These are original Marlbridge practice questions, not past exam questions. The mark points are a suggested Marlbridge rubric to help you check your work; they are not an official scoring guideline. All firms, places and data are fictional. Every labour market here is competitive, and “other things constant” applies unless a question says otherwise.
Question 1 (multiple choice · foundation)
Which event would increase the demand for bakers in the fictional town of Fernhollow?
- (A) A fall in the wage paid to bakers
- (B) A rise in the price of bread
- (C) A new college that trains more bakers
- (D) A rise in the wages of shop assistants, a job many bakers could do instead
Answer and explanation
Answer: (B). Demand for bakers is derived from demand for bread. A higher bread price raises each baker’s MRP (MP × P) at every level of employment, so labour demand shifts right.
- (A) is a change in the wage itself: a movement along the demand curve (a larger quantity demanded), not an increase in demand.
- (C) increases the supply of bakers, not the demand.
- (D) is an alternative option for bakers. It decreases the supply of bakers; it does not affect bakeries’ demand.
Question 2 (multiple choice · core)
Many construction workers leave the fictional country of Brennick to take better-paid jobs abroad. Other things constant, what happens in Brennick’s market for construction workers?
- (A) The wage falls and employment falls.
- (B) The wage rises and employment rises.
- (C) The wage rises and employment falls.
- (D) The wage falls and employment rises.
Answer and explanation
Answer: (C). Fewer people are available to work in Brennick’s construction industry at every wage, so labour supply shifts left. Along an unchanged demand curve, the wage rises and the quantity of labour falls.
- (A) is the result of a decrease in demand, not supply.
- (B) is the result of an increase in demand.
- (D) is the result of an increase in supply: the opposite direction of the shift.
Question 3 (multiple choice · core)
In the fictional city of Corvale, new software lets each accountant complete more audits per week. At the same time, more university graduates qualify as accountants. What is the effect on the market for accountants?
- (A) The wage rises and employment rises.
- (B) The wage rises; the change in employment is indeterminate.
- (C) The wage falls and employment rises.
- (D) Employment rises; the change in the wage is indeterminate.
Answer and explanation
Answer: (D). Higher productivity raises MRP, so labour demand increases. More qualified graduates increase labour supply. Both shifts raise employment. Demand pushes the wage up and supply pushes it down, so without the sizes of the shifts the wage change is indeterminate.
- (A) is only certain if the demand shift is larger; the question gives no sizes.
- (B) is the pattern for demand up and supply down.
- (C) is only certain if the supply shift is larger.
Question 4 (multiple choice · core)
A firm sells its output in a perfectly competitive market. Its 4th worker has a marginal product of 12 units. The output price falls from $5 to $4. What happens to the MRP of the 4th worker?
- (A) It falls by $12, to $48.
- (B) It falls by $1, to $59.
- (C) It does not change, because the worker’s marginal product has not changed.
- (D) It falls to $4, because MRP equals the price for a competitive firm.
Answer and explanation
Answer: (A). MRP = MP × P. Before: 12 × $5 = $60. After: 12 × $4 = $48. The fall is 12 × $1 = $12.
- (B) subtracts the price change from MRP directly, forgetting to multiply by MP.
- (C) ignores the output price, which is half of the MRP calculation. This is why labour demand shifts when the product price changes.
- (D) confuses marginal revenue (which equals price for a competitive firm) with marginal revenue product.
Question 5 (calculation · core)
Hollins Fishing hires crew for a boat of fixed size. It sells fish in a competitive market and pays crew a market wage of $55 per day. The marginal product of each crew member (kilograms of fish per day) is:
| Crew member | 1st | 2nd | 3rd | 4th | 5th | 6th |
|---|---|---|---|---|---|---|
| MP (kg per day) | 50 | 45 | 38 | 30 | 21 | 11 |
(a) The price of fish is $2 per kg. Calculate each crew member’s MRP and the number of crew whose MRP is at least the wage. (b) The price of fish rises to $3 per kg. Repeat (a). (c) Instead (price back at $2), a better net raises every crew member’s MP by 10 kg per day. Repeat (a). (d) Explain whether the changes in (b) and (c) are movements along, or shifts of, Hollins’s demand for crew.
Worked solution
(a) MRP = MP × $2: $100, $90, $76, $60, $42, $22. MRP is at least $55 for the first 4 crew.
(b) MRP = MP × $3: $150, $135, $114, $90, $63, $33. Now the first 5 crew have MRP of at least $55.
(c) New MP: 60, 55, 48, 40, 31, 21. MRP = MP × $2: $120, $110, $96, $80, $62, $42. Again 5 crew.
(d) Both are shifts (increases) of Hollins’s demand for crew. MRP rises at every crew size, so the MRP curve moves right. The wage stayed at $55; the extra crew member is hired because demand increased, not because the wage fell.
Suggested mark points (4): 1 for the MRPs and 4 crew in (a); 1 for (b); 1 for (c), including the new MPs; 1 for identifying both as shifts with the reason that MRP rises at every quantity.
Common error: in (c), multiplying the old MRP by a new price, or adding 10 to MRP instead of to MP. Each extra 10 kg is worth $20 at $2 per kg.
Question 6 (graph · core)
Marrow Valley is a fictional region with a competitive market for lorry drivers.
(a) New rules require rest areas and safer cabs, so driving becomes a safer and more pleasant job. Draw a correctly labelled graph of the market for lorry drivers and show the effect. State what happens to the wage and employment. (b) At the same time, a boom in online shopping raises the demand for goods deliveries. On the same graph, show this second change. (c) State the combined effect on employment and on the wage. Under what condition would the wage rise?
Model answer and suggested Marlbridge rubric
(a) Axes: “Wage rate” (vertical) and “Quantity of lorry drivers” (horizontal). Downward-sloping D₁ and upward-sloping S₁ crossing at W₁, Q₁. Better working conditions make more people willing to drive at every wage, so supply shifts right to S₂. On its own this lowers the wage and raises employment.
(b) Demand for lorry drivers is derived from demand for deliveries. More deliveries raise the price firms receive for haulage, and so raise drivers’ MRP: labour demand shifts right to D₂. Mark the final equilibrium where D₂ meets S₂, at W₃ and Q₃.
(c) Employment rises, because both shifts raise it. The wage is indeterminate: the demand increase pushes it up and the supply increase pushes it down. The wage rises only if the demand increase is larger than the supply increase (more precisely, if at the old wage W₁ the extra quantity demanded exceeds the extra quantity supplied).
| Point | What earns it |
|---|---|
| 1 | Correctly labelled axes, curves and initial equilibrium |
| 1 | Supply shifts right for the working-conditions change, with wage down and employment up |
| 1 | Demand shifts right for the delivery boom, linked to derived demand or MRP |
| 1 | Employment rises and wage indeterminate, with the condition for a rise |
Do not award the second point for a demand shift: working conditions change workers’ willingness to do the job, not firms’ MRP.
Question 7 (calculation and explanation · stretch)
Tarrow is a fictional city. In its market for hotel cleaners, Q is thousands of cleaners and W is the wage in dollars per hour:
- Demand: Qd = 90 − 3W
- Supply: Qs = 2W − 10
(a) Find the equilibrium wage and number of cleaners. (b) People in Tarrow come to value their free time more, and supply falls by 15 thousand cleaners at every wage. Find the new equilibrium. (c) Next, a tourism boom raises the price of hotel rooms, and demand for cleaners rises by 10 thousand at every wage. Find the final equilibrium. (d) Compare the final outcome with the original one and explain the result. (e) Give one example of a change in cultural expectations that could shift the supply of hotel cleaners, and state the direction.
Model answer and suggested Marlbridge rubric
(a) 90 − 3W = 2W − 10, so 100 = 5W, W = $20, Q = 90 − 60 = 30 thousand.
(b) New supply: Qs = 2W − 25. 90 − 3W = 2W − 25, so 115 = 5W, W = $23, Q = 90 − 69 = 21 thousand. A stronger preference for leisure decreases supply: the wage rises and employment falls.
(c) New demand: Qd = 100 − 3W. 100 − 3W = 2W − 25, so 125 = 5W, W = $25, Q = 100 − 75 = 25 thousand. More valuable hotel rooms raise cleaners’ MRP, so demand increases.
(d) Compared with the start, the wage is $5 higher and employment is 5 thousand lower. Both shifts pushed the wage up. Employment fell because the supply decrease (15 thousand) was larger than the demand increase (10 thousand), so the net effect on quantity was negative. This is the “demand up, supply down” case, where the wage must rise but the quantity depends on the sizes of the shifts.
(e) For example: hotel cleaning becomes more widely respected as a career, so more people are willing to do it: supply increases. Or: social norms discourage a group of people from working outside the home, so supply decreases. Any change in attitudes to the job, with a correct direction, is acceptable.
| Point | What earns it |
|---|---|
| 1 | $20 and 30 thousand |
| 1 | $23 and 21 thousand, with the supply curve shifted correctly |
| 1 | $25 and 25 thousand, with the demand curve shifted correctly |
| 1 | Comparison (+$5, −5 thousand) explained by the relative sizes of the shifts |
| 1 | A valid cultural-expectations example with the correct direction |
Allow follow-through in (c) and (d) from an error in (b) if the method is correct.
How did you do?
- Q1 or Q2 wrong: re-read “Movements and shifts”, “What shifts labour demand” and “What shifts labour supply” in the study guide.
- Q3 or Q6(c) wrong: re-read “Two shifts at once: a summary” and Worked example 2(c).
- Q4 or Q5 wrong: re-read Worked example 1. Change MP or P first, then multiply.
- Q7 incomplete: re-read Worked example 2(b) for solving the equations after a shift.
Then tick off the topic checklist.