Question 1

The Bubby Gum factory produces bubble gum.Joanne is one of the employees, and she produces 10 packs of bubble gum per hour.Joanne's money wage rate is $12 per hour.If a packet of bubble gum sells for $1.00, then

Accepted Answer

Joanne produces 10 packs of bubble gum per hour, which sell for $1.00 each, generating $10.00 in revenue. Her hourly wage is $12.00, so she is creating a $2.00 per hour loss for the firm.

Question 2

Suppose the price of a product is $4 and the nominal wage that the firm must pay is $20.Then the firm's real wage is

Accepted Answer

The real wage is calculated by dividing the nominal wage by the price level. In this case, real wage = $20 / $4 = $5.

Question 3

An increase in the real wage rate ________ the quantity of labor demanded and ________ the quantity of labor supplied.

Accepted Answer

The answer of An increase in the real wage rate...

Question 4

A firm's demand for labor depends on the

Accepted Answer

The real wage rate is the nominal wage rate adjusted for changes in the price level. As the real wage rate affects the cost of labor to the firm, it is the determining factor in the firm's demand for labor. The other choices are not the primary determinants of the firm's demand for labor.

Question 5

The demand for labor curve is

Accepted Answer

The demand for labor curve shows the relationship between the quantity of labor demanded by firms and the real wage rate. When the real wage rate falls, firms will demand more labor because it becomes cheaper to hire workers than to use other inputs. Therefore, the demand for labor curve is downward sloping. Firms will hire less labor when the real wage rate increases because it becomes more expensive to use workers.

Question 6

Firms hire more labor as long as

Accepted Answer

Firms hire more labor as long as the additional output produced by the labor is greater than the cost of hiring that labor. The cost of hiring labor is the real wage rate, so if the real wage rate is less than the additional output the labor produces, then it is profitable for the firm to hire more labor.

Question 7

If the real wage rate decreases from $9.00 per hour to $8.00 per hour, the

Accepted Answer

A decrease in the real wage rate means that labor becomes relatively cheaper for firms, leading to an increase in the quantity demanded of labor. This is because firms can now afford to hire more workers at the lower wage rate, which increases the demand for labor. Therefore, the correct choice is A.

Question 8

The lower the real wage rate, the

Accepted Answer

When the real wage rate is lower, firms can hire more workers because labor becomes relatively cheaper. Firms are able to reduce their labor costs and increase their profits by hiring more workers at lower wages.

Question 9

The benefit to the firm of hiring another worker is

Accepted Answer

The benefit to the firm of hiring another worker is the extra output produced by the worker. This means that the firm can produce more goods or services, which can increase revenue and profits.

Question 10

Hershey Chocolate Factory pays a money wage rate equal to $30 per hour and sells its candy bars for $1.50 each.Hershey Chocolate Factory should hire labor until an additional unit of labor produces ________ candy bars an hour.

Accepted Answer

To determine the additional unit of labor produces candy bars an hour, we need to calculate the marginal product of labor. Marginal product (MP) of labor is the additional output produced from each additional unit of labor.

MP = ∆output / ∆labor

Assuming that the only input to production is labor, we can assume that the marginal product of labor is equal to the additional candy bars produced per hour.

Let's assume that the factory currently has n workers, and that hiring an additional worker will increase output by MP candies per hour. The revenue received from selling these additional candies will be:

Revenue = MP * Price per candy = MP * $1.50

The additional cost to Hershey Chocolate Factory from hiring an additional worker will be $30 per hour.

In order to determine whether Hershey Chocolate Factory should hire another worker, they should compare the additional revenue from the extra worker to the additional cost of hiring the extra worker.

If Revenue - Cost > 0, then it is profitable to hire an additional worker.

If Revenue - Cost < 0, then it is not profitable to hire an additional worker.

For Hershey Chocolate Factory, the condition for profit maximization is:

$1.50MP - $30 < 0

Solving for MP, we get:

MP < $20

Therefore, Hershey Chocolate Factory should hire labor until an additional unit of labor produces 20 candy bars an hour.

Question 11

The quantity of labor demanded by a firm depends upon

Accepted Answer

The demand for labor is derived from the marginal revenue product of labor (MRPL). The real wage rate is the cost of labor to the firm, and the firm will hire labor up to the point where the MRPL equals the cost of hiring the last worker. Therefore, the quantity of labor demanded by a firm depends on the real wage rate, not on the nominal wage rate.

Question 12

The real wage rate is the ________ divided by the ________.

Accepted Answer

The real wage rate is the purchasing power of the nominal wage rate, which is the wage rate expressed in current prices. The price level is the level of current prices, so the real wage rate is calculated by dividing the nominal wage rate by the price level.

Question 13

As long as an additional worker hired by a firm produces

Accepted Answer

A firm will hire an additional worker if and only if the marginal product of labor (the amount of extra output produced by that worker) is greater than or equal to the real wage rate (the cost of hiring that worker). Therefore, if the additional worker produces more output than the real wage rate, the firm will hire that worker.

Question 14

The demand for labor reflects the point that the

Accepted Answer

The demand for labor reflects the point that the lower the real wage rate, the greater the quantity of labor demanded. This is because at lower wages, employers can afford to hire more workers and increase production, while at higher wages, employers may reduce the number of workers they hire to control costs.

Question 15

When all other influences on firms' hiring plans remain the same, the

Accepted Answer

According to the law of demand, when the price of a product (in this case, the wage rate) decreases, the quantity demanded of that product (labor in this case) increases. Therefore, when the real wage rate decreases, firms will demand a greater quantity of labor.

Question 16

The quantity of labor demanded is the labor hours all

Accepted Answer

The quantity of labor demanded is the amount of labor that firms plan to hire at a given real wage rate. This is because firms determine their demand for labor based on the marginal productivity of each additional unit of labor and compare it to the real wage rate. If the marginal productivity of labor is higher than the real wage rate, firms will demand more labor. Therefore, the quantity of labor demanded depends on firms' hiring plans, not employees' work preferences or nominal wage rates.

Question 17

Suppose that the Australian economy initially uses 50 billion hours of labor to produce $5 trillion of real GDP. If 50 billion more hours are employed and Australia's real GDP increases by $4 trillion more,

Accepted Answer

The increase in input (labor) by 50 billion hours led to an increase in output (real GDP) by only $4 trillion, which is lower than the initial increase of $5 trillion when the first 50 billion hours were employed. This indicates that the production function exhibits diminishing returns to labor, meaning that the marginal product of labor is decreasing as more labor is added to the production process.

Question 18

The total labor hours that all the firms in the economy plan to hire during a given time period at one particular real wage rate is the

Accepted Answer

The total labor hours that all firms in the economy plan to hire at a particular wage rate refers to the quantity of labor demanded in the economy. Therefore, option B is correct. The demand for labor is the amount of labor that all firms in the economy plan to hire at different wage rates, whereas the supply of labor is the total amount of labor hours that individuals in the economy are willing and able to offer at different wage rates. Option A and C are incorrect because they refer to the demand and supply of labor, respectively. Option D and E are incorrect because they refer to the quantity of labor supplied and quantity of jobs supplied, respectively, which are not the same as the quantity of labor demanded.

Question 19

The Bubby Gum factory produces bubble gum.Joanne is one of the employees, and she produce 10 packs of bubble gum per hour.Joanne's money wage rate is $12 per hour.Based on this information, the Bubby Gum company should

Accepted Answer

The answer of The Bubby Gum factory produces bubble gum.Joanne...

Question 20

A firm hires labor up to the point where the

Accepted Answer

The firm will hire labor up to the point where the additional hour of labor produces extra output that is equal to the real wage rate. At this point, the firm will not be able to increase profits by hiring any additional labor. Therefore, option B is the correct choice.

Quiz 8: Potential Gdp and the Natural Unemployment Rate