1) Suppose a profit-maximizing firm hires labour in a competitive labour market. If the marginal revenue product of labour is greater than the wage rate, the firm

A.increases the wage rate.

B.decreases the wage rate.

C.increases the quantity of labour it hires.

D.decreases the quantity of labour it hires.

E.shifts to a more labour-intensive production process.

2)The labour supply curve may eventually become "backward bending" at high wages because

A.the substitution effect on the demand1leisure dominates the income effect.

B.the income effect on the demand1leisure dominates the substitution effect.

C.firms demand added productivity from the workers as the wage reaches very high levels.

D.at high wage rates, the reservation wage rate rises.

E.people get tired of working so many hours and refuse to increase their labour supply

3)The marginal product of labour tells us

A.which employee is the most productive.

B.the average output produced by each employee.

C.the additional output produced by the last employee hired.

D.how much money the firm can make from hiring each employee.

4)The income effect on labour supply refers to

A.the fact that at higher wages the worker earns more income.

B.the fact that as the wage rate increases and income increases, labourers demand more of all normal goods, including leisure activities.

C.the increase in the income of firms that is necessary to pay higher wages.

D.the fact that as workers become more productive, they earn more income.

E.the fact that as the wage rate increases and income increases, labourers demand more of all normal goods, including labour.

5)In response to a wage rate increase, the substitution effect encourages individuals to take more leisure time.

True

False

6)If you have a positive wage elasticity of supply, substitution effect dominates income effects.

True

False

7)A technological change that increases the marginal revenue product of labour shifts the labour

A.demand curve leftward.

B.demand curve rightward.

C.supply curve leftward.

D.supply curve rightward.

E.demand curve rightward and the labour supply curve rightward.

8)Which of the following would not be associated with an elastic demand curve for labour?

A.a relatively flat MRP curve

B.many substitutes for this type of labour

C.the demand for the product made by these workers is elastic

D.labour costs represent a small percentage of total costs

9) If the United Auto Workers' Union obtained a 15 percent increase in the wages of its workers, employment in the auto industry would fall by the largest amount if

A.American consumers considered foreign automobiles a poor substitute for American-made automobiles.

B.the demand for American-made automobiles was elastic.

C.the demand for American-made automobiles was highly inelastic.

D.the demand for American-made automobiles was increasing.