of labor and capital.

The Widget Company has the following production function. If widgets sell for $6 each and the wage rate is $33,how many workers will the company hire?

Your boss wants to know if you should lay off any workers.You answer that you should lay off workers if the

Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?

Zowie! Surfboards has the following production function. If surfboards sell for $30 and the nominal wage rate is $200,how many workers should the firm employ?

A winter ice storm has paralyzed the entire east coast,reducing productivity sharply.This supply shock shifts the marginal product of labor curve

An increase in the real wage rate will cause

Firms hire labor at the point where the

Economists often treat the economy's capital stock as fixed because

A decrease in the number of workers hired by a firm could result from

An increase in the number of workers hired by a firm could result from

A technological breakthrough in using photons for computers will increase the productivity of those working with computers a hundredfold.You would expect this breakthrough to shift the

One reason that firms hire labor at the point where w = MPN is

Changes in the capital stock occur ,and changes in the amount of labor that firms employ occur .

A decrease in the real wage would result in a

The Upstart Company has the following production function. If the company hires 4 workers,which of the following could be the real wage rate?

What two factors should you equate in deciding how many workers to employ?

Quiz 3: Productivity, Output, and Employment

An adverse supply shock,such as a reduced supply of raw materials,would

Suppose the economy's production function is Y = AK0.3N0.7.Suppose K = 200,N = 2000,and A = 1. Calculate the marginal products of labor and capital.

The Widget Company has the following production function. If widgets sell for $6 each and the wage rate is $33,how many workers will the company hire?

Your boss wants to know if you should lay off any workers.You answer that you should lay off workers if the

Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?

Zowie! Surfboards has the following production function. If surfboards sell for $30 and the nominal wage rate is $200,how many workers should the firm employ?

A winter ice storm has paralyzed the entire east coast,reducing productivity sharply.This supply shock shifts the marginal product of labor curve

An increase in the real wage rate will cause

Firms hire labor at the point where the

Economists often treat the economy's capital stock as fixed because

A decrease in the number of workers hired by a firm could result from

An increase in the number of workers hired by a firm could result from

A technological breakthrough in using photons for computers will increase the productivity of those working with computers a hundredfold.You would expect this breakthrough to shift the

One reason that firms hire labor at the point where w = MPN is

Changes in the capital stock occur ________,and changes in the amount of labor that firms employ occur ________.

A decrease in the real wage would result in a

The Upstart Company has the following production function. If the company hires 4 workers,which of the following could be the real wage rate?

What two factors should you equate in deciding how many workers to employ?

Suppose the economy's production function is Y = AK^0.3N^0.7.Suppose K = 200,N = 2000,and A = 1. Calculate the marginal products of labor and capital.

Changes in the capital stock occur ,and changes in the amount of labor that firms employ occur .