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Exam 18: The Markets for the Factors of Production

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Question 131

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The labor supply curve reflects how workers' decisions about the labor-leisure tradeoff respond to changes in the opportunity cost of leisure.

A) True
B) False

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Question 132

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A competitive firm sells its output for $50 per unit. Assume that labor is the only input that varies for the firm. The marginal product of the 10th worker is 10 units of output per day; the marginal product of the 11th worker is 8 units of output per day. The firm pays its workers a wage of $160 per day. For the 10th worker, the value of the marginal product of labor is

A) $250.
B) $400.
C) $500.
D) $1,280.

E) A) and B)
F) B) and D)

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Question 133

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Capital owners are compensated according to the value of the marginal product of that capital.

Which of the following events would bring about a change in the value of the marginal product of labor?

Which of the following would decrease the demand for labor?

Consider the labor market for short-order cooks. An increase in the wages paid to fast-food workers will cause

When a firm hires labor up to the point where the wage is equal to the value of the marginal product of labor, it is

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 $6. The firm would not be interested in hiring a third worker unless the wage fell from its current level of $600 to what level?

If the value of the marginal product of labor is less than the wage, then the firm could

If a firm experiences diminishing marginal productivity of labor, the marginal product

A recent flood in the Midwest has destroyed much of the farmland that lies in fertile regions near the rivers. Describe the effect of the flood on the marginal productivity of land, labor, and capital. How would the flood affect the price of inputs? Provide some examples.

Table 18-9 The following table shows the production function for a particular business. The numbers represent the various labor and output combinations the firm may choose for its output on a daily basis. -Refer to Table 18-9. Suppose this firm charges a price of $5 per unit of output and pays workers a wage equal to $160 per day. How many workers should this firm hire to maximize its profit?

Over time, carpenters become aware of more attractive employment opportunities outside of carpentry. Does this development affect the demand for carpenters, or does it affect the supply of carpenters?

Because of diminishing returns, a factor in relatively low supply has a

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. Labor-market theory assumes that Gertrude's demand for crew members and her supply of fresh Pacific salmon result from her

Figure 18-10 -Refer to Figure 18-10. Assume W1 = $20 and W2 = $22, and the market is always in equilibrium. A shift of the labor demand curve from D1 to D2 would

Figure 18-5 The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily. -Refer to Figure 18-5. The firm would choose to hire three workers if

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 $6. What is the marginal profit of the fourth worker?

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. The marginal product of labor begins to diminish with the addition of which worker?

According to the neoclassical theory of distribution, the wages paid to workers depend on the