ECON 2000 Chapter : Chapter 16 Notes

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azuremammoth471

15 Mar 2019

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Firms willing to hire more workers at low wage rates and fewer workers as wage rate rises. Increase work hours, give up leisure hours: opportunity cost rises rapidly as leisure hours become more scarce, required higher wage to compensate for increasing oc. Supply more labor hours only if offered higher wage. Labor supply curve slopes upward: higher the wage the more hours worked, at a point, wages may not induce more work hours, wages may induce us to work fewer hours, not more. Substitution effect of higher wages: increased wage rate encourages people to work more hours (sub labor for leisure) Product (mpp: value to the firm of that added worker is the added sales revenue . Marginal revenue (mr) received when added output is sold. Put together to get dollar value of workers contribution to firms output: marginal revenue product (mrp): Change in quantity of labor: mrp sets upper limit to wage an employer will pay.

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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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.

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Labor Output Price (D1) Price (D2)

0	0	10.00	10.00
1	15	10.00	9.50
2	29	10.00	9.00
3	42	10.00	8.50
4	54	10.00	7.50
5	65	10.00	6.50
6	75	10.00	5.50

1. Suppose the firm's product demand is given by the column labelled D1. If the wage rate is $100, the firm will achieve maximum profit by hiring _____ workers.

a. 3 b. 4 c. 5 d. 6

2. Suppose the firm's product demand is given by the column labelled D1. If the wage rate rises from $100 to $130, the firm will reduce the quantity of labour employed by _____ unit(s)

a. 0 b. 1 c. 2 d. 3 16.

3.Suppose the firm's product demand is given by the column labelled D1. If the wage rate is $120, the firm will achieve maximum profit by hiring _____ workers.

a. 3 b. 4 c. 5 d. 6 3 17.

4. Suppose the firm's product demand is given by the column labelled D1. The value of the marginal product of the fourth worker is:

a. $10 b. $54 c. $120 d. $540 18.

5. Suppose the firm's product demand is given by the column labelled D2. If the wage rate is $100, the firm will achieve maximum profit by hiring _____ workers

a. 2 b. 3 c. 4 d. 5 19.

6. Suppose the firm's product demand is given by the column labelled D2. The extra revenue generated by the fourth worker is:

a. $1 b. $12 c. $48 d. $405 20.

7. Suppose the firm's product demand is given by the column labelled D2. If the wage rate rises from $100 to $130, the firm will reduce the quantity of labour employed by _____ unit(s).

a. 0 b. 1 c. 2 d. 3 21.

8. Compared to a firm facing D1, a firm facing demand schedule D2 but paying the same wage will hire:

a. the same number of workers, since the total product is the same in both instances

b. fewer workers, since product price declines as output increases

c. more workers, since product price declines as output increases

d. more information is required

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