Exam 19: Factor Markets and the Distribution of Income

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, the VMPL curve will shift to the right if:

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 horizontal intercept of his time allocation budget line is:

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 is due partially to the fact that the wage rate includes other costs, such as employee benefits, that have to be added to the $70,000 salary.

Holly and Emily both have a BS in nursing from the same college. Both have been nurses for eight years. Holly works from 11 P.M. until 7 A.M., and Emily works from 7 A.M. until 3 P.M. Holly's salary is $1,000 per month higher than Emily's salary. This is an example of a wage disparity due to a compensating differential.

Assume Alex is maximizing utility by working 51 hours per week and his wage is $15 per hour. Which of the following statements is CORRECT?

A factor demand curve will shift because:

Which of the following statements is TRUE?

A profit-maximizing firm will base its decision to hire workers on the additional costs and benefits of each 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.

The firm's value of marginal product curve slopes downward:

Use the following to answer questions: Figure: Joanna's Time Allocation Budget Line -(Figure: Joanna's Time Allocation Budget Line) The figure Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. If Joanna's wage increases and as a result she consumes LESS leisure, her supply curve of labor is:

The opportunity cost of an hour of leisure is always assumed to be equal to the minimum wage.

Use the following to answer question: -(Table: Workers and Art Output) Look at the table Workers and Art Output. Suppose you achieve your dream of opening an art studio specializing in selling mud statues. You pay $10 in fixed costs for equipment and $9 per day to each of your workers who make the mud statues. The industry is perfectly competitive, with a current market price of $1. How many statues should you produce?

Assume that perfect competition exists in output and factor markets. The P = MC rule for profit maximization implies the same level of labor use that would be implied by using the VMPL = W rule.

One objection to the marginal productivity theory of income distribution is the existence of large disparities in income between factors of production that should receive the same payment.

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 a shortage in the market for mortar lowers bricklayers' productivity, then the value of the marginal product of the eighth bricklayer will be:

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 equilibrium market wage for bricklayers is $100 per day, _____ bricklayers will be hired by this masonry firm.

Lakisha's labor supply curve is downward-sloping for wage rates greater than $40 per hour and upward-sloping for wage rates less than $40 per hour. If leisure is a normal good for Lakisha and if the wage is _____, the substitution effect of a wage increase is _____ than the income effect.

The marginal productivity theory of income distribution says that:

In terms of labor supply, the substitution effect of a higher wage causes a(n):

Sam and Bob have the same educational background. Both have been policemen in Memphis for 10 years. Sam works from 11 P.M. until 7 A.M., and Bob works from 7 A.M. until 3 P.M. Sam's salary is $800 per month higher than Bob's salary. This is an example of a wage disparity due to: