Question

1) Which of these factors would shift the labor demand curve out (increase labor demand)?

a) Decrease in immigration into the United States.

b) Increase in immigration into the United States

c) Price of output good increases (labor is used to make this output).

d) Price of output good decreases (labor is used to make this output).

2) If the marginal revenue product of labor is greater than the wage rate (M RPh > w), what should a profit maximizing firm in a competitive labor market do?

a) Nothing. This is the profit maximizing point.

b) Hire less labor.

c) Hire more labor.

d) Increase the wage rate.

e) Decrease the wage rate.

3) If the elasticity of labor demand with respect to wages is -3 (E = −3), what is the effect on labor demand of a 10 percent increase in the equilibrium wage rate.

a) No effect on labor demand.

b) Labor demand increases by 10 percent.

c) Labor demand decreases by 10 percent.

d) Labor demand decrease by more than 10 percent.

e) Labor demand decreases by less than 10 percent.

Answer 1