Chapter 18/The Markets for the Factors of Production ✦ 105 Chapter 18 The Markets for the Factors of Production The demand for labor by a particular firm is ultimately derived from a the productivity of labor b the productivity of the firm’s other inputs c demand for the firm’s output d the market supply of labor ANSWER: c the demand for the firm’s output SECTION: INTRO OBJECTIVE: 1 If the demand for automobiles increases, which of the following markets would also experience an increase in demand? a automobile workers b bicycle manufacturers c bus drivers d financial analysts ANSWER: a automobile workers SECTION: INTRO OBJECTIVE: 1 Which of the following is an assumption made about a competitive labor market? a A firm must offer a higher wage rate to attract more labor b A firm must offer a lower wage rate to attract more labor c A firm cannot influence the market wage rate d The labor supply curve facing a firm is relatively inelastic ANSWER: c A firm cannot influence the market wage rate SECTION:1 OBJECTIVE: 1 If eight workers can manufacture 70 tables per day and nine workers can manufacture 90 tables per day, and if tables can be sold for $10 each, the value of marginal product of the ninth worker is a 20 tables b 90 tables c $200 d $900 ANSWER: c $200 SECTION:1 OBJECTIVE: 1 An increasing marginal product of labor would be most commonly found a at high levels of employment b in perfect competition c at low levels of employment d when prices are rising ANSWER: c at low levels of employment SECTION:1 OBJECTIVE: 1 106 ✦ Chapter 18/The Markets for the Factors of Production If a firm is a price taker in the labor market, then the value of the marginal product of labor equals labor’s marginal a product b product multiplied by the price of the final product c product times the wage rate d product divided by the wage rate ANSWER: b product multiplied by the price of the final product SECTION:1 OBJECTIVE: 1 Value of marginal product is defined as the additional a output a firm would receive after hiring one more unit of resource b cost of hiring one more unit of resource c revenue earned by selling one more unit of product d revenue earned by hiring one more unit of resource ANSWER: d revenue earned by hiring one more unit of resource SECTION:1 OBJECTIVE: 1 Quantity of Number of Baseballs Labor Per Day 100 240 360 440 500 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. For which level of employment is the marginal product of labor greatest? a 1 worker b 2 workers c 3 workers d 4 workers ANSWER: b 2 workers SECTION:1 OBJECTIVE: 1 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. The total revenue per day for the firm if it employs five workers is a $500 b $300 c $2200 d $2500 ANSWER: d $2500 SECTION:1 OBJECTIVE: 1 Chapter 18/The Markets for the Factors of Production ✦ 107 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. The value of marginal product when marginal product is maximized is a 140 baseballs b $300 c $400 d $700 ANSWER: d $700 SECTION:1 OBJECTIVE: 1 11 The imposition of tariffs and quotas on imported goods tends to cause the a demand curve for domestic labor to shift to the right b demand curve for domestic labor to shift to the left c supply curve of domestic labor to shift to the right d supply curve of domestic labor to shift to the left ANSWER: a demand curve for domestic labor to shift to the right SECTION: 1 OBJECTIVE: 1 12 Bill is trying to convince the owner of a pizza shop to hire him. He argues that he could help the shop sell an additional five pizzas per day at the market price of $8 each. If the facts are not in dispute, but the owner does not hire him, then a the wage rate must be less than $40 per day b hiring Bill would involve a negative marginal product c the wage rate must be more than $40 per day d the wage rate must be less than $8 per day ANSWER: c the wage rate must be more than $40 per day SECTION: 1 OBJECTIVE: 1 13 A labor supply curve that has a negatively sloped portion is said to be a a zero elasticity of labor supply b a kinked labor supply curve c backward bending d perfectly inelastic ANSWER: c backward bending SECTION: 2 OBJECTIVE: 2 14 The migration of unskilled workers from Mexico to the United States tends to a increase the number of jobs for unskilled American workers b decrease the wage rate for unskilled American workers c increase the wage rates for skilled American workers d decrease the number of jobs for skilled American workers ANSWER: b decrease the wage rate for unskilled American workers SECTION: 2 OBJECTIVE: 2 15 A decrease in the supply of auto workers could be the result of a higher wages paid to workers in other industries b an increase in the value of the marginal product of auto workers c improving tastes and preferences for automobiles d an increase in the total product of auto workers ANSWER: a higher wages paid to workers in other industries SECTION: 2 OBJECTIVE: 2 108 ✦ Chapter 18/The Markets for the Factors of Production 16 This table shows the number of calculators that can be assembled per month by various numbers of workers. If the price per calculator in a perfectly competitive product market is $20, how many workers would the firm employ if the monthly wage rate is $1000? a b c d ANSWER: c SECTION: 3 OBJECTIVE: 3 Quantity of Number of Calculators Labor Per Month 60 160 240 280 300 17 Wally’s Wheat Farm sells its output and hires its labor in perfectly competitive markets. In the short run, Wally can vary only one input—labor. When Wally is producing in shortrun equilibrium, all of the following conditions, except one, will necessarily be satisfied. Which is the exception? a The value of marginal product of labor equals the wage rate b The marginal cost curve crosses the marginal revenue curve from below c Marginal revenue equals the price of the firm’s output d The firm’s total revenue will decrease if more labor is hired ANSWER: d The firm’s total revenue will decrease if more labor is hired SECTION: 3 OBJECTIVE: 3 18 A perfectly competitive firm should hire additional units of labor in a competitive labor market when a marginal revenue is less than marginal cost b the value of marginal product exceeds the wage rate c total revenue exceeds total cost d the marginal product of labor exceeds the wage rate ANSWER: b the value of marginal product exceeds the wage rate SECTION: 3 OBJECTIVE: 3 19 Concerning the market for radio assemblers, assume that the wage rate is $12 per hour in the U.S. and $3 per hour in Mexico. Also suppose that the marginal product of a Mexican worker is 3 radios per hour. A U.S. worker will be less costly to employ than the Mexican worker if the marginal product of the U.S. worker is at least a 4 radios per hour b 8 radios per hour c 12 radios per hour d 16 radios per hour ANSWER: d 16 radios per hour SECTION: 3 OBJECTIVE: 3 Chapter 18/The Markets for the Factors of Production ✦ 109 20 A new technology that increases the productivity of teachers has what effect on the labor market for teachers? a The wage rate will rise, and quantity of teachers employed will fall b The wage rate will rise, and the quantity of teachers employed will rise c The wage rate will fall, and quantity of teachers employed will fall d The wage rate will fall, and the quantity of teachers employed will rise ANSWER: b The wage rate will rise, and the quantity of teachers employed will rise SECTION: 3 OBJECTIVE: 3 21 If the productivity of capital increases, the a supply curve of capital shifts to the right b interest rate decreases c firm’s VMP of capital increases d firm’s VMP of capital decreases ANSWER: c firm’s VMP of capital increases SECTION: 4 OBJECTIVE: 4 22 The value of marginal product of capital is the increase in a output that results from employing one more unit of capital b profit that results from employing one more unit of capital c revenue that results from employing one more unit of labor d revenue that results from employing one more unit of capital ANSWER: d revenue that results from employing one more unit of capital SECTION: 4 OBJECTIVE: 4 23 When the price of capital increases, the a quantity demanded of loanable funds by the firm will decrease b quantity demanded of loanable funds by the firm will increase c firm’s VMP of capital increases d firm’s MP of capital increases ANSWER: a quantity demanded of loanable funds by the firm will decrease SECTION: 4 OBJECTIVE: 4 24 Human capital is a the plants and equipment owned by people b computers, autos, and other durable goods owned by households c the amount of money people save d the skills, knowledge, and abilities of people ANSWER: d the skills, knowledge, and abilities of people SECTION: 4 OBJECTIVE: 4 25 A decrease in population can be expected to a raise land rent b increase the supply of land c decrease the demand for land d increase the demand for land ANSWER: c decrease the demand for land SECTION: 4 OBJECTIVE: 4 ...106 ✦ Chapter 18/ The Markets for the Factors of Production If a firm is a price taker in the labor market, then the value of the marginal product of labor equals ... the firm if it employs five workers is a $500 b $300 c $2200 d $2500 ANSWER: d $2500 SECTION:1 OBJECTIVE: 1 Chapter 18/ The Markets for the Factors of Production ✦ 107 10 This table describes the number of baseballs a manufacturer can produce per day with different ... an increase in the total product of auto workers ANSWER: a higher wages paid to workers in other industries SECTION: 2 OBJECTIVE: 2 108 ✦ Chapter 18/ The Markets for the Factors of Production 16 This table shows the number of calculators that can be assembled per month by various numbers