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1. The revenue added by the last worker hired is called the:
- A. marginal physical product of labor.
- B. marginal revenue product of labor.
- C. wage rate.
- D. marginal factor cost of labor.
- E. marginal utility of labor.
- 2. The demand for labor slopes downward because:
- A. additional workers are usually less skilled and thus deserve lower wages.
- B. if another resource is fixed, hiring more workers eventually reduces output per hour worked.
- C. higher wages generally generate more work effort.
- D. as the relative price of capital falls, firms replace capital with labor.
3. If the last worker hired adds more to the firm's revenue than to the firm's cost:
- A. hiring the last worker causes profits to rise.
- B. hiring the last worker causes profits to fall.
- C. the firm should stop hiring additional workers.
- D. marginal resource cost is decreasing.
- E. marginal resource cost is increasing.
4. A monopsony is a:
- A. market with only one seller.
- B. market with only one buyer.
- C. market with only one product.
- D. market that only employs one resource in its production process.
- E. market that is protected by government regulation.
Use the graph below to answer question number 5 and 6
5. The firm will pay its workers a wage:
- A. equal to H.
- B. equal to G.
- C. equal to F.
- D. equal to E.
- E. less than E.
6. Monopoly exploitation is measured by:
- A. D - L.
- B. H - E.
- C. H - F.
- D. H - G.
- E. D - C.
7. Consider the following three statements:
- I. A profit maximizing monopoly will employ labor
and capital so that each resource price equals
their marginal revenue product (MRPL = w and
MRPK = i).
- II. Wage discrimination reduces the inefficiency
of a monopsonist.
- III. A firm who hires labor such that VMP = MRP =
MFC > w is a monopsonist.
- A. all three statements are true.
- B. all three statements are false.
- C. I is false while II and III are true.
- D. I is true while II and III are false.
- E. II is true while I and III are false.
8. All profit maximizing firms will hire labor until:
- A. MRP=MFC.
- B. MRP=w.
- C. VMP=MFC.
- D. VMP=w.
9. A firm that is a price taker in the labor market
will hire labor to the point where the wage rate
equals labor's:
- A. average output.
- B. marginal revenue product.
- C. average revenue product.
- D. marginal factor cost.
- E. marginal value product.
10. The ability to "exploit" labor is minimal when a firm:
- A. has monopoly power.
- B. is regulated by the government.
- C. has monopsony power.
- D. has vigorous competition in both the output and the labor market.
- E. has substantial economies of scale in production.
11. Consider the following three statements:
- I. A purely competitive firm's demand for a resource depends on the value of the marginal product generated
by the resource.
- II. Labor productivity depends on individual effort rather than on the technology used or the amounts of
other resources employed.
- III. The value of the marginal product of a resource is found by multiplying the resource's marginal physical
product times its cost.
- A. all three statements are true.
- B. all three statements are false.
- C. I is true while II and III are false.
- D. II is false while I and II are true.
- E. III is true while I and II are false.
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