AP Microeconomics Unit 5

In order to hire the least-cost combination of labor and capital, the firm must do which of the following?

• Find the combination of labor and capital where the marginal product of labor divided by the price of labor is equal to the marginal product of capital divided by the price of capital.

• Hire labor until the marginal product of labor equals the marginal product of capital.

• Minimize the total cost of labor and capital without considering their productivity.

• Choose labor and capital based solely on their prices.

Which of the following is a firm’s demand for labor?

• the firm’s marginal factor cost (MFC) curve

• the firm’s long-run average total cost (LRATC) curve

• the firm’s marginal revenue product of labor (MRP_L) curve

• the firm’s marginal revenue (MR) curve

A single large hospital system hires all nurses in a city. Assume that this is a for-profit hospital system. 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.

• 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.

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?

• 8 workers, $18 wage rate

• 10 workers, $20 wage rate

• 12 workers, $22 wage rate

• 15 workers, $25 wage rate

If a monopsony labor market suddenly were transformed into a perfectly competitive labor market, how would the wage and the number of workers employed change?

• Both would increase

• Both would decrease

• Wage would increase, but employment would decrease

• Wage would decrease, but employment would increase

Which of the following would cause the wage for computer programmers to increase?

• A decrease in the amount of physical capital per computer programmer

• An improvement in the education of computer programmers

• A decrease in the value that computer programmers place on leisure

• A minimum wage set below the equilibrium wage in the market for computer programmers

What is the rule to profit maximize when hiring workers?

• MRP = MFC

• MFC = MC

• MRP > MFC

• MC = MRP

A coffee entrepreneur is employing labor and capital to run a coffee kiosk. At the current mix of inputs, the marginal product of labor is 50 cups per hour and the marginal product of capital is 150 cups per hour. The price of labor is $10 per hour and the price of capital is $30 per hour. To minimize costs without changing the output, the firm should:

• make no changes

• increase labor input

• decrease capital input

• increase capital input

To minimize costs without changing its output, what should an entrepreneur do when the wage rate is $8 per unit, rent for capital is $10 per unit, marginal product of labor is 40 units, and marginal product of capital is 60 units?

• employ less labor and more capital

• increase labor and decrease capital

• maintain the current levels of labor and capital

• employ more labor and less capital

A profit-maximizing firm will continue to hire workers until the marginal revenue product of labor is equal to the:

• marginal factor cost

• average total cost

• marginal utility of labor

• total revenue