AP Microeconomics Unit 3

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?

• $700

• $1,300

• $400

• $100

• $500

Oreo cookies are now extremely expensive to purchase. Instead of buying Oreo cookies, I now want to buy Chips Ahoy. What determinant of demand does this likely fall under?

• Change in Price of Complementary Good

• Change in Price of Substitute Good

• Change in Consumer Price Expectations

• Change in Number of Consumers in the Market

Identify the correct determinant of supply.
Example: As the demand for DVDs decreased due to consumer preference for streaming movies, the market price for DVDs fell. This lower market price caused sellers to leave the DVD market and supply decreased. 

• Government regulation

• Change in number of sellers

• Change in income

• Change in expectations

In the diagram, what would be the competitive quantity of workers hired and wages, respectively?

• L2, W4

• L1, W3

• L2, W2

• L1, W2

The graph shows the conditions that a monopsonist faces in a labor market. How many workers would this monopsonist hire and what wage rate would it pay, respectively? 

• 5, $37.50

• 10, $30

• 10, $20

• 14, $24

What is the marginal factor cost of the fifth worker?

• $70

• $10

• $250

• $90

• $50

Which of the following can we predict about this market?

• The marginal factor cost of labor is less than the supply of labor.

• More nurses will be hired than in a competitive labor market.

• The quantity of labor hired will be allocatively efficient.

• Nurses are paid less than they would be paid in a competitive labor market.

• The hospital system will hire the quantity of labor where the supply of labor equals the marginal revenue product of labor.

What area represents deadweight loss in this monopsony labor market?

• w_azQ₁0

• vzy

• vxy

• w_bvxw_d

• w_bvQ₁0

What wage and quantity combination will this firm choose to maximize profits?

• 600 workers, $70 per day

• 600 workers, $35 per day

• 400 workers, $25 per day

• 400 workers, $35 per day

• 400 workers, $55 per day

What happens if a minimum wage is imposed in a monopsony labor market?

• The marginal factor cost becomes horizontal at the minimum wage until it hits the labor supply curve.

• The marginal factor cost curve is less than the labor supply curve.

• The demand for labor becomes vertical.

• The labor supply curve becomes vertical at the amount of labor hired in a competitive market.

• The demand for labor becomes horizontal.