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Exercise ch 3 for student

eco531 exercise

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2 views

Exercise ch 3 for student

eco531 exercise

Uploaded by

2024772245
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 3

1. The production function relates


A. factor prices to output prices.
B. wages to labor employed.
C. factors of production to total output.
D. factors of production to profit.
E. the output price to factors of production.

2. The slope of the production function while holding capital fixed is


A. the marginal product of labor.
B. the marginal product of capital.
C. the average product of labor.
D. the labor-capital ratio.
E. the capital-labor ratio.

3. The law of diminishing returns, as it applies to labor, means that


A. the marginal product of labor eventually declines.
B. the marginal product of labor will eventually be a horizontal line at zero.
C. the average product of labor increases at a decreasing rate.
D. the average product of labor starts to decline before the marginal product of labor.
E. the total output eventually decreases.

4. At what point should a firm stop hiring workers?


A. when the wage per worker starts to increase
B. when the price of capital starts to decrease
C. when the firm's marginal gain in output from hiring an additional worker is zero
D. when the firm's marginal revenue from hiring an additional worker equals the cost of
hiring that worker
E. when the firm's value of marginal product equals zero

5. The marginal rate of technical substitution at any particular labor-capital bundle is


A. the slope of the isoquant.
B. the average product of labor relative to the average product of capital.
C. the wage relative to the cost of capital.
D. the slope of the indifference curve.
E. the ratio of labor to capital.

6. What is an example of the substitution effect?


A. Workers choose to provide more hours of labor when the wage rate decreases.
B. More labor is hired as long as the marginal product of labor is positive.
C. The firm expands output when production costs fall.
D. The firm expands output when production costs increase.
E. The firm hires more labor when the wage falls because labor has become relatively
cheaper compared to the price of other factors of production.
7. Why is the short-run labor demand curve less elastic relative to the long-run labor demand
curve?
A. Firms care about changes in wages in the short run but not in the long run.
B. Firms are better able to substitute capital for labor in the long run compared to the short
run.
C. Labor is a normal good.
D. A perfectly competitive firm can always pay lower wages in the long run.
E. Isoquant lines get shallower when the wage increases.

8. At a wage of $25 per hour, the firm employs 50,000 hours of labor per week. If the wage
would increase to $27 per hour, the firm would employ 45,000 hours of labor per week. What
is the elasticity of labor demand?
A. 2.50
B. 1.50
C. 1.25
D. 0.50
E. 0.25

9. If unskilled labor and capital are substitutes,


A. the demand for unskilled labor increases when the price of capital decreases.
B. the cross-elasticity between unskilled labor and capital is positive.
C. the price of unskilled labor decreases when the price of capital increases.
D. the price of capital is increasing.
E. the demand curve for capital is upward sloping

10. The imposition of a minimum wage on a competitive labor market will likely
A. create additional employment opportunities because some low-skilled workers will now
see their wage increase.
B. lower the wages of workers earning more than the minimum wage.
C. create unemployment as some people enter the labor market while some firms reduce
the quantity of labor they are willing to employ due to the increased wage.
D. increase unemployment of high-skilled workers as firms substitute for high-skilled labor
with low-skilled labor.
E. lower the unemployment rate of low-income families.

11. Labor demand is more elastic the greater the elasticity of substitution between labor and
capital because
A. workers supply more labor when their wage increases.
B. the firm's output price falls when the firm produces more output.
C. a firm is less willing to pay higher labor costs if it is easy for the firm to substitute capital
for labor.
D. firms always have the option of substituting capital for labor.
E. a firm's technology is slow to change.

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