Homework 4 With Solutions

Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) As a firm hires more and more workers, ________. 1)

A) the value of the marginal product of the additional workers remains the same
B) the marginal product of the additional workers remains the same
C) the value of the marginal product of the additional workers eventually increases
D) the value of the marginal product of the additional workers eventually decreases
2) Which of the following equations is true of a profit-maximizing firm? 2)

A) Wage = A worker's total product
B) Wage = A worker's marginal product
C) Wage = The average product of all workers
D) Wage = The value of a worker's marginal product
3) If a firm hires a worker by paying her a wage lower than the value of the marginal product of the 3)
worker, it implies that ________.
A) the firm should reduce its employee strength to maximize profits
B) the firm is earning zero economic profit
C) the firm is making an optimum decision
D) the firm should hire more workers to increase profits
Scenario: Suppose that professors pay their teaching assistants $10 an hour to grade papers for their classes, and then the
professors sell the graded papers back to the students in their classes for $.75 a paper. The following table shows the number
of papers graded in a given number of hours.
Hours of Labor Number of Papers Graded

1 40
2 75
3 105
4 130
5 142
6 149
7 154
4) Refer to the scenario above. What is the marginal productivity of labor of the fifth hour of labor? 4)
A) 7 papers B) 12 papers C) 22 papers D) 19 papers
5) Refer to the scenario above. How many hours of labor should the professors employ to maximize 5)
their profits?
A) 2 B) 3 C) 4 D) 5
1
Scenario: The labor market equilibrium for ski patrol positions at Bridge Bowls Resort is shown in the figure below.
6) Refer to the scenario above. Consider the equilibrium in the figure. If this winter is unusually dry 6)
and warm without much snow, how is the graph going to change?
A) The labor demand curve will shift right. B) The labor supply curve will shift right.
C) The labor supply curve will shift left. D) The labor demand curve will shift left.
7) Which of the following statements is true? 7)

A) At all wages below the equilibrium wage rate, labor supplied exceeds labor demanded.
B) Some workers may be willing to work only at a wage rate above the equilibrium wage rate.
C) All workers are willing to work at the equilibrium wage rate.
D) At all wages above the equilibrium wage rate, labor demanded equals zero.
8) Which of the following people would be classified as being voluntarily unemployed? 8)

A) Tom, who married a rich widow so that he would not have to work at all.
B) Sally, who is not working because she wants to be at home with her kids.
C) Jackie, who does not want to work, because she is traveling the world.
D) Joey, who would be willing to work for $20 an hour but the market clearing wage rate is $15
an hour.
9) Which of the following statements is true? 9)

A) Technological innovation increases wages for all workers in an economy.
B) Technological innovation can cause wages to fall for some workers in an economy.
C) Technological innovation reduces the demand for goods and services in an economy.
D) Technological innovation always leads to unemployment in an economy as a whole.
2
The figure below shows labor supply and labor demand curves.
10) Refer to the figure above. Assume that instead of shifting to the left, the new demand for labor is 10)
shifted to the right of the initial demand for labor. A minimum wage is in effect at w1 . What is
likely going to happen due to the shift in the demand for labor?
A) Wages will remain the same because they are set by law.
B) The market for labor will likely clear at a higher wage rate.
C) Wages will likely decrease because there is greater demand for labor.
D) Unemployment will likely increase because of higher wages.
3
Answer Key
Testname: UNTITLED1
1) D
2) D
3) D
4) B
5) C
6) D
7) B
8) D
9) B
10) B

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Exam

1) As a firm hires more and more workers, ________. 1)

2) Which of the following equations is true of a profit-maximizing firm? 2)

Hours of Labor Number of Papers Graded

7) Which of the following statements is true? 7)

8) Which of the following people would be classified as being voluntarily unemployed? 8)

9) Which of the following statements is true? 9)

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