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ECO 232 Ch 11a Study Questions Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____

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1. The increase in a firm's total revenues resulting from hiring an additional unit of labor is known as the marginal: a. product. b. revenue product. c. cost. d. none of the above. 2. For a perfectly competitive firm, marginal revenue product is equal to: a. price minus marginal cost. b. price times marginal revenue. c. price times marginal product. d. none of the above. 3. Alan Jones owns a company that sells life insurance. When he employs 10 salespersons his firm sells $200,000 worth of contracts per week, and when he employs 11 salespersons, total revenue is $210,000. The marginal revenue product of the 11th salesperson is: a. $410,000. b. $10,000. c. $20,000. d. $210,000. 4. Troll Corporation sells dolls for $10.00 each in a market that is perfectly competitive. Increasing the number of workers from 100 to 101 would cause output to rise from 500 to 550 dolls per day. The marginal revenue product for the 101st worker is: a. $10.00. b. $500. c. $5,000. d. $1,010. 5. Tucker Corporation sells its whatsits for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is: a. $5.00 or less per hour. b. $1.00 or more per hour. c. $25.00 or less per hour. d. none of the above. 6. A firm's demand curve for labor coincides with the: a. marginal cost curve. b. average cost curve. c. marginal revenue curve. d. marginal revenue product curve. 7. When a firm hires an additional unit of labor, the increase in a firm's total revenues is known as the marginal: a. cost. b. product. c. utility product. d. revenue product. 8. Assume Ajax Company employs 100 workers and total revenue is $400,000 per week. When Ajax Company employs 101 workers, total revenue is $405,000. The marginal revenue product of the 101st workers is: a. $40,000.

b. $5,000. c. $405,000. d. none of the above. Exhibit 11-1 Labor and output data Labor 0 1 2 3 4 5 ____

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Output 0 20 45 80 100 110

9. In Exhibit 11-1, the marginal product of the 3rd unit of labor is equal to: a. 80. b. 45. c. 35. d. 100. e. 25. 10. In Exhibit 11-1, the marginal product of the 4th unit of labor is equal to: a. 80. b. 45. c. 35. d. 100. e. 20. 11. The marginal revenue product can be written as: a. TR/P. b. w/Q. c. MP x P. d. MRP x P. e. w x L. 12. A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is: a. derived demand. b. marginal demand. c. secondary demand. d. monopsonistic demand. 13. The demand for labor is: a. derived demand. b. featherbedding demand. c. marginal utility demand. d. all of the above. 14. Other things equal, assume consumer demand for children's toys increases. The result is a(an): a. rightward shift in the market demand for labor curve in the toy industry. b. increase in the marginal revenue product of firms in the toy industry. c. increase in derived demand for workers in the toy industry. d. all of the above. 15. Since the demand for labor depends on the demand for the product labor produces, the demand for labor is called:

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a. primary demand. b. secondary demand. c. dependent demand. d. derived demand. Which of the following statements concerning the supply of labor is true? a. The wage rate has no effect on the supply of labor. b. The labor supply curve is downward sloping. c. The supply of labor is determined by the prevailing wage rate. d. The typical labor supply curve is upward sloping. A union may attempt to obtain stricter certification requirements or longer apprenticeships. These changes would raise workers' wages because they: a. create unnecessary unemployment. b. shift in labor supply curve leftward. c. decrease the marginal product of labor. d. reduce management's use of featherbedding. One reason the supply of carpenters is greater than the supply of physicians is because: a. carpenters demand less income. b. physicians do not belong to a union. c. of differences in human capital. d. carpenters belong to unions. Which of the following would be a human capital investment? a. On-the-job training programs. b. Health care programs. c. Formal education. d. All of the above. A worker's accumulated investment in education, training, experience, and health is called: a. derived labor demand. b. collective entrepreneurship. c. seniority. d. human capital. An increase in the demand for a product will shift the demand for labor used to produce the product: a. downward. b. leftward. c. rightward. d. none of the above, the curve will not shift. Featherbedding allows unions to increase wages by: a. limiting the supply of labor. b. increasing firms' demand for labor. c. forcing firms to accept higher-than-equilibrium wages. d. reducing labor share of payroll taxes. Exhibit 11-3 Supply and demand curves for food servers

____ 23. In Exhibit 11-3, the equilibrium wage and the number of food servers employed per day, respectively, are: a. $2.00 and 5 thousand. b. $4.00 and 10 thousand. c. $6.00 and 15 thousand. d. $8.00 and 20 thousand. ____ 24. In Exhibit 11-3, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour. This minimum wage rate creates a(an): a. new labor market equilibrium. b. excess demand for labor of 10 thousand food servers. c. excess supply of labor of food servers. d. situation of full employment for food servers. ____ 25. In Exhibit 11-3, assume that both input and output markets are perfectly competitive. If one additional server increases the number of meals sold by four per day and each meal sells for $10, each additional food servers will be paid: a. $16 per day. b. $32 per day. c. $36 per day. d. $40 per day. e. none of the above. ____ 26. If the equilibrium wage rate in Exhibit 11-3 increased, the cause could be that: a. the supply of labor increased. b. the demand for labor decreased. c. either the demand for labor increased or the supply of labor decreased. d. none of the above. Exhibit 11-4 Sally's labor supply data

Wage $ 0 5 10 50

Quantity of Labor Supplied (hours) 0 20 30 40

100

35

____ 27. In Exhibit 11-4, if the wage rate is $10, how many hours will Sally work? a. 20. b. 30. c. 35. d. 40. e. 50. ____ 28. A union can influence the demand for labor by: a. requiring union fees. b. raising union fees. c. effective advertising that convinces customers to buy the "union label." d. all of the above. ____ 29. A union can influence the equilibrium wage rate by: a. collective bargaining. b. featherbedding. c. lobbying for legislation to reduce immigration. d. all of the above. ____ 30. Currently, union membership in the United States is about: a. 10 percent. b. 15 percent. c. 20 percent. d. 25 percent. ____ 31. A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as: a. featherbedding. b. human capital formation. c. monopsonistic bargaining. d. artificial demand stimulus. ____ 32. A monopsony is a: a. large number of buyers. b. large seller. c. single seller. d. single buyer. ____ 33. Which of the following type of firm is not a price taker in the market in which the firm buys its inputs? a. Perfect competition. b. Monopsony. c. Oligopoly. d. Monopoly. ____ 34. Compared to a competitive input market, a monopsonist will hire: a. more and pay a higher input price. b. less but pay a higher input price. c. more but pay a lower input price. d. less and pay a lower input price. ____ 35. As compared to a firm that competes for labor, a monopsony will: a. hire fewer workers and pay lower wages. b. hire fewer workers by pay higher wages. c. pay lower wages but hire more workers. d. pay higher wages and hire more workers.

____ 36. Which of the following statements is true? a. A monopsony is the only employer of a factor of production. b. A monopsony will pay workers a higher wage and employ fewer workers than a competitive labor market. c. A monopsony has a marginal factor cost curve which lies below its supply curve of labor. d. Unions are becoming a greater influence in American labor markets. e. All of the above. Exhibit 11-7 A labor market

____ 37. If the labor market shown in Exhibit 11-7 is competitive, the wage rate and number of workers employed will be determined at point: a. A. b. B. c. C. d. D. e. F. ____ 38. If the labor market shown in Exhibit 11-7 is a monopsony, the wage rate and number of workers employed will be determined at point: a. A. b. B. c. C. d. D. e. F. Exhibit 11-8 A labor market

____ 39. If the labor market shown in Exhibit 11-8 is competitive, the wage rate and number of workers employed will be determined at point: a. A. b. Y. c. C. d. Z. e. X. Exhibit 11-9 Labor and wage rate data Labor 6 7 8 9 10

Wage $12 13 14 15 16

____ 40. In Exhibit 11-9, the total wage cost of hiring 7 employees is: a. $15. b. $91. c. $13. d. $19. e. $112. ____ 41. When Harlan County, Kentucky, has a monopsony coal mining firm, a. d and e. b. workers will work for the firm that pays the higher wage. c. coal buyers will continue to buy coal from other counties. d. coal miners will only have one employer. e. wages will be determined only by the demand for labor. ____ 42. Economists define a labor market with only one buyer to be: a. a monopoly. b. an oligopoly. c. a monopsony.

d. perfectly competitive. e. backward bending. ____ 43. If a town has a monopsony, this means: a. there is only one employer. b. price discrimination takes place. c. goods are priced too high. d. no unions can exist. e. excess profits are being made. Exhibit 11-13 Labor cost data for a monopsonist Wage Rate $ 0 5 8 12 16

Number of Workers 0 10 20 30 40

____ 44. In Exhibit 11-13, when the monopsonist hires 30 workers, total wage cost is: a. $12. b. $30. c. $360. d. $480. e. $640. True/False Indicate whether the sentence or statement is true or false. ____ 45. For a perfectly competitive firm, marginal revenue product is equal to price minus marginal revenue. ____ 46. Marginal revenue product of labor measures the extra revenue generated to the firm from the employment of an additional worker. ____ 47. An improvement in technology that increases the marginal product will shift the demand for labor curve to the right. ____ 48. An improvement in technology that increases the marginal product will shift the demand for labor curve to the left. ____ 49. Union membership as a percentage of the civilian labor force is lower in the United States than in Germany or Japan. ____ 50. Monopsony means a labor market with a single buyer. ____ 51. Monopsony means a product market with single buyer. ____ 52. A monopsony is defined as a monopoly that has to negotiate with a labor union.

ECO 232 Ch 11a Study Questions

Answer Section MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41.

ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

B C B B C D D B C E C A A D D D B C D D C B B C D C B C D B A D B D A A E B E B D

DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF:

Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy Easy

OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ:

TYPE: RE TYPE: RE TYPE: SA TYPE: SA TYPE: SA TYPE: RE TYPE: RE TYPE: SA TYPE: SA TYPE: SA TYPE: RE TYPE: RE TYPE: RE TYPE: CA TYPE: RE TYPE: RE TYPE: SA TYPE: SA TYPE: RE TYPE: RE TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: RE TYPE: RE TYPE: RE TYPE: RE TYPE: RE TYPE: RE TYPE: RE TYPE: SA TYPE: SA TYPE: SA TYPE: SA TYPE: RE

TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP:

Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Marginal revenue product Derived demand Derived demand Derived demand Derived demand Labor supply curve Labor supply curve Human capital Human capital Human capital Change in demand for labor Change in demand for labor Equilibrium wage Minimum wage Marginal revenue product Change in equilibrium wage Equilibrium wage Labor union Labor union Labor union Labor union Monopsony Monopsony Monopsony Monopsony Monopsony Monopsony Monopsony Monopsony Monopsony Monopsony

42. ANS: C 43. ANS: A 44. ANS: C

DIF: Easy DIF: Easy DIF: Easy

OBJ: TYPE: RE OBJ: TYPE: RE OBJ: TYPE: SA

TOP: Monopsony TOP: Monopsony TOP: Monopsony

DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF:

OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ:

TOP: TOP: TOP: TOP: TOP: TOP: TOP: TOP:

TRUE/FALSE 45. 46. 47. 48. 49. 50. 51. 52.

ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

F T T F T T F F

Easy Easy Easy Easy Easy Easy Easy Easy

TYPE: RE TYPE: RE TYPE: SA TYPE: SA TYPE: RE TYPE: RE TYPE: RE TYPE: RE

Marginal revenue product Marginal revenue product Change in demand for labor Change in demand for labor Labor union Monopsony Monopsony Monopsony...