Micro · Unit 5 · Paper 3

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 1 Paper 2 Paper 3

Each paper is built from this unit’s 20 terms and is the same for everyone, so a teacher can assign “Unit 5, Paper 3” 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 34 min 31 points0/17 attempted

Market vs firm graph in factor markets

Derived demand

Profit-maximizing hiring rule

Compensating differential

Monopsony outcome

Why MRC lies above supply for a monopsonist

Shifters of labor demand

Marginal resource cost (MRC)

Shifters of labor supply

Economic rent

Wage differentials

Labor supply curve for an individual

Short answer 1. Define or explain: Least-cost combination rule

3 pts

Short answer 2. Define or explain: Why MRP slopes downward

3 pts

Short answer 3. Define or explain: Marginal revenue product (MRP)

3 pts

Short answer 4. Define or explain: Perfectly competitive labor market

3 pts

Free response

7 pts

This course has no free-response prompt tagged to this unit, so one from elsewhere in the course is used. It is still worth writing — the skill transfers.

A profit-maximizing firm operates in a perfectly competitive market for wheat. The market is currently in long-run equilibrium.

Draw a correctly labeled side-by-side graph for the wheat market and the individual firm, showing price, output, and average total cost (ATC).

A new medical study is published revealing immense health benefits of consuming wheat. On your graphs, show the short-run effect of this study on market price, market quantity, firm price, and firm quantity. Shade the area of the firm's short-run economic profit.

Explain what will happen to the number of firms in this market in the long run, and how that will affect the market price and the individual firm's economic profit.