Exam 19: Factor Markets and the Distribution of Income

Use the following to answer questions: Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Rita chooses 40 hours of leisure and income of $280. When her hourly wage doubles, Rita chooses 30 hours of leisure and income of $700. The substitution effect is making her work _____, the income effect is making her work _____, and the substitution effect is _____ than the income effect.

A profit-maximizing producer employs each factor of production up to the point at which the value of the marginal product of the last unit of the factor employed is equal to the price per unit of output.

Javon has 80 hours per week to allocate between labor and leisure. Graph hours of leisure per week on the horizontal axis and income per week on the vertical axis. If Javon's hourly wage is $8, then the vertical intercept of his time allocation budget line is:

Use the following to answer questions: -(Table: Total Product of Labor at Debbie's Bakery) Look at the table Total Product of Labor at Debbie's Bakery. Debbie can sell cakes at $10 each. What is the value of the marginal product for the fourth worker?

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.

Because the efficiency wage is _____ the equilibrium wage, it may lead to a _____ of labor.

Suppose Professor Jones receives a promotion and an increase in her annual salary. Her labor supply curve will be _____ if the substitution effect is _____ than the income effect.

While individual labor supply curves may bend backward, market labor supply curves are likely to be upward-sloping throughout, since higher wages induce new workers to enter the labor market.

Use the following to answer questions: Figure: The Value of the Marginal Product Curve -(Figure: The Value of the Marginal Product Curve) In the figure The Value of the Marginal Product Curve, if a technological advance makes labor more productive and everything else stays the same, then the profit-maximizing quantity of labor:

The factor distribution of income reflects that:

Use the following to answer questions: Figure: The Demand for Bricklayers -(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the price for bricks laid in the wall is $0.10 a brick, the total production of bricks by the first three bricklayers is _____ bricks.

Use the following to answer question: -(Table: Droids and Moisture Output) Look at the table Droids and Moisture Output. Luke Skywalker uses droids to operate a moisture farm in a perfectly competitive market on the planet Tatooine. A barrel of moisture sells for 50 republic credits. A droid costs 675 republic credits per month to rent. How many droids should Luke rent?

According to the marginal productivity theory of income distribution, every factor of production is paid _____ the equilibrium value of its _____ product.

At Hamill Manufacturing of Pennsylvania highly skilled senior machinists are paid $70,000, excluding benefits, but the average skilled machinist generates approximately $137,000 in value added. This difference is due to the fact that:

The corn-based ethanol boom has dramatically increased the price of farm acreage. Using the concept of derived demand, explain how this happened. What is the role of the elasticity of supply of land in the increased price for land?

An increase in the wage rate will:

Which of the following statements is TRUE?

An efficiency wage is higher than the equilibrium wage to motivate the employee to work hard.

André has asked his boss for a pay raise. His boss is concerned that if he increases André's salary, André might work less. In other words, André's boss is concerned that leisure is a normal good for André and that his:

Unions are organizations of workers that try to raise wages and improve working conditions for their members through collective bargaining with employers.