Practice Questions
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In the context of labor economics, what does the marginal product of labor represent?
The marginal product of labor shows how much extra stuff we make when we add one more worker. Other options are incorrect because This option confuses...
In the context of production efficiency, how would an increase in marginal product of labor affect fixed costs?
Fixed costs are expenses that do not change with production levels. Other options are incorrect because Some might think that more productivity means ...
How does an increase in the marginal product of labor affect the marginal cost of production, assuming other factors remain constant?
When workers become more productive, they create more goods in the same time. Other options are incorrect because Some might think that more productiv...
How does the labor supply curve interact with wage determination and marginal product in the context of production efficiency?
When more workers are available, the extra output each worker can produce often decreases. Other options are incorrect because This option suggests th...
How does an increase in labor costs affect the labor demand curve, considering the concept of marginal product in a competitive market?
When labor costs go up, companies hire fewer workers. Other options are incorrect because Some might think that companies can just adjust to higher co...
If a firm hires an additional worker and the marginal product of labor is 20 units, while the wage paid to that worker is $15, what is the firm's marginal benefit from hiring this worker?
The marginal benefit is the extra output from hiring one more worker. Other options are incorrect because This answer confuses cost with benefit; This...
What is the relationship between marginal product and labor costs in economics?
When the marginal product increases, it means each worker is producing more. Other options are incorrect because This idea suggests that higher produc...
What does the law of diminishing returns suggest about the marginal product of labor as more units of labor are added to a fixed amount of capital?
The law of diminishing returns means that adding more workers to a fixed amount of tools or machines will eventually lead to less output per worker. O...
Which of the following statements accurately describe the relationship between marginal product of labor and marginal factor cost in a perfectly competitive labor market? Select all that apply.
In a perfectly competitive labor market, firms hire workers until the wage equals the value of what each worker produces. Other options are incorrect ...
A firm in a perfectly competitive labor market has determined that the marginal revenue product of labor is $15 per hour, while the wage it pays its workers is $10 per hour. Which category best describes the firm's situation and the action it should consider taking?
The firm can make more money by hiring more workers. Other options are incorrect because This suggests the firm has too many workers; This option impl...
In a perfectly competitive labor market, firms like Pride Textiles will hire workers until the __________ of labor equals the wage they pay.
Firms hire workers until the extra value created by one more worker matches the wage. Other options are incorrect because Some might think average pro...
In a perfectly competitive labor market, what should a firm do if the marginal revenue product of labor is less than the wage rate?
If the extra money made from hiring one more worker is less than what you pay them, you lose money. Other options are incorrect because Some might thi...
Arrange the following steps in the correct order for a firm to determine the optimal number of employees to hire in a perfectly competitive labor market.
First, a firm needs to find out how much extra money each worker can bring in. Other options are incorrect because Some might think comparing the extr...
If Pride Textiles pays a wage higher than the marginal revenue product of labor, what is the likely outcome for the firm?
When a company pays more than what workers bring in, it loses money. Other options are incorrect because Some might think paying more means hiring mor...
If a firm like Pride Textiles decides to hire additional workers, resulting in a higher marginal product of labor, what is the primary reason for this increase in productivity?
Better organization of labor means workers can work together more effectively. Other options are incorrect because Some might think higher wages attra...
Pride Textiles is evaluating whether to hire an additional worker. The marginal revenue product (MRP) of the next worker is calculated to be $15, while the current wage paid to workers is $12. Based on this information, which of the following statements best reflects the decision-making process for hiring in a perfectly competitive labor market?
The company should hire the worker. Other options are incorrect because Some think MRP must equal the wage; This suggests hiring depends on current pr...
If the relationship between the marginal product of labor and marginal factor cost is analogous to a farmer's decision to plant seeds based on the yield they expect, then what would be the best way to describe the farmer's optimal planting decision in relation to costs?
The farmer should plant seeds until the extra yield matches the cost of planting. Other options are incorrect because This idea suggests that the farm...
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