Question

1. Consider the following table:

          

   Labor	Output	Marginal Product
   0	0	?
   10	100	?
   20	180	?
   30	240	?
   40	280	?

   Based on the table above, if labor increases from 20 to 30, then marginal product of the 30^th worker is:

   		10
   		8
   		6
   		4

2 points   

QUESTION 2

1. Suppose the long run production function is given by: Q = 4*L +2K². Marginal product of labor (MP_L) = 4 and wage is $10. Marginal product of capital (MP_K) = 4K and price of capital (K) is $10. Consider the allocation labor (L) = 10 and capital (K) = 2. Based on information, the MRTS is equal to

   		4
   		2.5
   		1
   		0.5

2 points   

QUESTION 3

1. The market supply of labor does NOT depend on:

   		non-monetary benefits.
   		working conditions.
   		mobility.
   		technology.

2 points   

QUESTION 4

1. In a perfectly competitive product market,

   		Price > MR
   		Price < MR.
   		Price = ME.
   		Price = MR.

2 points   

QUESTION 5

1. The marginal product for labor is given (MP) = 3 – 0.02*L; price of the product is $100 and wage = 200.  Based on information above, the marginal product of labor at the optimal level of employment is

   		$3
   		$2
   		$1.5
   		$1

2 points   

QUESTION 6

1. If the labor elasticity of output is 0.5 and the capital elasticity of output is 0.9, then the production function exhibits

   		constant returns to scale.
   		economies of scale.
   		diseconomies of scale.
   		diminishing returns.

2 points   

QUESTION 7

1. Suppose the long run production function is given by: Q = 4*L +2K². Marginal product of labor (MP_L) = 4 and wage is $10. Marginal product of capital (MP_K) = 4K and price of capital (K) is $10. Consider the allocation labor (L) = 10 and capital (K) = 2. Based on information, the MRTS is equal to

   		4
   		2.5
   		1
   		0.5

2 points   

QUESTION 8

1. If the demand for product increases,

   		labor demand increases.
   		labor demand decreases.
   		labor supply decreases.
   		labor supply increases.

2 points   

QUESTION 9

1. Suppose a firm is operating in both a perfectly competitive product market and perfectly labor market. The firm’s short run production is Q = L²; where Q is output and L is labor, expressed in millions. Marginal product of labor (MP_L) = 2L and wage is 10. The price of the product is $ 2. Based on information, the short run optimal level of employment is

   		4 million
   		2.5 million
   		5 million
   		0.4 million

2 points   

QUESTION 10

1. Consider the following production function: Q = KL where Q = output, L = labor and K = capital. The marginal product of labor is given by MP_L = K while the marginal product of capital is given by MP_K = L.   If L = 10 and K= 5, the marginal product of capital is

   		2
   		5
   		10
   		50

2 points   

QUESTION 11

1. At the market clearing wage,

   		labor supplied = labor demanded
   		labor supplied > labor demanded
   		labor supplied < labor demanded
   		None of these is true

Answer 1

(c)

Improvements in the occupational mobility of labour: For example if more people are trained with the necessary skills required to work in a particular occupation.

Non-monetary characteristics of specific jobs – include factors such as the risk with different jobs, the requirement to work anti-social hours or the non-pecuniary benefits that certain jobs provide including job security, working conditions, opportunities for promotion and the chance to live and work overseas, employer-provided in-work training, employer-provided or subsidised health and leisure facilities and other in-work benefits including occupational pension schemes.

Working conditions- Supply of labor also depend upon it's working aura and conditions.

So,Technology factor will be the factor in which market supply of labor doesn't depend much.

(d)

PRICE=MR is the correct option

(e)

MR*MP= MRPL

MRPL= P*MP

100*(3-0.02L)= w/p=200/100=2

So, L=50

Now substituting all the values we get, $2 as the answer i.e. Marginal product for labor(optimum)