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Exam 18: The Markets for the Factors of Production

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Question 1

True/False

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The value of the marginal product of labor can be calculated as the price of the final good minus the marginal product of labor.

A) True
B) False

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Question 2

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Scenario 18-2 Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market. -Refer to Scenario 18-2. If the price of fresh Pacific salmon were to increase significantly, it is most likely that Gertrude would

A) reduce her demand for crew members.
B) sell some of her boats.
C) become a seller in at least one factor market.
D) hire more crew members.

E) B) and C)
F) B) and D)

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D

Question 3

Multiple Choice

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Suppose that a large lake in the middle of Minnesota evaporates, leaving more fertile farm land for growing corn available. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and rents earned by landowners?

Suppose that a large tornado destroys the fleet of fire trucks for the city of Omaha, Nebraska. What happens to the earnings of firefighters in Omaha?

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following?

Diminishing marginal product affects the shape of the production function in what way?

If your wage increases from $10 per hour to $15 per hour, then your

Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the value of the marginal product of the second worker?

Sunshine's Organic Market sells organic produce. Assume that labor is the only input that varies for the firm. The store manager has determined that if she hires 12 workers, the store can sell 300 pounds of produce per day. If she hires 13 workers, the store can sell 370 pounds of produce per day. The store earns $4 for each pound of produce that it sells, and the manager pays each worker $80 per day. Assuming no changes in either the daily wages paid to store workers or the price at which the store sells its produce, what is the minimum number of sales that would allow the firm to increase its profits by hiring a 14th worker?

Because a firm's demand for a factor of production is derived from its decision to supply a good in the market, it is called a

Table 18-7 -Refer to Table 18-7. The fact that the production function exhibits diminishing marginal productivity implies that

Define monopsony.

The Black Death in fourteenth-century Europe resulted in

Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. Suppose that there is a technological advance that allows MadeFromScratch employees to produce more cupcakes than they could before. Because of this change, the firm's

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. For which level of employment is the marginal product of labor greatest?

Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the fourth worker's marginal product of labor?

Figure 18-8 This figure below shows the labor market for automobile workers. The curve labeled S is the labor supply curve, and the curves labeled D₁ and D₂ are the labor demand curves. On the horizontal axis, L represents the quantity of labor in the market. -Refer to Figure 18-8. Which of the following is a possible explanation of the shift of the labor-demand curve from D1 to D2?

Figure 18-1 On the graph, L represents the quantity of labor and Q represents the quantity of output per week. -Refer to Figure 18-1. Suppose the firm hires each unit of labor for $700 per week, and each unit of output sells for $9. How many workers will the firm hire to maximize its profit?

Consider the labor market for short-order cooks. An increase in immigration will cause

Figure 18-2 The figure below shows the production function for a particular firm. -Refer to Figure 18-2. The marginal product of the fourth worker is