Q: In the Cobb-Douglas production function $Y = AK^{\alpha}L^{1-\alpha}$, what does the parameter $\alpha$ represent in a competitive economy?

The share of income received by owners of capital

Q: Suppose a dog grooming studio receives $10 per grooming. If the marginal product of labour (MPL) for the third worker is 7, what is the marginal revenue product of labour (MRPL) for that worker?

$MRPL = P \times MPL = 10 \times 7 = 70$

Q: A firm will continue to hire additional workers as long as:

The marginal revenue product of labour (MRPL) is greater than the nominal wage ($MRPL > W$)

Question 1

Which of the following best describes the Cobb-Douglas production function used in macroeconomics?

Accepted Answer

$Y = AK^{\alpha}L^{1-\alpha}$, where $0 < \alpha < 1$

Question 2

In the Cobb-Douglas production function $Y = AK^{\alpha}L^{1-\alpha}$, what does the parameter $\alpha$ represent in a competitive economy?

Accepted Answer

The share of income received by owners of capital

Question 3

Suppose a dog grooming studio receives $10 per grooming. If the marginal product of labour (MPL) for the third worker is 7, what is the marginal revenue product of labour (MRPL) for that worker?

Accepted Answer

$MRPL = P 	imes MPL = 10 	imes 7 = 70$

Question 4

A firm will continue to hire additional workers as long as:

Accepted Answer

The marginal revenue product of labour (MRPL) is greater than the nominal wage ($MRPL > W$)

Question 5

If the nominal wage is $80 per day and the price of output is $10 per unit, what is the real wage?

Accepted Answer

$w = \frac{80}{10} = 8$ units of output per day

Question 6

What happens to the quantity of labour demanded if the real wage decreases, ceteris paribus?

Accepted Answer

The quantity of labour demanded increases

Question 7

Which of the following statements about the marginal product of labour (MPL) is correct?

Accepted Answer

MPL typically decreases as more workers are employed due to diminishing marginal productivity

Question 8

A technological improvement doubles the output produced by each worker at a dog grooming studio. What is the likely effect on the labour demand curve?

Accepted Answer

The labour demand curve shifts upward and to the right

Question 9

At the profit-maximizing level of employment, which condition must hold in real terms?

Accepted Answer

$MPL = w$

Question 10

If a firm is currently employing fewer workers than the profit-maximizing level, what is true about the marginal product of labour (MPL) and the real wage ($w$)?

Accepted Answer

MPL exceeds the real wage ($MPL > w$)

Question 11

Which of the following would shift the aggregate labour demand curve to the right, ceteris paribus?

Accepted Answer

An increase in the aggregate capital stock

Question 12

Suppose the nominal wage falls from $80 to $60 per day, and the price of output remains at $10 per unit. What is the new real wage?

Accepted Answer

$w = \frac{60}{10} = 6$ units of output per day

Question 13

Which of the following best describes the relationship between the real wage and the quantity of labour demanded by a firm?

Accepted Answer

There is a negative relationship between the real wage and the quantity of labour demanded

Question 14

If the marginal product of labour (MPL) curve shifts upward, what happens to the labour demand curve?

Accepted Answer

The labour demand curve also shifts upward

Question 15

Which of the following is NOT an assumption made when analyzing the demand for labour in a competitive market?

Accepted Answer

Firms set the wage themselves

Question 16

A firm is considering hiring an additional worker. The worker's marginal product of labour (MPL) is 9 units, and the real wage is 8 units. What should the firm do?

Accepted Answer

Hire the worker, since $MPL > w$

Question 17

Which of the following real-world events would most likely cause a rightward shift in the aggregate labour demand curve?

Accepted Answer

A technological innovation that increases worker productivity

Question 18

If the marginal product of labour (MPL) is less than the real wage, what should a profit-maximizing firm do?

Accepted Answer

Reduce employment

Question 19

Which of the following is true about the aggregate demand for labour?

Accepted Answer

It is the sum of the labour demands of all firms in the economy

Question 20

Suppose a beneficial supply shock increases the marginal product of labour (MPL) at every level of labour input. What is the effect on the profit-maximizing level of employment?

Accepted Answer

The profit-maximizing level of employment increases

Chapter 3: Productivity, Output, and Employment – Study Notes for Intermediate Macroeconomics

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