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Exam 14: Markets for Factor Inputs

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Question 21

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The Acme Company is a perfect competitor in its input markets and a monopolist in its output market. The marginal product of labor is 20 and the price of Acme's output is $10. For Acme Company, the marginal revenue product of labor is

A) less than $10.
B) $10.
C) $20.
D) less than $200.
E) $200

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Question 22

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Figure 14.4 -Given the information in Figure 14.4, the monopoly wage rate is:

A) W₁.
B) W₂.
C) W₃.
D) W₄.
E) none of the above

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Question 23

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Suppose the supply of farmland is infinitely inelastic and the demand for land is downward sloping but inelastic at the current equilibrium. If the supply curve shifts leftward (e.g., some farmland is permanently converted to other uses) , what happens to the aggregate economic rents in this market?

Who does NOT earn economic rent in a competitive factor market?

Figure 14.4 -Given the information in Figure 14.4, the competitive wage rate is:

If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where

Suppose the upward sloping labor supply curve shifts leftward in a labor market with a single employer (monopsony) . What happens to the equilibrium wage and level of employment in the market?

Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what is the marginal product of capital at the new optimal level of input usage?

Suppose the federal government allows labor unions to act as the sole seller in labor markets, but the government collects an annual $10,000,000 "administrative fee" from each union in this situation. Assuming this fee is not so large that it forces the unions to disband, what is the impact of this fee on the equilibrium wage and employment level in the monopolized labor market?

When comparing the market price of an input in a market characterized by bilateral monopoly to a perfectly competitive price

If the firms in an industry could take advantage of a reduced wage, how would one best describe the firms' demand for labor? The MRP_L

Suppose the labor market and all output markets are perfectly competitive. When the labor market is in equilibrium, the wage rate will:

Edna has a monopoly in the sale of engineering services in the local market. Also, Edna is the only employer of high skilled labor in the local market. The marginal product of labor is: MP_L(L) = 250. The marginal revenue of engineering services is: MR(L) = 12,000 - 0.25L The local supply of high skilled labor is: L^S (w) = 200w - 10,000 Or equivalently w = 50 + 0.005L^S This implies Edna's marginal high-skill labor wage bill expenditures is: ME(L) = 50 + 0.01L Determine Edna's optimal level of employment. Also, what is the wage rate Edna pays for a unit of high skilled labor? What is the marginal revenue of the product of labor at the optimal employment level? Suppose Edna acted as a wage taker in determining high-skilled labor employment. How much labor would she hire and at what wage rate? At this level of employment, calculate the marginal revenue of the product of labor.

Suppose the downward sloping labor demand curve shifts rightward in a labor market with a single employer (monopsony) . What happens to the marginal expenditure curve?

Figure 14.3 A labor union is exercising monopoly power in the labor market. -Refer to Figure 14.3. To maximize the number of workers hired, the labor union will agree to wage rate:

The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme Company, the marginal revenue product of labor

Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is P_Q and the input price is P_i. Efficient use of resources requires that

When compared to the demand curve for only one variable input, the demand curve for a factor input when several inputs are variable is

If the factor supply curve facing a monopolist is the market supply curve, and if the market supply curve is an upward sloping straight line, the marginal expenditure curve

All of the payment to a factor of production will be economic rent when the factor of production has: