Factor Markets: Demand, Supply, and Wage Determination

Question 1

Which type of unemployment occurs when the skills employers need do not match the skills job seekers have?

Accepted Answer

Structural unemployment

Answer

Seasonal unemployment

Answer

Frictional unemployment

Answer

Cyclical unemployment

Question 2

What is the equilibrium wage rate in a perfectly competitive labor market?

Accepted Answer

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded

Answer

The wage rate that maximizes the employer's profits

Answer

The wage rate that is set by government regulations

Answer

The wage rate that is negotiated between trade unions and employers

Question 3

Which of the following is NOT a role of trade unions in the labor market?

Accepted Answer

Reducing competition from foreign workers by advocating for protectionist policies

Answer

Negotiating higher wages for their members

Answer

Improving working conditions

Answer

Providing training and development opportunities for members

Question 4

What type of capital is used directly to produce goods and services?

Accepted Answer

Physical capital

Answer

Human capital

Answer

Financial capital

Answer

Natural capital

Question 5

What is the relationship between the marginal product of labor and the demand for labor?

Accepted Answer

The demand for labor is directly related to the marginal product of labor

Answer

The demand for labor is inversely related to the marginal product of labor

Answer

The demand for labor is not related to the marginal product of labor

Answer

The demand for labor may be either directly or inversely related to the marginal product of labor, depending on the context

Question 6

What is the impact of a technological advancement on the demand for capital?

Accepted Answer

It may either increase or decrease the demand for capital, depending on the specific technology

Answer

It will always increase the demand for capital

Answer

It will always decrease the demand for capital

Answer

It will have no effect on the demand for capital

Question 7

Which among the following is NOT a factor influencing labor supply?

Accepted Answer

Number of working hours

Answer

Wage rate

Answer

Population size

Answer

Government policies

Question 8

A perfectly inelastic supply curve for labor means:

Accepted Answer

The number of workers supplied remains the same regardless of the wage rate.

Answer

No workers are willing to work at any wage rate.

Answer

All workers are willing to work at any wage rate.

Answer

The number of workers supplied increases as the wage rate increases.

Question 9

What factor can lead to a shift in the demand for capital?

Accepted Answer

Technological innovation

Answer

Interest rate change

Answer

Increased labor supply

Answer

Reduced consumer demand

Question 10

The marginal revenue product of labor refers to:

Accepted Answer

Change in total revenue resulting from hiring an additional worker.

Answer

Change in total cost resulting from hiring an additional worker.

Answer

Value of output produced by an individual worker.

Answer

Wage paid to an individual worker.

Question 11

A firm's profit-maximizing quantity of labor is the point where:

Accepted Answer

Marginal revenue product of labor equals wage rate.

Answer

Average revenue product of labor equals wage rate.

Answer

Total revenue product of labor equals wage rate.

Answer

Marginal cost of labor equals wage rate.

Question 12

What defines a monopsony in the labor market?

Accepted Answer

One dominant buyer of labor.

Answer

Many buyers of labor.

Answer

Many sellers of labor.

Answer

One dominant seller of labor.

Question 13

In a perfectly competitive labor market, the wage rate is determined by the interaction of:

Accepted Answer

Both quantity of labor supplied and quantity of labor demanded

Answer

Quantity of labor supplied

Answer

Quantity of labor demanded

Answer

Government regulations

Question 14

According to the marginal productivity theory, firms will hire more workers as long as the:

Accepted Answer

Marginal revenue product of labor exceeds the wage rate

Answer

Marginal cost of labor exceeds the wage rate

Answer

Wage rate exceeds the marginal revenue product of labor

Answer

Marginal revenue product of labor equals the marginal cost of labor

Question 15

In a monopsony labor market:

Accepted Answer

The firm is the sole buyer of labor

Answer

The worker is the sole seller of labor

Answer

The firm has no control over the wage rate

Answer

The worker has perfect knowledge of the market

Question 16

Which factor is likely to cause a decrease in the demand for capital?

Accepted Answer

Technological advancements reducing the need for capital

Answer

Increased availability of capital

Answer

Lower interest rates

Answer

Higher expected rate of return on capital

Question 17

The demand for land is typically:

Accepted Answer

Inelastic

Answer

Elastic

Answer

Perfectly elastic

Answer

Perfectly inelastic

Question 18

The concept of diminishing returns implies that:

Accepted Answer

As you increase the use of a factor of production, the marginal product will eventually decrease

Answer

As you increase the use of a factor of production, the marginal product will eventually increase

Answer

The marginal product of a factor of production will remain constant as its use increases

Answer

The marginal product of a factor of production will increase at an increasing rate as its use increases

Question 19

Which of the following is NOT a primary factor of production?

Accepted Answer

Technology

Answer

Labor

Answer

Capital

Answer

Land

Question 20

What is the term for the payment made for the use of capital?

Accepted Answer

Interest

Answer

Profit

Answer

Rent

Answer

Wages

Question 21

In a competitive market, the equilibrium wage rate is achieved when:

Accepted Answer

The quantity of labor demanded equals the quantity of labor supplied

Answer

Firms maximize their profits by employing labor at the lowest possible wage

Answer

The government sets a minimum wage above the market equilibrium

Answer

Unions negotiate wages higher than the market equilibrium

Question 22

Trade unions primarily exist to:

Accepted Answer

Advocate for the well-being of workers, including wages and working conditions

Answer

Maximize profits for employers by suppressing labor costs

Answer

Reduce government intervention in the labor market

Answer

Increase the overall supply of labor in the economy

Question 23

According to the law of diminishing marginal productivity, as the quantity of labor employed increases, holding all other factors constant:

Accepted Answer

The marginal product of labor will decrease.

Answer

The marginal product of labor will increase indefinitely.

Answer

The marginal product of labor will remain constant.

Answer

The average product of labor will increase.

Question 24

The opportunity cost of labor refers to:

Accepted Answer

The value of the next best alternative use of labor.

Answer

The total cost of employing labor.

Answer

The marginal product of labor.

Answer

The average product of labor.

Question 25

The concept of marginal revenue product (MRP) of labor is used to determine:

Accepted Answer

The additional revenue generated by hiring an additional unit of labor.

Answer

The marginal cost of hiring an additional unit of labor.

Answer

The demand for labor.

Answer

The supply of labor.

Question 26

In the context of capital demand, which of the following is irrelevant?

Accepted Answer

Level of education in the workforce

Answer

Rate of technological innovation

Answer

Price of capital goods

Answer

Availability of substitutes

Question 27

How does a strike typically affect labor supply?

Accepted Answer

It decreases labor supply.

Answer

It increases labor supply.

Answer

It leaves labor supply unchanged.

Answer

It increases labor demand.

Question 28

How does technological advancement typically impact labor demand?

Accepted Answer

It can either increase or decrease labor demand based on the specific technology.

Answer

It always increases labor demand.

Answer

It always decreases labor demand.

Answer

It has no effect on labor demand.

Question 29

How does the responsiveness of labor demand to changes in wages (elasticity of demand for labor) affect the impact of a minimum wage?

Accepted Answer

Higher elasticity reduces the impact of a minimum wage.

Answer

Higher elasticity increases the impact of a minimum wage.

Answer

Higher elasticity has no impact on the minimum wage.

Answer

Lower elasticity reduces the impact of a minimum wage.

Question 30

The demand for labor is ultimately derived from:

Accepted Answer

The demand for goods and services

Answer

The supply of capital

Answer

The supply of land

Answer

Government regulations

Question 31

Which of the following would cause the supply curve of labor to shift to the right?

Accepted Answer

An increase in the population

Answer

A decrease in the cost of living

Answer

An increase in the minimum wage

Answer

A decline in technological advancements

Question 32

The marginal revenue product of labor (MRPL) represents:

Accepted Answer

The additional revenue generated by hiring one more unit of labor

Answer

The additional cost of hiring one more unit of labor

Answer

The difference between the average revenue product and the marginal product of labor

Answer

The elasticity of demand for labor

Question 33

The elasticity of demand for labor measures:

Accepted Answer

The percentage change in the quantity of labor demanded divided by the percentage change in the wage rate

Answer

The percentage change in the wage rate divided by the percentage change in the quantity of labor demanded

Answer

The ratio of the marginal revenue product of labor to the wage rate

Answer

The ratio of the wage rate to the marginal revenue product of labor