AP Micro Unit 5 Practice Test

Suppose that the market for low-wage labor is perfectly competitive and initially in equilibrium. If the government establishes an effective minimum wage, which of the following will occur?

• Employment of low-wage workers will decrease and unemployment will increase.

• The quantity of low-wage workers supplied will be less than the quantity demanded.

• The total wage payment received by all 
low-wage workers will increase.

• Economic efficiency will increase, since 
firms were paying workers less than the 
value of their marginal revenue product.

• Low-wage workers will be motivated to form a union.

A monopsony pays _____ & hires ____ than a perfectly competitive firm

• much more & tons of workers

• more & more

• less & less

• the same & fewer

The table shows the production function of an auto parts manufacturer. Assume that the firm can hire as many workers as it wants at the market wage rate of $600 per week per worker and sell as many auto parts as it wants at the price of $10 per part. To maximize profits, the firm should hire:

• 1 worker

• 2 workers

• 3 workers

• 4 workers

• 5 workers

Assume that firms sell their output in a perfectly competitive product market and hire labor in a perfectly competitive labor market. If all other factors remain constant, an increase in the demand for the firms’ product will result in which of the following changes in the labor market?

• The demand curve for labor will shift to the right.

• The supply curve for labor will shift to the left.

• The supply curve for labor will shift to the right.

• The demand curve for labor will shift to the left.

If a large number of unskilled workers enter the labor market, which of the following is most likely to occur in the labor market for unskilled workers?

• The supply curve will shift to the right and the wage rate will decrease.

• The supply curve will shift to the left and the wage rate will increase.

• The demand curve will shift to the left and the wage rate will decrease.

• The demand curve will shift to the right and the wage rate will increase.

Assume that a profit-maximizing, perfectly competitive firm hires labor in a perfectly competitive labor market. If the market wage is $12 per hour and the price of the product is $3 per unit, the firm will:

• hire more workers if each worker can produce 3 units per hour

• hire fewer workers, since the hourly wage exceeds the cost of producing one unit of output

• hire another worker if the output per hour of the additional worker exceeds 4 units

• not hire any workers, since the cost of labor is greater than the price of the output

A profit-maximizing firm will continue to hire workers until the marginal revenue product of labor is equal to the:

• demand for labor

• marginal product of labor

• price of the good that labor is producing

• marginal factor cost

Which of the following would cause the wage for computer programmers to increase?

• A decrease in the amount of physical capital per computer programmer

• A decrease in the value that computer programmers place on leisure

• A minimum wage set below the equilibrium wage in the market for computer programmers

• An improvement in the education of computer programmers

If the wage rate decreases, which of the following is the most likely outcome?

• people increase the quantity of labor supplied; firms decrease the quantity of labor demanded

• people decrease the quantity of labor supplied; firms increase the quantity of labor demanded

• people decrease their leisure and increase their supply of labor

• people decide to equalize their leisure and labor usage

The table gives output, marginal product, and average product of a firm producing novelty T-shirts using different numbers of workers. The firm produces t-shirts in a perfectly competitive market where the price of a t-shirt is $10. What is the marginal revenue product of labor (MRP_L) of the fourth worker?

• $500

• $700

• $450

• $800