Microeconomics
Instructor Miller
Practice Problems Labor Market
1. What is a factor market?
A) It is a market where financial instruments are traded.
B) It is a market where stocks and bonds are traded.
C) It is a market producers buy consumption and capital goods.
D) It is a market where resources used to produce final goods are traded.
2. 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 which rely on labor markets for the purpose of
raising tax revenue.
3. The demand for labor depends primarily on the additional output produced as a result of hiring
an additional worker and
A) the additional revenue received from selling the output produced as a result of hiring an
additional worker.
B) the payment made to the worker for producing the additional output.
C) the elasticity of demand for the output produced by the worker.
D) the number of workers willing to produce the additional output.
4. 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 marginal product when a firm hires an additional worker.
D) There is no difference between the two terms.
5. The demand curve for labor is also
A) the demand curve for the output produced with labor since the demand for labor is a derived
demand.
B) the marginal product of labor curve.
C) the marginal revenue product of labor curve.
D) the supply curve for the output labor is used to produce.
6. A firm should hire more workers to increase its profits if
A) the marginal product of labor is greater than the wage the firm will pay these workers.
B) the wage rate is less than the marginal revenue product of labor.
C) there is enough capital and other resources for the workers to use.
D) the demand for labor is elastic.
7. As more output is produced, the marginal product of labor declines
A) because of the law of diminishing returns.
B) if firms reduce the wage paid to labor.
C) if the firm’s output supply curve is inelastic.
D) because the firm’s marginal revenue declines.
