Question 1

In the standard production model, what is the formula for the Marginal Revenue Product of Labour (MRPN)?

Accepted Answer

$$	ext{MRPN} = P 	imes MPN$$

Question 2

According to the labour demand curve, what happens when the marginal product of labour (MPN) is greater than the real wage ($$w) at a $$given level of employment?

Accepted Answer

Firms will hire more workers.

Question 3

Given the labour demand curve $$MPN = a - bN$$, where $$b \u003e 0$$, what is the formula for the optimal number of workers ($$N^*) $$demanded by firms when the real wage is $$w$$?

Accepted Answer

$$N^* = \frac{a - w}{b}$$

Question 4

If the price of output ($$P) $$increases while the marginal product of labour ($$MPN) $$remains constant, what happens to the Marginal Revenue Product of Labour ($$MRPN$$)?

Accepted Answer

MRPN increases.

Question 5

What is the effect of an increase in Total Factor Productivity (TFP) on the labour demand curve, as shown in the second image?

Accepted Answer

The labour demand curve shifts upward.

Question 6

In the hot dog parable, after a technological improvement reduces the number of workers needed to produce a wiener from 2 to 1, what is the maximum number of hot dogs that can be produced at full employment?

Accepted Answer

40

Question 7

Which of the following best describes the relationship between technology and labour in the standard model?

Accepted Answer

Technology and labour are complements.

Question 8

If the real wage ($$w) is $$set above the marginal product of labour ($$MPN) at a $$given level of employment, what should a profit-maximizing firm do?

Accepted Answer

Reduce the size of the labour force.

Question 9

Skill-biased technological change is most likely to:

Accepted Answer

Increase the productivity of skilled workers more than unskilled workers.

Question 10

Between 1980 and 2000 in Canada, which group experienced the most rapid wage growth?

Accepted Answer

The most skilled workers.

Question 11

What is the real wage ($$w) in $$terms of nominal wage ($$W) $$and price of output ($$P$$)?

Accepted Answer

$$w = \frac{W}{P}$$

Question 12

If technological change increases TFP in a sector, what is the likely effect on aggregate labour demand?

Accepted Answer

Aggregate labour demand shifts outward.

Question 13

Which of the following is a plausible reason for the slow response of the workforce to skill-biased technological change?

Accepted Answer

The workforce takes time to acquire more skills.

Question 14

If the marginal product of labour ($$MPN) is $$downward sloping, what does this imply about the relationship between the number of workers ($$N) $$and $$MPN$$?

Accepted Answer

As $$N$$ increases, $$MPN$$ decreases.

Question 15

In a competitive labour market, what determines the wage?

Accepted Answer

The intersection of labour demand and labour supply.

Question 16

Which of the following best explains why technological improvements do not necessarily lead to higher unemployment rates?

Accepted Answer

Labour reallocation increases TFP and shifts aggregate labour demand outward.

Question 17

If a firm faces a real wage ($$w) $$that is equal to the marginal product of labour ($$MPN$$), what should it do?

Accepted Answer

Maintain its current level of employment.

Question 18

Which of the following is NOT a simplifying assumption of the standard production model for labour demand?

Accepted Answer

The wage is determined by government policy.

Question 19

What is the main implication of skill-biased technological change for wage inequality?

Accepted Answer

It increases wage inequality by raising skilled workers' wages faster than unskilled workers' wages.

Question 20

In the context of the hot dog parable, what is the effect of reallocating workers after a technological improvement in wiener production?

Accepted Answer

The economy can produce more hot dogs at full employment.

Labour Demand in Macroeconomics: Theory, Technological Change, and Wage Inequality

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