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Micro Unit 7 Practice Problems Part 2A monopsony labor market is shown above. If there is no regulation, which represents the # of workers the firm will hire and the wage it will pay?(A)Number of Workers = 30 ; Wage Rate = $60(B)Number of Workers = 40 ; Wage Rate = $80(C)Number of Workers = 40 ; Wage Rate = $40(D)Number of Workers = 60 ; Wage Rate = $60(E)Number of Workers = 80 ; Wage Rate = $80If Country A starts to import more copper from other countries and use less domestically produced copper, what will happen in the labor market for copper workers in Country A?(A)Jobs in Country A’s copper industry will become less desirable, so wages will have to go up to attract more workers to Country A’s copper industry.(B)The demand for Country A’s copper workers will go down, causing copper worker wages to go down as well.(C)The supply of copper workers will go up, decreasing the copper worker’s wage in Country A.(D)The supply of copper workers will go down, causing the copper worker’s wage in Country A to go up.(E)Domestic copper prices will go down, leading to sales of domestically produced copper going up, which makes the demand and employment of copper workers go up.If in a competitive labor market the supply of labor goes up, how will the equilibrium wage rate and level of employment change?(A)Wage Rate = Goes up ; Level of Employment = Goes up(B)Wage Rate = Goes down ; Level of Employment = Goes up(C)Wage Rate = Goes up ; Level of Employment = Goes down(D)Wage Rate = Goes down ; Level of Employment = Goes down(E)Wage Rate = Goes down ; Level of Employment = Does not changeIf the demand for automobiles goes up, what will happen to the demand for auto workers and their wage?(A)Demand for Auto Workers = Goes down ; Wage Rate = Goes up(B)Demand for Auto Workers = Goes down ; Wage Rate = Will Not Change(C)Demand for Auto Workers = Goes up ; Wage Rate = Goes up(D)Demand for Auto Workers = Goes up ; Wage Rate = Goes down(E)Demand for Auto Workers = Will Not Change ; Wage Rate = Goes upThe last worker a firm hired produces 30 additional units of a product per day and the last machine rented produces 3,000 units of a product per day. A worker's daily wage is $6, and the rental cost of a machine is $500 per day. In order to minimize the cost of its current level of output, the firm should(A)use more capital and use less labor (B)use more labor and use less capital(C)use less labor and use less capital(D)use more labor and use more capital(E)not change anything, because production costs are already minimizedA profit maximizing firm operating in perfect competition will hire additional workers as long as the(A)value of the marginal product created by the worker exceeds the wage.(B)marginal cost of hiring the worker is maximized.(C)marginal product of labor is maximized.(D)revenue generated by the worker is maximized.(E)price of the output exceeds the marginal cost of hiring the worker.A firm produces wheat by using labor and capital. The price of labor is $20 per worker, and the price of capital is $40 per machine. At current output level, the marginal product of labor is 80 bushels and the marginal product of capital is 120 bushels. To reduce the total cost of producing the current amount of wheat, how should the firm change its spending on labor and capital?(A)Labor = No change ; Capital = Spend more(B)Labor = Spend more ; Capital = Spend less(C)Labor = Spend less ; Capital = Spend more(D)Labor = Spend more ; Capital = No change(E)Labor = Spend less ; Capital = No changeSuppose that the wage for doctors is significantly higher than the wage for chiropractors. In the long-run, if the wage for chiropractors went up while the wage for doctors went down, which of the following would best explain why that happened?(A)The supply of chiropractors must have gone down, and the supply of doctors must have gone up.(B)The supply of chiropractors must have gone up, and the supply of doctors must have gone down.(C)The demand for chiropractors must have gone up, and the supply of doctors must have gone down.(D)The demand for chiropractors must have gone down, and the supply of doctors must have gone up.(E)The demand for both chiropractors and doctors must have gone down.Let’s say the product and labor markets in this question are perfectly competitive. The firm should hire additional workers if the wage/marginal product ratio is(A)higher than marginal cost(B)lower than marginal cost(C)higher than the product price(D)lower than the product price (E)equal to the product priceAssume the price of onions is $4 per pound and the cost of hiring each worker is $20 per day. How many workers should the firm hirew to maximize profits?(A)5(B)4(C)3(D)2(E)1Assume there is a perfectly competitive market for low-wage labor and it’s initially in equilibrium. What will happen if an effective minimum wage is implemented by the government?(A)The quantity of low-wage workers demanded will be greater than the quantity supplied.(B)Less low-wage workers will get jobs and unemployment will go up.(C)The total sum of wages earned by all low-wage workers will go up.(D)Efficiency will go up because businesses were not paying workers enough to cover of their marginal revenue product.(E)Low-wage workers will be inspired to unionize.A firm in a perfectly competitive market is producing where profits are maximized. If the marginal physical product of labor is 100 units per day and the firm pays a wage rate of $50 per day, which of the following is true?(A)The output price is $0.50 per unit.(B)The marginal cost is $2.(C)The average total cost is $0.50 per unit.(D)The marginal revenue product of labor is $5000.(E)The output price is $2 per unit.Why is the demand for labor considered derived demand?(A)The utility to a business goes up when they hire more workers.(B)The wage depends on the demand for labor.(C)The demand for labor depends on the demand for the firm's output.(D)The amount of workers needed depends on how much capital has been invested.(E)The firm benefits when the hire one more worker.What will happen if a competitive firm produces a product and its price goes up?(A)The marginal physical product of labor will go up.(B)The average product of labor will go up.(C)The demand for labor will go down in the short-run.(D)The marginal revenue product of labor will go up.(E)The supply of labor will go up.A perfectly competitive firm that wants to maximize profit hires a worker. The additional revenue generated by that worker equals the additional cost of hiring that worker. Five months later, the firm discovers that the additional revenue generated by that worker no longer covers the additional cost of hiring that worker. Which of the following may have occurred that could explain this change?(A)The firm fired some workers.(B)The market demand for the firm's product went down.(C)The market supply for the firm's product went down.(D)A technological advance made workers more productive.(E)The firm negotiated new contracts with workers, and wages went down.Let’s say there is an increase in the supply of unskilled workers in a country’s labor market. Assuming it’s a competitive labor market, what will happen to the number of unskilled workers hired and the wage?(A)Number of Unskilled Workers Hired = Goes up ; Wage = Goes up(B)Number of Unskilled Workers Hired = Goes up ; Wage = Not Change(C)Number of Unskilled Workers Hired = Goes up ; Wage = Goes down (D)Number of Unskilled Workers Hired = Goes down ; Wage = Goes up(E)Number of Unskilled Workers Hired = Goes down ; Wage = Goes downAccording to the data in the table above, the seventh worker would increase the hourly profit by(A) $0.10(B) $1.20(C) $1.00(D) $2.30(E) $5.10Which of the following causes the income gap between skilled and unskilled workers to go up over time?(A)When demand for unskilled workers goes down relative to skilled workers(B)When supply of skilled workers goes up relative to unskilled workers(C)When demand for unskilled workers goes up relative to skilled workers(D)When demand and supply of skilled workers goes down(E)When demand and supply of unskilled workers goes upThe only two inputs that a firm uses to produce its output are capital (K) and labor (L). The marginal product of capital is represented by MPK, the marginal product of labor is represented by MPL, the price of capital is represented by PK, and the price of labor is represented by PL. Which of the following represents the least-cost combination of capital and labor?(A)MPL/PL =MPK/PK(B)MPL/PL <MPK/PK(C)MPL/PK >MPK/PL(D)(MPL)PL <(MPK)PK(E)MPL = MPKA business's labor demand curve is taken from a segment of its(A)average fixed cost curve(B)marginal revenue product curve (C)marginal cost curve(D)total revenue curve(E)Total cost curveThe graph above illustrates the labor market for senior citizen workers. The current minimum wage for all workers is WA. If Congress introduces a sub-minimum wage, WS that applies only to senior citizens, what is the most likely effect on senior citizen employment?(A)Senior citizen employment will increase because more senior citizens will want to work at WS than at WA.(B)Senior citizen employment will increase because firms will want to hire more seniors citizens at WS than at WA.(C)Senior citizen employment will decrease because fewer senior citizens will want to work at WS than at WA.(D)Senior citizen employment will decrease because firms will want to hire fewer senior citizens at WS than at WA.(E)Senior citizen employment will stay the same because the market-clearing wage is lower than WA and WS.What is marginal revenue product?(A)The change in income that occurs when somebody works more hours.(B)The change in total revenue that happens when one more item is produced.(C)Total revenue divided by the # of workers employed.(D)The change in total revenue that happens when one more input is employed.(E)The change in total cost that happens when one more input is employed.You derive a person’s labor supply curve based on that person's preferences about the tradeoff between income and(A)effort(B)net worth(C)real wages(D)recreation(E)productivityA firm that wants to maximize profit will hire(A)labor until wages = marginal revenue product(B)labor until wages = average revenue product(C)labor until wages = the interest rate(D)capital until interest rate = wage rate(E)capital until interest rate > wage rateIf a product is produced in a competitive market and its price goes up, what is most likely to happen in the labor market for workers who produce that product?(A)The demand for labor and the amount of workers hired both go down. (B)The supply of labor and the amount of workers hired both go up.(C)The demand for labor and the amount of workers hired both go up.(D)The supply of labor and the amount of workers hired both go down.(E)A movement along the demand curve for labor, and firms hire more workers.Economic rent will not be earned by a factor of production when its supply is(A)elastic(B)inelastic(C)perfectly elastic(D)unit elastic(E)perfectly inelasticIf the labor market for doctors is perfectly competitive, which of the following statements is NOT true?(A)If the supply of doctors goes up it will cause unemployment and not affect wages.(B)An increase in the productivity of doctors will cause the demand for doctors to go up, thus increasing wages.(C)If an effective minimum wage is put forth it will result in unemployment.(D)If the demand for health care goes up it will cause the demand for doctors to go up and increase wages.(E)Taking away work permits for foreign doctors will cause the wages of domestic doctors to go up.For a particular firm, the marginal revenue product of labor is $30, and the marginal revenue product of capital is $50. In order to maximize profit, which combination of factor prices would need to exist?(A)Price of Labor = $1 ; Price of Capital = $10(B)Price of Labor = $3 ; Price of Capital = $25(C)Price of Labor = $30 ; Price of Capital = $50(D)Price of Labor = $1 ; Price of Capital = $5(E)Price of Labor = $5 ; Price of Capital = $5A firm sells its product in a perfectly competitive industry for a price of $30 per unit and hires workers at a daily wage of $300. Labor is the only variable cost, and the firm is currently earning profits. If the firm hires one more worker and output increases by 10 units per day, the firm's profits will(A)decrease by $10(B)remain unchanged(C)increase by $300(D)increase by $30(E)decrease by $300How would you describe the concept of derived demand?(A)An increase in the demand for soda will decrease the demand for juice.(B)If the salaries of chefs go up, the quantity of chefs demanded will go down.(C)People earn more income and as a result the demand for opera tickets goes up(D)Demand for football tickets decreases and as a result there is a decrease in the demand for football players.(E)A decrease in the price of football tickets will increase the demand for football tickets ................
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