Question

1. The marginal product of labor falls as a firm hires more hours because of: A....

1. The marginal product of labor falls as a firm hires more hours because of:

A. falling output prices.

B. diminishing marginal product of labor.

C. rising wages.

D. changes in the cost of physical capital.

2. A decrease in the price of a good due to a fall in demand will ultimately lead to

A. the market wage rate to decrease.

B. the firm hiring fewer workers.

C. the firm's demand for labor increasing.

D. the firm's demand for labor decreasing.

3. When the market wage is greater than the marginal revenue product, a firm in a competitive labor market will

A. continue to employ the same number of workers it already has

B. hire more workers

C. reduce the number of workers it employs

D. reduce the wages it pays workers

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Homework Answers

Answer #1

Q1 Answer is B.

Diminishing marginal product means when we hire more labour production by each additional unit of labour decreases.

Q2 Answer is B.

Firm will hire fewer labour because decrease in price of product will decrease the marginal revenue product of labour according to which labour is hired.

Q3 Answer is C.

Firm should hire the labour where marginal revenue product of labour equals the wage rate. If wage rate is higher then firm should reduce the labour demanded.

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