ECON 103 Chapter Notes - Chapter 12: Opportunity Cost

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mauvezebra141

12 Apr 2017

School

Simon Fraser University

Department

Economics

Course

ECON 103

Professor

Ryan Allen

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Document Summary

By observing input markets, we also must observe output markets (input value influences the price that is charged for output). Due to this, the demand for an input is called the derived demand because it reflects the value of the input is partially derived from the value of output. The demand for labour tells us how much a firm is willing to pay for a given input, this willingness stems from the mp and the price of the output. The more productive a worker is, the higher the mp, and the more wages a firm is willing to pay. Conversely, the higher the value of the output of the worker, the more the firm is willing to pay. Firms then keep hiring workers and paying them until they wage rate equals the value of the mp and that is when all gains from trade are exhausted .

Related Questions

1. In a perfectly competitive industry, an individual firm faces:

a. a perfectly elastic labour supply curve

b. a perfectly inelastic labour supply curve

c.a perfectly vertical labour supply curve

d.none of the above

2. A firm purchases more capital equipment. We would expect to observe:

a. an increase in the supply of labour for this firm

b. a decrease in the supply curve of labour for this firm

c.an increase in the wage rate paid for labour by this firm

d.an increase in the demand for labour by this firm

3. Which of the following would be h most likely outcome if all perfectly competitive firms in a product market join together to form a monopoly?

a. the rate of output in the market will increase but the quantity of labour input will decrease

b.both the rate of output and the quantity of labour input employed will increase

c.the rate of output in the market will decrease but the quantity of labour input will increase

d.both the rate of output and the quantity of labour input employed will decrease

4. what does the marginal revenue product equal when 28 workers are hired in one week?

Labor input (workers per week)__Marginal physical product (output per week)__marginal revenue

25_______________________150_________________________________9.00

26_______________________140_________________________________8.50

27_______________________130_________________________________8.00

28_______________________120_________________________________7.50

29_______________________110________________________________7.00

a. $210

b.$7.50

c.$900

d.$1040

5. The profit-maximizing firm will hire additional workers until:

a. the extra revenue by the last workers hired equals zero

b.the extra cost associated with hiring the last worker equals the price of goods produced

c.the additional cost associated with hiring the last worker equals the average wage rate of workers

d.the additional cost associated with hiring the last worker equals the additional revenue generated by that worker.

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17. All of the following can raise union member wages except:

a. limiting union membership over time

b. increasing the demand for non-union made goods

c. increasing the productivity of union workers

d. increasing the demand for union-made goods

12. If a firm wants to maximize its profits, it should

a. equates the marginal revenue product for each input to the price of the input

b.hire unskilled labour rather than skilled labour since unskilled labour is cheaper

c. hire lots of capital and very little labour since labour needs to be trained

d. equate the marginal physical product for each input to the price of the input

10. A profit-maximizing monopolist will hire labour up to the point where

a. marginal revenue equals than the wage rate.

b. marginal revenue product is greater than the wage rate.

c. marginal revenue equals the price of the product.

d. marginal revenue product is less than the wage rate.

9. The practice of outsourcing has been given a boost by:

a. firms that are becoming more risk-averse.

b. advances in telecommunications and computer networking.

c. support from organized labour.

d.sharp increases in the cost of overseas labour.

8. Suppose firms in an industry hire unskilled labour and skilled labour. unskilled labour is a substitute for capital and skilled labour is a complement with capital. A decrease in the real price of capital would:

a. cause the demand for unskilled labour to increase and the demand for skilled labour to decrease. the wage of unskilled labour would rise relative to the wage of skilled labour

b. cause the demand for both kinds of labour to decrease. wages rates of both kinds of labour would decrease too.

c. cause the demand for labour to increase, raising wages of both skilled and unskilled labour.

d. cause the demand for unskilled labour to decrease and the demand for skilled labour to increase. the wage of unskilled labour would decrease relative to the wage of skilled labour.

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Question 1

A firm should hire workers up to the point where

Question 1 options:

	MP = P.
	MFC = P.
	MFC = MRP.
	MP = MRP.

Question 2

If the additional revenue from hiring an additional worker equals the additional costs from hiring the extra worker, then we know that

Question 2 options:

	MFC/MPP_L = wage.
	MFC/MRP_L = 1.
	MFC = MPP_L.
	MRP_L/P = MFC.

Question 3

A firm that maximizes profits also

Question 3 options:

	pays input prices lower than other firms do.
	cuts corners in production processes so that its products are made too cheaply.
	is inefficient.
	uses the least-cost combination of resources.

Question 4

The demand curve for labor slopes down because

Question 4 options:

	firms value less efficient workers less than they value more efficient workers.
	firms must lower prices to sell the additional units of its product that the extra workers produce.
	of profit maximizing behavior.
	of the law of diminishing marginal product.

Question 5

If MFC > MRP_L, the firm should

Question 5 options:

	get rid of some capital.
	reduce the number of workers.
	lower wages.
	hire more workers.

Question 6

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Question 6 options:

	A decrease in labor productivity.
	A decrease in the price of automobiles.
	A decrease in the price of robots that are used to solder parts of the car together.
	An increase in the demand for automobiles.

Question 7

The marginal revenue product gives

Question 7 options:

	the additions to total cost when an additional unit of a variable input is hired.
	the additional revenue obtained when an additional unit of a variable input is hired.
	the change in total product for an additional unit of a variable input.
	the amount that other inputs must increase by when labor increase by one unit.

Question 8

The monopolist's input demand curve is the

Question 8 options:

	marginal physical product curve.
	marginal revenue product curve.
	marginal revenue curve.
	marginal factor cost.

Question 9

An increase in product price implies that

Question 9 options:

	the firm's demand for labor increases.
	the firm's demand for labor decreases.
	the wage rate the firm pays will increase.
	the firm's marginal factor cost will increase.