What is a factor market?

• A market where final goods and services are sold

• A market where resources such as labor, land, and capital are bought and sold

• A market for financial instruments like stocks and bonds

• A market where only labor is exchanged

In a perfectly competitive labor market, an individual firm’s supply of labor is:

• Perfectly elastic

• Perfectly inelastic

• Downward sloping

• Upward sloping

The demand for a factor of production is considered a derived demand because:

• It depends on the demand for the final goods and services it helps produce

• It is determined by the number of workers willing to supply labor

• Firms directly demand labor rather than the goods they produce

• The government sets the demand for all factors

Marginal Revenue Product (MRP) is calculated as:

• Marginal Product × Marginal Cost

• Marginal Product × Price of Output

• Price of Output × Average Product

• Total Revenue ÷ Total Quantity of Labor

A firm will hire a worker in a competitive labor market until:

• The worker's marginal revenue product equals the wage rate

• The worker's marginal product equals zero

• The total revenue of the firm reaches its maximum

• The wage rate equals the marginal cost of capital

If a firm has monopsony power in a labor market, it will:

• Pay workers their marginal revenue product

• Hire more workers than a competitive market would

• Pay a wage lower than the competitive equilibrium wage

• Face a perfectly elastic supply of labor

A minimum wage set above the equilibrium wage in a competitive labor market will likely:

• Decrease unemployment

• Have no effect on employment

• Increase the quantity of labor supplied and decrease the quantity demanded

• Decrease the quantity of labor supplied

The substitution effect in the labor market suggests that as wages increase, workers will:

• Work fewer hours because their income has risen

• Work more hours because the opportunity cost of leisure has increased

• Demand more leisure

• Not change their work hours

The income effect in the labor market suggests that as wages increase, workers will:

• Work more hours because higher wages are more attractive

• Work fewer hours because they can afford more leisure

• Work the same number of hours

• Shift to another industry

If a firm hires labor and capital, the least-cost combination of inputs occurs when:

• MPL/W = MPK/R

• MPL/W > MPK/R

• MPL = MPK

• W = R