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854 Miller Economics Today, 16th Edition
91) Ajax has just discovered that the marginal revenue product generated by the last worker hired
was $125 while the marginal factor cost was $85. What should Ajax do?
A) Leave the level of production unchanged.
B) Increase the amount produced.
C) Reduce the amount produced.
D) Collect more information before making a decision.
92) Ajax has just discovered that the marginal revenue product generated by the last worker hired
was $75 while the marginal factor cost was $95. What should Ajax do?
A) Leave the level of production unchanged.
B) Increase the amount produced.
C) Reduce the amount produced.
D) Collect more information before making a decision.
93) Ajax has just discovered that the marginal revenue product generated by the last worker hired
was $50 while the marginal factor cost was $50. What should Ajax do?
A) Leave the level of production unchanged.
B) Increase the amount produced.
C) Reduce the amount produced.
D) Collect more information before making a decision.
94) If the marginal revenue product of the last worker hired exceeds the marginal factor cost of the
worker, the firm would be better served if it
A) hires additional workers.
B) maintains its current level of workers already hired.
C) lays off the last worker hired.
D) None of the above is a good option for a profit seeking firm.
95) If MFC MRPL
,
the firm should
A) hire more workers. B) lower wages.
C) get rid of some capital. D) reduce the number of workers.
96) A firm should hire workers up to the point where
A) MP P. B) MFC P. C) MFC MRP. D) MP MRP.
97) If MFC MRPL
,
the firm should
A) hire more workers. B) lower wages.
C) get rid of some capital. D) reduce the number of workers.
98) If the additional revenue from hiring an additional worker equals the additional costs from
hiring the extra worker, then we know that
A) MFC MPPL. B) MFC/MPPLwage.
C) MFC/MRPL1. D) MRPL
/
P MFC.
99) The demand curve for labor is the
A) marginal factor cost curve for labor.
B) marginal physical product curve for labor.
C) marginal physical product curve for labor times the wage rate.
D) marginal revenue product curve for labor.
100) The demand curve for labor slopes down because
A) firms value less efficient workers less than they value more efficient workers.
B) firms must lower prices to sell the additional units of its product that the extra workers
produce.
C) of the law of diminishing marginal product.
D) of profit maximizing behavior.
101) An increase in the marginal factor cost of labor will
A) lead to an increase in the quantity demanded of labor.
B) induce a firm to hire fewer workers.
C) lead to an increase in the value of an additional worker.
D) cause the value of the marginal product of labor to increase.
102) A decrease in the marginal factor cost of labor will
A) lead to an decrease in the quantity demanded of labor.
B) induce a firm to hire fewer workers.
C) induce a firm to hire more workers.
D) cause the value of the marginal product of labor to decrease.
103) The wage rate for widget makers is currently $25 per hour and Ajax hires 20 widget makers. If
the wage rate were decreased to $20, what would happen to the marginal revenue product for
labor at Ajax?
A) It would remain the same.
B) It would increase since Ajax s demand for labor curve will shift.
C) It would increase since the price of widgets would decrease.
D) It would decrease since Ajax will hire more workers.
104) When the demand curve for an input is a derived demand this means that
A) the demand curve is derived from the demand for the final product being produced.
B) the demand curve depends upon the MFC.
C) the law of diminishing marginal product does not hold.
D) the demand curve slopes upward.
105) The demand for labor is
A) derived from the demand for the final product of the firm.
B) derived from the satisfaction that hiring labor provides the owner of the firm.
C) derived from the satisfaction workers get for being employed.
D) derived from a utility maximizing process similar to that used to derive the demand curve
for all workers in a given industry.
106) The demand curve for labor will shift whenever
A) the wage rate changes. B) the marginal factor cost changes.
C) demand for the final product changes. D) the supply of labor changes.
107) Which of the following will not cause the marginal revenue product of labor curve for a firm to
shift?
A) An increase in the productivity of workers.
B) An increase in demand for the product.
C) A decrease in the price of the product.
D) An increase in the wage rate.
108) An increase in product price implies that
A) the firm s marginal factor cost will increase.
B) the wage rate the firm pays will increase.
C) the firm s demand for labor increases.
D) the firm s demand for labor decreases.
109) An increase in the productivity of labor induces
A) an increase in the demand for labor.
B) an increase in the cost of labor.
C) a firm to hire fewer workers since fewer workers are needed with the increase in
productivity.
D) a firm to offer a higher wage for workers since the workers are now more productive.
110) If the wage rate doesn t change but a profit maximizing competitive firm hires fewer workers,
we know that
A) the price of the product increased.
B) technical change occurred that increased labor productivity, reducing the firm s demand
for labor.
C) demand for the product fell or there has been a reduction in labor productivity.
D) marginal factor cost increased.
111) Refer to the above figure. MRP0represents
A) the supply curve for the product. B) the supply curve for labor.
C) the demand curve for the product. D) the demand curve for labor.
112) Refer to the above figure. The firm is operating using MRP0. An increase in demand for the
product has occurred. The relevant curve for the firm after the increase in price
A) is MRP0.
B) is MRP1.
C) is MRP2.
D) could be MRP1or MRP2depending upon whether the firm was earning a positive profit.
113) Refer to the above figure. The firm is operating using MRP0. An increase in productivity has
occurred. The relevant curve for the firm after the increase in productivity
A) is MRP0.
B) is MRP1.
C) is MRP2.
D) could be MRP1or MRP2depending upon whether the firm was earning a positive profit.
114) Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets
per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets.
What was the MPP of the 5th laborer?
A) 8 cabinets B) 7 cabinets C) 6 cabinets D) 4 cabinets
115) Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets
per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets.
What was the MPP of the 6th laborer?
A) 11 cabinets B) 7 cabinets C) 36 cabinets D) 9 cabinets
116) The change in output resulting from the addition of one more worker is
A) marginal physical product. B) marginal revenue product.
C) average physical product. D) average revenue product.
117) The marginal physical product (MPP) is calculated by
A) dividing total physical product by labor.
B) dividing the change in total physical product by the change in the input.
C) dividing the change in total cost by the change in labor.
D) the difference between the output of skilled and unskilled workers.
118) The downward sloping marginal revenue product of labor is
A) the firm s supply of labor.
B) the firm s short run demand for labor.
C) the firm s marginal cost of labor.
D) another term for the marginal revenue product of labor.
119) A firm s demand curve for labor is equal to the
A) total revenue product. B) marginal revenue product.
C) marginal factor cost. D) marginal wage.
120) Marginal revenue product is
A) marginal physical product times marginal factor cost.
B) marginal physical product times marginal revenue.
C) average physical product times marginal revenue.
D) marginal physical product times the wage rate.
121) If the price of a product being sold in a perfectly competitive market increases,
A) the MRP curve shifts to the right. B) the MPP curve shifts to the right.
C) the MFC curve shifts to the right. D) the MFC curve shifts to the left.
122) The additional revenue associated with hiring one additional unit of some factor input, such as
labor, is called
A) marginal cost. B) marginal revenue product.
C) marginal factor cost. D) marginal physical product.
123) Marginal factor cost is computed as
A) total cost of the resource/total amount of the resource being used.
B) change in the total cost of the resource/total amount of the resource being used.
C) total cost of the resource/change in the amount of the resource being used.
D) change in the total cost of the resource/change in the amount of the resource being used.
124) The cost of hiring one more worker, ceteris paribus
,
is known as
A) marginal revenue product. B) marginal physical product.
C) marginal factor cost. D) marginal wage.
125) The additional cost associated with hiring one additional unit of some factor input, such as
labor, is referred to as
A) marginal physical product of labor. B) marginal revenue cost.
C) marginal factor cost. D) marginal revenue product.
126) The firm s demand for labor curve is its
A) average product of labor curve.
B) marginal product of labor curve.
C) marginal revenue product of labor curve.
D) average revenue product of labor curve.
127) The MRP of labor will shift to the right if
A) labor productivity increases. B) labor productivity decreases.
C) wages increase. D) wages decrease.
128) The MRP of labor will shift to the left if
A) labor productivity increases. B) labor productivity decreases.
C) wages increase. D) wages decrease.
129) The additional revenue a firm obtains when it hires an additional worker (holding other inputs
constant) is the
A) marginal revenue product (MRP) of labor.
B) total factor cost (TFC) per worker.
C) general rule for hiring.
D) marginal physical product (MPP) of labor.
130) The additional output from one more worker is known as
A) marginal revenue product. B) marginal physical product.
C) marginal factor cost. D) marginal wage.
131) All of the following statements regarding the marginal revenue product (MRP) curve and the
demand for labor are true EXCEPT
A) an individual firm s demand for labor is its MRP curve.
B) under conditions of perfect competition, MRP equals marginal physical product
multiplied by the product s price.
C) an increase in the market demand for a given product decreases the product s price.
D) the demand for labor is a derived demand.
132) The MRP is
A) the supply curve of labor for an individual firm.
B) the demand curve for labor for an individual firm.
C) the demand curve for labor for the entire market.
D) the supply curve of labor for the entire market.
133) Which of the following represents the general rule of hiring for a firm?
A) TPP TFC B) APP W C) MC MR D) MRP MFC
134) If the marginal factor cost of hiring an additional worker is $10 while the marginal revenue
product is $15, then the firm should
A) hire more workers.
B) stop hiring more workers.
C) fire some workers.
D) none of the above: insufficient information to answer the question
135) Derived demand is
A) a derivative of the demand curve.
B) the demand for goods and services produced by companies using scarce resources.
C) the demand for advertising to increase the sales of the product.
D) the demand for the factors of production that are used to produce goods and services.
136) Since the demand for labor depends upon the demand for the final product, we say that labor is
A) a derived demand. B) an inverse demand.
C) a positive demand. D) a reverse demand.
137) The demands for labor and other input factors are called
A) derived demands, because the demand for these inputs depends on the demand for goods
and services they are employed to produce.
B) developed demands, because the demand for these inputs is developed from an analysis
of the costs of advertising products.
C) indirect demands, because the demand for these inputs is indirectly related to the costs of
advertising products.
D) reverse demands, because the demand for these inputs varies inversely with the demand
for goods and services they are employed to produce.
Chapter 28 The Labor Market: Demand, Supply and Outsourcing 865
Quantity Total Marginal Marginal
of Workers Product Physical Product Revenue Product
0 0
1 7
2 18
3 30
4 40
5 48
138) In the above table, what is the marginal physical product of worker 4?
A) 10 B) 40 C) 11 D) 12
139) In the above table, what is the marginal physical product of worker 2?
A) 10 B) 40 C) 11 D) 12
140) In the above table, if this is a perfectly competitive firm and the market price of the product is
$10, what is the marginal revenue product of worker 4?
A) $210 B) $100 C) $411 D) $120
141) In the above table, if this is a perfectly competitive firm and the market price of the product is
$8, what is the marginal revenue product of worker 3?
A) $96 B) $88 C) $80 D) $240
142) In the above table, if this is a perfectly competitive firm and the market price of the product is $5
and the marginal factor cost of labor is $60, how many units of labor will the firm hire?
A) 2 B) 3 C) 4 D) 6
866 Miller Economics Today, 16th Edition
Labor Input Total Physical Output
(workers per week) (computers per week)
10 100
11 190
12 270
13 340
14 400
143) The above table depicts the output of a firm that manufactures computers. The computers sell
for $1,000 each. What is the marginal physical product (MPP) of the eleventh worker per week?
A) 90 units B) 80 units C) $7,000 D) $6,000
144) The above table depicts output from a firm that manufactures computers. The computers sell for
$1,000 each. What is the marginal revenue product (MRP) for the fourteenth worker per week?
A) 90 units B) 80 units C) $70,000 D) $60,000
145) An increase in the price of a product
A) automatically increases wages.
B) raises the firm s demand for labor.
C) would probably decrease total revenues.
D) increases productivity.
146) If labor productivity increases,
A) labor costs rise by equal increments. B) the demand for labor increases.
C) some workers will be laid off. D)
j
obs will relocate.
147) An increase in labor productivity will shift
A) MRP curve to the left. B) MRP curve to the left.
C) MRP curve to the right. D) MFC curve to the left.
148) At a perfectly competitive firm, all of the following is true of the MRP curve EXCEPT
A) the MRP curve is the derived supply of labor.
B) the MRP curve shifts leftward when labor productivity falls.
C) the MRP curve shifts rightward when the product price rises.
D) the MRP curve shifts leftward when the demand for the final product falls.
149) If the demand for online banking increases, we would expect to see the
A) supply of workers that produce online
b
anking services to increase.
B) supply of workers that produce online
b
anking services to decrease.
C) demand for workers that produce online
b
anking services to decrease.
D) demand for workers that produce online
b
anking services to increase.
150) If workers in an industry become less productive, we would expect the
A) supply of workers to increase. B) supply of workers to decrease.
C) demand for workers to decrease. D) demand for workers to increase.
151) If laborers become more efficient over time, and if the Ajax Company would want to expand
production, they would
A) substitute capital for labor. B) hire more laborers.
C) hire fewer laborers. D) produce less product.
152) In the above figure, the marginal revenue product is represented by line
A) a. B) b. C) c. D) d.
153) The individual demand curve for an input such as labor to a firm would be the downward
sloping portion of the firm s
A) marginal physical product curve. B) marginal revenue product curve.
C) marginal revenue curve. D) total revenue curve.
154) Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week.
If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210
computers are produced per week. Given this information, there
A) is diminishing marginal product. B) are too many workers.
C) are not enough workers. D) is increasing marginal product.
155) Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week.
If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210
computers are produced per week. Given this information, the marginal product of the third
worker is
A) 210 computers per week. B) 70 computers per week.
C) 60 computers per week. D) 50 computers per week.
156) Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week.
If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210
computers are produced per week. Given this information and the fact that the firm receives
$200 per computer, the marginal revenue product of the third worker is
A) $4,200. B) $12,000. C) $10,000. D) $14,000.
Number of Total Number of Total
Workers Output Workers Output
0 0 6 540
1 100 7 600
2 220 8 650
3 320 9 690
4 400 10 700
5 475
157) Refer to the above table. If the price of the good produced is $10 and the wage rate is $500, then
the marginal revenue product of the 5th worker is ________.
A) $10 B) $50 C) $750 D) $4,750
158) According to the above table, if the price of the good produced is $5 and the wage rate is $400,
then the marginal revenue product of the 7th worker is
A) $300. B) $60. C) $12. D) $400.
159) According to the above table, if the wage rate is $400 a week and the price of the good produced
is $5, the perfectly competitive firm should hire
A) 3 workers. B) 4 workers. C) 5 workers. D) 6 workers.
160) If the demand for hamburgers increases, it is likely that the demand for fast food employees
will
A) increase. B) decrease.
C) stay the same. D) increase at first but then fall rapidly.
161) Suppose the MRP of the 49th worker at a firm is $25 and that the market wage rate is $15. We
know that if this firm operates in perfectly competitive product and labor markets,
A) the firm is paying wages above the minimum wages.
B) the firm s profits would increase if it fired some workers.
C) the firm would be more profitable if it hired more workers.
D) the firm should use more capital.
162) Which of the following is FALSE regarding the general rule for hiring?
A) Virtually every optimizing rule in economics involves comparing marginal benefits with
marginal cost.
B) The benefit from added workers is extra output and consequently more revenues.
C) The firm hires workers up to the point at which the additional cost associated with hiring
the last worker is equal to the additional revenue generated by that worker.
D) If any firm hired fewer workers over time, profits would definitely increase at that firm.
163) A firm should continue to hire more workers as long as wages are low. Do you agree or
disagree? Why?
164) What is the marginal revenue product of labor (MRP)? What shape does the MRP curve have?
Why?
165) What is marginal factor cost? How is it related to the supply curve of an input?
28.2 The Market Demand for Labo
r
1) The market demand for labor will be
A) insensitive to the wage rate in the short run.
B) downward sloping.
C) the inverse of the market demand for output.
D) perfectly inelastic.
2) If labor is 80 percent of total costs in industry A and 20 percent in industry B, then other things
equal, we would expect the elasticity of demand for labor to be
A) greater in industry A than in industry B.
B) greater in industry B than in industry A.
C) the same in both industries.
D) uncertain since no general relationship exists between cost shares and elasticities.
3) In the long run, input demand becomes more
A) elastic. B) inelastic. C) unit elastic. D) cost efficient.
4) Whenever an input makes up a large percentage of a good s final cost, an increase in that input s
price will
A) affect total cost relatively more. B) not affect total revenues.
C) affect only accounting profits. D) cause the firm to shutdown.
5) As new substitutes for office productivity software are developed, the demand for workers in
office productivity software production should
A)
b
ecome more elastic. B)
b
ecome less elastic.
C)
b
e unchanged. D) change in an undetermined way.
6) Suppose a new technology allows firms to substitute mechanical tomato pickers for farm
laborers. As a result, the demand curve for farm laborers will
A)
b
ecome less elastic. B)
b
ecome more elastic.
C) shift to the right. D) not be affected.
7) The more inelastic the consumer demand for the final product, the
A) greater will be the economic profit in a competitive market.
B) greater the impact on employment from a change in the wage rate.
C) more inelastic the demand for labor producing the product.
D) more responsive the output demand to a change in the price of labor.
8) If the price elasticity of demand is greater than 1, then consumer demand is
A) unrelated to the elasticity of demand. B) inelastic.
C) elastic. D) unitary elastic.
9) If the price elasticity of demand is less than 1, then then consumer demand is
A) unrelated to the elasticity of demand. B) inelastic.
C) elastic. D) unitary elastic.
10) When an input represents a small proportion of a firm s total costs, then
A) demand for the input will tend to be less elastic.
B) the input demand will vary significantly with a change in input price.
C) the usage of the input cannot be varied in the production function.
D) output demand will be highly elastic.
11) When an input represents a larger proportion of a firm s total costs, then
A) demand for the input will tends to be less elastic.
B) the input demand will not vary significantly with a change in input price.
C) the usage of the input cannot be varied in the production function.
D) demand for the input will tends to be more elastic.
