Labor Economics Quiz

The marginal product of labor tells us which employee is the most productive.

• TRUE

• FALSE

An employer who is a monopolist in the product market, other things being equal, will probably hire more employees than a perfect competitor would.

• TRUE

• FALSE

Increasing marginal product of labor is needed if competitive firms are to stop hiring workers at some point.

• TRUE

• FALSE

When the price of capital increases, a firm will employ more, less, or the same amount of labor.

• TRUE

• FALSE

For two substitutes in production, if the scale effect dominates, then the inputs are gross substitutes.

• TRUE

• FALSE

For two substitutes in production, if the substitution effect dominates, then the inputs are gross complements.

• TRUE

• FALSE

In the long run, a profit-maximizing firm will select capital and labor so that the wage divided by the marginal product of labor is greater than the rental cost of a unit of capital divided by the marginal product of capital.

• TRUE

• FALSE

When a firm moves to a higher isoquant, the firm now produces less output.

• TRUE

• FALSE

If an increase in the cost of labor causes the firm to use less capital, then the substitution effect has dominated over the scale effect.

• TRUE

• FALSE

In the short run, a firm can add on to an assembly line or introduce new machines to the production process.

• TRUE

• FALSE