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Exam 18: The Markets for the Factors of Production

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Question 131

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If the wages of a dentist increase,

A) so does her opportunity cost of leisure.
B) her hours of labor supplied may increase.
C) her hours of labor supplied may decrease.
D) All of the above are correct.

E) A) and B)
F) None of the above

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Question 132

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Suppose that due to a severe drought in Texas, 100,000 farmers relocate from Texas to Louisiana. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners in Louisiana?

A) Both wages and rents would increase.
B) Both wages and rents would decrease.
C) Wages would increase, and rents would decrease.
D) Wages would decrease, and rents would increase.

E) B) and C)
F) A) and B)

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Question 133

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When a competitive firm hires labor up to the point at which the value of the marginal product of labor equals the wage, it also produces output up to the point at which marginal cost is equal to __________.

Suppose a shift of the labor-demand curve results in an increase of $5 in the equilibrium wage. How does this shift affect the value of the marginal product of labor?

Scenario 18-3 Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $13 per hour. During the summer, he drives a tour bus around the ski resort, earning $11 per hour. -Refer to Scenario 18-3. Assume that Sam has an upward-sloping labor supply curve. If the opportunity cost of Sam's leisure time increases, he will respond by working

Describe the difference between a diminishing marginal product of labor and a negative marginal product of labor. Why would a profit-maximizing firm always choose to operate where the marginal product of labor is decreasing (but not negative)?

For a competitive firm experiencing diminishing marginal productivity, the value of the marginal product (i) Increases when the price of output decreases. (ii) Changes when marginal product changes. (iii) Diminishes as the number of workers rises.

The marginal product of labor is the

Table 18-10 -Refer to Table 18-10. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. What is the total revenue per day that the firm will earn if it employs five workers?

Capital is paid according to the value of its marginal product

Suppose that in November a profit-maximizing firm has 100 employees. By December, the firm has decreased employment. One can infer that, when 100 employees are hired, the

Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7. Suppose also that the firm's fixed costs amount to $400. How many workers should the firm hire in order to maximize profit, and what is the maximum profit?

Figure 18-1. The figure shows the relationship between the number of mechanics hired and the number of car repairs performed per day at a car-repair shop. -Refer to Figure 18-1. If the shop charges $120 per repair, then what is the value of the marginal product of the third mechanic?

Which of the following events can not cause the labor-supply curve to shift?

Table 18-6 -Refer to Table 18-6. What is the value for the cell labeled AA?

What happens to labor supply in the pear-picking market when the wage paid to apple pickers increases?

Consider the market for land. Suppose the value of the marginal product of land decreases. Holding all else constant, the equilibrium rental price for land will

When firms are able to increase the amount of physical capital available to workers, the

Approximately how much of the income in the United States is earned by workers in the form of wages and fringe benefits?

Fiona's hourly wage decreases from $10 to $8. Which of the following describes a consequence of the decrease in Fiona's wage?