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If the wage rate increases:


A) a purely competitive producer will hire less labor,but an imperfectly competitive producer will not.
B) an imperfectly competitive producer will hire less labor,but a purely competitive producer will not.
C) a purely competitive producer and an imperfectly competitive producer will both hire less labor.
D) an imperfectly competitive producer may find it profitable to hire either more or less labor.

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Hiring the profit-maximizing combination of resources ensures that production costs will be minimized.

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The demand for labor is a derived demand,whereas the demand for capital is not.

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If the substitution effect outweighs the output effect,an increase in the price of a substitute resource will increase the demand for labor.

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Answer the question on the basis of the following information.A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired;32 when two workers are hired;37 when three are hired;and 40 when four are hired.The farmer's product sells for $3 per unit and the wage rate is $13 per worker. Refer to the given information.The marginal product of the second worker is:


A) 24.
B) 8.
C) 5.
D) 1.

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Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. Units ofLabor‾01234567TotalProduct‾01430353944MarginalProduct‾14102TotalRevenue‾$4290117126132\begin{array}{c}\begin{array}{c} \text {Units of}\\\underline{\text {Labor}}\\0\\1\\2\\3\\4\\5\\6\\7\end{array}\begin{array}{c}\text {Total}\\\underline{\text {Product}}\\0\\14\\\\30\\35\\39\\\\44\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Product}}\\\\14\\10\\\\\\\\\\2\end{array}\begin{array}{c}\text {Total}\\\underline{\text {Revenue}}\\\\\$ 42 \\\\90\\\\117\\126\\132\end{array}\end{array} Refer to the given data.What is the marginal product of the sixth worker?


A) 2 units.
B) 3 units.
C) 4 units.
D) 5 units.

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Assuming pure competition,which of the following are equivalents?


A) MRPL/PL = MRPC/PC and Px = 1/MC.
B) MRPL/PL = MRPC/PC and Px = AVC.
C) Px = MC and MRPL/PL = MRPC/PC = 1.
D) Px = MC and MPL/PL = MPC/PC.

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If a firm is hiring variable resources D and F in perfectly competitive input markets,it will minimize the cost of producing any level of output by employing D and F in such amounts that:


A) the price of each input equals its MP.
B) MPD = MPF.
C) MPD/PD = MPF/PF.
D) MPD/PF = MPF/PD.

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The more elastic the demand for a product,the less elastic will be the demand for the resources employed in producing it.

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A competitive employer should hire additional labor as long as:


A) the MRP exceeds the wage rate.
B) the wage rate is less than MP.
C) average product exceeds MP.
D) MC exceeds MR.

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If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market,labor demand is:


A) unit-elastic.
B) elastic.
C) inelastic.
D) perfectly elastic.

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The profit-maximizing and the least-cost combination of inputs are:


A) the result of unrelated decisions.
B) always identical.
C) such that the minimization of costs always results in profit maximization.
D) such that the maximization of profits always entails the least-cost combination of inputs.

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Which of the following statements best illustrates the concept of derived demand?


A) As income goes up,the demand for farm products will increase by a smaller relative amount.
B) A decline in the price of margarine will reduce the demand for butter.
C) A decline in the demand for shoes will cause the demand for leather to decline.
D) When the price of gasoline goes up,the demand for motor oil will decline.

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The demand for a resource depends primarily on:


A) the supply of that resource.
B) the demand for the product or service that it helps produce.
C) the price of that input.
D) the elasticity of supply of substitute inputs.

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We say that the demand for labor is a derived demand because:


A) labor is a necessary input in the production of every good or service.
B) we demand the product that labor helps produce rather than labor service per se.
C) the forces of supply and demand do not apply directly to labor markets.
D) labor is hired using the MRP = MRC rule.

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The labor demand curve of a firm:


A) will shift to the left if the price of the product the labor is producing falls.
B) is perfectly elastic if the firm is selling its product in a purely competitive market.
C) reflects a direct relationship between the number of workers hired and the money wage rate.
D) is the same as its marginal product curve.

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The equation MPL/PL = MPC/PC:


A) designates the MR = MC level of output.
B) assumes imperfect competition in the hiring of labor and capital.
C) is a sufficient condition for the maximization of profits.
D) is a necessary,but not sufficient,condition for the maximization of profits.

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The demand curve for labor would shift leftward as the result of:


A) an increase in the price of the product labor is producing.
B) a decrease in the productivity of labor.
C) an increase in the price of labor.
D) a decrease in the price of capital,provided the output effect exceeds the substitution effect.

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Which of the following will not cause a shift in the demand for resource X?


A) A decline in the price of resource X.
B) An increase in the price of the product resource X is producing.
C) A decrease in the price of substitute resource Y.
D) An increase in the productivity of resource X.

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Answer the question on the basis of the following information.A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired;32 when two workers are hired;37 when three are hired;and 40 when four are hired.The farmer's product sells for $3 per unit and the wage rate is $13 per worker. Refer to the given information.How many workers should the farmer hire?


A) 1.
B) 2.
C) 3.
D) 4.

Correct Answer

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