Question 1

Use the following to answer question(s) : The Minimum Wage
 
-(Exhibit: The Minimum Wage)  The total income received by the workers when the market is in equilibrium is:

Accepted Answer

A)   W₂ times L₁.
B)   W₁ times L₁.
C)   W₀ times L₃.
D)   W₀ times L₂.E) A) and B)
F) B) and D)

Question 2

In a perfectly competitive labor market, the price of labor is equal to the marginal factor cost of labor.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer question(s) :  
-(Exhibit: Marginal Revenue Product and Demand)  If the product price is $2 per unit and the price of the factor of production is $60 per unit, the profit-maximizing quantity of the factor is _______ units.

Accepted Answer

A)   0
B)   2
C)   4
D)   6E) C) and D)
F) A) and D)

Question 4

A leftward shift in the labor supply curve would result if:

Accepted Answer

A)   people value leisure less highly.
B)   people have more nonlabor income.
C)   transit costs to and from work decline.
D)   the population increases.E) C) and D)
F) A) and B)

Question 5

Use the following to answer question(s) : The Minimum Wage
 
-(Exhibit: The Minimum Wage)  Instituting a minimum wage causes a _______ of workers amounting to _______ workers.

Accepted Answer

A)   shortage; L₂-L₃
B)   surplus; L₁-L₂
C)   surplus; L₃-L₂
D)   shortage; L₁-L₃E) A) and B)
F) A) and C)

Question 6

The amount that an additional unit of a factor adds to a firm's total revenue is called:

Accepted Answer

A)   marginal revenue.
B)   marginal cost.
C)   additional revenue product.
D)   marginal revenue product.E) B) and C)
F) None of the above

Question 7

A factor demand curve will shift because of:

Accepted Answer

A)   a change in the price of a substitute factor.
B)   the elasticity of demand for the final product.
C)   the proportion of the factor's cost relative to total cost.
D)   the slope of the MP curve.E) A) and B)
F) A) and C)

Question 8

Marginal factor cost is the change in total cost divided by the change in the quantity of the product.

Accepted Answer

A) True 
 B)False

Question 9

A lower wage:

Accepted Answer

A)   has an income effect but not a substitution effect on the quantity of labor supplied.
B)   means a higher income for any given level of labor supplied.
C)   has an income effect which is always negative with respect to the quantity of labor supplied.
D)   has an income effect which is always positive with respect to the quantity of labor supplied.E) B) and D)
F) B) and C)

Question 10

All other things unchanged, an increase in income will increase the demand for leisure.

Accepted Answer

A) True 
 B)False

Question 11

If a firm is using a factor of production from a perfectly competitive market at a quantity of the factor where MFC = MRP, then profit:

Accepted Answer

A)   is maximized.
B)   can be increased by using less of the factor.
C)   can be increased by using more of the factor.
D)   can be increased by decreasing the factor price.E) All of the above
F) A) and D)

Question 12

Marginal revenue product is the:

Accepted Answer

A)   change in total output resulting from a unit change in the quantity of a variable input.
B)   change in total revenue resulting from a unit change in the quantity of a variable input.
C)   change in total cost resulting from a unit change in the quantity of a variable input.
D)   ratio of total revenue to the quantity of a variable input employed.E) All of the above
F) C) and D)

Question 13

The _______ effect of a _______ wage causes individuals to substitute _______ .

Accepted Answer

A)   substitution, higher; labor for leisure
B)   income; higher; labor for leisure
C)   substitution; lower; labor for leisure
D)   complementary; constant; leisure for laborE) B) and D)
F) All of the above

Question 14

Marginal product is obtained by multiplying the price of the product by the marginal revenue product.

Accepted Answer

A) True 
 B)False

Question 15

A change in labor demand will result from a change in the demand for the final product, a change in technology, and a change in the price of the labor.

Accepted Answer

A) True 
 B)False

Question 16

The price of an extra hour of leisure is:

Accepted Answer

A)   $1.
B)   the hourly wage rate.
C)   the same as the price of money.
D)   the total utility of labor.E) A) and D)
F) A) and C)

Question 17

Use the following to answer question(s) : The Minimum Wage
 
-(Exhibit: The Minimum Wage)  Give a minimum wage of Wm, the loss in employment is _______ and the change in the wage is _______ .

Accepted Answer

A)   L₁-L₂; Wm-W₁
B)   L₁-L₃; W₀-W₁
C)   L₂-L₃; W₀-Wm
D)   None of the above are correct.E) B) and D)
F) A) and B)

Question 18

If MRPL > MFCL, the firm should hire more labor.

Accepted Answer

A) True 
 B)False

Question 19

The Case in Point on Airline Pilots indicated that a decreased wage for some pilots resulted in:

Accepted Answer

A)   a decreased quantity of labor supplied because the substitution effect was the only relevant factor in this situation.
B)   an increased quantity of labor supplied because the substitution effect was the only relevant factor in this situation.
C)   a decreased quantity of labor supplied because the substitution effect dominated the income effect.
D)   an increased quantity of labor supplied because the income effect dominated the substitution effect.E) B) and C)
F) C) and D)

Question 20

Which of the following statements is true?

Accepted Answer

A)   MRP = MP x MR
B)   MRP = a one-unit change in a factor/change in total revenue.
C)   MFC = change in total revenue/one-unit change in a factor.
D)   MRP = change in the quantity of a factor times the price of the factor.E) A) and D)
F) B) and C)

Exam 12: Wages and Employment in Perfect Competition

The amount that an additional unit of a factor adds to a firm's total revenue is called:

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Use the following to answer question(s) : The Minimum Wage -(Exhibit: The Minimum Wage) Instituting a minimum wage causes a _______ of workers amounting to _______ workers.

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Use the following to answer question(s) : The Minimum Wage -(Exhibit: The Minimum Wage) The total income received by the workers when the market is in equilibrium is:

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A factor demand curve will shift because of:

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Marginal product is obtained by multiplying the price of the product by the marginal revenue product.

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If MRPL > MFCL, the firm should hire more labor.

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All other things unchanged, an increase in income will increase the demand for leisure.

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A change in labor demand will result from a change in the demand for the final product, a change in technology, and a change in the price of the labor.

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Use the following to answer question(s) : -(Exhibit: Marginal Revenue Product and Demand) If the product price is $2 per unit and the price of the factor of production is $60 per unit, the profit-maximizing quantity of the factor is _______ units.

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The Case in Point on Airline Pilots indicated that a decreased wage for some pilots resulted in:

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A lower wage:

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Marginal revenue product is the:

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In a perfectly competitive labor market, the price of labor is equal to the marginal factor cost of labor.

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Which of the following statements is true?

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A leftward shift in the labor supply curve would result if:

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The price of an extra hour of leisure is:

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The _______ effect of a _______ wage causes individuals to substitute _______ .

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Use the following to answer question(s) : The Minimum Wage -(Exhibit: The Minimum Wage) Give a minimum wage of Wm, the loss in employment is _______ and the change in the wage is _______ .

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Marginal factor cost is the change in total cost divided by the change in the quantity of the product.

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If a firm is using a factor of production from a perfectly competitive market at a quantity of the factor where MFC = MRP, then profit:

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Use the following to answer question(s) : The Minimum Wage -(Exhibit: The Minimum Wage) Instituting a minimum wage causes a _ of workers amounting to _ workers.

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The ___ effect of a _ wage causes individuals to substitute _____ .

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Use the following to answer question(s) : The Minimum Wage -(Exhibit: The Minimum Wage) Give a minimum wage of Wm, the loss in employment is _ and the change in the wage is _ .

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