Practice Quiz
Labor Markets

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1. Marginal revenue product measures the increase in

a. output resulting from one more unit of labor.
b. total revenue resulting from one more unit of output.
c. revenue per unit from one more unit of output.
d. total revenue resulting from one more unit of labor.

2. Troll Corporation sells dolls for $10.00 each in a market that is perfectly competitive. Increasing the number of workers from 100 to 101 would cause output to rise from 500 to 510 dolls per day. Troll should hire the 101st worker only when the wage is

a. $100 or less per day.
b. more than $100 per day.
c. $5.10 or less per day.
d. none of the above.

3. Derived demand for labor depends on the

a. cost of factors of production used in the product.
b. market supply curve of labor.
c. consumer demand for the final goods produced by labor.
d. firm's total revenue less economic profit.

4. If demand for a product falls, the demand curve for labor used to produce the product will shift

a. leftward.
b. rightward.
c. upward.
d. downward.

5. The owner of a restaurant will hire waiters if the

a. additional labor's pay is close to the minimum wage.
b. marginal product is at the maximum.
c. the additional work of the employees adds more to total revenue than to costs.
d. waiters do not belong to a union.

6. In a perfectly competitive market, the demand curve for labor

a. slopes upward.
b. slopes downward because of diminishing marginal productivity.
c. is perfectly elastic at the equilibrium wage rate.
d. is described by all of the above.

7. A union can influence the equilibrium wage rate by

a. featherbedding.
b. requiring longer apprenticeships.
c. favoring trade restrictions on foreign products.
d. all of the above.
e. none of the above.

8. In which of the following market structures is the firm not a price taker in the factor market?

a. Oligopoly
b. Monopsony
c. Monopoly
d. Perfect competition

9. The extra cost of obtaining each additional unit of a factor of production is called the marginal

a. physical product.
b. revenue product.
c. factor cost.
d. implicit cost.

10. A monopsonist's marginal factor cost curve lies above its supply curve because the firm must

a. increase the price of its product to sell more.
b. lower the price of its product to sell more.
c. increase the wage rate to hire more labor.
d. lower the wage rate to hire more labor.

11. In order to maximize profits, a monopsonist will hire the quantity of labor to the point where the marginal factor cost is equal to

a. marginal physical product.
b. marginal revenue product.
c. total revenue product.
d. any of the above.

12. BigBiz, a local monopolist, currently hires 50 workers and pays them $6 per hour. To attract an additional worker to its labor force, BigBiz would have to raise the wage rate to $6.25 per hour. What is BigBiz's marginal factor cost?

a. $6.25 per hour.
b. $12.50 per hour.
c. $18.75 per hour.
d. $20 per hour.

13. Suppose a firm can hire 100 workers at $8.00 per hour, but must pay $8.05 per hour to hire 101 workers. Marginal factor cost (MFC) for the 101st worker is approximately equal to

a. $8.00.
b. $8.05.
c. $13.05.
d. $13.00.

14. A monopsonist in equilibrium has a marginal revenue product of $10 per worker hour. Its equilibrium wage rate must be

a. less than $10.
b. equal to $10.
c. greater than $10.
d. equal to $5.