Q&A Hero

Q: Labor demand is considered a derived demand because producers do not demand labor for itself but only because labor is used to produce output that consumers desire.

Q: An increase in the supply of capital, which is a complement to labor, will lead to A) a decrease in the quantity of labor demanded. B) an increase in the demand for labor. C) a decrease in the demand for labor. D) an increase in the quantity of labor demanded.

Q: Which of the following factors will not cause the labor demand curve to shift? A) increases in human capital B) changes in technology C) change in the price of the product produced with labor D) the wage rate

Q: An increase in a perfectly competitive firm's demand for labor could be caused by A) a decrease in the market wage rate. B) an increase in the amount of human capital among the labor force. C) an increase in the supply of labor. D) a decrease in the market price of the product the firm produces.

Q: The market demand curve for labor A) is determined by adding up the quantity of labor demanded by each firm at each wage, holding constant the other variables that affect the willingness of firms to hire workers. B) is the same as the market demand curve for the product labor produces because it is a derived demand. C) is determined by adding up the demand for labor by each firm at each wage, holding constant the other variables that affect the willingness of firms to hire workers. D) is perfectly inelastic because there is a finite number of workers in the market for labor.

Q: Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If the last worker hired produces four units of output per hour, then to maximize profits the firm should A) not change the number of workers it currently hires. B) lay off some workers. C) hire another worker. D) There is not enough information to answer the question.

Q: Suppose a competitive firm is paying a wage of $12 an hour. Assume that labor is the only input. If hiring another worker would increase output by four units per hour, then to maximize profits the firm should A) not change the number of workers it currently hires. B) hire the extra worker. C) layoff some workers. D) There is not enough information to answer the question.

Q: Table 17-4Quantity of LaborOutputMPLPriceTotal RevenueMRPLWage00---$200$0---$5001661805002115160500315414050041831205005202100500621180500Table 17-4 lists data for the production of Apple iPods. Apple is assumed to be a price maker, so to increase its sales of iPods the firm must lower its price. MPL and MRPL refer to the marginal product of labor and the marginal revenue product of labor, respectively.Refer to Table 17-4. What are the quantity of labor and marginal revenue product of labor that will maximize the profit Apple would earn from selling iPods?A) 2; $160B) 3; $340C) 2; $680D) 3; $140

Q: Table 17-4Quantity of LaborOutputMPLPriceTotal RevenueMRPLWage00---$200$0---$5001661805002115160500315414050041831205005202100500621180500Table 17-4 lists data for the production of Apple iPods. Apple is assumed to be a price maker, so to increase its sales of iPods the firm must lower its price. MPL and MRPL refer to the marginal product of labor and the marginal revenue product of labor, respectively.Refer to Table 17-4. What are the price and quantity of workers that result in the maximum amount of profit Apple would earn from selling iPods?A) $140; 2B) $160; 2C) $140; 3D) $180; 1

Q: Table 17-4Quantity of LaborOutputMPLPriceTotal RevenueMRPLWage00---$200$0---$5001661805002115160500315414050041831205005202100500621180500Table 17-4 lists data for the production of Apple iPods. Apple is assumed to be a price maker, so to increase its sales of iPods the firm must lower its price. MPL and MRPL refer to the marginal product of labor and the marginal revenue product of labor, respectively.Refer to Table 17-4. What are the price and quantity of workers that result in the maximum amount of revenue Apple would earn from selling iPods?A) $180; 1B) $140; 2C) $120; 2D) $120; 4

Q: Which of the following is not held constant along a firm's demand curve for labor? A) the quantity of other inputs used by the firm B) the wage rate C) changes in technology D) the price of the product produced by the firm

Q: Table 17-3Number of WorkersOutput of Microwave Ovens per Week13025537549051006105Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets. The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces.Refer to Table 17-3. What is Hotspur's profit maximizing quantity of labor?A) 2 workersB) 3 workersC) 5 workersD) 6 workers

Q: Table 17-3Number of WorkersOutput of Microwave Ovens per Week13025537549051006105Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets. The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces.Refer to Table 17-3. What is the amount of profit added as a result of hiring the fourth worker?A) $7,200B) $1,200C) $800D) $400

Q: Table 17-3Number of WorkersOutput of Microwave Ovens per Week13025537549051006105Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets. The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces.Refer to Table 17-3. What is the amount of revenue added as a result of hiring the fourth worker?A) $1,200B) $7,200C) 15 microwavesD) 90 microwaves

Q: Figure 17-2 Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 17-2. Suppose the market price of bracelets falls to $2. What happens to the curve given in the diagram? A) Nothing, because labor's productivity has not changed. B) There will be a movement along the curve. C) The curve shifts to the left. D) We cannot answer the question without knowing if Becca would want to hire more workers.

Q: Figure 17-2 Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 17-2. If Becca can sell her bracelets at $3 each, what is the marginal product of the 4th worker? A) $36 B) 12 bracelets C) 36 bracelets D) $144

Q: Figure 17-2 Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 17-2. If the wage rate is $20, how many workers should Becca hire? A) 6 B) 5 C) 4 D) 3

Q: Marginal revenue product falls as more labor is hired because A) the price of the product must fall for a perfectly competitive firm to sell more. B) the wage rate rises as more workers work more hours. C) the marginal product of labor is negative as additional units of labor are hired. D) the marginal product of labor falls as a result of the law of diminishing returns.

Q: Hotspur Incorporated, a manufacturer of microwaves, is a price taker in both the input and output markets. To maximize its profit, Hotspur will hire labor up to the point where A) the marginal product of labor is no longer positive. B) all economies of scale have been exhausted. C) the marginal revenue product of labor equals the wage rate. D) the marginal revenue product of labor equals the output price.

Q: Holding the price of a firm's output constant, if the marginal product of labor increases A) the marginal revenue product of labor decreases. B) the marginal revenue product of labor also increases. C) the marginal products of other inputs also increase. D) the marginal revenue product of labor may increase or decrease.

Q: The benefit to the firm from hiring one additional worker is called the A) marginal revenue product of labor. B) marginal revenue. C) marginal profit. D) total revenue.

Q: The marginal revenue product of labor is defined as A) the change in the firm's revenue as a result of selling one more unit of output. B) the change in the firm's output as a result of hiring one more worker. C) the change in the firm's profit as a result of hiring one more worker. D) the change in the firm's revenue as a result of hiring one more worker.

Q: The change in a firm's revenue as a result of hiring one more worker A) is the definition of the marginal product of labor. B) is equal to the firm's marginal cost. C) is the definition of the marginal revenue product of labor. D) will be negative if the demand for the firm's output is inelastic.

Q: For a firm that is a price taker in the market for labor, the marginal revenue product of labor equals the A) marginal product of labor multiplied by the wage rate. B) marginal product of labor multiplied by the product price. C) marginal product of labor divided by the wage rate. D) marginal product of labor multiplied by the marginal cost of production.

Q: A firm's demand curve for labor slopes downwards because A) of the law of diminishing marginal returns. B) firms supply less labor as the wage rate rises. C) workers supply less labor services as the wage rate falls. D) of rising marginal product.

Q: As more output is produced, the marginal product of labor declines A) because of the law of diminishing returns. B) if firms reduce the wage paid to labor. C) if the firm's output supply curve is inelastic. D) because the firm's marginal revenue declines.

Q: Which of the following describes a difference between the marginal product of labor and the marginal revenue product of labor? A) The marginal product of labor declines as each additional worker is hired because of the law of diminishing returns. The marginal revenue product of labor declines as each additional worker is hired because of diseconomies of scale. B) The marginal product of labor declines as each additional worker is hired because of the law of diminishing returns. The marginal revenue product increases as each additional worker is hired because of increases in the productivity of labor. C) The marginal product of labor is inelastic. The marginal revenue product of labor is elastic. D) The marginal product of labor measures the change in output as additional workers are hired. The marginal revenue product measures the change in revenue as additional workers are hired.

Q: The demand curve for labor is also A) the demand curve for the output produced with labor since the demand for labor is a derived demand. B) the marginal product of labor curve. C) the marginal revenue product of labor curve. D) the supply curve for the output labor is used to produce.

Q: A firm should hire more workers to increase its profits if A) the marginal product of labor is greater than the wage the firm will pay these workers. B) the wage rate is less than the marginal revenue product of labor. C) there is enough capital and other resources for the workers to use. D) the demand for labor is elastic.

Q: The marginal product of labor is A) the payment made to workers for their contribution to the output they produce. B) equal to the demand for labor. C) the change in a firm's revenue as a result of hiring one more worker. D) the additional output a firm produces as a result of hiring one more worker.

Q: An increase in the demand for orthodontic services leads to A) an increase in the supply of orthodontists. B) lower prices for orthodontic care. C) an increase in the demand for orthodontists. D) a rise in the rates of dental insurance.

Q: The term "derived demand" refers to A) the demand for financial products called derivatives. B) the demand for a factor of production that is derived from the demand for the good the factor produces. C) a firm's estimated demand curve derived from sales data. D) a demand curve that derives from the availability of resources.

Q: The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and A) the additional revenue received from selling the output produced as a result of hiring an additional worker. B) the payment made to the worker for producing the additional output. C) the elasticity of demand for the output produced by the worker. D) the number of workers willing to produce the additional output.

Q: The demand for labor is different from the demand for final goods and services because A) the demand for labor is derived from the demand for the good or service the labor is used to produce. B) it is a demand for people, not inanimate objects. C) the demand for labor is more inelastic than the demand for the goods and services produced with this labor. D) the law of demand does not apply to the demand for labor.

Q: What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded. C) It is a market producers buy consumption and capital goods. D) It is a market where resources used to produce final goods are traded.

Q: Major League Baseball teams are similar to other firms in that they use factors of production to produce a product (baseball games). An example of capital used by teams to produce their products is A) the money teams earn from television contracts and ticket sales. B) the land on which baseball games are played. C) the labor of baseball players. D) the ballparks where the games are played.

Q: Zach Greinke and other star baseball players earn millions of dollars annually. These salaries are due to A) the greed of players and their agents. B) the demand and supply of labor in the market for baseball players. C) the elastic demand for jobs in Major League Baseball. D) the irrational behavior of team owners.

Q: One difference between the labor market and markets for goods and services is A) the demand in the labor market is inelastic; the demand for goods and services may be elastic or inelastic. B) the supply of labor is perfectly inelastic because the quantity supplied is constant. The elasticity of supply for goods and services is different in different markets. C) concepts of fairness arise more frequently in labor markets than in the markets for goods and services. D) in the labor market, firms are suppliers while households are demanders.

Q: Article Summary Seeking ways to improve education, Garrett Johnson has organized technology competitions called hackathons where participants such as students, teachers, and engineers build applications designed to improve secondary and higher education systems. These applications can include ways for teachers to improve skills, more productive study habits for students, improving school safety, or any number of ideas related to education. Several hackathons have been planned for around the country, including a virtual hackathon, entry is free, and each contest will award $5,000 in prizes to the winners. Source: Nancy Dahlberg, "Hackathon tackling education reform this week," Miami Herald, October 7, 2013. Refer to the Article Summary. The article addresses education reform by way of newly designed applications. Education reform could lead to a more skilled and better trained public. A more skilled and better trained public would A) cause the market supply curve for labor to shift to the right. B) cause the market demand curve for labor to shift to the right. C) not shift the market demand curve for labor. D) cause both the market demand curve for labor and the market supply curve for labor to shift to the left.

Q: Article Summary Seeking ways to improve education, Garrett Johnson has organized technology competitions called hackathons where participants such as students, teachers, and engineers build applications designed to improve secondary and higher education systems. These applications can include ways for teachers to improve skills, more productive study habits for students, improving school safety, or any number of ideas related to education. Several hackathons have been planned for around the country, including a virtual hackathon, entry is free, and each contest will award $5,000 in prizes to the winners. Source: Nancy Dahlberg, "Hackathon tackling education reform this week," Miami Herald, October 7, 2013. Refer to the Article Summary. The article addresses education reform by way of newly designed applications. If any of these apps lead to a more skilled and better trained public, the economy would experience A) an increase in human capital. B) an increase in the supply of labor. C) an increase in comparable worth. D) a decrease in compensating differentials.

Q: In the legal sector, some practice areas have declined in recent years. For example, personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, out-of-state plaintiffs and payouts on damages, and securities class-action litigation has declined in part because of a buoyant stock market. How does this affect the market for lawyers? A) The demand for lawyers shifts to the left. B) The supply of lawyers shifts to the left. C) The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. D) Both the demand and supply curves decrease.

Q: Which of the following will not cause the labor demand curve to shift to the right? A) an increase in the price of the firm's product B) a technological improvement that increases labor productivity C) an increase in human capital in the labor force D) an increase in the market wage rate

Q: An increase in a perfectly competitive firm's demand for labor could be caused by A) a decrease in the market wage rate. B) an increase in the market demand for the firm's product. C) a decrease in the marginal product of workers. D) an increase in the quantity of labor supplied.

Q: A decrease in the wage rate causes A) an increase in the quantity of labor demanded. B) a rightward shift of the firm's labor demand curve. C) a leftward shift of the firm's labor demand curve. D) a decrease in labor's productivity.

Q: An increase in the wage rate causes A) a rightward shift of the firm's labor demand curve. B) a leftward shift of the firm's labor demand curve. C) a decrease in the quantity of labor demanded. D) an increase in labor's marginal productivity.

Q: Marginal revenue product can be calculated using the formula marginal product output price A) only if output price is constant. B) only if the marginal product of labor is constant. C) only if the both marginal product of labor and the output price are constant. D) only if the firm has market power in the labor market

Q: If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker? A) $80 B) $80 minus the firm's profit markup C) It depends on what the going wage rate is in the labor market. D) There is insufficient information to answer the question.

Q: Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximize profits is A) P MP = W. B) P MP > W. C) P MP < W. D) MP W = P.

Q: Table 17-7Number of MachinesOutput of Pencils (boxes per week)Marginal Product of CapitalProduct Price (dollars per box)Total RevenueMarginal Revenue Product of CapitalRental Cost per MachineAdditional Profit from Renting One Additional MachineLQMPPTRMRPR00−$40−$240110402402184024032540240431402405364024064040240Refer to Table 17-7. Dante owns a pencil factory and faces the situation shown in the table and the cost of renting a machine is $240 per week.a. Fill in the blanks in the table and determine the profit-maximizing number of machines for Dante to rent. Explain why renting this number of machines is profit maximizing.b. Draw Dante's demand curve for capital.

Q: Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is A) P MP = W. B) P MP < W. C) P MP > W. D) P W > MP.

Q: The total amount of copper in the earth is not increasing. Does this mean that in the market for copper, the supply curve is perfectly inelastic? Explain.

Q: Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If the last worker hired increases output by three units per hour, then to maximize profits the firm should A) not change the number of workers it currently hires. B) lay off some of its workers. C) hire additional workers. D) There is not enough information to answer the question.

Q: How will a government-imposed minimum wage affect the equilibrium level of employment in a competitive labor market and in a monopsony labor market?

Q: Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by three units per hour, then to maximize profits the firm should A) not change the number of workers it currently hires. B) not hire an additional worker. C) hire another worker. D) There is not enough information to answer the question.

Q: In equilibrium, what determines the price of capital and what determines the price of natural resources?

Q: Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by five units per hour, then to maximize profits the firm should A) not change the number of workers it currently hires. B) lay off some of its workers. C) hire the additional worker. D) There is not enough information to answer the question.

Q: What is the marginal productivity theory of income distribution?

Q: Table 17-2Quantity of LaborOutput of iPods per WeekMarginal Product of LaborProduct Price (dollars)Wage (dollars)188$300$350215728035032162603504265240350530422035063332003507352180350Refer to Table 17-2. What is the profit-maximizing quantity of labor that the firm should hire?A) 5 unitsB) 4 unitsC) 3 unitsD) 2 units

Q: What is a monopsony?

Q: Table 17-2Quantity of LaborOutput of iPods per WeekMarginal Product of LaborProduct Price (dollars)Wage (dollars)188$300$350215728035032162603504265240350530422035063332003507352180350Refer to Table 17-2. The marginal profit from hiring the second unit of labor isA) $4,200.B) $1,960.C) $1,800.D) $1,450.

Q: Economic rent refers to the price of a factor of production which is fixed in supply.

Q: Table 17-2Quantity of LaborOutput of iPods per WeekMarginal Product of LaborProduct Price (dollars)Wage (dollars)188$300$350215728035032162603504265240350530422035063332003507352180350Refer to Table 17-2. The marginal revenue product of labor from the third unit of labor isA) $5,460.B) $1,560.C) $1,260.D) $780.

Q: A monopsony restricts the quantity of a factor demanded to force down the price of the factor and increase profits.

Q: Table 17-2Quantity of LaborOutput of iPods per WeekMarginal Product of LaborProduct Price (dollars)Wage (dollars)188$300$350215728035032162603504265240350530422035063332003507352180350Refer to Table 17-2. The firm represented in the diagramA) has market power in the factor market.B) has market power in the output market.C) has market power in both the factor and product market.D) has no market power in the factor or product market.

Q: A monopsony is a term used to refer to a firm that is the sole seller of a good or service.

Q: The firm's gain in profit from hiring another worker is A) the marginal revenue product of the extra worker. B) the difference between marginal revenue product and the wage of the worker. C) the extra output of the extra worker. D) the reduction in costs from hiring another worker.

Q: The market price of a factor of production that is in fixed is determined only by demand.

Q: A firm's primary interest when it hires an additional worker is A) the cost of hiring the additional worker. B) how the average output of the firm will be affected by this new worker. C) the extra revenue the firm realizes from hiring that worker. D) whether or not the new worker gets along with the firm's existing workers.

Q: The supply curve of a uniquely talented actor or superstar athlete will be perfectly inelastic.

Q: A reason why a perfectly competitive firm's demand for labor curve slopes downward is that A) each additional unit of labor hired is less efficient than previously hired units. B) in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. C) the extra cost of hiring additional units of labor increases as a firm hires more units of labor. D) the firm's demand curve for the product that uses labor is downward sloping.

Q: If you were to ask your employer for a raise, which of the following would be your most effective argument? A) "I have a job offer at another firm that will pay me more than my current wage." B) "I am willing to work more hours each week." C) "Increases in my productivity have resulted in greater revenue and profits for your business." D) "My marginal product is greater than my current wage."

Q: Firms use information on labor's marginal revenue product to determine A) how much to produce at each output price. B) how many workers to hire at each wage rate. C) how much marginal product to produce at each wage rate. D) how much labor services to supply at each wage rate.

Q: The price of a factor of production that is in fixed supply is called A) economic rent. B) economic profit. C) a compensating differential. D) opportunity cost.

Q: Table 17-1Quantity of LaborOutput (units)180217032404300535063907420Refer to Table 17-1. Suppose the output price is $3. If the wage rate is $90, what is the profit-maximizing quantity of labor that the firm should hire?A) 7 unitsB) 5 unitsC) 4 unitsD) 3 units

Q: In general, the supply curve for a natural resource A) is vertical. B) is horizontal. C) slopes downward to reflect decreasing available quantities over time. D) slopes upward.

Q: Table 17-1Quantity of LaborOutput (units)180217032404300535063907420Refer to Table 17-1. Suppose the output price is $3. If the firm represented in the table is maximizing its profit by hiring six workers, what is the wage rate?A) $120B) $65C) $40D) There is insufficient information to answer the question.

Q: The demand for capital is similar to the demand for labor in that A) the marginal product of labor is derived from the marginal product of capital. B) the marginal revenue product curve for labor is the same as the marginal revenue product curve for capital. C) both are derived demands. D) both are inelastic at high prices and elastic at low prices.

Q: Table 17-1Quantity of LaborOutput (units)180217032404300535063907420Refer to Table 17-1. If the output price is $3, what is the marginal revenue product of the fifth unit of labor?A) $1,050B) $360C) $210D) $150

Q: A firm chooses its profit-maximizing quantity of capital by A) comparing the marginal revenue product of capital with the rental price of capital. B) comparing the price of capital with the price of labor. C) examining the total cost of capital equipment. D) determining the rate at which the firm can borrow funds to purchase plant and equipment.

Q: Table 17-1Quantity of LaborOutput (units)180217032404300535063907420Refer to Table 17-1. The marginal product of the fourth unit of labor isA) 300.B) 75.C) 60.D) 15.