Question 1

A firm which is a monopolist in an output market and a competitor in an input market is:

Accepted Answer

A)  inefficient because MFC > w.
B)  inefficient because VMP > MRP and MFC > w.
C)  inefficient because VMP > MRP.
D)  efficient.E) A) and B)
F) A) and D)

Question 2

If a firm is a monopolist in its output market and a competitor in an input market, its input bundle will be chosen so that:

Accepted Answer

A)  VMP is not equal MRP for that input.
B)  VMP = MRP for that input.
C)  VMP > MRP for that input.
D)  VMP < MRP for that input.E) A) and D)
F) A) and C)

Question 3

Consider the following production function for a firm using two inputs x and y,
Q=20x+14y- 2x2+2xy- y2 where q denotes the quantity of output that is produced. An increase in the quantity of y:

Accepted Answer

A)  is ambiguous in terms of the effect it has on the marginal product of x.
B)  does nothing to the marginal product of x.
C)  increases the marginal product of x.
D)  decreases the marginal product of x.E) C) and D)
F) A) and B)

Question 4

Which of the following is not a potential source of monopsony power?

Accepted Answer

A)  many firms competing for the same input
B)  strong attachments of individuals to their home towns
C)  costs of transporting bulky material inputs
D)  immobility of inputsE) All of the above
F) C) and D)

Question 5

In perfectly competitive input markets

Accepted Answer

A)  all units of the same input command the same price
B)  there may be cases when there's only one seller
C)  not all information is known by all parties
D)  some units of input might be slightly different from othersE) A) and B)
F) None of the above

Question 6

Suppose MP = 10/L. If the firm sells its output in a competitive market at a price of $8, how much labour will the firm hire if the wage rate is $5 per unit of labour?

Accepted Answer

A)  4
B)  6
C)  2
D)  10E) C) and D)
F) A) and B)

Question 7

If a resource is exhaustible, its supply curve in a single period is:

Accepted Answer

A)  downward sloping.
B)  perfectly elastic.
C)  upward sloping.
D)  perfectly inelastic.E) B) and D)
F) A) and B)

Question 8

The marginal factor cost curve is:

Accepted Answer

A)  equal to input prices.
B)  below an upward sloping input supply curve.
C)  downward sloping.
D)  the ratio of changes in total factor cost to quantity purchased.E) All of the above
F) B) and C)

Question 9

The marginal revenue product of labour in the local saw mill is MRPL = 20 - .5L, where L = the number of workers. If the wage of saw mill workers is $10 per hour, then how many workers will the mill hire?

Accepted Answer

A)  20
B)  30
C)  10
D)  25E) B) and D)
F) A) and B)

Question 10

The most general profit maximization rule is to choose quantity such that the quantity of an input employed makes:

Accepted Answer

A)  w = VMP.
B)  MFC = MRP.
C)  MFC = VMP.
D)  w = MRP.E) None of the above
F) A) and C)

Question 11

When dealing with the demand for inputs

Accepted Answer

A)  substitution and output effects work in opposite directions for substitutes
B)  substitution and output effects always work in the same direction
C)  substitution output effects work in opposite directions for compliments
D)  substitution output effects work in opposite directions for inferior goodsE) A) and B)
F) B) and C)

Question 12

The demand for labour:

Accepted Answer

A)  is not the result of a maximization process.
B)  is related to the demand for leisure.
C)  is identical to the value of the marginal product when there is one input.
D)  is identical to the value of the marginal product when there are two inputs.E) A) and B)
F) All of the above

Question 13

Input z is the only variable input for Joe's manna factory. The supply function of the input is 10 + 2z and the MRP function is 110 - z. Then:

Accepted Answer

A)  w* = 60.
B)  w* = 90, z* = 20.
C)  w* = 50, z* = 20.
D)  w* = 100/3.E) None of the above
F) B) and C)

Question 14

Show what happens to the wage paid to workers and the quantity of labour hired in a monopsony labour market when the supply of labour decreases.

Accepted Answer

If a monopsonist wants to hire one more ...

Question 15

The demand for labor will increase in response to:

Accepted Answer

A)  increased labour productivity.
B)  a decrease in the supply of labor.
C)  a decrease in the price of capital that can be used in place of the labor.
D)  lower product prices.E) None of the above
F) All of the above

Question 16

If leisure is a normal good:

Accepted Answer

A)  then the supply of leisure is downward sloping.
B)  then the supply of labour might be downward sloping.
C)  then the demand for leisure is upward sloping.
D)  then the demand for labour is upward sloping.E) A) and B)
F) A) and C)

Question 17

Holding quantities of all other inputs constant, a firm's MRP curve is:

Accepted Answer

A)  its demand curve for the input regardless of market structure.
B)  below its VMP curve if it is a monopolist in its output market.
C)  its VMP curve if it is a monopolist in its output market.
D)  above its VMP curve if it is a monopolist in its output market.E) A) and C)
F) B) and C)

Question 18

If the marginal products of all inputs are identical, for the firm to be in long- run equilibrium:

Accepted Answer

A)  input prices cannot be identical.
B)  the output market must be perfectly competitive.
C)  the firm must use just two inputs.
D)  all input prices must be identical.E) None of the above
F) A) and C)

Question 19

Explain how a firm determines the optimal amount of capital.

Accepted Answer

Since capital provides input services ov...

Question 20

An increase in the interest rate will:

Accepted Answer

A)  shift the MRP curve to the right.
B)  shift the MRP curve to the left.
C)  not affect the MRP curve.
D)  rotate the MRP curve.E) A) and B)
F) A) and C)

Exam 11: Input Markets and the Allocation of Resources

A firm which is a monopolist in an output market and a competitor in an input market is:

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Consider the following production function for a firm using two inputs x and y, Q=20x+14y- 2x2+2xy- y2 where q denotes the quantity of output that is produced. An increase in the quantity of y:

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Suppose MP = 10/L. If the firm sells its output in a competitive market at a price of $8, how much labour will the firm hire if the wage rate is $5 per unit of labour?

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Input z is the only variable input for Joe's manna factory. The supply function of the input is 10 + 2z and the MRP function is 110 - z. Then:

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Which of the following is not a potential source of monopsony power?

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Holding quantities of all other inputs constant, a firm's MRP curve is:

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The most general profit maximization rule is to choose quantity such that the quantity of an input employed makes:

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The demand for labour:

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When dealing with the demand for inputs

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If the marginal products of all inputs are identical, for the firm to be in long- run equilibrium:

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In perfectly competitive input markets

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The demand for labor will increase in response to:

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Explain how a firm determines the optimal amount of capital.

Correct AnswerverifiedSince capital provides input services ov...View AnswerShow Answer

If a firm is a monopolist in its output market and a competitor in an input market, its input bundle will be chosen so that:

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The marginal revenue product of labour in the local saw mill is MRPL = 20 - .5L, where L = the number of workers. If the wage of saw mill workers is $10 per hour, then how many workers will the mill hire?

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If leisure is a normal good:

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If a resource is exhaustible, its supply curve in a single period is:

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Show what happens to the wage paid to workers and the quantity of labour hired in a monopsony labour market when the supply of labour decreases.

Correct AnswerverifiedIf a monopsonist wants to hire one more ...View AnswerShow Answer

The marginal factor cost curve is:

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An increase in the interest rate will:

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Consider the following production function for a firm using two inputs x and y, Q=20x+14y- 2x²+2xy- y²where q denotes the quantity of output that is produced. An increase in the quantity of y:

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Since capital provides input services ov...
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If a monopsonist wants to hire one more ...
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