Unit 5: Factor Markets
Micro · Unit 5 · Paper 2

Factor Markets unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1Paper 2Paper 3
Each paper is built from this unit’s 36 terms and is the same for everyone, so a teacher can assign “Unit 5, Paper 2” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.
Suggested time 32 min 29 points0/17 attempted
1

Labor supply curve for an individual

2

What determines the employment loss

3

Minimum wage under monopsony

4

Marginal revenue product (MRP)

5

How licensing raises wages

6

Compensating differential

7

Perfectly competitive labor market

8

Profit-maximizing combination of inputs

9

Monopsony outcome

10

The range condition on the monopsony result

11

Least-cost rule

12

Input substitution

Short answer 1. Define or explain: Human capital

3 pts

Short answer 2. Define or explain: Minimum wage in a competitive market

3 pts

Short answer 3. Define or explain: MRP

3 pts

Short answer 4. Define or explain: Profit-maximizing hiring rule

3 pts

Free response

5 pts

Cedar Mill is a perfectly competitive firm that hires labor in a perfectly competitive labor market. The market wage is $120 per day. The table below shows the firm's total output at different quantities of labor. Each unit of output sells for $20. Workers (L) Total product (Q) 0 0 1 12 2 22 3 30 4 36 5 40

A. Calculate the marginal product of the third worker.

B. Calculate the marginal revenue product of the third worker.

C. Determine the profit-maximizing number of workers Cedar Mill should hire, and explain your reasoning.

D. Identify the economic principle illustrated by the pattern in the marginal product column.

E. Assume the market wage falls to $90 per day. Determine the new profit-maximizing number of workers.