Question 1

Suppose a firm’s marginal product of labour (MPN) is given by $$MPN = 100 - 2N$$, where $$N is $$the number of workers. If the real wage $$w is$$ $$40$$, how many workers will the firm hire to maximize profit?

Accepted Answer

$$N = 30$$

Question 2

In the standard production model, why is the marginal product of labour (MPN) curve downward sloping?

Accepted Answer

Because of diminishing marginal returns to labour

Question 3

Given the equation for marginal product of labour $$MPN = a - bN$$, what happens to the labour demand curve if $$a$$ increases?

Accepted Answer

The labour demand curve shifts upward

Question 4

If the nominal wage is $$W$$ and the price level is $$P$$, what is the formula for the real wage?

Accepted Answer

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

Question 5

A firm will continue to hire workers as long as which of the following conditions holds?

Accepted Answer

$$MPN \u003e w$$

Question 6

Refer to the first graph provided. At point $$N_1$$, what should the firm do to maximize profit?

Accepted Answer

Hire more workers

Question 7

Refer to the second graph. What is the effect of an increase in total factor productivity (TFP) on the marginal product of labour (MPN) curve?

Accepted Answer

The MPN curve shifts upward

Question 8

If technological change is skill-biased, what is the likely effect on wage inequality?

Accepted Answer

Wage inequality increases as skilled workers’ wages rise faster than unskilled workers’ wages

Question 9

In the hot dog parable, after a technological improvement in wiener production, what happens if workers are reallocated efficiently?

Accepted Answer

The economy can produce more hot dogs at full employment

Question 10

Which of the following best describes the aggregate labour demand curve?

Accepted Answer

It is the sum of all individual firms’ labour demand curves

Question 11

Suppose the marginal product of labour is $$MPN = 80 - 4N$$ and the real wage is $$w = 40. $$What is the optimal number of workers hired?

Accepted Answer

$$N = 10$$

Question 12

Which of the following is a plausible reason why technological progress does not lead to a long-term increase in unemployment?

Accepted Answer

Labour is reallocated to other sectors, increasing total output and employment

Question 13

If the price of output increases while the marginal product of labour remains constant, what happens to the marginal revenue product of labour ($$MRPN$$)?

Accepted Answer

$$MRPN$$ increases

Question 14

Which of the following best explains why the wage gap between skilled and unskilled workers increased in Canada between 1980 and 2000?

Accepted Answer

Skill-biased technological change increased the productivity of skilled workers more than unskilled workers

Question 15

If a firm faces a downward sloping MPN curve and a fixed real wage, what happens to profit if the firm hires more workers beyond $$N^* ($$where $$MPN = w$$)?

Accepted Answer

Profit decreases because the cost of hiring exceeds the benefit

Question 16

Which of the following is NOT an assumption of the short-run labour demand model described in the materials?

Accepted Answer

Workers have different skills and are paid different wages

Question 17

If the marginal product of labour is $$MPN = 60 - N$$ and the real wage is $$w = 20$$, what is the labour demand equation solved for $$N$$?

Accepted Answer

$$N = 40$$

Question 18

Which of the following statements about the effect of technology on labour is most consistent with the standard production model?

Accepted Answer

Technological change generally increases the demand for labour by raising productivity

Question 19

What is the main reason for the recent decline in employment in routine jobs in the US, according to the study materials?

Accepted Answer

Technological change has automated many routine tasks

Question 20

If the marginal revenue product of labour is $$MRPN = P 	imes MPN$$, and $$P$$ doubles while $$MPN$$ stays the same, what happens to $$MRPN$$?

Accepted Answer

$$MRPN$$ doubles

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

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