Transcript Total Product of Labor (cakes per worker)

Factor Markets
Sample Questions
Mr. Bordelon
AP Microeconomics
Question 1
• Although horses were once a very important factor of
production, the development of automobiles and other
machinery reduced the demand for their use. This is an
example of:
– A. Lower prices of substitute factors shifting demand for horses
to the left.
– B. Higher marginal costs for horses, shifting demand for horses to
the right.
– C. Technological progress shifting the demand for horses to the
right.
– D. Higher marginal costs for horses, having no impact on the
demand for horses.
– E. Technological progress shifting the demand for horses to the
left.
Question 1
• Although horses were once a very important factor of
production, the development of automobiles and other
machinery reduced the demand for their use. This is an
example of:
– A. Lower prices of substitute factors shifting demand for horses
to the left.
– B. Higher marginal costs for horses, shifting demand for horses to
the right.
– C. Technological progress shifting the demand for horses to the
right.
– D. Higher marginal costs for horses, having no impact on the
demand for horses.
– E. Technological progress shifting the demand for horses to the
left.
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
2. Debbie owns a bakery and can hire workers to produce cakes selling in a
competitive output market at $10 each. The table shows the relationship
between the number of workers and the number of cakes produced. What is
the value of the marginal product for the fourth worker?
a. Five cakes
b. $50
c. $210
d. 21 cakes
e. $250
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
2. Debbie owns a bakery and can hire workers to produce cakes selling in a
competitive output market at $10 each. The table shows the relationship
between the number of workers and the number of cakes produced. What is
the value of the marginal product for the fourth worker?
a. Five cakes
b. $50
c. $210
d. 21 cakes
e. $250
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
3. Debbie must pay each worker a competitive market wage of $45 per day. How
many workers will she hire to maximize profit?
a. Two
b. Three
c. Four
d. Five
e. Six
Debbie’s Bakery
Quantity of Labor (workers)
Total Product of Labor (cakes per worker)
0
0
1
3
2
10
3
16
4
21
5
25
6
28
3. Debbie must pay each worker a competitive market wage of $45 per day. How
many workers will she hire to maximize profit?
a. Two
b. Three
c. Four
d. Five
e. Six
4.
Sarah owns a small flower shop and the industry is perfectly
competitive. She is considering whether or not to hire an
additional worker. The wage rate for the worker is $500 per week;
the marginal product of the additional worker would be 100 units
per week; and the price of the units produced is $10 per unit.
What should Sarah do?
a.
b.
c.
d.
e.
Hire the additional worker because the value of the marginal product
exceeds the wage.
Not hire the additional worker because the value of the marginal
product exceeds the wage.
Raise the price of the flower arrangements that she sells.
Hire the additional worker because the value of the marginal product
is below the wage.
Not hire the additional worker because the value of the marginal
product is below the wage.
4.
Sarah owns a small flower shop and the industry is perfectly
competitive. She is considering whether or not to hire an
additional worker. The wage rate for the worker is $500 per week;
the marginal product of the additional worker would be 100 units
per week; and the price of the units produced is $10 per unit.
What should Sarah do?
a.
b.
c.
d.
e.
Hire the additional worker because the value of the marginal product
exceeds the wage.
Not hire the additional worker because the value of the marginal
product exceeds the wage.
Raise the price of the flower arrangements that she sells.
Hire the additional worker because the value of the marginal product
is below the wage.
Not hire the additional worker because the value of the marginal
product is below the wage.
5.
In the figure, if the market wage rate increases:
a.
b.
c.
d.
e.
The VMPL curve would shift to the right.
The profit-maximizing quantity of labor will increase.
The VMPL curve would shift to the left.
The profit-maximizing quantity of labor will decrease.
There will be no change to the profit-maximizing quantity of labor.
5.
In the figure, if the market wage rate increases:
a.
b.
c.
d.
e.
The VMPL curve would shift to the right.
The profit-maximizing quantity of labor will increase.
The VMPL curve would shift to the left.
The profit-maximizing quantity of labor will decrease.
There will be no change to the profit-maximizing quantity of labor.
6.
Assume that the market wage rate for bricklayers is $100. For a
profit-maximizing firm at the equilibrium level of output, the
VMPLbricklayers is:
a.
b.
c.
d.
e.
$200.
Equal to the market wage rate.
Irrelevant, since the firm is a price-taker.
Six units of labor.
Equal to zero.
6.
Assume that the market wage rate for bricklayers is $100. For a
profit-maximizing firm at the equilibrium level of output, the
VMPLbricklayers is:
a.
b.
c.
d.
e.
$200.
Equal to the market wage rate.
Irrelevant, since the firm is a price-taker.
Six units of labor.
Equal to zero.
7.
If there is a decrease in another factor of production that
bricklayers use, then the value of the 8th worker will be _____ the
current value of _____.
a. Less than; $80
b. Greater than; $100
c. Less than; $60
d. Greater than; $80
e. Equal to; $80
7.
If there is a decrease in another factor of production that
bricklayers use, then the value of the 8th worker will be _____ the
current value of _____.
a. Less than; $80
b. Greater than; $100
c. Less than; $60
d. Greater than; $80
e. Equal to; $80
Droids and Moisture Output
Number of Droids
Output of Moisture (barrels per month)
0
0
1
25
2
45
3
60
4
70
5
75
8. Luke Skywalker operates a moisture farm on the planet Tatooine. The moisture
farm utilizes droids. Luke’s production function is given in the table. A barrel of
moisture sells for 10 Republic Credits. A droid costs 65 Republic Credits per month
to rent. How many droids should Luke rent?
a. One
b. Two
c. Three
d. Four
e. Five
Droids and Moisture Output
Number of Droids
Output of Moisture (barrels per month)
0
0
1
25
2
45
3
60
4
70
5
75
8. Luke Skywalker operates a moisture farm on the planet Tatooine. The moisture
farm utilizes droids. Luke’s production function is given in the table. A barrel of
moisture sells for 10 Republic Credits. A droid costs 65 Republic Credits per month
to rent. How many droids should Luke rent?
a. One
b. Two
c. Three
d. Four
e. Five
9.
Suppose the competitive labor market for plumbers is currently in
equilibrium. Which of the following might decrease the wage for
plumbers?
A.
B.
C.
D.
E.
An economic boom increases the demand for new homes.
The plumbers union creates a rigorous certification test that is
difficult for aspiring plumbers to pass.
A shortage of plumbers currently exists in the market.
A minimum wage is imposed on the market for plumbers.
Unemployed manufacturing workers attend technical schools to
learn the plumbing trade.
9.
Suppose the competitive labor market for plumbers is currently in
equilibrium. Which of the following might decrease the wage for
plumbers?
A.
B.
C.
D.
E.
An economic boom increases the demand for new homes.
The plumbers union creates a rigorous certification test that is
difficult for aspiring plumbers to pass.
A shortage of plumbers currently exists in the market.
A minimum wage is imposed on the market for plumbers.
Unemployed manufacturing workers attend technical schools to
learn the plumbing trade.
10. John is an entrepreneur who runs his own auto body repair shop.
Suppose that John’s business is booming and his salary is rising.
John’s labor supply curve will be:
A.
B.
C.
D.
E.
Upward-sloping if the substitution effect is smaller than the income
effect.
Downward-sloping if the substitution effect is smaller than the
income effect.
Horizontal if the substitution effect is equal to the income effect.
Vertical if the substitution effect is less than the income effect.
Horizontal if the substitution effect is greater than the income effect.
10. John is an entrepreneur who runs his own auto body repair shop.
Suppose that John’s business is booming and his salary is rising.
John’s labor supply curve will be:
A.
B.
C.
D.
E.
Upward-sloping if the substitution effect is smaller than the income
effect.
Downward-sloping if the substitution effect is smaller than the
income effect.
Horizontal if the substitution effect is equal to the income effect.
Vertical if the substitution effect is less than the income effect.
Horizontal if the substitution effect is greater than the income effect.
11. An increase in wealth will cause the labor supply curve to:
A.
B.
C.
D.
E.
Become less elastic but still upward-sloping.
Be downward-sloping if the substitution effect dominates the
income effect.
Be upward-sloping if leisure is an inferior good.
Be backward-bending if the income effect outweigh the substitution
effect of a change in wealth, and leisure is a normal good.
Shift leftward if leisure is a normal good.
11. An increase in wealth will cause the labor supply curve to:
A.
B.
C.
D.
E.
Become less elastic but still upward-sloping.
Be downward-sloping if the substitution effect dominates the
income effect.
Be upward-sloping if leisure is an inferior good.
Be backward-bending if the income effect outweigh the substitution
effect of a change in wealth, and leisure is a normal good.
Shift leftward if leisure is a normal good.
12. The price of an extra hour of leisure is:
A. $1.
B. The hourly wage rate.
C. The price of a movie ticket.
D. The total utility of labor.
E. The marginal product.
12. The price of an extra hour of leisure is:
A. $1.
B. The hourly wage rate.
C. The price of a movie ticket.
D. The total utility of labor.
E. The marginal product.
13. Which of the following will not shift the labor supply curve?
a.
b.
c.
d.
e.
A change in preferences and social norms.
Changes in wealth.
Changes in opportunities.
A change in the wage rate.
A change in the population.
13. Which of the following will not shift the labor supply curve?
a.
b.
c.
d.
e.
A change in preferences and social norms.
Changes in wealth.
Changes in opportunities.
A change in the wage rate.
A change in the population.
14. In the table, if the
price of a bushel of
wheat is $10, then
the value of the
marginal product of
the third worker is:
A.
B.
C.
D.
E.
$15.
$150.
$170.
$510.
$10.
14. In the table, if the
price of a bushel of
wheat is $10, then
the value of the
marginal product of
the third worker is:
A.
B.
C.
D.
E.
$15.
$150.
$170.
$510.
$10.
15. In the table, if the
price of a bushel of
wheat is $5 and the
price of labor (wage)
is $40, then the
profit-maximizing
quantity of labor is:
A.
B.
C.
D.
E.
One.
Three.
Six.
Eight.
Seven.
15. In the table, if the
price of a bushel of
wheat is $5 and the
price of labor (wage)
is $40, then the
profit-maximizing
quantity of labor is:
A.
B.
C.
D.
E.
One.
Three.
Six.
Eight.
Seven.
16. Which of the following statements is true?
A.
B.
C.
D.
E.
If W < VMPL, the firm should hire more labor.
If W > VMPL, the firm should hire more labor.
If W = VMPL, the firm should hire more labor.
If W > 0, the firm should shut down.
If W < P, the firm should hire more labor.
16. Which of the following statements is true?
A.
B.
C.
D.
E.
If W < VMPL, the firm should hire more labor.
If W > VMPL, the firm should hire more labor.
If W = VMPL, the firm should hire more labor.
If W > 0, the firm should shut down.
If W < P, the firm should hire more labor.
16. Eric is a professor who is paid an annual salary to teach
at a local college. Suppose Eric receives a promotion
and an increase in his annual salary. Eric’s labor supply
curve will be:
a. Upward-sloping if the substitution effect is greater than
the income effect.
b. Upward-sloping if the substitution effect is smaller than
the income effect.
c. Downward-sloping if the substitution effect is greater
than the income effect.
d. Vertical if the substitution effect is greater than the
income effect.
e. Horizontal if the substitution effect is greater than the
income effect.
16. Eric is a professor who is paid an annual salary to teach
at a local college. Suppose Eric receives a promotion
and an increase in his annual salary. Eric’s labor supply
curve will be:
a. Upward-sloping if the substitution effect is greater than
the income effect.
b. Upward-sloping if the substitution effect is smaller than
the income effect.
c. Downward-sloping if the substitution effect is greater
than the income effect.
d. Vertical if the substitution effect is greater than the
income effect.
e. Horizontal if the substitution effect is greater than the
income effect.
17. Andre Cummings, the production manager of Electric
Designs, has asked his boss for a pay raise. His boss is
concerned that if he increases Andre’s salary, Andre might
work fewer hours. In other words, Andre’s boss is concerned
that leisure is a normal good for Andre and that his:
a. Income and substitution effects might move in the same
direction.
b. Income effect might be greater than his substitution effect.
c. Substitution effect might be greater than his income effect.
d. Income and substitution effect might cancel out to zero.
e. Income effect is nonexistent.
17. Andre Cummings, the production manager of Electric
Designs, has asked his boss for a pay raise. His boss is
concerned that if he increases Andre’s salary, Andre might
work fewer hours. In other words, Andre’s boss is concerned
that leisure is a normal good for Andre and that his:
a. Income and substitution effects might move in the same
direction.
b. Income effect might be greater than his substitution effect.
c. Substitution effect might be greater than his income effect.
d. Income and substitution effect might cancel out to zero.
e. Income effect is nonexistent.
17. A backward-bending supply curve of labor shows that at
relatively low wages the:
a. Income effect dominates the substitution effect, and the
supply curve has a positive slope.
b. Income effect dominates the substitution effect, and the
supply curve has a negative slope.
c. Substitution effect dominates the income effect, and the
supply curve has a positive slope.
d. Substitution effect dominates the income effect, and the
supply curve has a negative slope.
e. Substitution effect equals the income effect, and the supply
curve has a zero slope.
17. A backward-bending supply curve of labor shows that at
relatively low wages the:
a. Income effect dominates the substitution effect, and the
supply curve has a positive slope.
b. Income effect dominates the substitution effect, and the
supply curve has a negative slope.
c. Substitution effect dominates the income effect, and the
supply curve has a positive slope.
d. Substitution effect dominates the income effect, and the
supply curve has a negative slope.
e. Substitution effect equals the income effect, and the supply
curve has a zero slope.
18. A leftward shift in the labor supply curve would result from which
of the following?
a.
b.
c.
d.
e.
People value leisure more highly
People have less wealth
Opportunities for women and minorities increase.
The population increases.
The wage falls.
18. A leftward shift in the labor supply curve would result from which
of the following?
a.
b.
c.
d.
e.
People value leisure more highly
People have less wealth
Opportunities for women and minorities increase.
The population increases.
The wage falls.
19. Which of the following will not shift the labor supply curve?
a.
b.
c.
d.
e.
A change in preferences and social norms
Changes in wealth
Changes in opportunities
A change in the wage rate
A change in the population
19. Which of the following will not shift the labor supply curve?
a.
b.
c.
d.
e.
A change in preferences and social norms
Changes in wealth
Changes in opportunities
A change in the wage rate
A change in the population