Understanding the Labor Markets

10. For a firm in an imperfectly competitive labor market, marginal revenue product =

a. MP_L x MR 

b. MP_L x Price

c.  MP_L x AR 

d. none of the above

11. A critical assumption economists make about the relationship between the quantity of labour hired and the marginal product of labour is that:

a. The MP_L diminishes as additional units of labor are added to the production process.

b. The MP_L increases as additional units of labor are added to the production process.

c. The MP_L diminishes to an irreducible minimum, then increases (i.e., the MP_L curve is u-shaped).

d. The two variables are totally unrelated. 

12. The word monopsony means

a. one market

b. one buyer

c. one seller

d. one strategy

13. There are two sources of imperfect competition in labor markets. These are:

a. demand-side sources, that is labor market power by employers

b. supply-side sources: labor market power by employees

c. both of the above

d. none of the above

15. A monopsony hires ____________ workers than that would be hired in a competitive labor market.

a. more

b. fewer

c. the same number of 

d. the highest number of 

1. Firms demand labor because

a. the employer likes you or is socially conscious.

b. your labor is worth something to the employer, i.e. your work brings in revenues to the firm.

c. firms have to engage in CSR

d. none of the above

2. The first rule of labor markets envisage that

a. If a firm wants to maximize profits, it will never pay more (in terms of wages and benefits) for a worker than the value of his or her marginal productivity to the firm.

b. firms should pay generously to their workers. 

c. firms should pay workers according to the average productivity of the workers.

d. firms should not discriminate between workers in terms of pay and benefits.

3. In a competitive labour market, the demand curve for labour is given by which one of the following?

a. Marginal revenue product  

b. Total physical product 

c. Marginal cost.

d. Marginal physical product

4. When economists refer to labour demand as a derived demand, they mean:

a. Its demand is derived from the historical precedent of compensation for comparable jobs.

b. Its demand is derived from the demand for the good or service workers contribute to producing.

c. Its demand is derived from the supply.

d. Its demand is found by taking the first derivative of the total revenue function.

5. Firms’ primary objective is:

a. Utility maximization

b. Profit maximization

c. Output maximization

d. Respect maximization

6.  For firms operating in a competitive output market, the value of additional output sold is 

a. the price the firms receive for the output.

b. the average product.

c. the marginal physical product

d. none of the above

7. A/An ___________________________________is the one where firms can hire all the labor they wish at the going market wage.

a. imperfectly competitive  labor market

b. perfectly Competitive Labor Market 

c. monopolistic labor market

d. monopsonistic

8.  If the employer does not sell its output in a perfectly competitive industry, they face a _______________ demand curve for output.

a. upward sloping

b. downward sloping

c. perfectly elastic

d. perfectly inelastic

9. If the firm is a monopoly or an oligopoly or monopolistically competitive. In this situation, the value of a worker’s marginal product is the 

a. price of the product

b. marginal revenue, not the price of the product.

c. average product

d. none of the above