Unit 5 Review

Businesses employ workers from city neighborhoods and rural areas. These workers are perfect substitutes and cannot relocate in the short run. The government offers businesses a wage subsidy if they hire workers from city neighborhoods. What is the effect of the subsidy on the wage rate of rural workers and on the total hours they work?

• Wage Rate of Rural Workers - Increase

  Total Hours Worked by Rural Workers - Decrease

• Wage Rate of Rural Workers - No Change

  Total Hours Worked by Rural Workers - Increase

• Wage Rate of Rural Workers - No Change

  Total Hours Worked by Rural Workers - Decrease

• Wage Rate of Rural Workers - Decrease

  Total Hours Worked by Rural Workers - Decrease

• Wage Rate of Rural Workers - Decrease

  Total Hours Worked by Rural Workers - No Change

All of the following are shifters of demand except

• Price of the Output

• Increase in the wage of the worker

• Productivity of the Worker

• Change in the price of other resources

All of the following are shifters of the supply of labor except

• Education and Training

• Working conditions

• Preferences for leisure

• Lower wages

• Availability of alternative options

For a competitive labor market, an increase in which of the following will lead to an increase in the demand for labor?

• The supply of labor

• The minimum wage

• The demand for the good that labor produces

• the cost of medical benefits provided to the labor hired by firms

• Labor union dues

If the price of a good produced by a competitive firm increases, then

• the marginal product of labor will increase

• the marginal revenue product of labor will increase

• the average product of labor will increase

• the short-run demand for labor will decrease

• the supply of labor will increase

Firm XYZ produces and sells corn in a perfectly competitive market and hires its workers in a perfectly competitive labor market. Which of the following best describes the demand curve for XYZ's corn and XYZ's demand curve for labor?

• Demand for XYZ's Corn - Horizontal

  XYZ's Labor Demand - Horizontal

• Demand for XYZ's Corn - Horizontal

  XYZ's Labor Demand - Downward sloping

• Demand for XYZ's Corn - Horizontal

  XYZ's Labor Demand - Vertical

• Demand for XYZ's Corn - Downward Sloping

  XYZ's Labor Demand - Downward Sloping

• Demand for XYZ's Corn - Downward Sloping

  XYZ's Labor Demand - Horizontal

Number of Workers        Potatoes Harvested
0                                         0
1                                         3
2                                         7
3                                         10
4                                         12
5                                         13
6                                         12

After which worker does diminishing marginal returns first occur?

• Second worker

• Third worker
  

• Fourth worker

• Fifth worker

• Sixth worker

Number of Workers Potatoes Harvested

0 0

1 3

2 7

3 10

4 12

5 13

6 12

If the firm can sell as many potatoes as they want for $2 per pound and has to pay each worker $5 dollars per hour, how many workers should the firm employ to maximize profits?

• 1

• 2

• 3

• 4

• 5

A firm produces truffles by using labor and capital. The price of labor is $30 per unit, and the price of capital is $10 per unit. At Current output level, the marginal product of labor is 60 truffles and the marginal product of capital is 100 truffles. To reduce the total cost of producing the current quantity of truffles, how should the firm change its spending on labor and capital?

• Labor - No change

  Capital - Increase

• Labor - Decrease

  Capital - No change

• Labor - Decrease

  Capital - Increase

• Labor - Increase

  Capital - No Change

• Labor - Increase

  Capital - Decrease

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to

• fall initially, but eventually rise

• rise initially, but eventually fall

• rise consistently due to diminishing return

• rise consistently due to the advantages of specialization

• rise consistently due to economies of scale