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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 30workers 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 30,000 workers.
b. the quantity demanded for the market will increase to more than 30,000 workers.
c. the quantity demanded for the market will increase, but we can't tell which of the above answers is correct.
d. the quantity demanded for the market will increase to less than 30,000 workers.
A firm that maximizes profits also
a. cuts corners in production processes so that its products are made too cheaply.
b. uses the least-cost combination of resources.
c. is inefficient.
d. pays input prices lower than other firms do.
What are the short-run economic effects when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?
a. The wage rate in the U.S. will decrease and the wage rate in the foreign country will increase.
b. The wage rate in the U.S. will decrease and the wage rate in the foreign country will decrease.
c. The wage rate in the U.S. will remain the same and the wage rate in the foreign country will decrease.
d. The wage rate in the U.S. will increase and the wage rate in the foreign country will decrease.
Coal and iron ore are complements in the manufacture of steel. An increase in the price of coal would lead to
a. an increase in the supply of iron ore as iron ore producers see an opportunity to expand their markets.
b. no change in the demand for iron ore since the steel makers must use both iron ore and coal if they are to make steel.
c. an increase in the demand for iron ore as producers substitute more iron ore for coal in the production process.
d. a decrease in the demand for iron ore as steel manufacturers reduce production of steel.
In the employment of any resource, a firm should
a. equate marginal revenue product with the cost of the additional resource.
b. A and B are both correct.
c. hire each input unit provided its marginal physical product is greater than zero.
d. hire each input unit that adds more to revenue than it adds to costs.
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. Adecrease in the real price of capital would
a. 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 ofskilled 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 increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage ofskilled labor.
d. cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
If a firm wants to maximize profits it should
a. hire lots of capital and very little labor since labor needs to be trained.
b. equate the marginal physical product for each input to the price of the input.
c. equate the marginal revenue product for each input to the price of the input.
d. hire unskilled labor rather than skilled labor since unskilled labor is cheaper.
A monopolist will hire fewer workers than a perfectly competitive firm because
a. 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.
b. the marginal product curve decreases as additional units of labor are hired for a monopoly but not for a competitive firm.
c. there is a variety of employers in a competitive market and only one in a monopoly.
d. marginal revenue is greater than price for a monopoly while marginal revenue is equal to price for a competitive firm.
Other things held constant, after some point hiring additional units of labor will cause the marginal physical product of labor to decline because
a. of the law of diminishing marginal product.
b. the wage rate increases when additional workers are hired.
c. the supply of labor is perfectly elastic.
d. the firm is a price taker.
Which of the following statements describes the long-run effects of global outsourcing?
a. Wages and employment will increase globally.
b. Wages will increase globally and employment will stay the same.
c. Wages for U.S. workers will decrease but wages in other countries will increase.
d. Wages in all countries will remain the same as before the outsourcing.
The wage rate found by the intersection of the market demand and supply curves for labor then determines the
a. firm's supply curve for labor.
b. labor's supply curve of labor.
c. firm's demand curve for labor.
d. labor's demand curve for jobs.
As a firm hires more workers, holding capital and other factors constant, the marginal physical product of labor declines because
a. workers don't perform well in teams.
b. the amount of other inputs each worker has to work with declines as the number of workers increases.
c. less efficient workers are hired as the number of workers increase.
d. there are diseconomies of scale.
Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajaxdo?
a. Leave the level of production unchanged.
b. Reduce the amount produced.
c. Increase the amount produced.
d. Collect more information before making a decision.
The cost-minimizing rule is that a firm should utilize inputs such that the marginal physical product of an input divided by the price of the input is the same for allinputs. This is also the profit-maximizing rule because
a. we obtain the profit-maximizing rule by multiplying each ratio by the marginal revenue produced.
b. we obtain the profit-maximizing rule by multiplying each ratio by the product price, which is the same for each input.
c. the profit-maximizing rule is just the inverse of the cost-minimizing rule.
d. they are exactly the same.
A firm's employment of labor outside the country in which the firm is located
a. shifts the supply of labor in the original country.
b. is the marginal revenue product.
c. is outsourcing.
d. shifts the supply of labor in the other country.
Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?
a. An increase in the demand for automobiles.
b. A decrease in the price of automobiles.
c. A decrease in labor productivity.
d. A decrease in the price of robots that are used to solder parts of the car together.
If the additional revenue from hiring an additional worker equals the additional costs from hiring the extra worker, then we know that
a. MFC = MPPL.
b. MRPL/P = MFC.
c. MFC/MRPL = 1.
d. MFC/MPPL = wage.