1. Suppose four firms face the same wage and hourly price of capital. Which of t

Question

1. Suppose four firms face the same wage and hourly price of capital. Which of the following firms will use the most labor?

A. Firm 1: Price of outpu: $5; Marginal Product of Labor: 10-L

B. Firm 2: Price of outpu: $5; Marginal Product of Labor: 20-L

C. Firm 3: Price of outpu: $10; Marginal Product of Labor: 10-L

D. Firm 4: Price of outpu: $10; Marginal Product of Labor: 20-L

E. They will all use the same amount of labor

2. For a certain firm, suppose northern and southern workers are perfect substitutes, if this is the case

A. The firm will use only southern workers if their wage is less than the wage of northern workers.

B. The firm will ususally use some southern and some northern workers in production.

C. The firm will use only northern workers if their MPL is higher than the MPC of southern workers.

D. None of abover.

3. The reason a minimum wage might raise labor demanded for a monopsonist is that

A. with a minimum wage, the marginal expense of labor curve is always upward sloping.

B. the government forces the firm to hire more workers at the higher wage

C a minimum wage can actually lower the marginal expense of labor

D. the monopsonist experiences a decrease in profits.

4. If labor costs twice as much as capital, then, for profit-maximizing firm in the long run

A. Labor's marginal product will be twice that of capital's

B Capital's marginal product will be twice that of labor's

C. the firm will hire twice as much labor as capital

D. the firm will hire twice as much capital as labor

5. If Industry A can substitute capital for labor easily and Inductry B cannot, then

A. Industry A's own-wage elasticity of demand will be higher than Industry B's

B Industry B's own-wage elasticity of demand will be higher than Industry A's

C. the industries' own-wage elasticities of demand will be equal

D. we cannot predict which firm's own-wage elasticity of demand will be higher

Please also expain you answer choices a little bit. Thank you!!

Explanation / Answer

1. C. Firm 3: Price of outpu: $10; Marginal Product of Labor: 10-L. (Explanation: Here MPL = price)

2. A. The firm will use only southern workers if their wage is less than the wage of northern workers. (Explanation: firm's main objective is to minimize cost. and firm will demand labor from the low cost region)

3. C a minimum wage can actually lower the marginal expense of labor

4. D. the firm will hire twice as much capital as labor. (Explanation: 1 labour = 2 capital)

5. A. Industry A's own-wage elasticity of demand will be higher than Industry B's. (Explanation: substitution is possible when elasticity is higher)

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.