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Exam 15: The Demand for Factors of Production

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Question 21

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When will the scale effect of a wage increase cause a fall in the amount of labor employed?

A) Always.
B) When labor is not a regressive factor.
C) When labor and capital are substitutes in production.
D) When labor and capital are complements in production.

E) C) and D)
F) B) and D)

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Question 22

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Labor Demand and Labor Supply The following questions refer to the accompanying diagram, which shows an industry's labor demand and labor supply. Labor and capital are the only factors used by the industry. The industry hires L units of labor at a wage of PL. -Refer to Labor Demand and Labor Supply.What does area B represent?

A) The industry's total revenue.
B) The rent earned by the industry's laborers.
C) The total wages paid to the industry's laborers.
D) The rent earned by the industry's capital.

E) All of the above
F) A) and C)

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Question 23

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A monopsonist will continue to hire additional laborers as long as their marginal revenue product exceeds the wage rate.

When production is subject to increasing returns to scale profit will be positive.

When a monopsony hires an additional worker,it must pay the new worker's wages and it bids up the wages of all workers.This fact implies that the monopsony's

If demand for output rises,producers' surplus increases more for factors with elastic supply curves than for other factors.

Consider the following:

The short-run demand curve for labor for a firm in any type of market for its output coincides with

When labor is a regressive factor,a higher wage rate leads to a reduction in the firm's long-run total costs.

Consider a fall in the wage rate.How does the substitution effect change the amount of labor that a firm hires? How does the scale effect change the amount of labor that a firm hires? What do these effects imply about the firm's long-run demand for labor?

A profit maximizing firm in any type of market for its output would hire the quantity of labor at which

If two factors of production are substitutes in production,then a decrease in plant size will make the total product curve

If the wage rate rises,then the firm's long-run marginal costs change,which in turn affects the firm's output level and its employment of labor.This phenomenon is known as

In terms of the marginal product of labor,how much labor is needed to produce one more unit of output? If the cost of that labor is w,then how much does one more unit of output cost to produce? If a firm is a perfectly competitive profit maximizer,show why they produce where w equals the marginal revenue product of labor.

If the wage rate rises,then in the long run,the firm will replace some of its labor with other factors such as capital,even if it keeps its output level constant.This phenomenon is known as

If the wage rate is $10 per hour and one worker can currently produce 2 units of output per hour,then the marginal cost of production is

Marginal revenue product for labor for any type of firm is

A monopsonist hires fewer workers and pays a lower wage than would be the case if many firms competed to hire labor.

For a firm in the long-run,an increase in the market wage rate will cause it to reduce the employment of labor.With fewer workers,the firm's marginal revenue product for capital

Discuss whether or not a competitive,profit-maximizing firm would ever cease hiring workers if the marginal product of the next worker is higher than that of the last worker hired (that is,the firm is on the increasing portion of its marginal product curve).