A firm that wants to maximize profits should hire each input to the point where
ID: 1255049 • Letter: A
Question
A firm that wants to maximize profits should hire each input to the point wherea. its marginal physical product divided by the price of the input equals the product price.
b. its marginal revenue product divided by the product price equals one.
c. its marginal revenue product divided by its marginal physical product equals the wage.
d. its marginal revenue product divided by the price of the input equals one.
Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because
a. the firm is a price taker.
b. the supply of labor is perfectly elastic.
c. of the law of diminishing marginal product.
d. the wage rate increases when additional workers are hired.
All of the following make the demand for labor more elastic EXCEPT
a. the easier it is to substitute another input for labor.
b. the longer the time period under consideration.
c. the smaller the proportion of total costs accounted for by labor.
d. greater elasticity of demand for the final product.
Which of the following statements describes the long-run effects of global outsourcing?
a. Wages for U.S. workers will decrease but wages in other countries will increase.
b. Wages and employment will increase globally.
c. Wages in all countries will remain the same as before the outsourcing.
d. Wages will increase globally and employment will stay the same.
For a firm in a perfectly competitive labor market, the supply curve of labor is
a. perfectly inelastic.
b. perfectly elastic.
c. inelastic.
d. elastic.
The marginal physical product of labor is
a. the change in total revenues resulting from the addition of one more worker, while increasing one other factor of production.
b. the output of the firm divided by the number of workers.
c. the change in output resulting from the addition of one more worker, holding other factors of production constant.
d. the change in output resulting from the addition of one more worker, adjusting the level of the capital stock accordingly.
In the employment of any resource, a firm should
a. equate marginal revenue product with the cost of the additional resource.
b. hire each input unit provided its marginal physical product is greater than zero.
c. A and B are both correct.
d. hire each input unit that adds more to revenue than it adds to costs.
An increase in the supply of labor to an industry could be caused by
a. an increase in job flexibility in the industry.
b. an increase of wages in another industry.
c. increased productivity of labor.
d. higher wages.
A firm should hire workers up to the point where
a. MP = P.
b. MFC = MRP.
c. MFC = P.
d. MP = MRP.
Suppose there are 1000 firms in a market and all are identical. Firm A will hire 20 workers when the wage rate is $10, 25 workers when the wage rate is $9, and 30 workers when the wage rate is $8. The equilibrium wage rate for a number of years has been $9. If the wage rate falls to $8, we know that
a. the quantity demanded for the market will increase to less than 30,000 workers.
b. the quantity demanded for the market will increase to 30,000 workers.
c. the quantity demanded for the market will increase to more than 30,000 workers.
d. the quantity demanded for the market will increase, but we can't tell which of the above answers is correct.
The marginal revenue product
a. represents the incremental contribution to the firm's total revenues obtained from an increase in a variable input.
b. gives the change in total product when an additional unit of a good is hired.
c. gives the increase in cost when there is an increase in a variable input.
d. always increases when there is an increase in a variable input.
Which of the following statements is not true about the long-run effects of outsourcing?
a. More goods and services can be produced than in the absence of outsourcing.
b. Globally wages will increase because of outsourcing.
c. Outsourcing allows countries to specialize in producing what they can produce most efficiently.
d. Employment levels will decrease globally as the result of outsourcing.
A monopolist will hire fewer workers than a perfectly competitive firm because
a. the marginal product curve decreases as additional units of labor are hired for a monopoly but not for a competitive firm.
b. marginal revenue is greater than price for a monopoly while marginal revenue is equal to price for a competitive firm.
c. there is a variety of employers in a competitive market and only one in a monopoly.
d. to sell an additional unit of the good the competitive firm will keep the price the same while the monopolist must lower it on all units sold.
Which of the following will not lead to a change in the demand for labor?
a. A change in the price of a substitute input.
b. A change in the supply of labor.
c. A change in demand for the final good.
d. A change in labor productivity.
Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would
a. cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor.
b. cause the demand for both kinds of labor to decrease. Wages rates of both kinds of labor would decrease too.
c. cause the demand for unskilled labor to decrease and the demand for skilled labor to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor.
d. cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
Explanation / Answer
A firm that wants to maximize profits should hire each input to the point where
a. its marginal physical product divided by the price of the input equals the product price.
b. its marginal revenue product divided by the product price equals one.
c. its marginal revenue product divided by its marginal physical product equals the wage.
d. its marginal revenue product divided by the price of the input equals one.
Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because
a. the firm is a price taker.
b. the supply of labor is perfectly elastic.
c. of the law of diminishing marginal product.
d. the wage rate increases when additional workers are hired.
All of the following make the demand for labor more elastic EXCEPT
a. the easier it is to substitute another input for labor.
b. the longer the time period under consideration.
c. the smaller the proportion of total costs accounted for by labor.
d. greater elasticity of demand for the final product.
Which of the following statements describes the long-run effects of global outsourcing?
a. Wages for U.S. workers will decrease but wages in other countries will increase.
b. Wages and employment will increase globally.
c. Wages in all countries will remain the same as before the outsourcing.
d. Wages will increase globally and employment will stay the same.
For a firm in a perfectly competitive labor market, the supply curve of labor is
a. perfectly inelastic.
b. perfectly elastic.
c. inelastic.
d. elastic.
The marginal physical product of labor is
a. the change in total revenues resulting from the addition of one more worker, while increasing one other factor of production.
b. the output of the firm divided by the number of workers.
c. the change in output resulting from the addition of one more worker, holding other factors of production constant.
d. the change in output resulting from the addition of one more worker, adjusting the level of the capital stock accordingly.
In the employment of any resource, a firm should
a. equate marginal revenue product with the cost of the additional resource.
b. hire each input unit provided its marginal physical product is greater than zero.
c. A and B are both correct.
d. hire each input unit that adds more to revenue than it adds to costs.
An increase in the supply of labor to an industry could be caused by
a. an increase in job flexibility in the industry.
b. an increase of wages in another industry.
c. increased productivity of labor.
d. higher wages.
A firm should hire workers up to the point where
a. MP = P.
b. MFC = MRP.
c. MFC = P.
d. MP = MRP.
Suppose there are 1000 firms in a market and all are identical. Firm A will hire 20 workers when the wage rate is $10, 25 workers when the wage rate is $9, and 30 workers when the wage rate is $8. The equilibrium wage rate for a number of years has been $9. If the wage rate falls to $8, we know that
a. the quantity demanded for the market will increase to less than 30,000 workers.
b. the quantity demanded for the market will increase to 30,000 workers.
c. the quantity demanded for the market will increase to more than 30,000 workers.
d. the quantity demanded for the market will increase, but we can't tell which of the above answers is correct.
The marginal revenue product
a. represents the incremental contribution to the firm's total revenues obtained from an increase in a variable input.
b. gives the change in total product when an additional unit of a good is hired.
c. gives the increase in cost when there is an increase in a variable input.
d. always increases when there is an increase in a variable input.
Which of the following statements is not true about the long-run effects of outsourcing?
a. More goods and services can be produced than in the absence of outsourcing.
b. Globally wages will increase because of outsourcing.
c. Outsourcing allows countries to specialize in producing what they can produce most efficiently.
d. Employment levels will decrease globally as the result of outsourcing.
A monopolist will hire fewer workers than a perfectly competitive firm because
a. the marginal product curve decreases as additional units of labor are hired for a monopoly but not for a competitive firm.
b. marginal revenue is greater than price for a monopoly while marginal revenue is equal to price for a competitive firm.
c. there is a variety of employers in a competitive market and only one in a monopoly.
d. to sell an additional unit of the good the competitive firm will keep the price the same while the monopolist must lower it on all units sold.
Which of the following will not lead to a change in the demand for labor?
a. A change in the price of a substitute input.
b. A change in the supply of labor.
c. A change in demand for the final good.
d. A change in labor productivity.
Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would
a. cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor.
b. cause the demand for both kinds of labor to decrease. Wages rates of both kinds of labor would decrease too.
c. cause the demand for unskilled labor to decrease and the demand for skilled labor to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor.
d. cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
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