Quiz 18: Markets for Factors of Production

Which of the following groups lists the four factors of production? A) labor, capital, land, entrepreneurship B) labor, capital, land, money C) labor, money, land, entrepreneurship D) labor, capital, money, entrepreneurship

Profit is the factor price for A) capital. B) land. C) entrepreneurship. D) labor.

Coal is an example of A) a nonrenewable natural resource. B) a renewable natural resource. C) capital. D) a casual resource.

Water from the Mississippi river is an example of A) a nonrenewable natural resource. B) a renewable natural resource. C) capital. D) a static resource.

The demand for a productive resource, not for its own sake, but for use in the production of goods and services is called a A) goods and services demand. B) production demand. C) derived demand. D) resource demand.

The demand for factor is driven by the demand for goods and services produced by that factor of production. This phenomenon is referred to as A) elastic demand. B) joint demand. C) inverse demand. D) derived demand.

The demand for labor is a derived demand because it is derived from A) the supply of labor. B) union pressure. C) the demand for the output the labor produces. D) natural law.

Consider the demand for labor in the computer chip industry. The demand for labor A) is derived from the demand for computer chips. B) is shown by a perfectly elastic demand for labor. C) is shown by a perfectly inelastic demand for labor. D) has a demand curve that is backward bending.

The demand for the services of labor ________ a derived demand and the demand for the services of land ________ a derived demand. A) is; is B) is; is not C) is not; is D) is not; is not

The marginal product of labor is the A) change in total product produced by hiring an additional unit of labor. B) total revenue divided by units of labor. C) extra revenue gained by selling one more unit of output produced by hiring additional units of labor. D) extra revenue gained by employing one more unit of labor.

The value of an additional baker to a bakery is equal to the A) price of bread. B) value of marginal product of the baker. C) baker's marginal productivity in terms of loaves of bread. D) marginal cost of making an additional loaf of bread.

The change in total revenue that results from employing one more unit of labor is called the A) wage rate. B) value of marginal product of labor. C) average revenue. D) marginal product of labor.

The value of marginal product (VMP) of an input such as labor is the A) additional output produced by the last unit of an input. B) total revenue divided by the units of the input employed. C) extra revenue gained by selling one more unit of output. D) extra revenue gained by employing one more unit of the input.

The value of marginal product (VMP) of labor is the extra revenue generated by A) selling one additional unit of output. B) raising the price of the good by one dollar. C) hiring one additional unit of labor. D) price discrimination.

The value of marginal product of labor is the increase in A) revenue created by producing one more unit of output. B) revenue created by hiring one more unit of labor. C) total product necessary to make revenue increase by one dollar. D) total product generated by hiring one more unit of labor.

The value of marginal product of labor is the change in A) profit from hiring one more worker. B) output from hiring one more worker. C) total revenue from hiring one more worker. D) profit from producing one more unit of output.

The increase in revenue created by hiring one more unit of labor is the A) marginal product of labor. B) marginal revenue of labor. C) marginal product revenue of labor. D) value of marginal product of labor.

Jose owns a local coffee shop. When Jose calculates how his total revenue changes in response to hiring an extra worker, Jose is calculating the A) marginal revenue. B) value of marginal product of labor. C) marginal product of labor. D) total revenue.

The value of marginal product of labor A) is the change in total product that results from selling one more unit of a good. B) is equal to the price of the good produced multiplied by the marginal product of labor. C) is equal to marginal revenue multiplied by the quantity. D) increases as the amount of labor employed increases.

The value of marginal product equals marginal product A) multiplied by the quantity of labor. B) divided by the quantity of labor. C) multiplied by the good's market price. D) divided by the good's market price.

The value of marginal product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal product. C) total revenue multiplied by total product (output). D) good's market price multiplied by marginal product.

The value of marginal product equals ________ multiplied by ________. A) the good's market price; marginal cost B) the good's market price; marginal product C) marginal cost; marginal product D) marginal revenue; total product

The value of marginal product of labor is the ________ when one additional unit of a labor is employed, all other things remaining the same. A) change in marginal revenue B) change in marginal product C) change in total revenue D) total revenue

As the quantity of labor employed by a firm decreases, labor's ________ increases. A) marginal cost B) value of marginal product C) marginal revenue D) average cost

As a competitive firm hires increasing amounts of labor, the value of marginal product of labor A) decreases. B) increases. C) remains constant. D) decreases then increases.

A firm that can sell its output for $40 per unit. When it increases its labor force from 4 workers to 5 workers its output increases from 15 to 17 units. The value of marginal product of the 5th worker is A) $680. B) $340. C) $80. D) $40.

For a perfectly competitive firm, the value of marginal product diminishes as employment increases because the A) price falls as the firm's production increases. B) marginal revenue decreases as the firm's production increases. C) marginal product decreases as the firm's production increases. D) None of the above answers is correct.

As the quantity of labor increases, value of marginal product for a perfectly competitive firm A) decreases because the firm must lower its price to sell a larger quantity. B) decreases because the marginal product of labor decreases. C) decreases because marginal revenue decreases. D) is constant because marginal revenue is constant.

Intel hired a consultant who found that the value of marginal product of Intel's workers decreased as more workers were hired. Suppose Intel is a monopolistically competitive firm. Then the value of marginal product decreases because the I. workers' marginal product of labor decreased as more workers were hired. II) marginal revenue of Intel's chips decreased as more chips were sold. A) I only B) II only C) Both I and II D) Neither I nor II

Joe manages a company that produces lawn mowers. Joe knows that the value of marginal product A) decreases as he hires more labor to produce lawn mowers. B) does not change as he sells more lawn mowers. C) increases as he hires more labor to produce lawn mowers. D) increases as he sells more lawn mowers.

Sam's Scarves has 2 knitting machines and employs 2 people. They produce 15 scarves a day. If the firm hires an additional person, the 3 workers can produce 19 scarves a day other things remaining the same. The market for scarves is perfectly competitive and the price of a scarf is $20. The value of marginal product of the third worker is A) $80. B) $300. C) $380. D) 4 scarves.

When Sam's Scarves uses 2 knitting machines and employs 3 people, total revenue is $330 a day. When Sam's Scarves uses 2 knitting machines and employs 4 people, total revenue is $360 a day. The value of marginal product of the third worker is A) $110. B) $30. C) $360. D) $90.

-Sun's Gas Station is a firm operating in a perfectly competitive industry. Sun's Gas Station sells each gallon of gas for $3. What is the total revenue earned by selling 180 gallons of gas? A) $240 B) $540 C) $840 D) $3,300

-Sun's Gas Station is a firm operating in a perfectly competitive industry. Sun's Gas Station sells each gallon of gas for $3. What is the marginal product from hiring the fourth worker? A) 70 gallons of gasoline B) 280 gallons of gasoline C) 40 gallons of gasoline D) 80 gallons of gasoline

-Sun's Gas Station is a firm operating in a perfectly competitive industry. Sun's Gas Station sells each gallon of gas for $3. What is the value of marginal product from hiring the fourth worker? A) $2,400 B) $840 C) $120 D) $60

-In the table above, the marginal product of the first unit of labor is ________ units of output. A) 4 B) 5 C) 16 D) 20

-In the table above, the marginal product of the third unit of labor is ________ units of output. A) 3 B) 4 C) 12 D) 16

-In the table above, the value of marginal product of the third unit of labor is A) $3. B) $4. C) $12. D) $16.

-In the table above, the firm producing the product is A) a monopoly. B) an oligopoly. C) a duopoly. D) perfectly competitive.

-In the table above, if the wage rate is $8.00 per hour, the profit-maximizing number of workers is A) 1. B) 2. C) 4. D) 5.

-In the table above, if the wage rate is $12.00 per hour, the profit-maximizing number of workers is A) 2. B) 3. C) 4. D) 5.

A firm in a competitive labor market will hire labor until the value of marginal product of labor equals the A) firm's marginal revenue. B) firm's marginal cost. C) firm's average cost. D) wage rate.

The quantity of labor demanded by the firm is such that the A) wage rate equals the marginal cost. B) wage rate equals the value of marginal product of labor. C) wage rate equals the marginal product of labor. D) marginal revenue equals the marginal product.

To maximize profit, a firm hires the quantity of labor that makes the ________ of labor equal to the ________. A) value of marginal product; wage rate B) total revenue; total cost of labor C) marginal product; total cost of labor D) marginal product; marginal revenue

Which of the following is a condition for maximum profit? A) VMP = W. B) VMP = MC. C) MP = W. D) MC = W.

To maximize its profit, a firm will hire more workers as long as A) marginal revenue exceeds the wage rate. B) marginal revenue is less than the wage rate. C) value of marginal product exceeds the wage rate. D) marginal product exceeds the wage rate.

If the wage that a competitive firm must pay its workers exceeds their value of marginal product, the firm will A) decrease the quantity of labor it employs. B) increase the quantity of labor it employs. C) lower the price of the good. D) raise the price of the good.

If a firm finds that, at its current level of employment, VMP > W, it will A) be maximizing profits. B) be minimizing profits. C) increase the amount of labor it hires. D) decrease the amount of labor it hires.

If a firm finds that, at its current level of employment, VMP < W, then it has A) reached maximum profits. B) reached minimum profits. C) not hired enough labor to maximize its profit. D) hired too much labor to maximize its profit.

If the wage rate is ________ the value of marginal product, a firm can increase its profit by ________. A) greater than; selling an extra unit of output B) less than; selling one less unit of output C) less than; hiring an extra worker D) less than; hiring one less worker

If the value of marginal product of the last worker hired is $24 and the wage rate is $25, then A) more workers should be hired. B) the worker should be fired. C) the firm has hired the profit maximizing number of workers. D) the firm is earning $1 of profit from this worker.

If the value of marginal product of a factor of production exceeds the price of the factor, the A) firm should hire more of that factor. B) firm should hire less of that factor. C) firm is maximizing profits. D) firm should shut down.

If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire A) less labor, which will increase the VMP. B) more labor, which will decrease the VMP. C) no more or less labor, because profits are greatest when W < VMP. D) more labor, because hiring more labor will increase both W and VMP until they are equal.

A perfectly competitive firm in a competitive labor market will hire more labor whenever A) its average revenue product of labor exceeds the wage rate. B) the wage rate exceeds its average revenue product of labor. C) its value of marginal product of labor exceeds the wage rate. D) the wage rate exceeds its value of marginal product of labor.

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. What is the marginal product of labor when the 5th worker is hired? A) 72.5 car washes B) 75 car washes C) 5 car washes D) 3 car washes

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, what is the value of marginal product of the 4th worker? A) $240 B) $70 C) $10 D) $40

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, what is the value of marginal product of the second worker? A) $80 B) $20 C) $30 D) $180

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5, what is the value of marginal product of the 4th worker? A) $300 B) $50 C) $70 D) $10

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5, what is the value of marginal product of the second worker? A) $100 B) $20 C) $30 D) $125

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $50 per day, how many workers should Winnie employ to maximize his profit? A) 1 B) 2 C) 3 D) 4

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $70 per day, how many workers should Winnie employ to maximize his profit? A) 1 B) 2 C) 3 D) 4

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5 and the wage rate is $62.50 per day, how many workers should Winnie employ to maximize his profit? A) 2 B) 3 C) 4 D) 5

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5 and the wage rate is $37.50 per day, how many workers should Winnie employ to maximize his profit? A) 2 B) 3 C) 4 D) 5

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, and Winnie maximizes his profit when he employs 3 workers, the wage rate is A) $25 per day. B) $30 per day. C) $70 per day. D) $50 per day.

-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, and Winnie maximizes his profit when he employs 4 workers, the wage rate is A) $90 per day. B) $30 per day. C) $70 per day. D) $50 per day.

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. The firm's value of marginal product of labor for the third worker is equal to A) $264. B) $48. C) $8. D) $6.

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate is $24 per worker, what quantity of labor will maximize profits? A) 1 worker B) 2 workers C) 4 workers D) 5 workers

-The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate falls from $24 per worker to $12 per worker, the quantity of labor hired ________ and the new number of workers employed is ________. A) increases; 2 B) decreases; 2 C) increases; 5 D) increase; 3

-Based on the production and revenue data in the above table, what is the marginal product of the 4th worker? A) 28 B) 6 C) 4 D) 2

-Based on the production and revenue data in the above table, what is the price of the product? A) $100 B) $10 C) $1 D) More information is needed to determine the price of the product.

-Based on the production and revenue data in the above table, if the wage rate is $20 per worker, how many workers will be hired? A) 5 B) 4 C) 3 D) 2

-Based on the production and revenue data in the above table, if the wage rate is $35 per worker, how many workers will be hired? A) 5 B) 4 C) 3 D) 2

-Doug's Dog Grooming is a perfectly competitive firm charging $5 per dog grooming. Doug's Dog Grooming has the total and marginal product of labor schedules in the above table and can hire workers from a perfectly competitive labor market for $15 per hour. What is the value of marginal product of the third worker? A) $5 B) $25 C) $15 D) $375

-Doug's Dog Grooming is a perfectly competitive firm charging $5 per dog grooming. Doug's Dog Grooming has the total and marginal product of labor schedules in the above table and can hire workers from a perfectly competitive labor market for $15 per hour. The profit-maximizing level of employment for Doug's Dog Grooming is A) 1 worker. B) 2 workers. C) 4 workers. D) 6 workers.

-The table above shows the number of pounds of bricks that can be produced by the Red Brick Company as the number of workers hired increases. The brick market is perfectly competitive and each pound of bricks sells for $20. The labor market is competitive and the wage rate is $30 an hour. When the Red Brick Company maximizes its profit, it produces ________ bricks an hour. A) 19 B) 21 C) 22 D) 10

The firm's demand for labor is derived directly from A) the wage rate. B) the supply of labor. C) labor's cost. D) labor's value of marginal product.

A firm's demand for labor curve is the same as the firm's A) marginal product curve. B) marginal cost curve. C) marginal revenue curve. D) value of marginal product curve.

Which answer below CORRECTLY describes the relationship between the demand for labor curve and the value of marginal product curve? A) The curves intersect to determine the equilibrium quantity of labor. B) The value of marginal product curve lies to the right and above the demand for labor curve. C) The curves are the same. D) The value of marginal product curve lies to the left of the demand for labor curve.

A firm's demand for labor curve A) is the same as its value of marginal product curve. B) is steeper than its value of marginal product curve. C) is flatter than its value of marginal product curve. D) intersects its value of marginal product curve at the profit-maximizing quantity of employment.

A firm's value of marginal product of labor curve A) is flatter than its demand for labor curve. B) is steeper than its demand for labor curve. C) is its demand for labor curve. D) bends backward.

A firm's demand for labor curve A) is the same as its value of marginal product of labor curve. B) shows how many jobs the firm demands at different wage rates. C) shifts rightward when the price of the firm's output falls. D) None of the above answers are correct.

Because the value of marginal product diminishes as the quantity of labor employed increases, the ________ the wage rate, the ________ workers the firm hires. A) lower; more B) higher; more C) lower; fewer D) None of the above answers is correct because there is no relationship between the wage rate and the number of workers hired.

In the short run, ________ increases the quantity of labor demanded by the firm. A) a decrease in the price of the firm's output B) an increase in the prices of other factors of production used by the firm C) a technological advance that decreases the marginal product of labor D) a decrease in the wage rate

A decrease in the wage rate A) shifts the firm's demand for labor curve rightward. B) shifts the firm's demand for labor curve leftward. C) leads to a movement along the demand for labor curve but does not shift the curve. D) shifts the supply for labor curve leftward.

The demand for labor depends on I. technology. II) the prices of other factors of production. III) the price of the product. A) I and II B) II and III C) I and III D) I, II and III

A firm's demand for labor A) increases when the price of the firm's output falls. B) decreases when the price of the firm's output falls. C) decreases when the wage rate decreases. D) always increases when the prices of other factors fall.

A fall in the price of a firm's output A) decreases the firm's demand for labor. B) increases the firm's demand for labor. C) decreases the firm's supply of labor. D) increases the firm's supply of labor.

The demand for labor increases (that is, the demand for labor curve shifts rightward) if the A) wage rate increases. B) wage rate decreases. C) price of the firm's output rises. D) price of the firm's output falls.

If the price of hair styling increases, then A) hair styling salons hire fewer workers but makes more profit. B) hair stylists demand an increase in wages and the salons hire fewer workers. C) the value of marginal product of each hair stylist increases and the demand curve for hair stylists shifts leftward. D) the value of marginal product of each hair stylist increases and the demand curve for hair stylists shifts rightward.

An increase in the price of a firm's output A) raises the value of marginal product of each unit of labor. B) shifts the firm's demand for labor curve rightward. C) results in the firm increasing the amount of output it produces. D) All of the above answers are correct.

A decrease in the price of a firm's output A) raises the value of marginal product of each unit of labor. B) shifts the firm's demand for labor curve rightward. C) results in the firm increasing the amount of output it produces. D) None of the above is correct.

If the price of a firm's output rises, its A) marginal product of labor increases. B) value of marginal product decreases. C) demand for labor increases. D) demand for labor decreases.

An increase in the price of a firm's product A) decreases its value of marginal product of labor. B) increases its demand for labor. C) increases its supply of labor. D) None of the above answers is correct.

When the price of the good or service it produces rises, the firm's A) demand for labor curve shifts rightward. B) demand for labor curve shifts leftward. C) demand for labor curve remains unchanged. D) output decreases.

If the demand for dog grooming increases so that the price of dog grooming rises, then number of workers hired by Doug's Dog Grooming would A) decrease. B) increase. C) remain unchanged. D) Any of the above answers are possible.

Which of the following would explain why Josh's Limo Service might increase its demand for limo drivers? A) an increase in demand for limo rides, resulting in a rise in the price of a limo ride B) a decrease in the demand for limo rides C) a fall in the price of a taxi ride D) a rise in the wage paid to limo drivers

An increase in the price of a firm's output increases the firm's demand for labor because the A) marginal product of each worker increases. B) value of marginal product of each worker increases. C) value of marginal product curve becomes steeper. D) value of marginal product curve becomes flatter.

Due to a recession, Hostess Bakeries found that the demand for its products decreased. The demand for products ________ the demand for bakers and ________ the equilibrium wage rate paid to bakers. A) increased; raised B) decreased; raised C) increased; lowered D) decreased; lowered

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. What is the marginal product from employing the fourth worker? A) 7 pounds of peanuts B) 100 pounds of peanuts C) 400 pounds of peanuts D) 2,800 pounds of peanuts

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. What is the value of marginal product from employing the third worker? A) $800 B) $1,200 C) $2,000 D) $4,800

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. If a worker costs $800 per month, how many workers will Peter employ to maximize profit? A) zero B) one C) two D) four

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. Initially the market price of peanuts is $2.00 per pound. If the market price of peanuts fall to $1 per pound and a worker costs $800 per month, how many workers will Peter employ to maximize his profit? A) zero B) two C) three D) four

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. A worker costs $1,200 per month. How many workers does Peter hire to maximize his profit? A) zero B) one C) three D) four

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. An increase in the wage rate for labor leads to A) an increase in the quantity of labor demanded. B) a decrease in the quantity of labor demanded. C) an increase in the demand for labor. D) a decrease in the demand for labor.

-The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. If the market wage is $300 per day, the firm will NOT hire a fourth worker because the fourth worker would create A) an economic loss and the firm would shut down. B) additional revenue that exceeds the worker's wage. C) additional revenue that exceeds the worker's value of marginal product. D) additional revenue that falls short of the worker's wage.

-The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. How much labor will the firm hire if the market wage is $300 per day? A) 0 workers B) 1 worker C) 2 workers D) 3 workers

-The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. If the wage rate rises from $100 per day to $200 per day, the firm's demand for labor curve A) shifts leftward. B) shifts rightward. C) does not shift at all, but the firm moves upward along the curve. D) None of the above because this change shifts the supply of labor curve.

-The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. If the price of lawn cutting rises to $60 per acre of lawn cut, the firm's demand for labor curve A) shifts rightward. B) shifts leftward. C) does not shift at all, but the firm moves upward along the curve. D) None of the above because this change shifts the supply of labor curve.

Usually the demand for labor decreases (that is, the demand for labor curve shifts leftward) if the A) wage rate increases. B) wage rate decreases. C) price of the firm's output rises. D) prices of other factors fall.

A firm's demand for labor increases and its demand curve for labor shifts rightward if A) the wage rate falls. B) the price of its product falls. C) its value of marginal product decreases. D) an advance in technology increases the marginal product of labor.

New technology A) definitely increases a firm's demand for labor. B) definitely decreases a firm's demand for labor. C) definitely does not change a firm's demand for labor. D) could increase or decrease a firm's demand for labor.

A company finds that for the next worker hired, the worker's VMP is less than the cost of the worker. In this case, to maximize its profit the company should A) definitely hire the worker. B) perhaps hire the worker, depending on the relationship between the company's MC and MR. C) definitely not hire the worker. D) None of the above answers is correct.

A firm's price rises. As a result, the A) supply of labor to the firm decreases, that is, the labor supply curve shifts leftward. B) supply of labor to the firm increases, that is, the labor supply curve shifts rightward. C) demand for labor by the firm increases, that is, the labor demand curve shifts rightward. D) demand for labor by the firm decreases, that is, the labor demand curve shifts leftward.

Suppose the price of oranges rises. As a result, the A) supply of orange pickers increases. B) supply of orange pickers decreases. C) demand for orange pickers increases. D) demand for orange pickers decreases.

A household's reservation wage is the A) lowest wage rate at which the household will supply labor. B) wage at which the household's labor supply curve bends backward. C) wage rate at which the household's income is largest. D) highest wage rate at which the household will supply labor.

The reservation wage is the A) highest wage for which a person is willing to supply labor. B) lowest wage for which a person is willing to supply labor. C) wage for which a person is willing to work full time. D) wage for which a person is willing to work overtime.

The lowest wage for which a person is willing to supply labor is known as the A) substitution wage. B) income effect. C) derived wage. D) reservation wage.

A worker supplies labor to the market if the A) wage is less than the reservation wage. B) wage is greater than the reservation wage. C) minimum wage is less than the reservation wage. D) demand for labor exceeds the supply of labor.

If Sam decides to work, his A) reservation wage is greater than his wage rate. B) reservation wage is less than his wage rate. C) value of marginal product is greater than his wage rate. D) value of marginal product equals his wage rate.

John's reservation wage is $16 per hour. This means that A) John will not supply labor in the market until he receives a wage of at least $16 per hour. B) John will supply labor in the market at a wage of $16 and lower. C) John will work 16 hours per week. D) John will decrease the hours he works when his wage rate exceeds $16 per hour.

If the wage rate paid in the fast-food outlets in a small town is greater than the reservation wage of all the teenagers in the town and less than the reservation wage of all the adults, then the fast-food outlets will hire A) mostly adults and a few teenagers. B) some adults and some teenagers. C) only adults. D) only teenagers.

The ________ effect means that, other things remaining the same, the higher the wage rate, the less time people will spend working and the more time people will spend at leisure. A) price B) labor C) income D) substitution

With respect to the labor supply curve, the income effect A) reinforces the substitution effect. B) lowers the opportunity cost of labor. C) raises the opportunity cost of labor. D) influences a person to work less as the wage rate increases.

Because of the income effect, a higher wage rate A) shifts the supply of labor curve leftward. B) shifts the supply of labor curve rightward. C) leads to a decrease in quantity of labor supplied. D) leads to an increase in quantity of labor supplied.

Because of the income effect, the labor supply curve is A) eventually backward bending as wage rate increases. B) positively sloped. C) horizontal. D) vertical.

The income effect means that at a high enough wage rate labor supply curve has a A) positive slope because an increase in the wage rate increases income. B) positive slope because an increase in income increases the demand for leisure. C) negative slope because an increase in income increases the demand for leisure. D) negative slope because an increase in the wage rate increases hours worked to earn more income.

The income effect of a higher wage rate results in a I. higher income as people work more. II) person choosing to decrease work hours as income increases. III) backward-bending labor supply curve. A) I and II B) II and III C) I and III D) II only

A professional tennis player enters fewer tournaments each year as the prize money she won increased. This observation indicates that the tennis player A) is irrational. B) has shifted her labor demand curve leftward. C) has shifted her labor supply curve rightward. D) has a backward bending labor supply curve.

As wages rise, the substitution effect induces households to A) choose leisure rather than supplying labor in the labor market. B) choose supplying labor in the labor market rather than engage in leisure. C) reduce the opportunity cost of leisure. D) reduce the economic rent from leisure.

The opportunity cost of leisure is A) the substitution effect. B) the income effect. C) a person's income. D) a person's wage rate.

The hourly wage rate is the opportunity cost of one hour of leisure because A) the person's substitution effect exceeds his or her income effect. B) that is what a person gives up to enjoy the hour of leisure time. C) the person must work for a living. D) the person prefers leisure to work regardless of the wage.

With respect to labor supply, the substitution effect means a A) person increases his or her hours of labor in response to a higher wage rate. B) person decreases his or her hours of labor in response to a higher wage rate. C) person substitutes high paying work for low paying work. D) firm substitutes capital for labor.

With respect to labor supply, the substitution effect takes account of the point that at higher wage rates A) a person can afford to take more leisure. B) leisure has become less expensive and so a person consumes less leisure. C) there are no factors inducing a person to work less. D) leisure has become more expensive and so a person consumes less leisure.

Meredith receives a wage hike. If Meredith decides to work an extra hour A) her reservation wage rate exceeds her value of marginal product. B) her opportunity cost of leisure is high. C) her substitution effect is greater than her income effect. D) she operates on the backward-bending portion of her labor supply curve.

For the past year, Teddy has had a part-time job at which he is willing to work 10 hours each week. During Teddy's annual review, his boss grants him an 8 percent increase in his wage. As a result of the wage increase, Teddy is now willing to work 15 hours each week. Teddy's opportunity cost of ________ has risen and because for Teddy the substitution effect of the wage hike is ________ than the income effect. A) work; greater B) work; less C) leisure; greater D) leisure; less

For the past year, Teddy has had a part-time job at which he is willing to work 30 hours each week. During Teddy's annual review, his boss grants him an 8 percent increase in his wage. As a result of the wage increase, Teddy is now willing to work 25 hours each week. Teddy's opportunity cost of ________ has risen and because for Teddy the substitution effect of the wage hike is ________ than the income effect. A) work; greater B) work; less C) leisure; greater D) leisure; less

At high wage rates, the labor supply curve bends backward because the ________ effect dominates the ________ effect. A) income; price B) substitution; income C) substitution; price D) income; substitution

As the wage rate rises, the income effect influences workers to choose ________ leisure, and the substitution effect influences workers to choose ________ leisure. A) more; less B) more; more C) less; less D) less; more

The labor supply curve is backward bending because A) as the wage rate rises, the substitution effect becomes larger than the income effect. B) as the wage rate rises, the income effect becomes larger than the substitution effect. C) an increase in the wage rate shifts the supply of labor curve leftward at higher wages. D) an increase in the wage rate shifts the supply of labor curve rightward at higher wages.

If your labor supply increases when you get a raise, which of the following is TRUE? A) Your substitution effect is greater than your income effect. B) Your substitution effect is less than your income effect. C) Your substitution effect equals your income effect. D) None of the above answers is correct.

If Joe receives an increase in his wage rate and decides to decrease his hours worked, the A) substitution effect and the income effect must be equal. B) substitution effect must exceed the income effect. C) income effect must exceed the substitution effect. D) substitution effect must be zero.

In order for there to be a backward-bending supply of labor curve, it must be the case that A) at low wage rates, the income effect of a wage increase exceeds the substitution effect, but at high wage rates the substitution effect of a wage increase exceeds the income effect. B) at low wage rates, the substitution effect of a wage increase exceeds the income effect, but at high wage rates the income effect of a wage increase exceeds the substitution effect. C) the income effect of a wage increase exceeds the substitution effect at all wage rates. D) the substitution effect of a wage increase exceeds the income effect at all wage rates.

An individual's labor supply curve will have a A) positive slope if the income effect exceeds the substitution effect. B) negative slope if the substitution effect exceeds the income effect. C) positive slope if the substitution effect exceeds the income effect. D) negative slope regardless of whether the substitution effect or income effect is larger.

The labor supply curve has a A) positive slope always. B) negative slope if the income effect is greater than the substitution effect. C) positive slope if the income effect is greater than the substitution effect. D) negative slope always.

When the ________ effect dominates the ________ effect, the labor supply curve is ________. A) income; substitution; vertical B) substitution; income; positively sloped C) income; substitution; negatively sloped D) substitution; income; horizontal

The labor supply curve has a positive slope if the A) substitution effect outweighs the income effect. B) income effect outweighs the substitution effect. C) demand for labor is elastic. D) demand for labor is inelastic.

For many jobs, as wages increase, the quantity supplied of labor increases. This set of facts is evidence that the A) substitution effect is larger than the income effect and the supply of labor curve is upward sloping. B) income effect is larger than the substitution effect and the supply of labor curve is upward sloping. C) substitution effect is larger than the income effect and the supply of labor curve is backward bending. D) income effect is larger than the substitution effect and the supply of labor curve is backward bending.

-In the figure above, the substitution effect outweighs the income effect in all segments EXCEPT A) 0a. B) 0c. C) bc. D) cd.

-In the figure above, the segment of the curve showing where the income effect outweighs the substitution effect is A) 0a. B) bd. C) 0c. D) cd.

The market supply of labor curve has a positive slope if higher wages induce households to choose A) leisure rather than supplying labor in the labor market. B) supplying labor in the labor market rather than leisure. C) demanding labor rather than supplying it. D) work less hours because they are getting paid more.

Which of the following will increase the wage rate? A) an increase in the adult population B) an increase in the retirement age C) an improvement in technology that increases the marginal product of labor D) Both answers A and B are correct.

Which of the following will increase the wage rate? A) The price of the output produced by the workers increases. B) New technology increases the marginal product of labor. C) an increase in labor supply D) Both answers A and B are correct.

You observe that more labor is employed and the wage rate increases. This set of events could have been the result of a A) rightward shift of the labor demand curve. B) leftward shift of the labor supply curve. C) rightward shift of the labor supply curve. D) leftward shift of the labor demand curve.

-The table above gives information about the labor market in Lantis, a community in which the labor market is perfectly competitive. The equilibrium wage rate is ________ an hour and the quantity of labor employed is ________ hours per day. A) $5; 600 B) $25; 200 C) $15; 400 D) $25; 600

-The table above gives information about the labor market in Lantis, a community in which the labor market is perfectly competitive. If the demand for labor decreases by 200 hours per day, the equilibrium wage rate falls to ________ an hour and the quantity of labor employed ________ hours per day. A) $10; remains at 400 B) $10; decreases to 300 C) $20; increases to 400 D) $5; remains at 200

-The table above gives information about the labor market in Lantis, a community in which the labor market is perfectly competitive. If the price of the good increases and increases the value of marginal product of labor by $10 an hour, the equilibrium wage rate ________ an hour and the quantity of labor employed ________. A) rises to $10; increases to 600 B) stays at $15; decreases to 300 hours C) rises to $20; increases to 500 hours D) None of the above answers is correct.

-The figure above shows the labor demand and labor supply curves for workers in local fast-food restaurants. The fast-food restaurant industry is competitive. A decrease in the supply of labor shifts the labor supply curve from LS₀ to LS₁. Fast-food restaurants hire ________ and total labor income earned by the fast-food workers ________. A) 40 hours of labor a day; increases B) 30 hours of labor a day; decreases C) 40 hours of labor a day; decreases D) 30 hours of labor a day; increases

-The figure above shows the labor demand and labor supply curves for workers in local fast-food restaurants. The fast-food restaurant industry is competitive. A decrease in the supply of labor shifts the labor supply curve from LS₀ to LS₁. The wages of fast-food workers A) decrease by $4 per hour. B) decrease by $10 per hour. C) increase by $4 per hour. D) remain the same.

The existence of a union A) has no effect on labor supply and demand. B) affects labor supply only. C) affects labor demand only. D) can affect both labor supply and labor demand.

If a union is able to decrease the supply of workers in a competitive labor market but the union cannot affect the demand for its members' labor, then A) wages and the quantity of labor hired will both increase. B) wages will increase but the quantity of labor hired will decrease. C) wages will decrease but the quantity of labor hired will increase. D) wages and the quantity of labor hired will both decrease.

If a union restricts the supply of labor but cannot change the demand for labor, the union ________ the wage rate and ________ the level of employment. A) raises; decreases B) raises; increases C) lowers; decreases D) lowers; increases

If a union successfully restricts the supply of labor to the firm but the union has no effect on the demand for labor, then the A) wage increases and there is no change in employment. B) wage increases and employment increases. C) wage increases and employment decreases. D) wage increases and there is an unambiguous effect on employment.

On the supply side of the labor market, the union's success is limited by how much A) nonunion labor is available in the same market. B) employment union members will accept. C) capital the firm utilizes. D) all of the above

If a union is unable to increase the demand for its workers, then success at raising the wage rate paid its members means that A) all union members receive a higher wage. B) some union members will lose their jobs. C) more union members will be hired. D) the union will push for a decrease in the minimum wage.

If a union can successfully shift the demand curve for union labor rightward, the union can achieve A) an increase in wages and employment. B) an increase in wages but a decrease in employment. C) an increase in employment but a decrease in wages. D) a decrease in both employment and wages.

Unions tend to ________ import restrictions and ________ a higher minimum wage. A) favor; favor B) favor; oppose C) oppose; favor D) oppose; oppose

Which of the following methods is used by unions to increase the demand for the labor of its members? A) Decrease the marginal product of union members. B) Support minimum wage laws. C) Oppose import restrictions. D) Decrease demand for the good produced.

Which of the following increases the demand for U.S. union labor? A) an increase in the minimum wage B) an increase in the demand for imported goods C) new laws that ease immigration restrictions D) All of the above cause an increase in the demand for union labor.

Unions support minimum wage laws because an increase in the minimum wage A) increases the supply of union labor. B) decreases the supply of union labor. C) increases the demand for union labor. D) decreases the demand for union labor.

A rise in the minimum wage increases the demand for union labor because this policy change A) lowers the wage rate paid to union labor. B) raises the productivity of union labor. C) lowers the cost of a substitute for union labor. D) raises the cost of a substitute for union labor.

Unions support minimum wage laws, because A) union workers are typically paid the minimum wage. B) an increase in the minimum wage paid to low-skilled labor increases the opportunity cost of employing high-skilled union labor and, hence, increases the demand for union labor. C) an increase in the minimum wage paid to low-skilled labor increases the opportunity cost of employing low-skilled labor and, hence, increases the demand for union labor. D) an increase in the minimum wage paid to low-skilled labor causes the supply curve of low-skilled labor to shift leftward and, hence, increases the demand for union labor.

Which of the following is a method used by unions to increase the demand for their members' labor? A) Support import restrictions. B) Decrease the marginal product of union members. C) Oppose immigration restrictions. D) Oppose minimum wage laws.

Which of the following activities increases the demand for union labor? A) a decrease in the minimum wage B) a decrease in immigration C) an increase in the union wage D) an increased desire by consumers to buy imports

Which of the following decreases the supply of labor that competes with union labor? A) an increase in the minimum wage B) an increase in the demand for imported goods C) new laws that restrict immigration D) All of the above would cause a decrease in the supply of labor that competes with union labor.

An advertisement campaign that successfully convinces consumers to buy union-made products has the direct effect of shifting the A) demand curve for union labor rightward. B) demand curve for union labor leftward. C) supply curve of union labor rightward. D) supply curve of union labor leftward.

Which of the following activities increases the demand for union labor? A) a decrease in the minimum wage B) an increase in immigration C) additional job training for union members D) an increased desire by consumers to buy imports

Many autoworkers are unionized. Which of the following methods can help them achieve higher wages? I. Training that increases union members' marginal product II) A publicity campaign promoting purchase of union-made automobile A) I only B) II only C) I and II D) Neither I nor II

Which of the following is NOT a method by which unions try to increase the demand for the labor of their members? A) increasing the marginal product of union members B) increasing the supply of the goods produced by union labor C) supporting minimum wage laws D) supporting immigration restrictions

In order to change the demand for union labor, unions favor all of the following EXCEPT increasing A) the minimum wage. B) import restrictions. C) immigration. D) job training for members.

A monopsony is A) a market in which there is only a single seller. B) a market in which there is only a single buyer. C) a monopoly sanctioned by law. D) an illegal monopoly.

A monopsony is a market structure in which there is a A) single seller. B) single buyer. C) price floor set by a regulatory agency. D) price ceiling set by a regulatory agency.

A market structure in which there is only one buyer is A) a monopoly. B) a monopsony. C) an oligopoly. D) a competitive market.

A monopsony is A) a market in which there is only one producer of a good or service. B) a market in which there is only one producer and one consumer of a good or service. C) a market in which there is only one buyer of a good or service. D) a temporary situation in labor markets when prices are adjusted through the use of collective bargaining.

In which of the following situations is there most likely to be a monopsony? A) the market for farm workers in a large rural area B) the market for advertising executives in New York City C) the market for accountants in New York City D) the market for NBA players drafted out of college by one NBA team

The marginal cost of labor, MCL, is defined as the A) total cost of producing a certain amount of output. B) total cost of hiring an additional worker. C) additional cost of hiring an additional worker. D) additional fixed cost of producing an additional unit of output.

Because a monopsony is the only buyer in a particular market, the A) supply of labor to the monopsony is perfectly elastic. B) supply of labor to the monopsony is perfectly inelastic. C) supply of labor curve faced by the monopsony is upward sloping. D) supply of labor curve faced by the monopsony is downward sloping.

For a monopsony, the labor supply curve is A) above the MCL curve. B) always below the VMP curve. C) downward sloping. D) upward sloping.

For a monopsony the labor supply curve A) does not exist. B) is the marginal product of labor curve. C) is the marginal cost of labor curve. D) lies below the marginal cost of labor curve.

Because a monopsony must raise the wage on all labor hired in order to hire more labor, A) the MCL curve is horizontal at the market wage. B) the MCL curve is negatively sloped. C) MCL = W. D) MCL > W.

For a monopsony, the marginal cost of labor is ________ the wage rate. A) greater than B) less than C) equal to D) first greater than and later less than

A labor market monopsony A) has a marginal cost of labor curve that lies above the labor supply curve. B) has a marginal cost of labor curve that lies below the labor supply curve. C) is a labor market in which the firm has an elastic demand for labor. D) is a labor market in which the firm has an inelastic demand for labor.

For a monopsony, the marginal cost of labor curve lies above the labor supply curve because A) to hire one more unit of labor requires that the wage be raised for all units of labor. B) to hire one more unit of labor requires that the wage be raised for just the last unit of labor hired. C) to hire one more unit of labor, the firm uses its monopsony power to not raise the wage it pays. D) to hire one more unit of labor requires that the firm offer a lower wage.

If a firm faces a labor supply curve that is positively sloped, then the marginal cost of labor curve A) equals the wage rate. B) equals the minimum wage. C) lies above the value of marginal product curve. D) lies above the labor supply curve.

When a firm faces a labor supply curve that is upward sloping, the firm must A) offer a higher wage if it wishes to hire more workers. B) pay a wage that exceeds the value of marginal product. C) pay a wage that does not exceed the minimum wage. D) maximize the amount of labor that it hires.

A monopsony will hire another worker if the A) marginal cost of labor exceeds the value of marginal product. B) marginal cost of labor is less than the value of marginal product. C) marginal cost of labor is less than the wage rate. D) wage rate exceeds the value of marginal product.

A monopsony maximizes its profit by hiring the level of employment that sets A) labor supply equal to labor demand. B) the value of marginal product equal to the wage. C) the value of marginal product equal to the marginal cost of labor. D) the value of marginal product equal to the demand for labor.

The monopsony will hire the amount of labor so that the A) demand for labor equals supply for labor. B) value of marginal product of labor equals the wage rate. C) value of marginal product of labor equals the marginal cost of labor. D) supply for labor equals the wage rate.

A monopsony pays a wage rate ________ the marginal cost of labor and ________ the value of marginal product of labor. A) equal to; equal to B) lower than; lower than C) equal to; lower than D) lower than; equal to

Because the marginal cost of labor curve lies above the labor supply curve, a monopsony will pay a wage that is A) equal to the wage paid in a competitive market. B) equal to value of marginal product. C) greater than value of marginal product. D) less than the wage paid in a competitive market.

A monopsony pays a wage rate that is A) greater than value of marginal product. B) equal to the marginal cost of labor. C) less than value of marginal product. D) unacceptable to the workers hired.

A monopsony will never pay a wage that is A) equal to the minimum wage. B) less than the value of marginal product. C) more than the value of marginal product. D) negotiated with the union.

In comparison to an employer in a competitive labor market, a monopsony employer hires ________ workers and produces ________ output. A) fewer; less B) fewer; more C) more; less D) more; more

In comparison to an employer in a competitive labor market, a monopsony employer pays a ________ wage rate and hires ________ workers. A) lower; fewer B) lower; more C) higher; more D) higher; fewer

In a monopsony labor market, the employer hires the quantity of labor where the ________ equals the ________. A) marginal revenue of labor; marginal cost of labor B) marginal cost of labor; marginal product of labor C) marginal product of labor; value of marginal product of labor D) marginal cost of labor; value of marginal product of labor

In a labor market, employment A) and the wage rate are higher when the market is a monopsony than when the market is competitive. B) is higher and the wage rate is lower when the market is a monopsony than when the market is competitive. C) is lower and the wage rate is higher when the market is a monopsony than when the market is competitive. D) and the wage rate are lower when the market is a monopsony than when the market is competitive.

Compared to a monopsony, a perfectly competitive labor market results in a A) higher wage rate and more workers hired. B) higher wage rate and fewer workers hired. C) lower wage rate and more workers hired. D) lower wage rate and fewer workers hired.

If a labor market that was previously competitive becomes controlled by a monopsony, the wage rate ________ and employment ________. A) rises; increases B) falls; decreases C) rises; decreases D) falls; increase

-Anthony's Accountants is the only employer of accountants in the island of Fairisle. The table gives the demand and supply of accountants on Fairisle. The marginal cost of hiring a sixth accountant is ________ an hour. A) $20 B) $15 C) $25 D) $45

-Pointy Stone State Park is the sole employer of naturalists in the area. The table above provides information about the supply of naturalists and the value of marginal product of labor for naturalists. The marginal cost of labor for the third naturalist is A) $650. B) $450. C) $350. D) $525.

-Pointy Stone State Park is the sole employer of naturalists in the area. The table above provides information about the supply of naturalists and the value of marginal product of labor for naturalists. How many naturalists will Pointy Stone State Park hire? A) 2 B) 3 C) 4 D) 5

-Pointy Stone State Park is the sole employer of naturalists in the area. The table above provides information about the supply of naturalists and the value of marginal product of labor for naturalists. What weekly wage will Pointy Stone State Park pay naturalists? A) $550 per week B) $500 per week C) $450 per week D) $400 per week

-Pointy Stone State Park is the sole employer of naturalists in the area. The table above provides information about the supply of naturalists and the value of marginal product of labor for naturalists. On the last naturalist hired, Pointy Stone State Park will earn a profit of A) zero. B) $100 per week. C) $150 per week. D) $200 per week.

-Pointy Stone State Park is the sole employer of naturalists in the area. The table above provides information about the supply of naturalists and the value of marginal product of labor for naturalists. If as a result of a minimum wage law Pointy Stone State Park were required to pay its naturalists $450 per week then the employment of naturalists by Pointy Stone State Park will A) increase. B) decrease. C) not change. D) Any of the above are possible results.

-In the above figure, the competitive wage rate is ________ and the quantity of labor is ________. A) $7.00; 150 hours B) $8.00; 200 hours C) $6.00; 100 hours D) $8.00; 100 hours

-In the above figure, the monopsony wage rate is ________ and the quantity of labor is ________. A) $7.00; 150 hours B) $8.00; 200 hours C) $6.00; 100 hours D) $8.00; 100 hours

-Consider the labor market depicted in the above figure. The competitive equilibrium would be for ________ hours of employment. A) 200 B) 400 C) 600 D) a number between 200 and 400

-Consider the labor market depicted in the above figure. The competitive equilibrium would be for workers to be paid an hourly wage equal to A) $10. B) $15. C) $20. D) a wage between $10 and $20.

-Consider the monopsony in the above figure. The monopsony will hire ________ hours per week. A) 200 B) 400 C) 600 D) between 200 and 400

-Consider the monopsony in the above figure. The monopsony will pay a hourly wage rate equal to A) $10. B) $15. C) $20. D) a wage between $10 and $20.

-Consider the monopsony in the above figure. The 200th hour of labor creates how much added revenue per hour for the monopsony? A) $10 B) $15 C) $20 D) None of the above answers is correct.

-Consider the labor market depicted in the above figure. What wage rate must be paid to have the 200th hour of labor supplied? A) $10 B) $15 C) $20 D) None of the above answers is correct.

-City-Mart is the only employer of sales clerks in Panburg. In the figure above S is the labor supply curve faced by City-Mart, VMP is City-Mart's value of marginal product curve, and MCL is its marginal cost of labor curve. The lowest wage rate at which City-Mart can hire 40 hours of labor per day is A) $8 per hour. B) $12 per hour. C) $4 per hour. D) $9 per hour.

-City-Mart is the only employer of sales clerks in Panburg. In the figure above S is the labor supply curve faced by City-Mart, VMP is City-Mart's value of marginal product curve, and MCL is its marginal cost of labor curve. City-Mart maximizes its profit if it hires ________ hours of labor and pays ________ per hour. A) 90; $9 B) 60; $12 C) 90; $6 D) 60; $6

-City-Mart is the only employer of sales clerks in Panburg. In the figure above S is the labor supply curve faced by City-Mart, VMP is City-Mart's value of marginal product curve, and MCL is its marginal cost of labor curve. If the market for sales clerks' labor in Panburg were competitive, the wage rate would be ________ per hour, and ________ hours of labor would be hired. A) $9; 90 B) $12; 60 C) $6; 90 D) $6; 60

-City-Mart is the only employer of sales clerks in Panburg. In the figure above S is the labor supply curve faced by City-Mart, VMP is City-Mart's value of marginal product curve, and MCL is its marginal cost of labor curve. City-Mart sales clerks' wage is ________ it would be if the labor market were competitive. A) $3 per hour higher than B) $3 per hour lower than C) $6 per hour lower than D) the same as

-City-Mart is the only employer of sales clerks in Panburg. In the figure above S is the labor supply curve faced by City-Mart, VMP is City-Mart's value of marginal product curve, and MCL is its marginal cost of labor curve. If a minimum wage law is passed that requires employers to pay at least $7 per hour, City-Mart will employ ________ hours of sales clerk labor per day. A) 35 B) 110 C) 90 D) 70

-The above figure shows the market for labor. The employer is a monopsony. The firm maximizes its profit by hiring A) 800 hours of labor at a wage of $5 per hour. B) 600 hours of labor at a wage of $10 per hour. C) 400 hours of labor at a wage of $5 per hour. D) 200 hours of labor at a wage of $5 per hour.

-The above figure shows the market for labor. The employer is a monopsony. At the equilibrium level of employment, which of the following is CORRECT? A) MCL = VMP B) VMP > W C) W < MCL D) All of the above are correct.

-The above figure shows the market for labor. The employer is a monopsony. The firm will maximize its profit by hiring 400 hours of labor because at that point A) MCL > W. B) VMP > W. C) MCL > VMP. D) MCL = VMP.

-The above figure shows the market for labor. The employer is a monopsony. The firm will NOT hire 800 hours of labor because at that point A) VMP > MCL. B) VMP = MCL. C) VMP < MCL. D) VMP = W.

-The above figure shows the market for labor. The employer is a monopsony. If the workers are unionized, the wage will be A) $5 per hour. B) between $5 per hour and $15 per hour. C) above $15 per hour. D) less than if the workers were not unionized.

-The above figure shows the market for labor. The employer is a monopsony. If a minimum wage is set at $10 per hour, which of the following will occur? A) The firm will pay $5 per hour. B) The firm will pay $10 per hour. C) The firm will pay $15 per hour. D) The firm will hire less than 400 hours of labor.

-The above figure shows the market for labor. The employer is a monopsony. If a minimum wage of $10 is imposed, the equilibrium level of employment is A) 200 hours per day. B) 400 hours per day. C) 600 hours per day. D) 800 hours per day.

-The figure above shows a labor market. If this labor market is perfectly competitive, the wage rate is A) $4 per hour. B) $6 per hour. C) $8 per hour. D) $10 per hour.

-The figure above shows a labor market. If this labor market is perfectly competitive, employment is A) 0 hours per week. B) 50 hours per week. C) 100 hours per week. D) 150 hours per week.

-The figure above shows a labor market. If there is a monopsony in this labor market, the wage rate is A) $4 per hour. B) $6 per hour. C) $8 per hour. D) $10 per hour.

-The figure above shows a labor market. If there is a monopsony in this labor market, employment is A) 0 hours per week. B) 50 hours per week. C) 100 hours per week. D) 150 hours per week.

-The figure above shows a labor market. If there is a monopsony in this labor market, the monopsony pays a wage rate A) greater than the value of marginal product of labor. B) equal to the value of marginal product of labor. C) less than the value of marginal product of labor. D) equal to the average revenue product of labor.

-The figure above shows a labor market. If there is a monopsony in this labor market, then increasing the minimum wage from $3 per hour to $5 per hour A) will increase the quantity of labor employed. B) will leave unchanged the quantity of labor employed. C) will decrease the quantity of labor employed. D) could increase, decrease, or leave unchanged the quantity of labor employed.

-If the labor market in the above figure is competitive, what is the equilibrium wage and quantity of labor hired? A) $10 and 100 hours B) $10 and 50 hours C) $5 and 100 hours D) $15 and 50 hours

-If there is a monopsony operating in the labor market illustrated in the figure above, the equilibrium wage and quantity of labor hired is A) $15 and 50 hours. B) $10 and 100 hours. C) $10 and 50 hours. D) $5 and 50 hours.

-If there is a monopsony operating in the labor market illustrated in the figure above and the federal government decides to institute a minimum wage of $8 an hour then the wage paid will ________ and the quantity of labor hired will ________. A) increase; decrease B) increase; increase C) decrease; increase D) decrease; decrease

-Hank's Propane Storage Company is a profit-maximizing monopsony in the local labor market for propane handling, delivery, and other associated services. The supply and marginal cost of labor curves are shown in the figure above. Hank's demand for labor curve is the curve labeled VMP = D. Hank will employ ________ hours of labor per week and pay a wage rate of ________ per hour. A) 100; $12 B) 100; $8 C) 100; $6 D) 120; $8

-Hank's Propane Storage Company is a profit-maximizing monopsony in the local labor market for propane handling, delivery, and other associated services. The supply and marginal cost of labor curves are shown in the figure above. Hank's demand for labor curve is the curve labeled VMP = D. What is Hank's total cost of labor at the profit-maximizing quantity of labor employed? A) $1,200 B) $960 C) $800 D) $600

-Hank's Propane Storage Company is a profit-maximizing monopsony in the local labor market for propane handling, delivery, and other associated services. The supply and marginal cost of labor curves are shown in the figure above. Hank's demand for labor curve is the curve labeled VMP = D. At what level should a minimum wage be set in order to achieve the wage rate and quantity of employment that would be attained in a competitive labor market? A) $4 per hour B) $6 per hour C) $8 per hour D) $12 per hour

-In the above figure, the curve labeled MCL is the marginal cost of labor curve and is used in a A) competitive situation in which individual firms cannot influence the wage rate they must pay. B) competitive situation in which skill differentials create a difference between what a firm must pay labor versus the wage at which households are willing to supply labor. C) monopsony situation in which the firm can influence wages by how much labor it hires, so that the wage rate received by workers is less than the marginal cost of labor. D) monopsony situation in which the firm can influence wages by how much labor it hires, so that the wage rate received by workers is greater than the marginal cost of labor.

-In the above figure, what would be the wage paid and quantity of labor employed under competitive market conditions compared to monopsony conditions? A) W₁ and L₁ with competition versus W₂ and L₂ with monopsony B) W₂ and L₂ with competition versus W₁ and L₁ with monopsony C) W₂ and L₂ with competition versus W₃ and L₁ with monopsony D) W₃ and L₃ with competition versus W₃ and L₁ with monopsony

The above figure illustrates the case of a monopsony in the labor market. If the current wage paid is W₁ and new wage legislation is passed that increases the minimum wage in this market to W₂, the firm will A) hire less labor at the higher wage and, according to the law of demand, moving from point D to B. B) hire the same amount of labor as before the law was passed because it cannot adjust to wage changes. C) hire more labor, moving from point C to B. D) pay a higher wage, moving from point C to A.

In a monopsony labor market, a minimum wage set equal to the competitive market equilibrium wage rate can ________ the wage rate and ________ employment. A) raise; increase B) raise; decrease C) lower; increase D) lower; decrease

The union representing the bread makers at the Hostess Bread Company went on strike and demanded higher wages than what the firm wanted to pay. I. If the firm is in a competitive labor market the union can only raise wages by decreasing employment. II) If the firm is a monopsony in the labor market the union can only raise wages by decreasing employment. III) If the firm is a monopsony in the labor market the union can both raise wages and increase employment. A) I only B) II only C) I and II D) I and III

When a union faces a monopsony buyer, a ________ exists. A) dual-monopoly B) monopoly C) bilateral monopoly D) monopolistic monopsony

An example of a bilateral monopoly would be when a union A) bargains with many different employers. B) deals directly with the final consumers. C) bargains with a monopoly. D) bargains with a monopsony.

A situation where a union bargains with a monopsony employer is termed a A) bilateral monopsony. B) bilateral monopoly. C) bilateral agreement. D) unilateral agreement.

A bilateral monopoly is a A) firm that is a monopsony in a resource market and a monopoly in a product market. B) firm that is a monopoly in two product markets. C) market in which a monopoly discriminates, setting a higher price for affluent customers. D) market in which a monopsony bargains with a monopoly.

If a monopsony must negotiate with a union, then the wage will probably be A) more than the value of marginal product. B) more than the marginal cost of labor. C) the same as if there had been no union. D) more than what it would have been without a union but not more than the value of marginal product.

In a bilateral monopoly, the wage rate is likely to be ________ than the value of marginal product of labor and ________ than in a pure monopsony. A) lower; lower B) lower; higher C) higher; lower D) higher; higher

A minimum wage might increase employment by a monopsony if it makes the supply of labor curve to that firm A) steeper, that is, makes supply more elastic. B) steeper, that is, makes supply less elastic. C) flatter, that is, makes supply more elastic. D) flatter, that is, makes supply less elastic.

Which of the following is a recent trend in the labor market? A) Low-skilled workers have lost jobs. B) The demand for high-skilled labor has increased as technology has increased. C) The wages of high-skilled labor have decreased. D) The marginal productivity of low-skilled workers has increased.

If the substitution effect from a higher wage rate exceeds the income effect, then a higher wage rate A) increases the quantity of labor supplied. B) decreases the quantity of labor supplied. C) shifts the supply of labor curve leftward. D) shifts the supply of labor curve rightward.

The demand for a product produced by a union becomes more elastic. After this change, how does an increase in the wage rate paid its members affect their employment? A) It does not decrease employment at all. B) It decreases employment by less than it would have before. C) It decreases employment by more than it would have before. D) It increases employment.

Which of the following would unions be most likely to support? A) decreasing the legal minimum wage B) restricting immigration C) encouraging imports D) increasing the elasticity of demand for the goods their workers produce

For a monopsony, the labor supply curve A) lies above the MCL curve. B) is the same as the MCL curve. C) lies below the MCL curve. D) is the same as the labor demand curve.

In order to hire an additional worker, a monopsony must pay A) a higher wage rate than it paid before. B) the same wage rate it paid before. C) a lower wage rate than it paid before. D) a wage rate that is sometimes higher, sometimes lower, and sometimes the same as before, depending on the elasticity of the supply of labor.

Changes in which of the following change the demand for capital and shifts the demand curve for capital? A) current income B) expected future income C) the rental rate D) the marginal product of capital

A technological change that raises the value of marginal product of capital ________ the rental rate of capital because the ________. A) raises; supply curve of capital shifts leftward B) lowers; supply curve of capital shifts rightward C) raises; demand curve for capital shifts rightward D) lowers; demand curve for capital shifts leftward

Other things being equal, a technological change that raises the value of marginal product of capital raises the rental rate of capital because the A) supply curve of capital shifts leftward. B) supply curve of capital shifts rightward. C) demand curve for capital shifts rightward. D) demand curve for capital shifts leftward.

The supply of land is A) perfectly elastic. B) elastic, but not perfectly elastic. C) perfectly inelastic. D) inelastic, but not perfectly inelastic.

If the supply of a factor is perfectly inelastic, then A) no more than the existing quantity can be supplied. B) the supply curve is horizontal. C) sellers will provide whatever quantity is demanded at the going price. D) a fall in price results in no quantity being supplied.

The land market is in equilibrium. If the demand for land decreases, the rental rate of land A) might rise or fall. B) rises. C) falls. D) remains unchanged.

-In the above figure, which curve depicts the supply of land for Chicago's "Magnificent Mile"? A) curve F B) curve G C) curve H D) curve I

Starbucks sells coffee in both New York City and in rural upstate New York. The price of coffee is higher in New York City. This fact means that the value of marginal product of land is ________ in New York City and so Starbucks is willing to pay a ________ rent in New York City. A) lower; lower B) higher; lower C) lower; higher D) higher; higher

________ natural resources are natural resources that can be used repeatedly, and ________ natural resources are natural resources that can be used only once. A) Nonrenewable; renewable B) Renewable; hydrocarbon C) Renewable; nonrenewable D) Non-fossil; fossil

Which of the following is a nonrenewable resource? A) residential land B) sunshine C) a machine tool D) oil

The proposition that the price of a resource is expected to rise at a rate equal to the interest rate is called the A) discounted present value. B) derived demand for productive resources. C) diminishing marginal revenue product. D) Hotelling Principle.

According to the Hotelling Principle, the price of an nonrenewable resource A) falls slowly over time. B) falls at a rate equal to the interest rate. C) rises at a rate equal to the interest rate. D) remains constant over time.

According to the Hotelling Principle, the price of a nonrenewable resource is expected to A) rise at a rate higher than the interest rate. B) rise at a rate lower than the interest rate. C) rise at a rate equal to the interest rate. D) fall at a rate equal to the interest rate.

The price of an nonrenewable resource is expected to rise at a rate equal to the A) rate of supply. B) rate of population growth. C) rate of demand. D) interest rate.

Next year's expected price of oil is $88 per barrel and the interest rate is 10 percent per year. According to the Hotelling Principle the price of oil this year is A) $80 per barrel. B) $88 per barrel. C) $96 per barrel. D) $79.20 per barrel

If a nonrenewable natural resource's price is expected to increase at a rate faster than the interest rate, then the supply today will A) the supply today will increase. B) the supply today will decrease. C) the demand today will decrease. D) the price today will fall.

Next year's expected price of oil is $90 per barrel. If the interest rate climbs from 5 percent to 20 percent per year and nothing else changes, then according to the Hotelling Principle the price of oil this year A) will rise. B) will fall. C) will not change. D) could rise, fall, or stay the same.

An increase in the marginal product of capital shifts the A) supply of capital curve rightward. B) supply of capital curve leftward. C) demand for capital curve rightward. D) demand for capital curve leftward.

Which of the following lowers the current price of an nonrenewable natural resource? A) an increase in the interest rate B) a decrease in the stock of the resource C) an increase in the marginal revenue product of the resource D) an increase in the price of a substitute resource

For a nonrenewable natural resource, such as oil, the equilibrium price ________ the market fundamentals price. A) is always the same as B) can be greater than but not less than C) can be less than but not greater than D) can be less than, greater than, or equal to

If people suddenly start to expect the price of oil to rise less rapidly than the interest rate, the demand for oil ________ and the supply of oil ________. A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; increases

If the price of a barrel of oil is $100 this year and the interest rate is 10 percent, then according to the Hotelling Principle the price next year is expected to be ________ per barrel. A) $90 B) $110 C) $100 D) Need more information to answer this question.

Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week. If Lynn charges $100 to clean a house, what is the marginal product of her employee? A) 9 houses B) 15 houses C) $1,500 D) 6 houses

Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week. If Lynn charges $100 to clean a house, what is the value of marginal product of her employee? A) 6 houses B) 9 houses C) $600 D) $900

Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week. If Lynn charges $100 to clean a house, and she pays her employee $400 a week, should she hire this employee? A) Yes, because the value of marginal product of the worker is less than the wage. B) Yes, because the value of marginal product of the worker is greater than the wage. C) No, because the value of marginal product of the worker is greater than the wage. D) No, because the value of marginal product of the worker is less than the wage.

Linda Evangelista, a supermodel, once said that she "won't get out of bed for less than $10,000 a day." This fee is an example of A) a reservation wage. B) the demand for Linda's labor. C) a competitive labor market. D) the substitution effect.

Pennsylvania's largest grower of fresh-to-market tomatoes announced in March 2009 he will no longer produce the crop because he can't find enough workers to harvest it. Though his tomato pickers made an average of $16.59 per hour last year, he said the relatively high wage is not enough to attract local labor to work the fields. In the market for tomato workers, what is TRUE? A) $16.59 is above the equilibrium wage rate B) $16.59 is the equilibrium wage rate C) $16.59 is below the equilibrium wage rate D) Cannot determine where the equilibrium wage rate is in comparison to $16.59 without more information.

Pennsylvania's largest grower of fresh-to-market tomatoes announced in March 2009 he will no longer produce the crop. The acreage he previously devoted to tomatoes and pumpkins will be converted to field corn that is harvested by machines. Of the following, which could have led to the shift from labor intensive tomato production to field corn? A) The market price of tomatoes increased. B) Farm workers' reservation wage fell. C) The wage rate for farm workers increased. D) All of the answers are true.

In November 2008, the air traffic controllers who work at Guam became unionized. What would NOT be a way for the union to influence labor demand? A) Have monthly training which improves the marginal productivity of the air traffic controllers. B) Support minimum wage laws. C) Creating job certification which limits the number of newly certified air traffic controllers. D) Lobby the government to limit who can apply to be an air traffic controller in Guam to those who are certified through the union.

Americans are always connected today, talking on the phone at home, while driving down the road and while shopping for groceries. But that wasn't always the case. In fact, it wasn't that long ago people had to go through an operator in order to get connected with the person they were trying to reach. How do cell phones impact the labor market for telephone operators? A) Decreased telephone operators' value of marginal product B) Increased the demand for telephone operators C) Increased the supply for telephone operators D) Decreased the marginal productivity of telephone operators

According to a 1963 edition of the Effingham Daily News, Illinois Consolidated Telephone Co. switched from the switchboard system to the dial system at 12:01 a.m. Sunday, Aug. 18, 1963. Thirty miles of cable supported the new high-tech system. It took four weeks to lay the telephone lines that allowed Effingham residents to directly connect to each other through the telephone. How does the switch from the switchboard system to the dial system impact the labor market for switchboard operators? A) Increased the demand for telephone operators B) Increased the supply for telephone operators C) Decreased the marginal productivity of telephone operators D) Decreased telephone operators' value of marginal product

S & S Backhoe Service in Ozark, Arkansas rents backhoes and other heavy equipment to local construction companies. What determines the demand for backhoes in Arkansas? A) The rental rate for backhoes B) The equilibrium quantity of backhoes C) The value of marginal product of backhoes D) The maximum number of backhoes available to rent

An auction of the leases to drill for natural gas on about 55,000 acres on the Roan Plateau in western Colorado in August 2008 generated nearly $114 million, a record for onshore energy lease sales in the lower 48 states. Is natural gas a renewable or non-renewable resource? Why? A) Renewable, because the resource can be recycled B) Non-renewable, because the used resource cannot be reused C) Non-renewable, because the value of marginal product for natural gas is diminishing D) Renewable, because oil, natural gas, and coal are traded in global community markets

An auction of the leases to drill for natural gas on about 55,000 acres on the Roan Plateau in western Colorado in August 2008 generated nearly $114 million, a record for onshore energy lease sales in the lower 48 states. What is the most likely reason companies are leasing this land? A) Increasing natural gas prices lead to an increased value of marginal product for an acre on the Roan Plateau. B) Increasing natural gas prices lead to an increased supply of acres on the Roan Plateau. C) The future price of natural gas is expected to increase leading to an increased supply of acres on the Roan Plateau, D) The value of marginal product of natural gas is diminishing.

An auction of the leases to drill for natural gas on about 55,000 acres on the Roan Plateau in western Colorado in August 2008 generated nearly $114 million, a record high for onshore energy lease sales in the lower 48 states. What is going on in the rental market for land? A) There is a decrease in the value of marginal product for an acre on the Roan Plateau, leading to an increase in the equilibrium rental rate. B) There is an increase in the value of marginal product for an acre on the Roan Plateau, leading to a decrease in the equilibrium rental rate. C) There is an increase in the supply of acreage on the Roan Plateau, leading to an increase in the equilibrium rental rate. D) There is an increase in the value of marginal product for an acre on the Roan Plateau, leading to an increase in the equilibrium rental rate.

The present value of a future sum of money is the amount that, if invested today, will grow A) as large as that future sum, given the interest rate. B) at a constant rate forever. C) as large as that future sum, less taxes payable. D) as large as that future sum, if the interest rate is zero.

Discounting is the process whereby A) present values are adjusted to their future value, using the interest rate. B) future values are converted to their value today, using the interest rate. C) product prices are reduced (discounted) to increase sales and profits today. D) future values are adjusted for inflation.

The process of converting a future amount of money into its value today is called A) trending. B) depreciation. C) discounting. D) compounding.

Whenever you discount a future sum of money into its present value, you must know I. the interest rate. II) the number of years in the future in which the money will be received. A) only I B) only II C) both I and II D) neither I nor II

Assuming r is the interest rate, to compute the present value of a dollar to be received a year from today, you A) multiply the dollar by r. B) divide the dollar by (1 - r). C) multiply the dollar by (1 + r). D) divide the dollar by (1 + r).

If the interest rate falls, the present value of $100 to be received in one year A) rises. B) falls. C) is unaffected. D) might rise, fall, or not change.

If the interest rate increases from 5 percent to 7 percent, the present value of a future payment A) rises. B) falls. C) is unaffected. D) might either rise or fall.

An increase in the interest rate A) lowers the present value of future revenue. B) increases the present value of future revenue. C) has no effect on the present value of future revenue. D) shifts the demand curve for capital leftward.

The present value of a stream of future revenues varies ________ with the future revenues and ________ with the interest rate. A) inversely; inversely B) directly; directly C) inversely; directly D) directly; inversely

The present value of $100 to be received in a year is A) less than $100 and falls as the interest rate rises. B) less than $100 and rises as the interest rate rises. C) more than $100 and falls as the interest rate rises. D) more than $100 and rises as the interest rate rises.

The present value of $100 to be received in the year 2021 is A) less than the present value of $100 to be received in 2022. B) greater than the present value of $100 to be received in 2022. C) the same as the present value of $100 to be received in 2022. D) greater than the present value of $100 to be received in 2022 if the interest rate in 2022 exceeds the interest rate in 2021; otherwise, it is less.

If the interest rate is 20 percent, $100 to be received four years from today has a present value of approximately A) $48. B) $69. C) $80. D) $100.

A rational individual would be indifferent between ________ today and ________ four years from today if the interest is 20 percent. A) $100, $100 B) $48, $100 C) $30, $100 D) $100, $48

Suppose the interest rate is 5 percent per year. The present value of $210 to be received one year from today is A) $200.00. B) $210.00. C) $215.00. D) $220.50.