Economics Quiz on Factor Markets and Labor

How does a firm maximize profit in labor hiring?

• Hire until MRPL = cost

• Hire until MRPL = wage

• Hire until MRPL = zero

• Hire until MRPL = total revenue

What shifts the factor demand curve?

• Changes in consumer preferences

• Changes in output price, technology, supply of other factors

• Changes in government policy

• Changes in market competition

What happens if product price rises?

• MRPL shifts left, demand for labor decreases

• MRPL shifts right, demand for labor increases

• MRPL remains unchanged

• MRPL shifts right, demand for labor decreases

Example of derived demand?

• After a hurricane, higher demand for cleanup crews raises wages

• Increased demand for luxury goods

• Higher demand for technology products

• Increased demand for agricultural products

What is economic rent?

• Earnings of a factor above the minimum needed to keep it in use

• Cost of maintaining a factor

• Profit from selling a factor

• Tax on a factor

Why is land supply perfectly inelastic?

• It's fixed and cannot be increased

• It can be easily increased

• It fluctuates with demand

• It is dependent on market conditions

Where does economic rent graphically appear?

• Below the supply curve, above the price

• Above the supply curve, below the price

• At the intersection of supply and demand

• Below the demand curve, above the price

Define equilibrium marginal revenue product.

• Total revenue from all units of a factor hired

• Additional revenue from the last unit of a factor hired

• Revenue from selling all units of a factor

• Cost of hiring the last unit of a factor

What does a steep land supply curve mean?

• High price changes cause large change in quantity

• High price changes cause little change in quantity

• Low price changes cause large change in quantity

• Low price changes cause little change in quantity

What is the substitution effect in labor?

• Higher wage → work less, more leisure

• Higher wage → work more, less leisure

• Lower wage → work more, less leisure

• Lower wage → work less, more leisure