Deck 18: Markets for Factors of Production

Question 1

Kevin owns a personal training gym in Darwin. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires four trainers, the value of marginal product of the fourth trainer equals

A) 1 client.
B) $10.25.
C) $41.
D) $410.
E) 10 clients.

Answer 1

$41.

Question 2

Which of the following is NOT a factor of production?

A) Capital
B) Labour
C) Bonds
D) Entrepreneurship
E) Land

Answer 2

Bonds

Question 3

The table has the marginal products for workers at Bart's Bats, a cricket bat factory.
Using the above table, if the price of a bat is $8, then the value of marginal product of labour of the fourth worker is

A) $1.375.
B) $40.
C) 5 bats.
D) $0.625.
E) None of the above answers is correct.

Answer 3

$40.

Question 4

The demand for a resource is derived from the

A) supply of the resource.
B) supply of complement resources.
C) supply of substitute resources.
D) demand for the good or service that the resource is used to produce.
E) price of the resource.

Question 5

Kevin owns a personal training gym in Darwin. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires one trainer, the value of marginal product of this trainer equals

A) 4 clients.
B) $410.
C) $164.
D) $41.
E) None of the above.

Question 6

When hiring labour, to maximise profit a firm hires labour

A) if the workers are not unionised.
B) until the value of marginal product is greater than the wage rate.
C) until the value of marginal product equals the wage rate.
D) until the value of marginal product is less than the wage rate.
E) until the value of marginal product equals the marginal revenue from hiring the worker.

Question 7

If Australia Post hires another worker, Australia Post will be able to deliver an additional 20 packages an hour. The price of each package is $5. The value of this worker's marginal product is equal to

A) $5.
B) $100.
C) $20.
D) 20 packages.
E) $4.

Question 8

The table has the marginal products for workers at Bart's Bats, a cricket bat factory.
Using the above table, if the wage rate for a worker in a cricket bat manufacturing plant is $18 an hour, and the price of a bat is $3, then the firm will hire ________ workers.

A) 1
B) 2
C) 3
D) 4
E) More information is needed.

Question 9

Which of the following factors have a derived demand? i. Labour
Ii) Capital
Iii) Raw materials

A) i, ii and iii
B) i and ii
C) i only
D) ii and iii
E) i and iii

Question 10

Kevin owns a personal training gym in Darwin. He charges $41 per session. The above table shows the marginal product of trainers in Kevin's gym. If Kevin hires three trainers, the value of marginal product of the third trainer equals

A) $123.
B) 2 clients.
C) $82.
D) $369.
E) 9 clients.

Question 11

Entrepreneurship differs from the other factors of production because it

A) is the most important.
B) is not real.
C) has only existed since the new economy of the 1990s.
D) is not paid.
E) is not traded in a factor market.

Question 12

The table has the marginal products for workers at Bart's Bats, a cricket bat factory.
Using the above table, if the wage rate for a worker in a cricket bat manufacturing plant is $12 an hour, and the price of a bat is $3, then the firm will hire ________ workers.

A) 1
B) 2
C) 3
D) 4
E) 5

Question 13

The table has the marginal products for workers at Bart's Bats, a cricket bat factory.
Using the above table, suppose the price of a bat is $3. If the wage rate for a worker in a cricket bat manufacturing plant is $18 an hour, then the firm will hire ________ workers; if the wage rate falls to $12 an hour, then the firm will hire ________.

A) 5; 4
B) 1; 2
C) 3; 3
D) 3; 5
E) 2; 4

Question 14

Which of the following represents a derived demand? Demand for

A) a hamburger eaten by Sam when she is hungry.
B) a checkout chic at your local Safeway store.
C) new clothing by Matthew, who is starting a new job.
D) golf balls by Jose, who is going golfing with his boss.
E) a car by Jack, who wants a car to get to school.

Question 15

The rule for employing a profit-maximising amount of labour is to continue to hire additional workers until the additional worker's value of marginal product is

A) equal to the price of the product.
B) less than the price of the product.
C) greater than 1.
D) equal to the wage rate.
E) less than the wage rate.

Question 16

The demand for a factor of production is called a derived demand because it is derived from

A) a financial market.
B) the demand for the goods and services produced by the factor of production.
C) the supply of the factor of production.
D) the ideas of an entrepreneur.
E) a table of specific prices and quantities.

Question 17

Sky High Camping offers overnight camping in tree houses built on its 10-hectare property. Workers are hired to build and maintain the tree houses. Which of the following are true statements? i. The land and the trees grown are considered natural resources.
Ii) The demand for trees and land is not a derived demand because supply is limited.
Iii) The demand for workers is considered a derived demand because they help produce the service of tree-house camping.

A) ii and iii
B) i and iii
C) i only
D) iii only
E) i, ii and iii

Question 18

The value of the marginal product of labour is calculated by multiplying the ________ by the ________.

A) wage rate; price of a unit of the output
B) total product; wage rate
C) marginal product of labour; price of a unit of the output
D) quantity of labour; wage rate
E) marginal product of labour; wage rate

Question 19

If the demand for a good increases, the demand for the factors used to produce the good

A) increases.
B) stays the same.
C) decreases.
D) could increase, decrease or stay the same depending on whether the demand for the good is elastic, inelastic or unit elastic.
E) None of the above answers is correct.

Question 20

The value of the marginal product of labour

A) declines only if each worker is paid more than the previous worker.
B) always increases as more labour is hired.
C) at some point declines as more workers are hired.
D) at first decreases and then increases as more workers are hired.
E) is constant as long as each worker is paid the same wage rate.

Question 21

The rule for maximising profit is to hire labour up to the point at which the value of marginal product

A) equals the price of the product produced.
B) is greater than the wage rate.
C) equals the wage rate.
D) is less than the wage rate.
E) is a mirror image of the wage rate.

Question 22

If the price of capital rises, in the long run the demand for labour

A) definitely decreases.
B) definitely increases.
C) could increase or decrease, depending on the change in the scale of production.
D) definitely is unaffected.
E) changes only if the supply of labour changes.

Question 23

The above figure shows the demand for labour curve for workers at a Pizza Hut in Darwin. If the wage rate is $6 per hour, then the i. quantity of workers Pizza Hut demands is 10 workers.
Ii) Pizza Hut would have been willing to hire the 6th worker even if it had to pay $7 per hour rather than $6 per hour.
Iii) value of the marginal product of the 10th worker is $6 per hour.

A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii and iii

Question 24

A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $53. Which of the following is correct?

A) The firm is employing the profit-maximising quantity of labour.
B) Too much labour is currently employed and the firm will lay off some workers.
C) Too few workers are currently employed and the firm will hire more workers.
D) The firm should shut down and produce nothing.
E) More information about the price of the product is needed.

Question 25

If the marginal product of labour increases, the firm's demand for labour curve

A) might shift leftward or rightward depending on whether the demand for the firm's product is elastic or inelastic.
B) does not shift but there is a movement along it.
C) shifts rightward.
D) does not shift, and there is no movement along it.
E) shifts leftward.

Question 26

For a firm selling its product in a perfectly competitive market, the demand curve for a factor of production is downward sloping because

A) a factor's marginal product increases when the price of the factor increases.
B) firms must hire more factors of production if they want to increase their output.
C) to sell more output, the firm must lower the price of its product.
D) of the diminishing marginal product of the factor.
E) None of the above answers is correct.

Question 27

As the wage rate rises, the quantity of labour an individual supplies

A) increases at all wage rates.
B) decreases at all wage rates.
C) initially increases at low wage rates and then decreases at high wage rates.
D) does not change.
E) initially decreases at low wage rates and then increases at high wage rates.

Question 28

If we compare the value of marginal product of labour curve and the demand for labour curve we see that

A) the demand for labour curve lies above the value of marginal product curve.
B) the demand for labour curve is twice as steep but they share the same axes.
C) the demand for labour curve has no relationship to the value of marginal product curve.
D) they are the same thing.
E) the value of marginal product curve is twice as steep.

Question 29

If the price of the firm's output increases, the demand for labour curve

A) remains constant.
B) shifts rightward.
C) shifts leftward.
D) might shift leftward or rightward depending on whether the demand for the firm's product is elastic or inelastic.
E) could shift rightward, leftward or remain constant.

Question 30

The wage paid to labour is

A) a factor input.
B) part of the firm's normal profit.
C) an input of the workforce.
D) a factor output.
E) a factor price.

Question 31

If a firm uses new technology that increases its demand for labour, the firm's demand for labour curve

A) shifts rightward only if the demand for labour is elastic.
B) shifts rightward only if the demand for labour is inelastic.
C) shifts rightward regardless of whether the demand for labour is elastic or inelastic.
D) does not shift, but there is a movement along it.
E) shifts leftward.

Question 32

The price of capital falls. Assuming that the firm does not increase the quantity it produces, in the long run the firm's demand for labour curve

A) shifts rightward only if the elasticity of demand for labour is elastic.
B) shifts leftward.
C) shifts rightward only if the elasticity of demand for labour is inelastic.
D) does not shift, but there is a movement along it.
E) does not shift, and there is no movement along it.

Question 33

Which of the following is true?

A) The value of marginal product equals the price of the good produced divided by the marginal product.
B) The value to a firm of hiring another worker is the worker's value of marginal product.
C) A firm will hire more workers if the wage rate is greater than the value of marginal product.
D) The value of marginal product is the cost of hiring a worker.
E) The value of marginal product increases as more workers are hired.

Question 34

The above figure shows the initial demand for labour curve at a Pizza Hut in Darwin. The wage rate is $6 an hour. If the demand for pizzas increases so that the price of a pizza rises,

A) the supply of labour curve shifts rightward.
B) Pizza Hut's demand for labour curve shifts leftward.
C) at the wage rate of $6 per hour, Pizza Hut hires fewer than 10 workers.
D) Pizza Hut's demand for labour curve shifts rightward.
E) the supply of labour curve shifts leftward.

Question 35

Suppose the Adelaide Crows are considering adding another backup ruckman to their list of players. If the salary the Crows would have to pay equals $1,000,000 and the value of marginal product of the new ruckman equals $1,200,000, to maximise their profit the Crows should

A) not add the new ruckman and, de-list at least one other backup ruckman.
B) not add the new ruckman.
C) add the new ruckman.
D) add two new ruckmen.
E) Not enough information is given to determine if the Crows should hire the ruckman.

Question 36

Robotic technology is a substitute for labour in many manufacturing processes. If the price of robotic technology decreases and the scale of the firm's production does not change, there is

A) a decrease in the demand for labour.
B) an increase in the demand for labour.
C) a decrease in the supply of labour.
D) an increase in the supply of labour.
E) no change in the demand for labour.

Question 37

The demand curve for a factor of production is

A) vertical.
B) the same as the factor's value of marginal product curve.
C) upward sloping.
D) the same as the factor's supply curve.
E) None of the above answers is correct.

Question 38

If the value of marginal product of the 10th worker is $60, then the

A) marginal cost of the 10th worker will be $6.
B) wage rate of the 10th worker will be $6.
C) firm will not hire the worker if the wage rate is less than $60.
D) quantity of labour demanded when the wage rate is $6 will be 10 workers.
E) quantity of labour demanded when the wage rate is $60 will be 10 workers.

Question 39

If the wage rate exceeds the value of marginal product, a firm

A) can increase its profit by firing some workers.
B) can increase its profit by increasing the wage rate and not changing its employment.
C) can increase its profit by hiring more workers.
D) can increase its profit by increasing the wage rate and increasing its employment.
E) is maximising its profit.

Question 40

The demand curve for labour is the same as the firm's

A) marginal revenue curve.
B) value of marginal product of labour curve.
C) marginal cost curve.
D) wage rate curve.
E) supply of output curve.

Question 41

If the supply of labour increases, then the equilibrium wage rate ________ and the equilibrium quantity of labour ________.

A) might rise, fall or not change; increases
B) falls; increases
C) rises; increases
D) falls; does not change
E) rises; might increase, decrease, or not change

Question 42

What is the effect on the supply of low-skilled labour of an increase in the number of people pursuing higher education?

A) It becomes more inelastic.
B) The supply of low-skilled labour increases.
C) The supply of low-skilled labour decreases.
D) It becomes more elastic.
E) None of the above answers is correct.

Question 43

Because leisure time has value to many workers, as wages increase, the labour supply curve

A) becomes a vertical line.
B) has a positive slope.
C) bends backwards and has a negative slope.
D) bends forward and has a positive slope.
E) becomes a horizontal line.

Question 44

The more people who remain in school for full-time education and training, the ________ is the ________ low-skilled labour.

A) larger; supply of
B) smaller; supply of
C) smaller; demand for
D) larger; demand for
E) less elastic; demand for

Question 45

The supply of labour curve shifts leftward if

A) the population increases.
B) the wage rate falls.
C) the supply of labour increases.
D) the demand for labour curve shifts leftward.
E) the supply of labour decreases.

Question 46

The figure above shows the market supply of labour curve. Which of the following might be the reason the labour supply curve shifted from S0 to S1?

A) An increase in the wage rate.
B) An increase in the adult population.
C) An increase in technology.
D) A decrease in the number of women in the workforce.
E) A decrease in technology.

Question 47

If both the demand for labour and the supply of labour increase, then the equilibrium wage rate ________ and the equilibrium quantity of labour ________.

A) falls; increases
B) falls; decreases
C) rises; increases
D) rises; might increase, decrease or not change
E) might rise, fall or not change; increases

Question 48

A change in the wage rate

A) shifts the supply of labour curve rightward.
B) does not shift the supply of labour curve but instead leads to a movement along it.
C) either shifts the supply of labour curve leftward or rightward depending whether the demand for labour curve shifts rightward or leftward.
D) shifts the supply of labour curve so that the supply becomes more elastic.
E) shifts the supply of labour curve leftward.

Question 49

Which of the following is a method used by unions to increase the demand for their members' labour?

A) Decrease the marginal product of union members.
B) Oppose minimum wage laws.
C) Increase imported goods and services
D) Oppose immigration restrictions.
E) Support import restrictions.

Question 50

An individual's labour supply curve eventually bends backward because at a high enough wage rate,

A) very few workers are hired.
B) employers are willing to hire more workers.
C) people desire more leisure time.
D) people are willing to work more hours.
E) more people enter the labour market to search for jobs.

Question 51

The figure above shows the market supply of labour curve. Which of the following might be the reason the labour supply curve shifted from S0 to S1?

A) A decrease in technology.
B) A decrease in the adult population.
C) An increase in the wage rate.
D) An increase in the number of women in the workforce.
E) An increase in technology.

Question 52

A technological change that raises the value of marginal product of capital ________ the rental rate for capital because the ________.

A) raises; demand curve for capital shifts rightward
B) lowers; supply curve of capital shifts rightward
C) lowers; demand curve for capital shifts leftward
D) raises; supply curve of capital shifts leftward
E) raises; demand curve for capital shifts leftward

Question 53

Suppose in Canberra the quantity of economists demanded is less than the quantity supplied by 2,000 economists. As a result,

A) the labour supply curve for economists in Canberra is vertical.
B) there is equilibrium in this market.
C) the labour demand curve for economists in Canberra shifts rightward.
D) salaries for economists fall.
E) there is a shortage of economists in Canberra.

Question 54

Which of the following is NOT a method used by unions to increase their members' wages?

A) Increase union members' productivity.
B) Support minimum wage increases.
C) Increase the demand for union workers.
D) Limit the supply of non-union workers.
E) None of the above because they are all methods unions use to increase their members' wages.

Question 55

A rise in the minimum wage increases the demand for union labour because this policy change

A) raises the productivity of union labour.
B) lowers the wage rate paid to union labour.
C) lowers the productivity of union labour.
D) lowers the cost of a substitute for union labour.
E) raises the cost of a substitute for union labour.

Question 56

When the rental rate for capital falls, the ________ capital ________.

A) demand for; increases
B) quantity demanded of; increases
C) demand for; decreases
D) quantity demanded of; decreases
E) supply of; increases

Question 57

If a union restricts the supply of labour, it ________ the wage rate and ________ the level of employment.

A) lowers; decreases
B) raises; decreases
C) raises; does not change
D) lowers; increases
E) raises; increases

Question 58

Peyton is a personal trainer and works at several gyms in her neighbourhood. Peyton's labour supply curve is shown above. Which of the following statements is true regarding Peyton's labour supply? i. Peyton is willing to supply more labour and give up leisure at wages between $50 and $75 per hour.
Ii) Peyton will not work for less than $30 per hour.
Iii) If the wage increases above $75 per hour, Peyton will choose to take more leisure.

A) ii and iii
B) ii only
C) i and ii
D) iii only
E) i, ii and iii

Question 59

Of the following, a union is LEAST likely to support

A) laws that increase the quantity of the nation's imports.
B) laws that restrict immigration into the country.
C) an increase in the minimum wage rate.
D) on-the-job training that makes their members more productive.
E) programs that boost the demand for the goods and services their members produce.

Question 60

Unions support immigration restrictions because the restrictions create

A) a decrease in the supply of union labour.
B) an increase in the supply of union labour.
C) a decrease in the demand for union labour.
D) unemployment.
E) an increase in the demand for union labour.

Question 61

The demand for a nonrenewable resource is

A) not defined because the resource can be used only once.
B) fixed and cannot change.
C) perfectly elastic.
D) determined by the value of its marginal product.
E) perfectly inelastic.

Question 62

The supply of nonrenewable natural resources is

A) perfectly elastic.
B) perfectly inelastic.
C) inelastic at high prices and elastic at low prices.
D) elastic at high prices and inelastic at low prices.
E) always elastic but not necessarily perfectly elastic.

Question 63

The proposition that the price of a resource is expected to rise at a rate equal to the interest rate is called the

A) Hotelling Principle.
B) diminishing marginal revenue product.
C) derived demand for productive resources.
D) Discounted Value Proposition.
E) Interest Rate Theory.

Question 64

In the market for land, the supply curve is

A) U-shaped.
B) upward sloping.
C) horizontal.
D) downward sloping.
E) vertical.

Question 65

Over time, the actual (not expected) price of a nonrenewable natural resource

A) stays the same.
B) could rise, fall or stay the same.
C) falls.
D) rises.
E) first rises and then falls.

Question 66

Which of the following is a renewable resource? i. A forest of pine trees grown by ForestrySA
Ii) Oil reserves in Saudi Arabia
Iii) The Amazon Rainforest

A) i and iii
B) ii and iii
C) i only
D) i and ii
E) i, ii and iii

Question 67

The price of coal is currently $80 per tonne and the interest rate is 10 per cent per year. If next year's expected price is $86 per tonne, a firm that owns 1,000 tonnes of coal

A) will sell none of its coal now but might sell it all next year.
B) will sell half of the coal today and half of it next year.
C) might or might not sell the coal today, depending on the price the firm paid for the coal.
D) will sell none of its coal now but will sell it all next year regardless of the price next year.
E) will sell all its coal now.

Question 68

Refer to the figures above to answer this question. Figure B represents the market for ________ because ________, all else held the same.

A) land; the Hotelling Principle states rental rates will increase predictably over time
B) capital; as the rental rate increases, the quantity of capital supplied increases and the quantity of capital demanded decreases
C) land; landowners respond to higher rental rates by making more land available
D) capital; the Hotelling Principle predicts that prices will vary inversely with the interest rate
E) a nonrenewable resource; as the interest rate increases, less of the resource is supplied

Question 69

The aggregate quantity of land supplied

A) is fixed.
B) is constantly increasing.
C) varies depending on its price.
D) is perfectly elastic.
E) depends on the buying and selling decisions of individuals.

Question 70

The rental rate of land is the payment for the resource land. The lower the rental rate, the greater the

A) quantity supplied of land.
B) elasticity of supply for land.
C) supply of land.
D) demand for land.
E) quantity demanded of land.

Question 71

Refer to the figures above to answer this question. Figure ________ represents the market for ________ because its supply is ________.

A) B; land; elastic as predicted by the Hotelling Principle
B) A; land; perfectly inelastic because the quantity of land is fixed
C) B; a nonrenewable resource; demand changes as the economy changes
D) A; a nonrenewable resource; inelastic because reserves can always be discovered
E) B; land; inelastic given only a limited amount of land is available

Question 72

The supply of each particular block of land is

A) elastic but not perfectly elastic.
B) inelastic but not perfectly inelastic.
C) unit elastic.
D) perfectly inelastic.
E) perfectly elastic.

Question 73

A producer's supply of a nonrenewable natural resource is

A) always decreasing because the resource is always being used.
B) perfectly elastic.
C) determined by the value of the resource's marginal product.
D) perfectly inelastic.
E) not relevant because non-renewable resources are used only once.

Question 74

According to the Hotelling Principle, the price of a nonrenewable resource is expected to

A) fall at a rate equal to the interest rate.
B) remain constant over time.
C) rise at a rate equal to the interest rate.
D) fall slowly over time.
E) fluctuate randomly.