January 10

A firm's demand curve for labor is equal to a segment of its

• average variable cost curve

• total revenue curve

• marginal cost curve

• marginal revenue product curve

• average product curve

A firm's demand for labor is known as a derived demand because

• the firm gains utility from hiring more labor

• the wage rate paid to workers depends on the demand for labor

• the amount of labor demanded depends on the amount of capital invested

• the amount of labor demanded depends on the demand for the firm's product

• the firm will benefit from hiring additional labor

Assume that barber shops operate in perfectly competitive product and factor markets. Which of the following will happen to working barbers if the price of haircuts decreases?

• The marginal product of the last barber hired will not change.

• The marginal product of the last barber hired will decrease.

• The marginal revenue product curve will shift to the right.

• The marginal revenue product curve will shift to the left.

• There will be a movement upward along the marginal revenue curve.

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?

• Firms will move down along the demand curve for labor and hire more workers.

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

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

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

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

If a binding minimum wage increases in a perfectly competitive labor market, then which of the following will likely occur in the labor market?

• The supply of workers will increase.

• The supply of workers will decrease.

• The demand for workers will increase.

• The demand for workers will decrease.

• The quantity of workers supplied will increase.

The table above shows the short-run output for a perfectly competitive firm. If the price of the product is $10, what is the marginal revenue product of the third worker hired?

• $24

• $27

• $40

• $240

• $300

When the demand for new homes decreases, the demand for construction workers who build homes decreases. This relationship illustrates the concept of

• derived demand

• diminishing marginal productivity of labor

• substitution in production

• supply shock

• property rights

For a firm hiring labor in a perfectly competitive labor market, the marginal revenue product curve slopes downward after some point because as more of a factor is employed, which of the following declines?

• Marginal product

• Marginal factor cost

• Marginal cost

• Total output

• Wage rates

Heggood, Inc., a perfectly competitive firm, produces hats using capital and labor purchased in competitive factor markets. If the demand for hats increases, Heggood, Inc. will

• decrease the price of hats

• decrease its demand for labor

• decrease the quantity of labor demanded

• increase its demand for capital

• increase the rental price of capital

If labor is the only variable input of a firm and the marginal product of labor is falling, the firm will always produce

• more than the profit-maximizing level of output

• less than the profit-maximizing level of output

• at a level of output where average total cost is at a minimum

• at a level of output where marginal costs are rising

• at a level of output where average variable costs are falling