Factor Market PP

Multiple Choice

Identify the choice that best completes the statement or answers the question.

____ 1. Human capital: a. consists of man-made resources such as buildings and machines. b. is the improvement in labor created by education and knowledge that is embodied in the workforce. c. has become less important due to the progress in technology. d. is the same factor as labor. e. consists of natural resources made more productive by entrepreneurs.

____ 2. The demand for factors of production is called a derived demand because it is: a. derived from the marginal cost of employing those factors. b. derived from the available supply of factors. c. not easy to determine and must be derived by a technical (and often complicated) process. d. derived on the basis of questions posed to residents during the census. e. derived from the demand for the outputs that are produced by the factors of production.

____ 3. The demand for a factor of production is a(n): a. derived demand. b. implicit demand. c. direct demand. d. distributional demand. e. technical demand.

____ 4. As a general rule, a profit-maximizing restaurant owner employs each factor of production up to the point at which the value of the marginal product of the ______unit of the factor employed is ______that factor's price. a. first; greater than b. last; equal to c. first; equal to d. last; less than e. next; greater than

____ 5. Maria operates a persimmon orchard in southeastern Oklahoma. She pays her workers $248 per week to pick and process persimmons, and she sells her persimmons for $6 per bushel. If she adds one more worker and that worker can pick and process 44 bushels per week, what will be the profit for Maria from hiring that worker? a. $0 b. $16 c. $264 d. $544 e. $6

____ 6. Phil's Photo Studio pays its workers $60 per day and it sells photos for $10 per print. Now suppose during the holiday season the price of photos increases to $12. What happens to the labor demand during the holiday season? a. The demand for labor increases. b. The demand for labor decreases. c. The quantity demanded of labor increases but the demand for labor curve does not shift. d. The quantity demanded of labor decreases but the demand for labor curve does not shift. e. There are no shifts of, and no movements along, the labor demand curve.

____ 7. Suppose all perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are paying their workers $7 per hour. Then suppose the government decides to raise the minimum wage to $8 per hour. Then: a. since the value of the marginal product would exceed the wage, firms would hire more workers. b. since the value of the marginal product would be less than the wage, firms would lay off some workers. c. the firms would increase their prices to keep the value of the marginal product equal to the wage. d. firms would have to exit the industry since the value of the marginal product is less than the wage. e. firms would be unable to alter their hiring because the minimum wage is set by the government.

Quantity of Labor Quantity of Wheat Marginal Product of Labor (workers) (baskets) (bushels per worker) 0 0 19 1 19 17 2 36 15 3 51 13 4 64 11 5 75 9 6 84 7 7 91 5 8 96 Table 69-3: Employment and Output

____ 8. (Table 69-3: Employment and Output) In the table, if the price of a bushel of wheat is $10, then the value of the marginal product of the third worker is: a. $15. b. $150. c. $170. d. $510. e. $10.

____ 9. If the extra output that is produced by hiring one more unit of labor adds more to ______than to ______, the firm will increase its profit by increasing the use of labor. a. total cost; total revenue b. total revenue; total cost c. marginal cost; marginal revenue d. marginal revenue; marginal cost e. marginal product; marginal cost

Quantity of Labor Total Product 0 0 1 20 2 50 3 90 4 120 5 140 6 150 7 150 8 140 Table 69-4: Value of the Marginal Product of Labor and Demand

____ 10. (Table 69-4: Value of the Marginal Product of Labor and Demand) If the product price is $2 per unit, the value of the marginal product for the fifth unit of labor is: a. $0. b. $20. c. $40. d. $60. e. $280.

Figure 69-2: Demand for Bricklayers in a Perfectly Competitive Labor Market

____ 11. (Figure 69-2: Demand for Bricklayers in a Perfectly Competitive Labor Market) If the price (wage) of bricklayers is $100 per day, that price was determined by: a. the firm hiring the bricklayers. b. demand and supply in the market for bricklayers. c. the government.

d. where VMPLbricklayers = MPbricklayers  P of output. e. the union representing the bricklayers.

____ 12. (Figure 69-2: Demand for Bricklayers in a Perfectly Competitive Labor Market) Based on the figure, if the price, or wage, of bricklayers is $80 per day, then: a. four bricklayers will be hired. b. six bricklayers will be hired. c. five bricklayers will be hired. d. three bricklayers will be hired. e. eight bricklayers will be hired.

____ 13. A factor demand curve will shift to the left because of: a. an increase in the price of the factor. b. an increase in the price of the good the factor produces. c. a decrease in the price of the factor. d. decrease in the elasticity of demand for the final product. e. a decrease in the price of the good the factor produces.

____ 14. A decrease in the demand for pastry chefs may come about because of an: a. increased concern for fitness. b. increase in the market wage rate for pastry chefs. c. increase in the productivity of pastry chefs. d. increase in the supply of other factors that pastry chefs use. e. decrease in the price of other factors that are employed with pastry chefs.

____ 15. A determinant of the demand for a factor of production is the: a. price of the factor. b. productivity of the factor. c. quantity of the factor supplied. d. compensating differential. e. elasticity of demand for the factor.

____ 16. Which of the following statements is true? a. If the price of labor is increased, holding everything else constant, the demand for labor will increase. b. If the wage is increased, holding everything else constant, the marginal product of labor will decrease. c. If the quantity of labor is increased, holding everything else constant, the marginal product of labor will rise. d. If the quantity of labor is increased, holding everything else constant, the value of the marginal product of labor will rise. e. If the quantity of labor is increased, holding everything else constant, the marginal product of labor will fall.

____ 17. If a perfectly competitive firm is hiring labor such that W > VMPL, then profit: a. is maximized. b. can be increased by hiring less labor. c. can be increased by hiring more labor. d. can be increased by decreasing the price of the output. e. can be increased by increasing the price of the output.

Scenario 69-1: Perfectly Competitive Market Assume the product market is perfectly competitive and that the labor market is also perfectly competitive. Also assume that the price of the firm's product is $5. The firm's total product with respect to labor is given in the table below.

Quantity of Labor (number Quantity of workers) of Output 0 0 1 7 2 13 3 18 4 21

____ 18. (Scenario 69-1: Perfectly Competitive Market) If the market wage is $30, how many workers will this perfectly competitive, profit-maximizing firm choose to hire? a. one b. two c. three d. four e. zero

____ 19. Tanya is an independent truck driver who delivers cargo all around the country. For Tanya, she and her truck are: a. complementary inputs in the production process. b. more productive when used separately, rather than when they are used together. c. substitute inputs in the production process. d. both examples of physical capital. e. both examples are human capital.

____ 20. An efficiency wage describes a wage rate that is: a. equal to the marginal factor cost of the most efficient worker at the firm. b. efficient because it is exactly equal to the wage rate implied by the marginal productivity theory. c. determined by collective bargaining between unions and management. d. equal to the VMPL adjusted so as to make the structure of compensation more equitable. e. above the equilibrium wage and is paid in order to provide workers with an incentive to perform efficiently. Factor Market PP

Answer Section

MULTIPLE CHOICE

1. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Definitional

2. ANS: E PTS: 1 DIF: M REF: Module 69/33

MSC: Concept-Based

3. ANS: A PTS: 1 DIF: E REF: Module 69/33

MSC: Definitional

4. ANS: B PTS: 1 DIF: E REF: Module 69/33

MSC: Concept-Based

5. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

6. ANS: A PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

7. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

8. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

9. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

10. ANS: C PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

11. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Concept-Based

12. ANS: E PTS: 1 DIF: M REF: Module 69/33

MSC: Critical Thinking

13. ANS: E PTS: 1 DIF: M REF: Module 69/33

MSC: Concept-Based

14. ANS: A PTS: 1 DIF: M REF: Module 69/33

MSC: Concept-Based

15. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Concept-Based

16. ANS: E PTS: 1 DIF: D REF: Module 69/33

MSC: Critical Thinking

17. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Concept-Based

18. ANS: B PTS: 1 DIF: M REF: Module 69/33

MSC: Analytical Thinking

19. ANS: A PTS: 1 DIF: M REF: Module 72/36

MSC: Critical Thinking

20. ANS: E PTS: 1 DIF: M REF: Module 73/37 MSC: Definitional