CHAPTER 27: Factor Markets
MULTIPLE CHOICE
1. Suppose that in Problem 2, the demand curve for mineral water is given by p = 20 − 16q, where p is
the price per bottle paid by consumers and q is the number of bottles purchased by consumers. Mineral
water is supplied to consumers by a monopolistic distributor, who buys from a monopolist producer
who is able to produce mineral water at zero cost. The producer charges the distributor a price of c per
bottle, that will maximize the producer’s total revenue. Given his marginal cost of c, the distributor
chooses an output to maximize profits. The price paid by consumers under this arrangement is
a.
$10.
b.
$15.
c.
$1.25.
d.
$.63.
e.
$5.
2. Suppose that in Problem 2, the demand curve for mineral water is given by p = 20 − 12q, where p is
the price per bottle paid by consumers and q is the number of bottles purchased by consumers. Mineral
water is supplied to consumers by a monopolistic distributor, who buys from a monopolist producer
who is able to produce mineral water at zero cost. The producer charges the distributor a price of c per
bottle, that will maximize the producer’s total revenue. Given his marginal cost of c, the distributor
chooses an output to maximize profits. The price paid by consumers under this arrangement is
a.
$15.
b.
$.83.
c.
$1.67.
d.
$10.
e.
$5.
3. Suppose that in Problem 2, the demand curve for mineral water is given by p = 70 − 16q, where p is
the price per bottle paid by consumers and q is the number of bottles purchased by consumers. Mineral
water is supplied to consumers by a monopolistic distributor, who buys from a monopolist producer
who is able to produce mineral water at zero cost. The producer charges the distributor a price of c per
bottle, that will maximize the producer’s total revenue. Given his marginal cost of c, the distributor
chooses an output to maximize profits. The price paid by consumers under this arrangement is
a.
$52.50.
b.
$35.
c.
$4.38.
d.
$2.19.
e.
$17.50.
4. Suppose that in Problem 2, the demand curve for mineral water is given by p = 60 − 8q, where p is the
price per bottle paid by consumers and q is the number of bottles purchased by consumers. Mineral
water is supplied to consumers by a monopolistic distributor, who buys from a monopolist producer
who is able to produce mineral water at zero cost. The producer charges the distributor a price of c per
bottle, that will maximize the producer’s total revenue. Given his marginal cost of c, the distributor
chooses an output to maximize profits. The price paid by consumers under this arrangement is
a.
$30.
b.
$45.
c.
$3.75.
d.
$7.50.
e.
$15.
5. Suppose that in Problem 2, the demand curve for mineral water is given by p = 40 − 16q, where p is
the price per bottle paid by consumers and q is the number of bottles purchased by consumers. Mineral
water is supplied to consumers by a monopolistic distributor, who buys from a monopolist producer
who is able to produce mineral water at zero cost. The producer charges the distributor a price of c per
bottle, that will maximize the producer’s total revenue. Given his marginal cost of c, the istributor
chooses an output to maximize profits. The price paid by consumers under this arrangement is
a.
$2.50.
b.
$20.
c.
$1.25.
d.
$30.
e.
$10.
6. Suppose that the labor supply curve for a large university in a small town is given by w = 60 + 0.08L,
where L is number of units of labor per week and w is the weekly wage paid per unit of labor. If the
university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of
labor
a.
equals the wage rate.
b.
is twice the wage rate.
c.
equals the wage rate plus $160.
d.
equals the wage rate plus $80.
e.
equals the wage rate plus $240.
7. Suppose that the labor supply curve for a large university in a small town is given by w = 160 + 0.03L,
where L is number of units of labor per week and w is the weekly wage paid per unit of labor. If the
university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of
labor
a.
equals the wage rate.
b.
is twice the wage rate.
c.
equals the wage rate plus $60.
d.
equals the wage rate plus $30.
e.
equals the wage rate plus $90.
8. Suppose that the labor supply curve for a large university in a small town is given by w = 140 + 0.02L,
where L is number of units of labor per week and w is the weekly wage paid per unit of labor. If the
university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of
labor
a.
equals the wage rate plus $40.
b.
is twice the wage rate.
c.
equals the wage rate plus $20.
d.
equals the wage rate.
e.
equals the wage rate plus $60.
9. Suppose that the labor supply curve for a large university in a small town is given by w = 160 + 0.05L,
where L is number of units of labor per week and w is he weekly wage paid per unit of labor. If the
university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of
labor
a.
equals the wage rate.
b.
equals the wage rate plus $50.
c.
is twice the wage rate.
d.
equals the wage rate plus $100.
e.
equals the wage rate plus $150.
10. Suppose that the labor supply curve for a large university in a small town is given by w = 140 + 0.05L,
where L is number of units of labor per week and w is the weekly wage paid per unit of labor. If the
university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of
labor
a.
is twice the wage rate.
b.
equals the wage rate plus $50.
c.
equals the wage rate plus $100.
d.
equals the wage rate.
e.
equals the wage rate plus $150.
11. Rabelaisian Restaurants has a monopoly in the town of Upper Glutton. Its production function is Q =
30L, where L is the amount of labor it uses and Q is the number of meals produced. Rabelaisian
Restaurants finds that in order to hire L units of labor, it must pay a wage of 30 + .1L per unit of labor.
The demand curve for meals at Rabelaisian Restaurants is given by P = 26.67 − Q/1,000. The
profit-maximizing output for Rabelaisian Restaurants is
a.
12,000 meals.
b.
24,000 meals.
c.
3,000 meals.
d.
2,500 meals.
e.
1,500 meals.
12. Rabelaisian Restaurants has a monopoly in the town of Upper Glutton. Its production function is Q =
10L, where L is the amount of labor it uses and Q is the number of meals produced. Rabelaisian
Restaurants finds that in order to hire L units of labor, it must pay a wage of 10 + .1L per unit of labor.
The demand curve for meals at Rabelaisian Restaurants is given by P = 41 − Q/1,000=. The
profit-maximizing output for Rabelaisian Restaurants is
a.
2,500 meals.
b.
20,000 meals.
c.
10,000 meals.
d.
2,000 meals.
e.
1,250 meals.
13. Rabelaisian Restaurants has a monopoly in the town of Upper Glutton. Its production function is Q =
40L, where L is the amount of labor it uses and Q is the number of meals produced. Rabelaisian
Restaurants finds that in order to hire L units of labor, it must pay a wage of 40 + .1L per unit of labor.
The demand curve for meals at Rabelaisian Restaurants is given by P = 13.75 − Q/1,000. The
profit-maximizing output for Rabelaisian Restaurants is
a.
12,000 meals.
b.
1,000 meals.
c.
6,000 meals.
d.
1,500 meals.
e.
750 meals.
14. Rabelaisian Restaurants has a monopoly in the town of Upper Glutton. Its production function is Q =
10L, where L is the amount of labor it uses and Q is the number of meals produced. Rabelaisian
Restaurants finds that in order to hire L units of labor, it must pay a wage of 10 + .1L per unit of labor.
The demand curve for meals at Rabelaisian Restaurants is given by P = 49 − Q/1,000. The
profit-maximizing output for Rabelaisian Restaurants is
a.
24,000 meals.
b.
2,500 meals.
c.
3,000 meals.
d.
12,000 meals.
e.
1,500 meals.
15. Rabelaisian Restaurants has a monopoly in the town of Upper Glutton. Its production function is Q =
10L, where L is the amount of labor it uses and Q is the number of meals produced. Rabelaisian
Restaurants finds that in order to hire L units of labor, it must pay a wage of 10 + .1L per unit of labor.
The demand curve for meals at Rabelaisian Restaurants is given by P = 49 − Q/1,000. The
profit-maximizing output for Rabelaisian Restaurants is
a.
3,000 meals.
b.
12,000 meals.
c.
2,500 meals.
d.
24,000 meals.
e.
1,500 meals.
16. In Problem 1, suppose that the demand curve for antimacassars is p = 66 − Q/900. The firm’s
profit-maximizing output is closest to
a.
14,625 antimacassars.
b.
7,312.50 antimacassars.
c.
21,937.50 antimacassars.
d.
4,826.25 antimacassars.
e.
3,656.25 antimacassars.
17. In Problem 1, suppose that the demand curve for antimacassars is p = 55 − Q/1,100. The firm’s
profit-maximizing output is closest to
a.
4,900.50 antimacassars.
b.
22,275 antimacassars.
c.
7,425 antimacassars.
d.
14,850 antimacassars.
e.
3,712.50 antimacassars.
18. In Problem 1, suppose that the demand curve for antimacassars is p = 53 − Q/1,000. The firm’s
profit-maximizing output is closest to
a.
6,500 antimacassars.
b.
13,000 antimacassars.
c.
19,500 antimacassars.
d.
4,290 antimacassars.
e.
3,250 antimacassars.
19. In Problem 1, suppose that the demand curve for antimacassars is p = 66 − Q/1,000. The firm’s
profit-maximizing output is closest to
a.
24,375 antimacassars.
b.
16,250 antimacassars.
c.
5,362.50 antimacassars.
d.
8,125 antimacassars.
e.
4,062.50 antimacassars.
20. In Problem 1, suppose that the demand curve for antimacassars is p = 51 − Q/900. The firm’s
profit-maximizing output is closest to
a.
16,875 antimacassars.
b.
5,625 antimacassars.
c.
3,712.50 antimacassars.
d.
11,250 antimacassars.
e.
2,812.50 antimacassars.