ECO205Y5 Chapter Notes - Chapter 13: Cengage Learning, Perfect Competition, Isoquant

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24 Aug 2013

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A profit-maximizing firm will hire additional units of any input up to the point at which the additional revenue from hiring one more unit of the input is exactly equal to the cost of hiring that unit. If the firm is a price take in the input markets: Mek = mrk w =mel = mrl v = mek = mrk. The extra revenue earned from selling the output produced by hiring an extra input is the marginal revenue product. Mvp is the marginal value product - the extra revenue obtained from selling the output produced by hiring an extra worker or machine. As more labor is hired, mvpl will fall due to diminishing marginal physical product. As the wage rate falls, the firm is able to hire more workers even if they add less to total output than previous workers. At a wage rate w1, profit maximization requires that l1 labor input be hired.

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.

Question 10

Which of the following will not lead to a change in the demand for labor?

Question 10 options:

	A change in the supply of labor.
	A change in demand for the final good.
	A change in the price of a substitute input.
	A change in labor productivity.

skyox48

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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1. In a market economy, the high salaries of some star baseball players such as Adrian Gonzalez, are determined by

		Team owners, based on the total number of star athletes they plan to hire.
	B	advertising companies, based on what they are willing to pay to advertise their products at baseball games.
	C	the interaction of the demand for star athletes and the supply of star athletes.
	D	consumers, based on their willingness to watch baseball games.

2. Demand in factor markets differs from demand in product markets in that

	A	the demand for a factor of production is difficult to determine.
B		the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers.
C		demand for a factor of production is based on the tastes and preferences of firms.
D		demand for a factor of production is based on the tastes and preferences of resource owners.

3. The demand for labor is described as a derived demand because

A		it is derived by workers seeking to earn income to fund the consumption of goods and services.
B		it is derived by producers seeking to make profits by starting new businesses.
C		it is derived from the demand for products that use labor in the production process.
D		it is derived from government institutions that rely on labor markets for the purpose of raising tax revenue.

4. Which of the following is not an example of a derived demand?

A		Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators.
B		Seth Bullock, a personal injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages.
C		Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market.
D		As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

5. Marginal revenue product for a perfectly competitive seller is equal to

A		the output price multiplied by the total product of labor.
B		the output price multiplied by the number of workers hired.
C		the change in total revenue that results from hiring another worker.
D		the marginal cost of production.

6. What is the difference between labor's marginal product and marginal revenue product?

A		The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.
B		The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker.
C		The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.
D		Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

7. What is the difference between a firm's marginal revenue and its marginal revenue product?

A		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker.
B		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker.
C		Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in the marginal product when a firm hires an additional worker.
D		There is no difference between the two terms.

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ECO205Y5 Chapter Notes - Chapter 13: Cengage Learning, Perfect Competition, Isoquant

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