Question 1

All of the payment to a factor of production will be economic rent when the factor of production has:
A)an infinitely inelastic supply curve.
B)an infinitely elastic supply curve.
C)a constant,unit elastic supply curve.
D)an infinitely inelastic demand curve.

Accepted Answer

Economic rent occurs when the supply of a factor of production is fixed and there is excess demand for it. In this case, the supply curve is infinitely inelastic, meaning that even if the price of the factor of production increases, the amount supplied will not change. Therefore, all of the payment to the factor of production will be economic rent.

Question 2

Which of the following is NOT true about the supply of labor to the firm in a competitive labor market?
A)It is horizontal.
B)It is perfectly elastic.
C)It is equal to the marginal expenditure curve.
D)It is upward sloping.

Accepted Answer

The supply of labor to the firm in a competitive labor market is not upward sloping. In fact, it is typically assumed to be upward sloping in a monopsony market where the firm is the only buyer of labor. However, in a competitive labor market, each individual employee has no influence on the wage rate and is thus willing to supply labor at a constant wage rate, resulting in a perfectly elastic or horizontal supply curve.

Question 3

The Acme Company is a perfect competitor in its input markets and a monopolist in 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
A)is $100.
B)is $150.
C)is $400.
D)is $600.
E)cannot be determined with the information provided.

Accepted Answer

The answer of The Acme Company is a perfect competitor...

Question 4

Let P be the output price for a particular good.Why is the value P*MP_L greater than MRP_L for a monopolist? A)The monopolist is not as technically efficient as firms operating under perfect competition. B)The monopolist hires less labor,so MP_L is higher under a monopoly than under perfect competition. C)The monopolist sets a price that is higher than MR. D)A and C are correct. E)B and C are correct.

Accepted Answer

The value P*MPS (Marginal Product of Labor) is greater than MRP (Marginal Revenue Product) for a monopolist because the monopolist sets a price (P) that is higher than marginal revenue (MR), and due to hiring less labor, the marginal product of labor (MPS) is higher under monopoly than under perfect competition.

Question 5

Suppose the labor market is perfectly competitive,but the output market is not.When the labor market is in equilibrium,the wage rate will:
A)be less than the marginal revenue product of labor.
B)equal the marginal revenue product of labor.
C)be greater than the marginal revenue product of labor.
D)None of the above is necessarily correct.

Accepted Answer

In a perfectly competitive labor market, the wage rate is determined by the intersection of the demand and supply curves for labor, which is equal to the marginal cost of labor. In this situation, the firms are price-takers in the labor market and the wage rate is equal to the marginal revenue product of labor (MRP). However, the output market is not perfectly competitive, which means that the firm's marginal revenue (MR) is not equal to the market price. Therefore, the wage rate may not be equal to the marginal revenue of the product, but it will always be equal to the MRP in a perfectly competitive labor market.

Question 6

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 A)MRP_i = MP_i. B)MRP_i = Mp_i/P_Q. C)MRP_i = MP_i P_Q. D)MRP_i = P_i.

Accepted Answer

The answer of Suppose a competitive industry produces output,Q,using some...

Question 7

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?
A)100 units
B)133 units
C)150 units
D)We do not have enough information to answer this question.

Accepted Answer

The answer of Suppose labor and capital are variable inputs.The...

Question 8

Figure 14.2 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A.After a wage decrease,the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.2.The income effect of the wage decrease on the amount of hours of leisure is: A)L₀ to L₁. B)L₀ to L₂. C)L₁ to L₂. D)L₂ to L₁. E)none of the above

Accepted Answer

The answer of  Figure 14.2
A consumer's original utility maximizing...

Question 9

What happens to the marginal revenue product curve of a factor as more of a complementary factor is hired?
A)It shifts to the left,because its marginal product decreases.
B)It shifts to the left,because its marginal product increases.
C)It shifts to the right,because its marginal product decreases.
D)It shifts to the right,because its marginal product increases.

Accepted Answer

The marginal revenue product curve of a factor shifts to the right as more of a complementary factor is hired because the marginal product of the factor increases. This is due to the fact that with more of the complementary factor, the original factor can produce more output, thus increasing its marginal product.

Question 10

Use the following statements to answer this question: I.Under profit maximization,the quantity of labor used in production is optimal if MR = w/MP_L. II.The expression MR = w/MPL implies that the revenue earned from the last unit of output produced equals the marginal cost of the last unit of output. A)I and II are true. B)I is true and II is false. C)II is true and I is false. D)I and II are false.

Accepted Answer

The answer of Use the following statements to answer this...

Question 11

In a competitive labor market,with one variable factor,the supply of labor to the firm is
A)equal to the marginal expenditure curve.
B)equal to the demand curve for labor.
C)greater than the marginal expenditure curve.
D)equal to the marginal revenue product curve.

Accepted Answer

The answer of In a competitive labor market,with one variable...

Question 12

Under an upward sloping supply curve for land,the economic rents to land __________ as the demand for land shifts rightward.
A)decrease
B)increase
C)remain the same
D)We do not have enough information to answer this question.

Accepted Answer

Economic rent is the difference between the earnings from a given piece of land and the earnings of the next best alternative. As demand for land shifts rightward, the price of land increases. With an upward sloping supply of land, the supply of land cannot increase easily, meaning that the economic rent to landowners increases. Therefore, the economic rent to land increases as demand for land shifts rightward.

Question 13

Suppose the labor market and all output markets are perfectly competitive.When the labor market is in equilibrium,the wage rate will:
A)be less than the marginal revenue product of labor.
B)equal the marginal revenue product of labor.
C)be greater than the marginal revenue product of labor.
D)None of the above is necessarily correct.

Accepted Answer

In a perfectly competitive labor market, the wage rate will be equal to the marginal revenue product of labor in equilibrium. This is because firms will keep hiring more workers until the additional revenue generated by the last worker hired (i.e. the marginal revenue product of labor) is equal to the cost of hiring that worker (i.e. the wage rate). If the wage rate is less than the marginal revenue product of labor, firms would want to hire more workers than are available, leading to a shortage of labor and upward pressure on wages. Similarly, if the wage rate is greater than the marginal revenue product of labor, firms would have excess labor and downward pressure on wages. Therefore, the equilibrium wage rate will be equal to the marginal revenue product of labor.

Question 14

Figure 14.2 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A.After a wage decrease,the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.2.The substitution effect of the wage decrease on the amount of hours of leisure is: A)L₁ to L₀. B)L₀ to L₁. C)L₁ to L₂. D)L₂ to L₀. E)none of the above

Accepted Answer

The answer of  Figure 14.2
A consumer's original utility maximizing...

Question 15

Suppose the labor market is perfectly competitive,but the output market is not.When the labor market is in equilibrium,the wage rate will:
A)be less than price times the marginal product of labor.
B)equal price times the marginal product of labor.
C)be greater than price times the marginal product of labor.
D)None of the above is necessarily correct.

Accepted Answer

The answer of Suppose the labor market is perfectly competitive,but...

Question 16

The Acme Company is a perfect competitor in its input markets and its output market.Its average product of labor is at its maximum and equals 30.The marginal revenue product of labor is $300.The price of its output
A)is $0.10.
B)is $10.
C)is $9,000.
D)cannot be determined without more information.

Accepted Answer

Since the average product of labor is at its maximum and equals 30, this means that the marginal product of labor equals 30 as well. 
We know that in a perfectly competitive market, price equals marginal revenue. Therefore, the wage rate for the company should be equal to the marginal revenue product of labor, which in this case is $300. 
To determine the price of the output, we can use the formula: price = marginal revenue = marginal revenue product / marginal product. 
So, price = $300 / 30 = $10. Therefore, the answer is B.

Question 17

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 happens to the amount of capital used by the firm?
A)Decreases
B)Increases
C)No change
D)We do not have enough information to answer this question.

Accepted Answer

The answer of Suppose labor and capital are variable inputs.The...

Question 18

Under what circumstances will the economic rent earned by a factor of production always be zero?
A)Infinitely inelastic supply curve
B)Infinitely elastic supply curve
C)Somewhat inelastic supply curve
D)Elastic demand curve

Accepted Answer

Economic rent is the difference between the actual earnings of a factor of production and its minimum supply price. If the supply curve is infinitely elastic, the factor of production can be obtained from an alternative source at the same price, which means its supply price is zero. Therefore, the economic rent earned by a factor of production will be zero.

Question 19

Suppose a firm has one variable input,labor.Why is the MRP_L curve for a competitive firm above the MRP_L curve for a monopolist? A)Without competition from other firms,monopolies are less efficient and the marginal product of labor is lower at each level of output. B)Although the marginal product of labor may be the same under both market structures,the marginal revenue of the monopoly declines with output. C)Monopolists have less incentive to invest in worker training and other methods for improving labor productivity,so the marginal product of labor is lower in the monopoly case. D)none of the above

Accepted Answer

The MRP_L curve for a competitive firm is higher than that of a monopolist because monopolists face a downward sloping demand curve for their product, which means that as they produce more output, the price they can charge for each unit decreases. This, in turn, means that the marginal revenue that the monopolist earns on each unit of output also declines with output. As a result, the monopolist's MRP_L curve is lower than that of a competitive firm.

Question 20

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

Accepted Answer

The answer of The Acme Company is a perfect competitor...

Quiz 14: Markets for Factor Inputs

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

Which of the following is NOT true about the supply of labor to the firm in a competitive labor market?

The Acme Company is a perfect competitor in its input markets and a monopolist in 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

Let P be the output price for a particular good.Why is the value P*MPL greater than MRPL for a monopolist?

Suppose the labor market is perfectly competitive,but the output market is not.When the labor market is in equilibrium,the wage rate will:

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

What happens to the marginal revenue product curve of a factor as more of a complementary factor is hired?

In a competitive labor market,with one variable factor,the supply of labor to the firm is

Under an upward sloping supply curve for land,the economic rents to land __________ as the demand for land shifts rightward.

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

Suppose the labor market is perfectly competitive,but the output market is not.When the labor market is in equilibrium,the wage rate will:

The Acme Company is a perfect competitor in its input markets and its output market.Its average product of labor is at its maximum and equals 30.The marginal revenue product of labor is $300.The price of its output

Under what circumstances will the economic rent earned by a factor of production always be zero?

Suppose a firm has one variable input,labor.Why is the MRPL curve for a competitive firm above the MRPL curve for a monopolist?

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

Let P be the output price for a particular good.Why is the value P*MP_L greater than MRP_L for a monopolist?

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

Suppose a firm has one variable input,labor.Why is the MRP_L curve for a competitive firm above the MRP_L curve for a monopolist?