Midterm Exam of Economics Winter 2010.docVIP

Midterm Examination of Economics 1.Factor markets are different from product markets in an important way because a. equilibrium is the exception, and not the rule, in factor markets. b. the demand for a factor of production is a derived demand. c. the demand for a factor of production is likely to be upward sloping, in violation of the law of demand. d. All of the above are correct. 2.When a firm maximizes profit, a. it will hire workers up to the point where the marginal product of labor is equal to the product price. b. it will hire workers up to the point where the marginal product of labor is equal to the wage. c. it will hire workers up to the point where the value of the marginal product of labor is equal to the product price. d. it will hire workers up to the point where the value of the marginal product of labor is equal to the wage. 3. If a firm finds that the wage rate (W) is higher than the marginal revenue product (MRP), then to maximize its profit the firm should hire a. no more or less labor, because profits are greatest when W MRP. b. less labor, which will increase the MRP. c. more labor, which will decrease the MRP. d. more labor, because hiring more labor will increase both W and MRP until they are equal. 4.A competitive firm sells its output for $30 per unit. The marginal product of the 10th worker is 20 units of output per day; the marginal product of the 11th worker is 16 units of output per day. The firm pays its workers a wage of $150 per day. a. For the 11th worker, the value of the marginal product of labor is $120. b. For the 11th worker, the value of the marginal product of labor is $480. c. For the 11th worker, the value of the marginal product of labor is $600. d. For the 11th worker, the value of the marginal product of labor is $2,400. 5.Which of the following statements is correct? An individual workers labor supply curve a. can never be backward sloping. b. slopes backward if that person respon