Daniel

Chapter 11

Labor Markets

1. Alan Jones owns a company that sells life insurance. When he employs 10

salespersons his firm sells $200,000 worth of contracts per week, and when he employs 11 salespersons, total revenue is $210,000. The marginal revenue product of the 11th salesperson is

a. $410,000.

b. $10,000.

c. $20,000.

d. $210,000.

ANS

a. Incorrect. See answer b. for correct calculation.

b. Correct. Marginal revenue product (MRP) = $210,000 - $200,000 = $10,000.

c. Incorrect. See answer b. for correct calculation.

d. Incorrect. See answer b. for correct calculation.

2. The demand for labor is

a. derived demand.

b. featherbedding demand.

c. marginal utility demand.

d. all of the above answers are correct.

ANS

a. Correct. The demand for labor is derived demand.

b. Incorrect. This is a meaningless term.

c. Incorrect. This is a meaningless term.

d. Incorrect. This is a meaningless term.

3. If product price increases, then

a. MP will increase.

b. MFC will increase.

c. MRP will increase.

d. MP will decrease.

ANS

a. Incorrect. The product price does not affect the marginal product MRP.

b. Incorrect. Marginal factor cost (MFC) refers to additional total cost from an extra factor, which does include product price.

c. Correct. Since MRP = P x MP, an increase in price increases MRP.

d. Incorrect. The product price does not affect the marginal product MRP.

4. Which of the following statements is true?

a. Derived demand for labor depends on the demand for the product labor produces.

b. Unions can either increase demand or decrease the supply of labor.

c. Investment in human capital is expected to increase the demand for those workers.

d. All of the above answers are correct.

ANS

a. Incorrect. Each answer is correct.

b. Incorrect. Each answer is correct.

c. Incorrect. Each answer is correct.

d. Correct. Each answer is correct.

5. The optimal hiring rule is to employ labor up to the point where

a. wage =...