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Marginal revenue product is calculated as:
the extra profit generated by producing one more unit
extra revenue generated by employing one extra person i.e. MPP (marginal physical product) * price of product
marginal physical product * wage

Identify the shape of the MRP graph, assuming that product prices are constant, at all levels of output

What can cause a shift out in MRP as shown?
Increase in wages
Decrease in wages
Fall in productivity
Rise in price of product

Why does the MRP curve fall after reaching a peak?
Diseconomies of scale
Diminishing marginal returns to labour

In the graph below, perfectly competitive labour and product markets are sbown. Consider that the government has lowered the school leaving age. The amount of labour employed will change from _________ to _________?
From S to P
From P to S

What can cause a shift out in MRP as shown?A Fall in producitivityB Rise in productiivityC Fall in the price of the productD Rise in the price of the product
A only
A and C only
B only
B and D only

A firm's MRP curve is shown below. It also faces a labour cost schedule but this is not a horizontal straight line as in the case of perfectly competitive markets. What do we call this type of firm?
Monopsony
Monopoly

A firm employs 100 workers in a chocolate factory at a daily wage of $50. It has monopsony power and to employ an extra worker, it has to pay an additional $5 per day. What is the marginal cost to this firm of hiring that one extra worker?
$5
$55
$555

In the diagram below, which area represents economic rent and which are represents transfer earnings?
Economic rent is A and Transfer Earnings are B
Economic rent is B and Transfer Earnings are A

In the diagram below, what change would make economic rent increase as a proportion of an exsiting wage, and transfer earnings move closer to zero?
If the PES of labour moves to unity (1)
If supply of labour becomes more elastic
If supply of labour becomes more inelastic

Trade unions are threatening strike action. What would not strengthen their chances of successful negotiation?I. Economic growthII. High profit rates of companiesIII. An increase in cyclical unemploymentIV. Looser immigration policy adopted by government
I only
II and III only
II and IV only
III and IV only

A firm faces a minimum wage claim by unions who threaten to withdraw labour supply completely unless their claims are met. What will be the increase in unemployment based on the graph below?
AB
AC
BC

If a labour market operates without intervention by either government or trade unions, and wages move upwards and downwards freely (e.g. they are not 'sticky' downwards), what would unemployment be, as predicted by classical economists?
Approximately 5%
Zero
10%

An individual faces a backward bending supply curve of labour, as shown. As real wages rise from W1 to W2, s/he supplies extra labour of (L2-L1). In terms of choices between leisure and work, what must be true for this to happen?
The substitution effect dominates over the income effect over the range stated.
The income effect dominates over substitution effect over the range stated.
There is no income effect
There is no substitution effect

An individual faces a backward bending supply curve of labour, as shown. As real wages rise from W3 to W4, s/he supplies no extra labour. In terms of choices between leisure and work, what MUST be true?
The substitution effect dominates the income effect
The income effect dominates the substitution effect
The income effect exactly offsets the substitution effect
There is no income effect

Where there is a profit-maximising monopsonist buyer of labour and NO trade union, what will be a) the equilibrium quantity employed and b) the wage rate paid to workers?
X people employed at a wage of W3
X people employed at a wage of W2
X people employed at a wage of W1
Y employed at a wage of W2

Where there is a proft-maximising monopsonist buyer of labour and a trade union, the equilibrium quantity employed is indeterminate. Assume that the TU insists on a wage of W2, as in diagram below. Compared to the equilibrium of a 'monopsonist/no trade union', there will be a new equilibrium with a) higher/lower wage and b) more/less employment
a) higher wage b) lower employment
a) higher wage b) higher employment
a) lower wage b) lower employment

The government may introduces minimum wage legislation in order to:I reduce income inequality as measured by the Gini coefficientII improve equity in the economyIII reduce the poverty trap by ensuring those in the labour force have incentives to remain in it
I only
I and II only
I, II and III

The government may introduces minimum wage legislation in order to:I reduce income inequality as measured by the Gini coefficientII imrpove equity in the economyIII reduce the poverty trap by ensuring those in the labour force have incentives to remain in it
I only
II only
I, II and III

Arguments against the introduction of minimum wages could be as follows:I They increase unemploymentII They increase allocative efficiencyIII They do not reduce Gini coefficient since may of those in poverty are not part of the work force
I only
I and III only
I, II and III
I and III only

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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