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A firm's labor demand curve is derived from the supply of the goods and services it produces.

A) True
B) False

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Each of the following conditions,except one,must be satisfied in a perfectly competitive labor market.Which is the exception?


A) There are a large number of buyers of labor services.
B) Wages are the sole source of household income.
C) There are no barriers to entering the market.
D) There are a large number of sellers of labor services.
E) All workers appear the same to buyers of labor services.

F) D) and E)
G) A) and E)

Correct Answer

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Wally's Wheat Farm sells its output and hires its labor in perfectly competitive markets.In the short run,Wally can vary only one input-labor.In short-run equilibrium,all of the following conditions,except one,will be satisfied.Which is the exception?


A) The marginal revenue product of labor equals the wage rate.
B) The marginal revenue product of labor would decrease if more labor is hired.
C) Marginal revenue equals the price of the firm's output.
D) The marginal product of labor would decrease if more labor is hired.
E) The firm's total revenue will decrease if more labor is hired.

F) C) and E)
G) B) and C)

Correct Answer

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If the demand for automobiles increases,which of the following would also experience an increase in demand?


A) automobile workers
B) skateboards
C) bicycle manufacturers
D) ice cream
E) financial analysts

F) A) and B)
G) A) and C)

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As baby boomers move into their retirement years,the incomes of geriatricians (doctors for the aged) will most likely


A) fall due to a fall in the demand for geriatricians
B) rise due to a fall in the price of complementary inputs
C) rise due to a rise in the demand for geriatricians
D) fall due to a drop in the number of medical providers
E) rise due to a rise in the supply of geriatricians

F) A) and C)
G) A) and D)

Correct Answer

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The wage premium for the average college graduate (vs.the average high school graduate)has gone up significantly in recent years.

A) True
B) False

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Which of the following is true along the demand curve for labor?


A) The marginal cost of labor is constant.
B) The wage rate is constant.
C) The total cost of production is constant.
D) The quantity of labor demanded is constant.
E) The prices of all other inputs are constant.

F) B) and E)
G) A) and B)

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The perfectly competitive model is most likely to apply to a labor market in which


A) many well-informed firms must negotiate with one dominant labor union
B) there are a few firms,and they are uninformed about the attributes of each worker
C) there are many workers currently in the market who must negotiate with one dominant firm
D) there are many well-informed workers and firms,and each worker appears the same to firms
E) one dominant labor union must negotiate with one dominant firm

F) B) and D)
G) All of the above

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The most appropriate type of labor market to analyze


A) is the world market
B) is the national market
C) is a regional market
D) is a local market
E) depends upon the purpose of the analysis

F) C) and D)
G) B) and D)

Correct Answer

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Jordan and Jennifer are musicians in New Orleans.Ezra is a musician thinking about moving to New Orleans.Which of the following statements is correct?


A) The wage needed to keep Jordan and Jennifer in the New Orleans music industry in the long run will be lower than the wage needed to keep them in the industry in the short run.
B) The costs of entering the New Orleans music industry are sunk costs for Jordan,Jennifer,and Ezra.
C) The costs of entering the New Orleans music industry are sunk costs for Ezra but not for Jordan and Jennifer.
D) The wage needed to induce Ezra to enter the New Orleans music industry will be lower than the wage needed to keep him in the industry after he enters.
E) The costs of entering the music industry in New Orleans are sunk costs for Jordan and Jennifer,but not for Ezra.

F) C) and E)
G) A) and B)

Correct Answer

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-Figure 12-8 provides production data for Peg's Pie Shop,indicating the output per day with different numbers of employees.The shop sells its pies and hires its labor in perfectly competitive markets.Currently,the equilibrium price of a pie is $5,and the equilibrium wage rate is $80 per day.In order to maximize profit,Peg's Pie Shop should hire A) 1 worker B) 2 workers C) 3 workers D) 4 workers E) 5 workers -Figure 12-8 provides production data for Peg's Pie Shop,indicating the output per day with different numbers of employees.The shop sells its pies and hires its labor in perfectly competitive markets.Currently,the equilibrium price of a pie is $5,and the equilibrium wage rate is $80 per day.In order to maximize profit,Peg's Pie Shop should hire


A) 1 worker
B) 2 workers
C) 3 workers
D) 4 workers
E) 5 workers

F) B) and D)
G) A) and E)

Correct Answer

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In a perfectly competitive labor market,no individual firm's employment decision can affect the market wage because


A) union agreements prevent any firm from altering the wage rate
B) each firm is ignorant of the market wage rate
C) the demand for labor is a derived demand
D) each firm hires a very small portion of the labor services available
E) the wage rate is regulated by the government

F) B) and E)
G) B) and C)

Correct Answer

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-Figure 12-9 shows the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5.If the wage rate is $380 per day,the firm A) should hire two workers B) should hire five workers C) cannot justify hiring any workers D) should hire four workers E) should hire three workers -Figure 12-9 shows the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5.If the wage rate is $380 per day,the firm


A) should hire two workers
B) should hire five workers
C) cannot justify hiring any workers
D) should hire four workers
E) should hire three workers

F) B) and E)
G) All of the above

Correct Answer

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The demand for labor is likely to decrease if


A) there is a rise in the demand for the good it produces
B) the price of a complementary input falls
C) the price of a substitute input rises
D) there is a decline in the demand for the good it produces
E) there is an increase in the number of firms in the market

F) A) and E)
G) A) and C)

Correct Answer

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If bicycles can be sold for $100 each,and the marginal product of hiring a third worker is 2 bicycles,then the marginal revenue product from hiring that worker is


A) 2 bicycles
B) $200
C) $100
D) $1,000
E) $300

F) All of the above
G) B) and C)

Correct Answer

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One seamstress can sew 2 dresses per day and two seamstresses can sew 5 dresses per day.If the marginal revenue product of hiring the second seamstress is $360,then in a competitive product market


A) there are decreasing returns to scale
B) there are diminishing returns to labor
C) each dress sells for $120
D) the seamstresses are earning zero economic profits in the short run
E) marginal cost of production is $120

F) None of the above
G) B) and E)

Correct Answer

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If the wage rate increases,there is an increase in the quantity of labor supplied.This means the labor supply curve shifts outward.

A) True
B) False

Correct Answer

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