ECON 1B03 Lecture Notes - Lecture 12: Aerial Work Platform, Mangalore Refinery And Petrochemicals Limited, Marginal Revenue

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ECON 1B03 Full Course Notes

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The market is perfectly competitive: buyers and sellers are price takers, firm has no control over wages, determined by market supply and demand. A workers contribution to total revenue: mrp = marginal revenue x marginal product, mpl what one worker adds to total output, mr change in total revenue from an additional unit sold. In a perfectly competitive market, mr = p: so mrp = price x marginal product. Mrp diminishes because mp diminishes: due to fixed inputs. A worker adds 50 pens to total output: pens sell for each. The worker adds to tr: tr = 2 x 50. Firm hires workers till w = mrpl. = p x mpl: mcl the wage of one worker. Competitive market: firm sells bottles at sh. 50. Firm hires 6 workers: w = = mrpl. The fir(cid:373) (cid:449)o(cid:374)"t (cid:1011) (cid:449)orkers: 7th worker adds to tr but costs .

Related Questions

(1)

Which of the following employment situations would most closely approximate a monopsony?

	a steel mill in Yokahama, Japan.
	a fast food restaurant in a big city.
	a farmer hiring seasonal workers.
	a large factory in a small town.

(2)

If a monopsonist hires labor, it will choose to hire that quantity at which ___________ and pay a wage rate that is _______________.

	MR = MC; equal to the MRP curve.
	the supply curve intersect the MRP; less than MFC
	MRP = MFC; less than MRP
	the supply curve intersect the MRP; equal to MRP

(3)

Suppose a firm employs both labor and capital. If the ratio of marginal product to price of labor is 50/$10 and the ratio of marginal product of capital to price of capital is 60/$12, the firm should

	maintain the current combination capital and labor.
	buy more labor and less capital because labor is cheaper.
	buy more capital and less labor because capital is cheaper.
	buy more capital because it is more productive than labor.

(4)

Derived demand for labor means that when a firm hires labor, it has to derive its demand

	mathematically.
	based on the labor supply.
	from the demand for the product that the labor produces.
	based on the minimum wage.

(5)

For a firm in perfect competition, the value of the marginal product is

	the value of an additional unit of output measured in terms of additional cost.
	the total value of the total output output divided by the total output.
	additional revenue minus additional cost as a result of an increase in output.
	the price of the product multiplied by the additional output resulting from an additional unit employed.

(6)

A firm that is perfectly competitive will hire labor as long as which of the following is true?

	VMP < W.
	VMP > W.
	MC > MR.
	VMP < MRP.

(7)

The VMP curve slopes downward at some point because

	congestion in the work place lowers marginal product.
	teamwork in the work place increases marginal product.
	the firm hires less labor as the wage rate rises.
	labor supplies less amounts of labor as the wage rate falls.

(8)

Which of the following would not be considered capital in a business?

	The employees
	The factory
	A machine
	Tools

(9)

The increase in the value of a firmâs capital as it increases in age and use is depreciation.

	true
	false

(10)

On a labor market graph, a firmâs demand for labor is

	the wage rate.
	the marginal revenue product curve.
	the marginal product curve.
	indeterminant.

(11)

Why may a householdâs labor supply curve bend backwards at some wage rate?

	The household substitutes labor for leisure.
	The household substitutes leisure for labor.
	Employers demand fewer employees at higher wage rates.
	Households want to supply more labor as the wage rate decreases to maintain incomes.

(12)

The substitution effect is usually stronger than the income effect, thus creating an upward sloping labor supply curve.

	true
	false

(13)

An inelastic demand for labor means that an increase in the wage rate causes a less than proportionate decrease in the quantity of labor demanded.

	true
	false

(14)

Marginal revenue product is

	marginal revenue divided by marginal product.
	marginal revenue times marginal product.
	marginal product minus marginal revenue.
	marginal product plus marginal revenue.

(15)

A firm obeys the least-cost rule by equating the ratios of ___________________ to the ________________ price.

	marginal product; product
	marginal product; factor
	marginal cost; product
	marginal revenue; product

(16)

Suppose the MP of the last unit of capital hired equals 12 and the MP of the last unit of labor hired equals 16.If the price of capital is $8 per unit and the price of labor is $8 per unit, then the firm

	is maximizing its costs with this combination of factors.
	is maximizing its profits with this combination of factors.
	should hire more labor and less capital in order to minimize its costs.
	should hire more capital and less labor in order to minimize its costs.

(17)

For a firm to minimize its costs with more than one factor of production, for every factor, the ratio of the

	marginal product to factor price must be equal.
	marginal revenue product to factor price must be equal.
	marginal revenue product to output must be equal.
	marginal cost to factor price must be equal.

(18)

A monopsony is a firm that, in a specific market, is the only

	seller of a product.
	buyer of a product.
	seller of a factor of production.
	buyer of a factor of production.

(19)

Which of the following businesses would most closely approximate a monopsonist?

	A steel mill in Pittsburgh
	A fast food franchise in a large city
	A large manufacturer in a rural county
	A rancher who hires ranch help

(20)

A firm has the opportunity to buy a machine that costs $2500. It has found the present value of the income generated by the machine to be $2487. It should purchase the machine.

	true
	false

(21)

An increase in the market rate of interest causes

	a leftward shift in the demand for capital curve.
	a rightward shift in the demand for capital curve.
	a movement up the demand for capital curve.
	a movement down the demand for capital curve.

(22)

The characteristic of capital that makes it different from labor is its

	high cost.
	durability.
	rotunda.
	relatively low cost compared to labor.

(23)

The present value of $1000 one year in the future at a 10 percent interest rate is approximately

	$870.
	$909.
	$1000.
	$1909.

coffeemouse295

1) Which of the following inputs can be changed in the short run?

2) In a perfectly competitive market:

price is always equal to marginal revenue.

price is always greater than marginal revenue.

price is always greater than marginal cost.

price is always equal to marginal cost.

3) The following table shows the total output, number of workers employed, variable costs, and fixed costs of a firm.

Number of Workers	Total Output (units)	Variable Costs ($)	Fixed Costs ($)
0	0	0	150
1	25	10	150
2	55	20	150
3	86	30	150
4	110	40	150
5	130	50	150
6	145	60	150
7	155	70	150
8	160	80	150

Refer to the table above. Suppose that the only variable input that the firm uses is labor. What is the wage paid to a worker in the firm?

4) A firm produces 200 units of a good when it employs 7 workers. The marginal product of the eighth worker is 46 units. If the eighth worker is hired, the firm's total product will increase to:

Assume that the product price is $2 per unit, the price of thefactor of production is $40 per unit, and 8 units are being hired.Profit can be maximized by hiring _______ unit(s).
Answer
A. 2 more
B. 1 more
C. 1 fewer
D. 3 fewer

If a firm is using a factor of production from a perfectlycompetitive market such that MFC > MRP, then profit:
Answer
A. can be increased by decreasing the factor price.
B. is maximized.
C. can be increased by using more of the factor.
D. can be increased by using less of the factor.

The amount a factor adds to a firm's total cost per period iscalled:
Answer
A. marginal factor cost.
B. marginal fixed cost.
C. marginal cost.
D. MFR .

Which of the following statements is true?
Answer
A. Marginal product is the change in total revenue divided by a oneunit change in a factor.
B. Marginal factor cost is equal to average total cost.
C. Marginal revenue product is marginal product times marginalrevenue.
D. Marginal revenue is the change in total output divided by thechange in output

Given an increase in the demand for labor, the more the supply oflabor rises:
Answer
A. the fewer the number of workers employed.
B. the greater the increase in wages.
C. the greater the increase in workers employed at the originalwage rate.
D. the less the increase in wages and the greater the number ofworkers employed.

Which of the following statements is true?
Answer
A. The market demand curve for labor is found by adding the supplycurves for labor of individual firms.
B. The market demand for labor will change as a result of a changein the use of a complementary factor or a substitute factor.
C. The market demand curve for labor is vertical at theprofit-maximizing wage.
D. A firm's demand for labor is the upward-sloping portion of theMRP curve for labor.

If marginal product is _______ , marginal revenue product must be_______ .
Answer
A. rising; falling
B. rising; zero
C. falling; rising
D. falling; falling

If a firm is using a factor of production from a perfectlycompetitive market such that MFC < MRP, then profit:
Answer
A. can be increased by using more of the factor.
B. can be increased by increasing the factor price.
C. is maximized.
D. can be increased by using less of the factor.

Which of the following statements is true?
Answer
A. Leisure is a normal good.
B. The demand for leisure is perfectly inelastic.
C. All other things unchanged, an increase in income will decreasethe demand for leisure.
D. Leisure is an inferior good.

ECON 1B03 Lecture Notes - Lecture 12: Aerial Work Platform, Mangalore Refinery And Petrochemicals Limited, Marginal Revenue

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