ECO 202 Chapter 27 Exam Solution
• Question 1
1 out of 1 points
Firm X is a monopolistic competitive firm and a factor price taker. For
... [Show More] this firm at the profit-maximizing factor quantity,
Selected Answer: a.
VMP > MRP = MFC = factor price.
Answers: a.
VMP > MRP = MFC = factor price.
b.
VMP> MRP = MFC > factor price.
c.
VMP < MRP = MFC = factor price.
d.
VMP = MRP > MFC = factor price.
• Question 2
1 out of 1 points
Situation 27-1
A company is trying to decide whether it should produce good X in the U.S. or in Mexico. Suppose a U.S. worker earns $15 per hour and a worker in Mexico earns $4 per hour. Also suppose that the marginal physical product (MPP) of the U.S. worker is 12 units of good X and the MPP of the Mexican worker is 3 units of good X.
Refer to Situation 27-1. The output produced per $1 of cost in the U.S. is
Selected Answer: a.
0.80 units of good X.
Answers: a.
0.80 units of good X.
b.
1.25 units of good X.
c.
3 units of good X.
d.
180 units of good X.
• Question 3
0 out of 1 points
Suppose a sailboat factory and a fishing boat factory exist in the same town. Employees at both factories have the same skills and are initially paid the same wage rate. If the sailboat manufacturer increases the hourly wage paid to his employees, then the
Selected Answer: d.
b and c
Answers: a.
demand for sailboats will increase, and the supply will decrease.
b.
quantity supplied of labor at the sailboat factory will increase.
c.
supply of labor at the fishing boat factory will increase.
d.
b and c
e.
a and c
• Question 4
1 out of 1 points
Exhibit 27-1
(1) (2) (3) (4)
Units of Factor X Quantity of Output Product Price Marginal Revenue Product
0 0 $12
1 10 $12 (A)
2 18 $12 (B)
3 25 $12 (C)
4 28 $12 (D)
Refer to Exhibit 27-1. What dollar value goes in blank (C)?
Selected Answer: c.
$84
Answers: a.
$30
b.
$12
c.
$84
d.
$300
• Question 5
1 out of 1 points
The elasticity of demand for a factor is lower,
Selected Answer: c.
the fewer substitutes for the factor.
Answers: a.
the higher the elasticity of demand for the product the factor helps to produce.
b.
the higher the factor cost-total cost ratio.
c.
the fewer substitutes for the factor.
d.
a and c
e.
all of the above
• Question 6
1 out of 1 points
The marginal productivity theory states that
Selected Answer: d.
firms in perfectly competitive product and factor markets will pay factors their marginal revenue products.
Answers: 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 each type of input is exactly the same.
c.
marginally productive inputs (that is, inputs that are not particularly productive) will not be heavily utilized.
d.
firms in perfectly competitive product and factor markets will pay factors their marginal revenue products.
• Question 7
1 out of 1 points
Suppose that all the necessary conditions exist for the realization of equal wage rates in every labor market, but that currently the wage rate in market X is higher than the wage rate in market Y. We expect that eventually the wage rate
Selected Answer: c.
in market X will decrease and the wage rate in market Y will increase.
Answers: a.
in market X will increase more.
b.
in market Y will decrease.
c.
in market X will decrease and the wage rate in market Y will increase.
d.
will not change in either market, because something out of the ordinary must have caused the wage rates in the two markets not to be equal.
e.
a and b
• Question 8
1 out of 1 points
"Screening" is the process by which
Selected Answer: b.
firms try to increase the probability of hiring good employees.
Answers: a.
discrimination is claimed to be an "information problem."
b.
firms try to increase the probability of hiring good employees.
c.
wages tend to be equalized as workers move from one labor market to another.
d.
firms calculate the point of MRP = MFC.
• Question 9
1 out of 1 points
Exhibit 27-4
Refer to Exhibit 27-4. The marginal factor cost of labor
Selected Answer: b.
is $10.
Answers: a.
is $7.
b.
is $10.
c.
is $14.
d.
depends on the amount of labor employed.
e.
is $3.
• Question 10
1 out of 1 points
For a product price searcher (such as a monopolist),
Selected Answer: a.
P > MR, therefore VMP > MRP.
Answers: a.
P > MR, therefore VMP > MRP.
b.
P < MR, therefore VMP < MRP.
c.
P > MR, therefore VMP < MRP.
d.
P = MR, therefore VMP = MRP.
• Question 11
1 out of 1 points
Given a 10 percent decrease in wages, firm A hires more labor than firm B. It follows that, ceteris paribus,
Selected Answer: c.
firm A likely has more substitutes for labor than firm B.
Answers: a.
the elasticity of demand for the product that firm A produces is likely lower than the elasticity of demand for the product that firm B produces.
b.
firm A likely has a lower labor cost-total cost ratio than firm B.
c.
firm A likely has more substitutes for labor than firm B.
d.
firm A likely has higher per-unit costs than firm B.
e.
none of the above
• Question 12
1 out of 1 points
When a prospective employer asks a graduating college senior for evidence of his grade point average (GPA), the employer is
Selected Answer: b.
screening the graduating senior.
Answers: a.
discriminating against the graduating senior.
b.
screening the graduating senior.
c.
probably just trying to intimidate the graduating senior.
d.
b and c
• Question 13
1 out of 1 points
If, at a particular wage rate in a competitive market, the quantity supplied of labor exceeds the quantity demanded of labor, then
Selected Answer: b.
some workers will begin to accept lower wages and, as a result, employers will begin to hire more workers.
Answers: 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.
some workers will begin to accept lower wages and, as a result, employers will begin to hire more workers.
c.
the supply curve will shift to the right, the demand curve will shift to the left, and the shortage of labor will be eliminated.
d.
since wages are so high, the quantity supplied of workers will increase further, and the quantity demanded will decrease further.
• Question 14
1 out of 1 points
Value marginal product (VMP) is
Selected Answer: a.
the price of the product multiplied by the additional output resulting from an additional factor unit employed.
Answers: a.
the price of the product multiplied by the additional output resulting from an additional factor unit employed.
b.
the total value of the total output of a firm divided by the total quantity of output.
c.
the value of an additional unit of product as measured in terms of additional factor cost.
d.
a measure of additional revenue minus additional cost as a result of additional output.
e.
the marginal revenue of the product divided by the additional output resulting from an additional factor unit employed.
• Question 15
1 out of 1 points
Exhibit 27-5
Units of
Labor Quantity of Output Marginal Revenue
0 0 $6
1 100 6
2 180 6
3 250 6
4 310 6
5 330 6
Refer to Exhibit 27-5. The value of marginal product (VMP) of the third unit of labor equals
Selected Answer: b.
$420.
Answers: a.
$105.
b.
$420.
c.
$700.
d.
$300.
e.
$70.
• Question 16
1 out of 1 points
If MRP = VMP = MFC = wages, then the firm is
Selected Answer: d.
selling its product in a perfectly competitive market and is hiring its labor in a perfectly competitive labor market.
Answers: a.
not selling its product in a perfectly competitive market but is hiring its labor in a perfectly competitive labor market.
b.
neither selling its product in a perfectly competitive market nor hiring its labor in a perfectly competitive labor market.
c.
selling its product in a perfectly competitive market but is not hiring its labor in a perfectly competitive labor market.
d.
selling its product in a perfectly competitive market and is hiring its labor in a perfectly competitive labor market.
• Question 17
1 out of 1 points
A perfectly competitive firm will maximize its profits by hiring factors up to the point at which
Selected Answer: e.
c and d
Answers: a.
MRP > MFC.
b.
VMP > MFC.
c.
MRP = MFC.
d.
VMP = MFC.
e.
c and d
• Question 18
1 out of 1 points
If for a given individual, between a wage rate of $20 and $25 the ____________________ effect outweighs the ________________ effect, the individual's supply curve of labor curve between those two wages will be _________________.
Selected Answer: b.
substitution; income; upward sloping
Answers: a.
substitution; income; vertical
b.
substitution; income; upward sloping
c.
substitution; income; downward sloping
d.
income; substitution; vertical
e.
income; substitution; upward sloping
• Question 19
1 out of 1 points
If the demand for a product that labor produces is highly elastic, a small percentage increase in price will __________ quantity demanded of the product by a relatively __________ percentage, which, in turn, will __________ the demand for the labor that produces the product.
Selected Answer: c.
decrease; large; greatly reduce
Answers: a.
increase; small; slightly reduce
b.
decrease; small; greatly increase
c.
decrease; large; greatly reduce
d.
increase; large; greatly reduce
e.
decrease; large; greatly increase
• Question 20
1 out of 1 points
Which of the following assumptions is not likely to be met in the real world?
Selected Answer: e.
all of the above
Answers: a.
Demand for labor is identical in every labor market.
b.
Nonpecuniary factors in each job are the same.
c.
All labor is homogeneous.
d.
All labor has zero costs of mobility.
e.
all of the above
• Question 21
1 out of 1 points
Exhibit 27-2
Refer to Exhibit 27-2. What factor quantity should the firm purchase?
Selected Answer: c.
Q2
Answers: a.
Q1
b.
Q3 - Q1
c.
Q2
d.
Q3
e.
Q1 + Q2
• Question 22
1 out of 1 points
Suppose there are two labor markets, A and B, and labor is homogeneous between markets. The wage rate in labor market A falls relative to the wage rate in labor market B. What happens in labor market B?
Selected Answer: b.
The supply curve of labor shifts rightward.
Answers: a.
The supply curve of labor shifts leftward.
b.
The supply curve of labor shifts rightward.
c.
The demand curve for labor shifts leftward.
d.
b and c
e.
none of the above
• Question 23
1 out of 1 points
Marginal productivity theory states that if a firm sells its product in a perfectly competitive product market it will necessarily pay its factors their VMP.
Selected Answer: False
Answers: True
False
• Question 24
1 out of 1 points
A product price searcher (monopolist, oligopolist, or monopolistic competitive firm) will hire more factor units as long as
Selected Answer: a.
MRP > MFC.
Answers: a.
MRP > MFC.
b.
MRP > VMP.
c.
MRP = MFC.
d.
VMP = MFC.
e.
c and d
• Question 25
1 out of 1 points
Marginal productivity theory implies that a worker will be paid an amount
Selected Answer: b.
equal to his or her contribution to the productive process.
Answers: a.
greater than his or her contribution to the productive process.
b.
equal to his or her contribution to the productive process.
c.
determined by his or her individual bargaining.
d.
less than his or her contribution to the productive process. [Show Less]