MODEL UNIT IV TEST EC202 MICROECONOMICS Essays - Labour Economics

MODEL UNIT IV TEST EC202: MICROECONOMICS 1. The term "derived demand" refers to the idea that a change in the A. demand for one good, say, tennis racquets, will affect the demand for related goods, say, tennis balls. B. demand for a good is affected by the supply of that good. C. demand for a good will affect the demand for the factors used to produce that good. D. supply of a factor will affect the demand for that factor. E. price of a factor will affect the price of the good produced with that factor. 2. The price of the product multiplied by the marginal physical product of the factor is the definition of the ______________ of that factor. A. value of marginal product B. marginal factor cost C. marginal physical product D. total factor cost E. marginal revenue product 3. The economist says that in order to maximize profits (minimize costs), any firm should hire a factor of production up until the point where: A. VMP = MRP B. MRP = MFC C. W = MFC D. W = VMP E. VMP = MFC 4. If MRP = VMP, we can conclude that the firm in question is A. maximizing profits B. minimizing costs C. a perfect competitor in the factor market D. a perfect competitor in the product market E. all of the above 5. The effect of an increase in the wage rate that causes the amount of labor supplied by the individual worker to decrease is called the _________ effect. A. complement B. substitution C. income D. normal E. inferior 6. If W = MFC, we can conclude that the firm in question is A. maximizing profits B. minimizing costs C. a perfect competitor in the factor market D. a perfect competitor in the product market E. all of the above 7. Which of the following changes would cause a firms demand for labor to increase (the labor demand curve shift to the right)? A. an increase in the price of the product being produced B. a decrease in the wage rate C. an increase in the marginal physical product of labor D. all the above E. A and C but not B 8. Applying the least-cost rule to two factors, a firm will A. maximize profits at the output at which MRP = MFC. B. minimize costs when the MPP of factor A equals the MPP of factor B. C. minimize costs when the MRP of factor A equals the MRP of factor B. D. minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B. E. do none of the above. 9. A firms demand for labor will be less elastic under which of the following conditions? A. the more good substitutes there are for labor B. the larger is the ratio of labor costs to total cost C. the less elastic is the demand for the good being produced D. all the above E. none of the above 10. Accountants can either work at accounting firms or they can teach accounting at a university. The supply of labor in the market for accountants who teach at universities would increase (the supply curve would shift to the right) as a result of which of the following changes? A. a decrease in the fringe benefits for accountants working at accounting firms B. an increase in the fringe benefits for accounting professors C. a decrease in the wage rate for accountants working at accounting firms D. all the above E. none of the above 11. If, at a particular wage rate in a competitive market, the quantity supplied of labor exceeds the quantity demanded of labor, then A. the supply curve will shift to the left, the demand curve will shift to the right, and the surplus of labor will be eliminated. B. since wages are so high, the quantity supplied of workers will increase further, and the quantity demanded will decrease further. C. some workers will begin to accept lower wages and, as a result, employers will begin to hire more workers, and the wage will decrease until equilibrium is reached. D. the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated. E. none of the above would happen. 12. The marginal productivity theory states that A. as variable inputs are added to a fixed quantity of other inputs eventually the additional output produced by each additional variable input will decrease. B. inputs will be used most efficiently when the additional output gained from