Vocab/Example FRQ (Labor Markets)

• $90

• $100

• $450

• $500

• $90

• $450

• $950

• $1,400

• $450

• 10 boxes

• 90 boxes ($450 / $5 per box)

• 280 boxes ($1,400 / $5 per box)

Which of the following is the best available definition for the principle of Diminishing Marginal Returns?

• As more and more units of a variable input are added to a fixed input, the output increases at a decreasing rate

• When something is marginal, people want less of it... meaning that it "diminishes"

• As less and less of an economic product is produced by consumers, more and more of it must be produced by producers.

• All of the Above

What is the most common cause of the Diminishing Marginal Returns?

• A firm has begun to overuse its fixed resources. In other words, the factory no longer has vital tasks for additional workers.

• After a certain point, additional workers will not fit in well with older workers. This will lead to conflict.

• 1st worker

• 2nd worker

• 3rd worker

• 4th worker

• 5th worker

The highest wage that a profit-maximizing firm will be willing to pay a worker will be equal to the...

• Marginal Revenue Product provided by that worker.

• Minimum amount of money that worker requires to support themselves and/or their family.

• Maximum amount of money the business can pay to its workers without going bankrupt

• $400

• $300

• $80 (8 x $10)

• It depends on the minimum wage

What will happen to Demand for labor in the cardboard box market if the demand for cardboard boxes increases? (BUT, the cost of producing cardboard boxes remains the same)

• Demand for Labor will increase, because firms will be able to sell the products workers make for more money.

• Demand for Labor will increase, because more people will want to work in cardboard box factories

• Demand for Labor will decrease, because fewer people will be buying cardboard boxes if demand has increased.

• Demand for Labor will decrease, because cardboard will become more scarce.