The Marginal Product of Labor Practice Questions

Determine whether the following statements are true or false. The marginal product of labor is *

a. the amount of extra profit that a firm will earn if it hires one more worker

b. the amount of extra revenue that a firm will earn if it hires one more worker

By definition, a labor supply curve cannot have a negative slope. *

True

False

State whether you think Joe’s labor supply will tend to increase or decrease as a result of the following change: While in Las Vegas for the weekend, Joe wins a $1 million jackpot. *

a. Joe will work more.

b. Joe will work less.

One way to think about wages for different jobs is to see it as another application of the law of one price. The basic idea is that the supply of workers will keep adjusting until jobs that need the same kinds of workers earn the same wage. If similar workers earned different wages, then the workers in the low-paid jobs would reduce their labor supply, and the workers in the high-paid jobs would face more competition from those low-paid workers. Let’s look at 100 computer programmers who are trying to decide whether to work for one of two companies: Robotron or Korrexia. To keep things simple, assume that both companies are equally fun to work for, so you don’t need to worry about compensating differentials here (featured in the video devoted to compensating differentials). The marginal product of labor (per additional hour of work) is listed in the table below. At a wage of $80 per hour, the total demand for workers would be

a. 50 workers

b. 60 workers

c. 70 workers

d. 100 workers

The programmers in this town are going to work at one of these two places for sure: Their labor supply is vertical, or in other words perfectly inelastic, with supply = 100. So, what will the equilibrium wage be? Hint: the numbers may not work out exactly—so use your judgment to come up with a good answer. *

a. $50 dollars per hour

b. $55 dollars per hour

c. $60 dollars per hour

d.$65 dollars per hour

About how many programmers will work at Robotron at this price? Again, use your judgment to come up with a good answer. *

a. 55 workers

b. 60 workers

c. 65 workers

d. 70 workers

Suppose 50 more programmers come to town. What will the wage be now? *

a. $15 per hour

b. $20 per hour

c. $25 per hour

d. $30 per hour

Courses See all

Series See all

Interactive Practice See all

Timely News Articles for Econ Class

Free High School Teacher Trainings

High School Teaching Resources See all

University Teaching Resources See all

Practice Questions

The Marginal Product of Labor Practice Questions

Introduction

Supply, Demand, and Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Price Floors

Trade

Externalities

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Labor Markets

Public Goods and the Tragedy of the Commons

Asymmetric Information

Consumer Choice

Bonus Topics

Exam