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d.
Supply decreases from S2 to S1.
184. Refer to Figure 18-4. If doctors’ offices adopt new labor-augmenting technologies, what happens in the market for
nurses?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
185. Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases,
what happens in the market for nurses?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
186. Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals decreases,
what happens in the market for nurses?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As
part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon,
there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her
contribution to the entire harvest of salmon is negligible relative to the size of the market.
187. Refer to Scenario 18-2. Based on the given information, it is likely that Gertrude's firm has
a.
some influence over the wages paid to crew members but no influence over the price of salmon.
b.
some influence over the price of salmon but no influence over the wages paid to crew members.
c.
some influence over both the price of salmon and the wages paid to crew members.
d.
no influence over either the price of salmon or the wages paid to crew members.
188. Refer to Scenario 18-2. When Gertrude participates in the labor market to hire crew members for her boats, she is
most likely considered a
a.
demander of labor services.
b.
supplier of labor services.
c.
demander of capital.
d.
supplier of capital.
189. Refer to Scenario 18-2. If the price of fresh Pacific salmon were to decrease significantly, it is most likely that
Gertrude would
a.
reduce her demand for crew members.
b.
hire more boats.
c.
become a seller in at least one factor market.
d.
hire more crew members.
190. Refer to Scenario 18-2. If the price of fresh Pacific salmon were to increase significantly, it is most likely that
Gertrude would
a.
reduce her demand for crew members.
b.
sell some of her boats.
c.
become a seller in at least one factor market.
d.
hire more crew members.
191. Refer to Scenario 18-2. If Gertrude is a competitor in both the fresh Pacific salmon market and in the market for
crew members, she is called a price
a.
taker in the salmon market and a wage setter in the crew market.
b.
taker in the crew market and a price setter in the salmon market.
c.
taker in both markets.
d.
setter in both markets.
192. Refer to Scenario 18-2. In the fresh Pacific salmon product market, Gertrude has some control over the
a.
price she charges for her fresh salmon.
b.
quantity of fresh salmon that she supplies to the market.
c.
competitive environment of the market.
d.
supply of labor in the market.
193. Refer to Scenario 18-2. If Gertrude is a price taker in the labor market, she can choose
a.
the price at which she will sell the fish she catches.
b.
how many crew members she will hire.
c.
the wages that she will pay to her crew members.
d.
All of the above.
194. Refer to Scenario 18-2. Labor-market theory assumes that Gertrude's demand for crew members and her supply of
fresh Pacific salmon result from her
a.
intrinsic desire to hire crew members.
b.
primary goal of maximizing profit.
c.
altruistic motives to provide fresh salmon to consumers.
d.
desire to strike a balance between environmental concerns and maximum profit.
195. Which of the following statements is correct?
a.
An increase in the supply of other factors, such as capital, will increase the demand for labor.
b.
Labor-saving technology will increase the demand for labor.
c.
Labor-augmenting technology will decrease the demand for labor.
d.
A decrease in the price of output will increase the demand for labor.
196. Harold owns a cranberry bog in which he grows cranberries. Harold’s farm is a competitive, profit-maximizing firm.
As such, Harold much decide
(i)
how many cranberries to sell.
(ii)
what price to charge for his cranberries.
(iii)
what wages to pay his workers.
(iv)
how many workers to hire.
a.
(i) only
b.
(ii) and (iii) only
c.
(i) and (iv) only
d.
(i), (ii), (iii), and (iv)
197. If the selling price of a bushel of cranberries rises, we would expect the demand for labor in the cranberry industry to
a.
increase.
b.
decrease.
c.
be unchanged.
d.
increase by less than the corresponding decrease in supply.
198. Which of the following would decrease the demand for labor?
(i)
a decrease in the output price
(ii)
an increase in the output price
(iii)
a labor-saving technological advance
(iv)
a labor-augmenting technological advance
a.
(i) only
b.
(i) and (iii) only
c.
(ii) only
d.
(ii) and (iv) only
199. Which of the following would increase the demand for labor?
(i)
a decrease in the output price
(ii)
an increase in the output price
(iii)
a labor-saving technological advance
(iv)
a labor-augmenting technological advance
a.
(i) only
b.
(i) and (iii) only
c.
(ii) only
d.
(ii) and (iv) only
200. Which of the following best illustrates the concept of "derived demand?"
a.
An increase in the wages of auto workers will lead to an increase in the demand for robots in automobile
factories.
b.
An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile
production workers.
c.
An automobile producer's decision to supply more minivans results from a decrease in the demand for station
wagons.
d.
An increase in the price of gasoline will lead to an increase in the demand for small cars.
201. When a competitive firm maximizes profit, it will hire workers up to the point where the
a.
marginal product of labor is equal to the product price.
b.
marginal product of labor is equal to the wage.
c.
value of the marginal product of labor is equal to the product price.
d.
value of the marginal product of labor is equal to the wage.
202. For a competitive, profit-maximizing firm, the labor demand curve is the same as the
a.
marginal cost curve.
b.
value of marginal product curve.
c.
production function.
d.
profit function.
203. Which of the following is true at the level of output at which a competitive firm maximizes profit?
a.
price = marginal cost
b.
price = wage/value of marginal product of labor
c.
price = marginal product of labor/wage
d.
All of the above are correct.
204. What causes the labor demand curve to shift?
(i)
changes in productivity
(ii)
changes in wages
(iii)
changes in output prices
a.
(i) and (ii)
b.
(ii) and (iii)
c.
(i) and (iii)
d.
All of the above are correct.
205. If the price of Verizon cell phones falls, what will happen to the demand curve for Verizon sales people?
a.
It will shift to the right.
b.
It will shift to the left.
c.
The direction of the shift is ambiguous.
d.
It will remain unchanged.
206. If the demand curve for wedding cakes shifts to the right, then the value of the marginal product of labor for bakers
will
a.
rise.
b.
fall.
c.
remain unchanged.
d.
rise or fall; either is possible.
207. If the demand curve for economics textbooks shifts to the left, then the value of the marginal product of labor for
economics textbook authors will
a.
rise.
b.
fall.
c.
remain unchanged.
d.
rise or fall; either is possible.
208. Competitive firms decide how much output to sell by producing output until the price of the good equals
a.
marginal product.
b.
the value of marginal product.
c.
marginal cost.
d.
marginal profit.
209. Competitive firms hire workers until the additional benefit they receive from the last worker hired is equal to
(i)
the additional cost of that worker.
(ii)
the wage paid to that worker.
(iii)
the marginal product of that worker.
a.
(i) only
b.
(iii) only
c.
(i) and (ii) only
d.
(ii) and (iii) only
210. Dan owns one of the many bakeries in New York City. Which of the following events will lead to an increase in
Dan's demand for the services of bakers?
(i)
The price of muffins increases. (Muffins are Dan's specialty.)
(ii)
Dan adds three new ovens to the kitchen area to help the bakers work faster.
(iii)
Local bakers form a union to protect themselves from low wages.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
211. John owns a number of hot dog stands in New York City. He hires workers to sell hot dogs at his stands. Which of
the following events will lead to a decrease in John's demand for hot dog vendors?
a.
Hollywood glamorization of a new movie about a hot dog vendor leads hundreds of high-school students in
New York City to apply for a job at John's.
b.
The price of hot dogs falls.
c.
The local hot dog vendors form a union increasing hot dog vendor wages.
d.
The demand curve for hot dogs shifts to the right.
212. A pretzel-stand owner in Chicago hires workers to make hot pretzels and sell them to customers. If the firm is
competitive in both the market for pretzels and in the market for pretzel-makers, then it has
a.
some control over both the price of pretzels and the wage it pays to its workers.
b.
no control over the price of pretzels but some control over the wage it pays to its workers.
c.
some control over the price of pretzels but no control over the wage it pays to its workers.
d.
no control over either the price of pretzels or the wage it pays to its workers.
213. Which of the following events could increase the demand for labor?
a.
A decrease in output price
b.
A decrease in the amount of capital available for workers to use
c.
An increase in the marginal productivity of workers
d.
A decrease in the wage paid to workers
214. Which of the following events could decrease the demand for labor?
a.
An increase in the number of migrant workers
b.
An increase in the marginal productivity of workers
c.
A decrease in demand for the final product produced by labor
d.
A decrease in the supply of labor
215. When we focus on the firm as a supplier of a good or a service, we assume that the firm is a profit maximizer. When
we focus on the firm as a demander of labor, we assume that the firm's objective is to
a.
minimize wages.
b.
minimize variable costs.
c.
maximize the number of workers hired.
d.
maximize profit.
216. Suppose that a new invention increases the marginal productivity of labor, shifting labor demand to the right. Such
an invention would be an example of
a.
labor-saving technology.
b.
labor-augmenting technology.
c.
revenue technology.
d.
supply-shifting technology.
217. Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. Such an
invention would be an example of
a.
labor-saving technology.
b.
labor-augmenting technology.
c.
revenue technology.
d.
supply-shifting technology.
218. Labor-saving technology causes which of the following?
(i)
The marginal productivity of labor increases.
(ii)
The marginal productivity of labor decreases.
(iii)
Labor demand shifts to the right.
(iv)
Labor demand shifts to the left.
a.
(i) only
b.
(ii) only
c.
(i) and (iii) only
d.
(ii) and (iv) only
219. Labor-augmenting technology causes which of the following?
(i)
The marginal productivity of labor increases.
(ii)
The marginal productivity of labor decreases.
(iii)
Labor demand shifts to the right.
(iv)
Labor demand shifts to the left.
a.
(i) only
b.
(ii) only
c.
(i) and (iii) only
d.
(ii) and (iv) only
220. For a competitive, profit-maximizing firm, the demand curve for labor will shift in response to a change in the
a.
wage rate.
b.
quantity of labor demanded.
c.
price of the product that the firm sells.
d.
an increase in the supply of labor.
221. Suppose a labor-augmenting technology were developed for a product that increased the marginal product of labor
for all workers. Which of the following would happen in the labor market for this product?
a.
Demand would decrease.
b.
Demand would increase.
c.
Supply would decrease.
d.
Supply would increase.
Figure 18-5
The figure shows a particular profit-maximizing, competitive firm’s value-of-marginal-product (VMP) curve. On the
horizontal axis, L represents the number of workers. The time frame is daily.
222. Refer to Figure 18-5. The value-of-marginal-product curve that is drawn could be relabeled as the firm’s
a.
production function.
b.
total revenue curve.
c.
labor supply curve.
d.
labor demand curve.
223. Refer to Figure 18-5. The firm would choose to hire three workers if
a.
the market wage for a day’s work is $220.
b.
the market wage for a day’s work is $260.
c.
the output price is $220.
d.
the output price is $260.
224. Refer to Figure 18-5. Suppose the marginal product of the fifth unit of labor is 30 units of output per day. The figure
implies that the
a.
price of output is $4.
b.
price of output is $6.
c.
price of output is $8.
d.
daily wage is $120.
225. Refer to Figure 18-5. Suppose one point on the firm’s production function is
(L = 3, Q = 180), where L = number of workers and Q = quantity of output. If the firm sells its output for $5 per unit, then
a.
a second point on the firm’s production function is (L = 4, Q = 216).
b.
the firm’s production function exhibits the property of diminishing marginal product of labor.
c.
the firm will maximize profit by hiring four workers if it pays workers $160 per day.
d.
All of the above are correct.
226. Refer to Figure 18-5. Assume that two points on the firm’s production function are (L = 2, Q = 180) and (L = 3, Q =
228), where L = number of workers and Q = quantity of output. The firm pays its workers $120 per day. The firm’s non-
labor costs are fixed, and they amount to $250 per day. We can conclude that
a.
the firm sells its output for $12 per unit.
b.
if the firm is currently employing 2 workers per day, then profit could be increased by $48 per day if a third
worker is hired.
c.
the marginal cost per unit of output is $2.50 when output is increased from 180 units per day to 228 units per
day.
d.
the firm’s maximum profit occurs when it hires 3 workers per day.
Table 18-A
Labor
Output
Marginal Product
of Labor
Value of Marginal
Product of Labor
Wage
Marginal
Profit
0
0
---
---
---
---
1
1,000
1,000
$5,000
$3,000
$2,000
2
1,800
800
$4,000
$3,000
$1,000
3
2,300
500
$2,500
$3,000
-$500
4
2,600
300
$1,500
$3,000
-$1,500
227. Refer to Table 18-A. The price of output is
a.
$5.
b.
$3.
c.
$2.
d.
$1.
228. A consultant interviews the hiring manager of a small, profit-maximizing firm. The manager explains that the firm
used to have 15 employees but decided not to rehire when the most-recently-hired employee left the company, so the firm
now has 14 employees. We can infer that
a.
for the 15th employee, the wage exceeded the value of the marginal product of labor.
b.
for the 15th employee, the value of the marginal product of labor exceeded the wage.
c.
the firm is too small and should rehire to replace the 15th employee.
d.
the firm is no longer attempting to maximize profits.
229. A consultant interviews the hiring manager of a small, profit-maximizing firm. The manager explains that the firm
used to have 15 employees, but the most-recently-hired employee has just left the company. The firm is currently
advertising to hire a worker to replace the employee who just left at the same wage rate. We can infer that
a.
for the 15th employee, the wage exceeded the value of the marginal product of labor.
b.
for the 15th employee, the value of the marginal product of labor exceeded the wage.
c.
the firm is too large and should remain at 14 employees.
d.
the firm is no longer attempting to maximize profits.
Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each
and pays the workers a wage of $325 per day.
Labor
(number of
workers)
Quantity
(cupcakes
per day)
Marginal
Product of
Labor
(cupcakes
per day)
Value of the
Marginal
Product of
Labor
Wage
(per day)
Marginal
Profit
0
0
$325
1
200
$325
2
350
$325
3
475
$325
4
575
$325
230. Refer to Table 18-B. What is the second worker's marginal product of labor?
a.
350 cupcakes
b.
150 cupcakes
c.
125 cupcakes
d.
100 cupcakes
231. Refer to Table 18-B. What is the third worker's marginal product of labor?
a.
125 cupcakes
b.
150 cupcakes
c.
200 cupcakes
d.
475 cupcakes
232. Refer to Table 18-B. What is the value of the marginal product of the second worker?
a.
$150
b.
$350
c.
$450
d.
$1,050
233. Refer to Table 18-B. What is the value of the marginal product of the third worker?
a.
$125
b.
$375
c.
$450
d.
$1,425
234. Refer to Table 18-B. The marginal product of labor begins to diminish with the addition of which worker?
a.
the 1st worker
b.
the 2nd worker
c.
the 3rd worker
d.
the 4th worker
235. Refer to Table 18-B. Assuming MadeFromScratch is a competitive, profit-maximizing firm, how many workers will
the firm hire?
a.
1 worker
b.
2 workers
c.
3 workers
d.
4 workers
Figure 18-4
The graph below illustrates the market for nurses who work in doctors’ offices.
236. Refer to Figure 18-4. Each August many students entering college for the first time visit a doctor’s office to have an
MMR booster vaccine. If a new labor-augmenting technology exists that allows nurses to administer the vaccine more
quickly and accurately, what happens in the market for nurses?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
237. Refer to Figure 18-4. Each August many students entering college for the first time visit a doctor’s office to have an
MMR booster vaccine. If a new labor-saving technology exists that allows robots to administer the vaccine quickly and
accurately, what happens in the market for nurses?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
