Question 1

Exhibit 26-5
  ​
-Refer to Exhibit 26-5. Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $1,000. The firm should hire __________ of labor.

Accepted Answer

A)  one unit
B)  two units
C)  three units
D)  four units
E)  five units

Question 2

Exhibit 26-6
​
 
-Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

Accepted Answer

A)  AA
B)  BB
C)  CC
D)  any of the above

Question 3

If, at a particular wage rate in a competitive market, the quantity supplied of labor exceeds the quantity demanded of labor, then

Accepted Answer

A)  the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated.
B)  since wages are so high, the quantity supplied of workers will increase further, and the quantity demanded will decrease further.
C)  some workers will begin to accept lower wages and, as a result, employers will begin to hire more workers.
D)  the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated.

Question 4

Exhibit 26-1
  ​
-Refer to Exhibit 26-1. What dollar value goes in blank (C) ?

Accepted Answer

A)  $300
B)  $10
C)  $30
D)  $80

Question 5

The least-cost rule requires that, for every factor, the ratio of the

Accepted Answer

A)  marginal physical product to factor price must be equal.
B)  marginal revenue product to factor price must be equal.
C)  marginal revenue product to output must be equal.
D)  marginal cost to factor price must be equal.
E)  b and c

Question 6

A firm will maximize its profits by hiring factors up to the point at which

Accepted Answer

A)  MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist.
B)  P = MC, if the firm is a perfect competitor.
C)  MRP = MFC.
D)  VMP = MFC, if the firm is a price searcher (monopolist, etc.) .
E)  a and b

Question 7

If, at a particular wage rate in a competitive market, the quantity demanded of labor exceeds the quantity supplied of labor, then

Accepted Answer

A)  the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated.
B)  since wages are so low, the quantity supplied of workers will decrease further, and the quantity demanded will increase further.
C)  some workers will begin to demand higher wages, as a result, employers will begin to hire more workers.
D)  the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated.
E)  none of the above

Question 8

The elasticity of demand for a factor is lower,

Accepted Answer

A)  the higher the elasticity of demand for the product the factor helps to produce.
B)  the higher the factor cost-total cost ratio.
C)  the fewer substitutes for the factor.
D)  a and c
E)  all of the above

Question 9

Marginal factor cost (MFC)  is

Accepted Answer

A)  the additional cost incurred by employing an additional factor unit.
B)  the additional output generated by employing an additional factor unit.
C)  equal to factor price for a factor price taker.
D)  a and c
E)  b and c

Question 10

When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

Accepted Answer

A)  $22.00.
B)  $29.00.
C)  $0.53.
D)  $114.
E)  There is not enough information to answer the question.

Question 11

Which of the following can change the supply of labor in labor market A?

Accepted Answer

A)  a change in the wage rate in labor market A.
B)  a change in the wage rate in related labor markets B or C.
C)  a positive change in the overall pleasantness of working in labor market A.
D)  a negative change in the working conditions in labor market A.
E)  b, c, and d

Question 12

List and describe the four conditions necessary for everyone to receive equal pay in the long run.

Accepted Answer

Given the following conditions, there wo...

Question 13

Consider two labor markets, C and D. Wages in labor market D fall. This could be due to

Accepted Answer

A)  the marginal revenue curve in the product market (that employees in labor market D supply with goods)  shifts to the left.
B)  an increase in the marginal physical product of the employees in labor market D.
C)  an increase in the price and marginal revenue of the product that employees in labor market D produce.
D)  b and c
E)  a, b, and c

Question 14

The higher the labor cost to total cost ratio, the lower the elasticity of demand for labor.

Accepted Answer

A) True 
 B)False

Question 15

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

A)  is minimizing its costs with this combination of factors.
B)  is maximizing its profits with this combination of factors.
C)  should hire more labor and less capital in order to minimize its costs.
D)  should hire more capital and less labor in order to minimize its costs.
E)  a and b

Question 16

Exhibit 26-4
​
 
-Refer to Exhibit 26-4. How many units of labor should this firm employ?

Accepted Answer

A)  1
B)  2
C)  3
D)  4

Question 17

The demand for factors (which arises from the demand for the products that the factors help produce)  is called a(n)  __________ demand.

Accepted Answer

A)  derived
B)  indirect
C)  secondary
D)  expressed

Question 18

Refer to Exhibit 26-8. The dollar amounts that go in blanks (E)  and (F)  are, respectively,

Accepted Answer

A)  $6 and $6.
B)  $70 and $60.
C)  $84 and $72.
D)  $72 and $24.
E)  There is not enough information to answer the question.

Question 19

Which of the following statements is false?

Accepted Answer

A)  If a firm is a factor price taker, marginal factor cost is constant and equal to factor price.This means a factor price taker pays a wage equal to its marginal factor cost.
B)  Firms hire the factor quantity at which marginal revenue product equals marginal factor cost.
C)  If a firm is a product price taker, marginal revenue product is greater than value marginal product.
D)  If a firm is product price taker and a factor price taker, it pays labor a wage equal to its value marginal product.

Question 20

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

Accepted Answer

A)  the demand curve of its product to the left.
B)  the demand curve of its product to the right.
C)  its MRP curve to the left.
D)  its MRP curve to the right.
E)  b and c

Exam 26: Factor Markets With Emphasis on the Labor Market

Exhibit 26-1 ​ -Refer to Exhibit 26-1. What dollar value goes in blank (C) ?

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

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Exhibit 26-4 ​ -Refer to Exhibit 26-4. How many units of labor should this firm employ?

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The demand for factors (which arises from the demand for the products that the factors help produce) is called a(n) __________ demand.

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The higher the labor cost to total cost ratio, the lower the elasticity of demand for labor.

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Which of the following statements is false?

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Exhibit 26-5 ​ -Refer to Exhibit 26-5. Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $1,000. The firm should hire __________ of labor.

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Marginal factor cost (MFC) is

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List and describe the four conditions necessary for everyone to receive equal pay in the long run.

Correct AnswerverifiedGiven the following conditions, there wo...View AnswerShow Answer

Exhibit 26-6 ​ -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

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The least-cost rule requires that, for every factor, the ratio of the

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A firm will maximize its profits by hiring factors up to the point at which

Correct AnswerverifiedShow Answer

If, at a particular wage rate in a competitive market, the quantity supplied of labor exceeds the quantity demanded of labor, then

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Refer to Exhibit 26-8. The dollar amounts that go in blanks (E) and (F) are, respectively,

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When a firm employs 1 unit of factor X it produces 28 units of output and when it employs 2 units of factor X it produces 57 units of output. It follows that marginal revenue product of the second unit of factor X is

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Consider two labor markets, C and D. Wages in labor market D fall. This could be due to

Correct AnswerverifiedShow Answer

If, at a particular wage rate in a competitive market, the quantity demanded of labor exceeds the quantity supplied of labor, then

Correct AnswerverifiedShow Answer

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

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Which of the following can change the supply of labor in labor market A?

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The elasticity of demand for a factor is lower,

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Exhibit 26-1 -Refer to Exhibit 26-1. What dollar value goes in blank (C) ?

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Exhibit 26-4 -Refer to Exhibit 26-4. How many units of labor should this firm employ?

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Exhibit 26-5 -Refer to Exhibit 26-5. Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $1,000. The firm should hire __________ of labor.

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Given the following conditions, there wo...
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Exhibit 26-6 -Refer to Exhibit 26-6. Let AA represent the value marginal product curve of an oligopolist. Which of the following could represent his marginal revenue product curve?

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