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Question Bank - Economics

Wages: Labour demand

Q1. An individual firm's demand for a factor of production

(Select one answer)

(a) * slopes downward because an increase in the production of output reduces the price at which the output can be sold in a competitive market, thereby reducing the value of the marginal product as more of the factor is used.
(b) * slopes downward due to the factor's diminishing marginal product.
(c) * slopes upward due to the factor's increasing marginal product.
(d) * is perfectly elastic (horizontal) if the factor market is perfectly competitive.

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Q2. An increase in the price of automobiles shifts the demand for autoworkers to the

(Select one answer)

(a) * left and decreases the wage.
(b) * right and decreases the wage.
(c) * right and increases the wage.
(d) * left and increases the wage.

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