Perfectly competitive labor market

Which of the following will result in an increase in labor demand?

• An increase in the wage rate

• An increase in the productivity of labor

• A decrease in the price of the product that labor is used to produce

• A decrease in the wage rate

• A decrease in the demand for the product produced by labor

Which of the following will result in an increase in supply of labor?

• An increase in the wage rate

• An increase in the marginal product of labor

• An increase in the tax rates applied to labor income

• An increase in the desire for greater leisure time

• An increase in the retirement age

Which of the following statements about the relationship between the demand for apple pickers and the demand for apples is true?

• An increase in the demand for apples increases the demand for apple pickers

• An increase in the demand for apples increases the wage rate and decreases the demand for apple pickers

• A decrease in the demand for apples decreases the wage rate and increases the demand for apple pickers

• An increase in the demand for apples increases productivity and the demand for apple pickers

• A decrease in the demand for apples decreases productivity and the demand for apple pickers

The demand curve for labor shows which of the following?

• The quantity of output each worker can produce at various wage rates

• The number of workers required to produce a given level of output

• The number of workers a firm is willing and able to hire at various wage rates

• The positive relationship between the wage rate and the number of hours people wish to work

• The number of workers who are willing and able to work at various wage rates

Which of the following will occur when wage rates decrease in a given labor market?

• The supply of labor will decrease

• The demand for labor will increase

• The quantity supplied of labor will decrease

• The quantity demanded of labor will decrease

• The supply of labor will decrease and the demand for labor will increase

In the long run, assume a firm uses both labor and capital to produce 25 units of output. The marginal product of the last unit of labor being employed is 100; the marginal product of the last unit of capital being employed is 500. The wage rate of labor is $10. If the firm is minimizing the cost of producing 25 units of output, what must be the unit price of capital?

• $5

• $10

• $25

• $50

• $500

Firm Z is producing 50 widgets using labor and capital. The marginal product of the last unit of labor employed is 500; the marginal product of the last unit of machinery (or capital) is 1000. The unit price of labor is $10, and the unit price of machinery or capital is $100. With competitive input markets, which of the following statements is true?

• The firm is minimizing the cost of producing 50 widgets with this combination of labor and capital

• The marginal product of labor is 500 and the marginal product of capital is 1000, so the firm is employing too much labor and too few machines to produce the 50 widgets

• The marginal product per dollar of labor exceeds the marginal product per dollar of machinery, so more labor and less capital should be used to produce the 50 widgets

• The firm should lower the price of machinery so that it is equal to the price of labor

• The firm is producing the given quantity inefficiently and should shut down