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PRACTICE QUESTIONS FOR CHAPTER 5
TrueFalse Questions:
1.
A firm that hires workers to maximize profits will also maximize labor
productivity.
Answer:
False
2.
If the demand for labor is price inelastic and the minimum wage exceeds
the competitive equilibrium wage, an increase in the minimum wage will
increase the total wages of employed workers.
Answer:
True
3.
A price ceiling that is lower than the competitive equilibrium price will
cause excess supply.
Answer:
False
Multiple Choice Questions:
4. Ed's bakery can sell as many loaves of bread as it wishes for a price of
$2 per loaf. To keep calculations simple, let us assume that Ed's only costs
are hired labor. If Ed hires 1 worker, he can produce 200 loaves of bread
per day. If Ed hires 2 workers, he can produce 350 loaves of bread per day.
If he hires 3 workers, he can produce 450 loaves of bread per day. If he
hires 4 workers, he can produce 480 loaves of bread per day. If he hires 5
workers, he can produce 500 loaves of bread per day, and if he hires 6
workers, he can produce 510 loaves of bread per day. If he hires 7 or more
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 Fall '07
 Bergstrom
 Microeconomics

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