Chapter 16 assume that in table 30.5 the cost of labor is

107.

Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor

wage changes with output. In Table 30.3, the contribution to total revenue of the fourth worker hired is

108.

Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor

wage changes with output. In Table 30.3, how many workers should be hired?

109.

Table 30.4 shows how many hairstyling appointments a hair salon can schedule per week based on the

number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the

hairstylists, total revenue, and the marginal revenue product of the stylists, assuming that a hairstylist

charges $60 per appointment. In Table 30.4, what is the marginal physical product of the fourth hairstylist?

110.

Table 30.4 shows how many hairstyling appointments a hair salon can schedule per week based on the

number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the hairstylists,

total revenue, and the marginal revenue product of the stylists, assuming that a hairstylist charges $60 per

appointment. In Table 30.4, suppose a hairstylist is paid $600 per week. How many hairstylists should a

profit-maximizing salon hire?

111.

Table 30.4 shows how many hairstyling appointments a hair salon can schedule per week based on the

number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the

hairstylists, total revenue, and the marginal revenue product of the stylists, assuming that a hairstylist

charges $60 per appointment. In Table 30.4, what is the marginal revenue product of the second hairstylist?

112.

Table 30.4 shows how many hairstyling appointments a hair salon can schedule per week based on the

number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the hairstylists,

total revenue, and the marginal revenue product of the stylists, assuming that a hairstylist charges $60 per

appointment. In Table 30.4 suppose a hairstylist is paid $700 per week. How many hairstylists should a profit–

maximizing salon hire?

113.

Table 30.4 shows how many hairstyling appointments a hair salon can schedule per week based on the

number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the hairstylists,

total revenue, and the marginal revenue product of the stylists, assuming that a hairstylist charges $60 per

appointment. In Table 30.4, as more stylists are hired,

114.

Assume that in Table 30.5 the cost of labor is $4 per unit and the cost of capital is $6 per unit. In Table 30.5,

what is the cost efficiency of the second unit of labor?

115.

Assume that in Table 30.5 the cost of labor is $4 per unit and the cost of capital is $6 per unit. In Table 30.5,

what is the cost efficiency of the second unit of capital?

116. Opportunity wage refers to the

117. The opportunity wage is often a better measure of executive pay than

118. When an individual’s MRP is not measurable, his or her market wage is usually determined by

119. One In the News article is titled “Challenging Work and Corporate Responsibility Will Lure MBA Grads.” In the

headline, which of the following determinants of labor supply is most explicitly mentioned?

A. Tastes.

120. Joe Sabia, an assistant professor of public policy at American University in Washington, DC, says that a 10

percent increase in the minimum wage reduces retail employment by 1 percent and reduces employment

among young workers by 3.4 percent. If President Obama is successful increasing the minimum wage by

30 percent as explained in “Obama Wants $9.50 Minimum Wage,” we can expect

121. According to the In The News article “Mauer, Twins Agree to Eight-Year, $184 Million Extension,” high salaries

of professional baseball player are due to

122. In general, it can be said that leisure is a “free good.”

123. The opportunity cost of working is the amount of leisure time that must be given up in order to work.

124. A decreasing marginal utility of income contributes to the upward slope of an individual’s supply curve.

125. The substitution effect of wages explains shifts in the labor supply curve.

126. If Amber is willing to work additional hours if her wage rate increases, the substitution effect must outweigh the

income effect.

127. If the income effect dominates the substitution effect, the labor supply curve will be backward-bending.

128. The market supply of labor represents the sum of all individual labor supply decisions.

129. Institutional constraints, such as immigration policies, affect the shape and location of the labor supply curve.

130. The demand for labor is derived from the demand for the goods and services labor can produce.

131. The marginal physical product of a factor is equal to the additional revenue generated from employing one

additional unit of the factor.

132. The marginal revenue product sets an upper limit to the wage rate an employer will pay.

133. The law of diminishing returns means that marginal costs will eventually rise as a firm produces more.

134. If the MPP is declining, ceteris paribus, the MRP must decline.

135. A profit-maximizing firm should continue to hire workers until the MRP has declined to the level of the market

wage rate in a competitive labor market.

136. For wages to be higher without sacrificing jobs, productivity must decrease.

137. If the wage rate drops, an employer will be willing to hire more workers, ceteris paribus.

138. The intersection of the labor market supply and market demand curves establishes the minimum wage.

139. When the minimum wage is set below the market equilibrium wage, it does not affect the market.

140. An effective minimum wage will increase the quantity demanded of labor.

141. An effective minimum wage creates a surplus of labor and increases the level of unemployment.

142. Cost efficiency is achieved when the MPP of a worker relative to the worker’s wage is the same for all workers.

143. If the cost efficiency of input A is 45 pounds per $1 of cost, and the cost efficiency of input B is 40 pounds per

$1 of cost, then input A is more cost-efficient than input B.

144. The most cost-efficient input is the one that can produce the most revenue per unit of input.

145. A production process is a specific combination of resources used to produce a good or service.

146. President Obama wanted to increase the federal minimum wage.

147. Identify two reasons why an individual’s labor supply curve is typically upward-sloping.

148. Explain the concept of a backward-bending labor supply curve.

149. Why is the demand curve for labor downward-sloping? What causes the labor demand curve for a firm to shift?

150. Diagram a model of supply and demand for a competitive labor market with a minimum wage in effect.

Identify a group that gains and a group that loses when a minimum wage is imposed.

151. The argument is sometimes made that the United States should not trade with low-wage countries. The

reasoning is that more highly paid U.S. workers cannot compete, and U.S. jobs are lost. What is wrong with this

argument?

Chapter 16 Test Bank Summary