Deck 16: The Facts of Production

Question 1

If the demand for oranges falls, it is highly likely that the demand for:

A)orange juice will fall.
B)orange grove workers will fall.
C)apples will increase.
D)apple orchard workers will decrease.

Answer 1

orange grove workers will fall.

Question 2

If the demand for a good increases, it is likely that the demand for the factors of production used as its inputs will:

A)decrease.
B)increase.
C)stay the same.
D)either increase or decrease.

Answer 2

increase.

Question 3

The production function represents the:

A)relative values of the inputs and modes of production.
B)relative costs of the inputs across various modes of production.
C)relationship between the quantity of inputs and the quantity of outputs.
D)relationship between the cost of the inputs and the revenue generated by outputs.

Answer 3

relationship between the quantity of inputs and the quantity of outputs.

Question 4

If the demand for pizza increases, it is highly likely that the demand for:

A)chicken nuggets will fall.
B)soda will increase.
C)mozzarella cheese will increase.
D)All of these are a likely result.

Question 5

The increase in output that is generated by an additional unit of input is called:

A)the input-output relationship.
B)the production function.
C)resource product.
D)marginal product.

Question 6

The factor of production called "capital" refers to:

A)manufactured goods that are used to produce new goods.
B)any piece of raw material that is used to produce goods and services.
C)any input that's not a human being or part of the earth.
D)the amount of money a firm has access to when running its business.

Question 7

The ingredients that go into making any good or service are called the:

A)output makers.
B)factors of production.
C)factors of output.
D)production ingredients.

Question 8

Graphically, we can think of the marginal product of a factor as the:

A)slope of the total production curve, when output is plotted against the quantity of the input that is used.
B)slope of the total cost curve, when output is plotted against the costs of the quantity of the inputs used.
C)additional cost associated with producing one more unit of output.
D)additional inputs associated with producing one more unit of output.

Question 9

The factor of production called "land" can be defined as the:

A)earth and anything naturally occurring on or in it used to produce goods and services.
B)area of the earth exchanged in the real estate market by businesses.
C)fraction of a firm's total costs spent on rent, lease, or mortgage.
D)earth and any structures on it that are used to produce goods and services.

Question 10

The factors of production are the:

A)ingredients that go into making any good or service.
B)outputs that society as a whole has chosen to produce.
C)costs and benefits of a given production process.
D)inputs required for a given durable good.

Question 11

The relationship between the quantity of inputs and the quantity of outputs is called the:

A)cost function.
B)production function.
C)profit function.
D)resource function.

Question 12

The factor of production called "labor" can be defined as the:

A)time spent by employees in the production of goods, but not services.
B)fraction of total costs spent on employees.
C)number of worker-hours a business uses at a given time.
D)number of people a business has access to at any given time.

Question 13

Derived demand:

A)is the sum total of all factors of production for a given good or service.
B)refers to the demand for variable inputs when at least one fixed input exists.
C)refers to the supply decisions of a final good influencing the demand for the inputs needed to make it.
D)is only computed for long run demand decisions based on short run marginal changes.

Question 14

The demand for factors of production is known as _______ demand.

A)primary
B)derived
C)implied
D)production

Question 15

If the demand for baseballs increases, it is highly likely that the demand for:

A)leather will increase.
B)bats will decrease.
C)soccer balls will rise.
D)tennis balls will increase.

Question 16

If the demand for hand-sewn leather shoes increases, the demand for leather will likely:

A)also increase.
B)decrease slightly.
C)stay the same.
D)drop significantly, and producers will use another material.

Question 17

The marginal product of any input into the production process is the:

A)increase in output that is generated by an additional unit of input.
B)decrease in input that is generated by an additional unit of output.
C)constant ratio of inputs to outputs.
D)ratio of total output divided by total quantity.

Question 18

If the demand for hand-sewn leather shoes increases, it is highly likely that the demand for:

A)leather will decrease.
B)skilled hand-sewers of leather will increase.
C)needles and thread will decrease.
D)other types of shoes will increase.

Question 19

In general, economists place all factors of production into which three categories?

A)Land, labor, and capital
B)Technology, land, and capital
C)Land, labor, and technology
D)Technology, labor, and capital

Question 20

The demand for factor inputs:

A)depends upon the markets for the goods that the inputs are used to produce.
B)is referred to as imputed demand.
C)is independent of how much the inputs contribute to the value of the end product.
D)is generally constant across most factor markets.

Question 21

All factors of production eventually experience:

A)decreasing average variable cost.
B)diminishing marginal productivity.
C)decreasing average fixed costs.
D)diminishing total productivity.

Question 22

Farming in poor countries is considered to be:

A)capital intensive.
B)labor intensive.
C)production intensive.
D)cost intensive.

Question 23

The table shown displays the production schedule for a bakery in a competitive market that sells cookies for $2 each.

What is the value of the marginal product of labor for the sixth worker?

A)$50
B)$100
C)$470
D)$390

Question 24

The marginal product generated by an additional unit of input multiplied by the price of the output gives us the:

A)value of the marginal product.
B)marginal input profit.
C)production function.
D)production price.

Question 25

The table shown displays the production schedule for a bakery in a competitive market that sells loaves of bread for $5 each.

If each worker is paid $60 per day how many workers should the bakery hire?

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

Question 26

Holding other things constant, diminishing marginal productivity eventually happens to:

A)any input as more of the input is used.
B)labor as more is used, but not to land or capital.
C)capital inputs as more is used, but not to labor or land.
D)all inputs, with the exception of land as more of those inputs are used.

Question 27

A profit-seeking firm will choose the combination of inputs that:

A)maximizes profit.
B)maximizes costs.
C)has the lowest average variable cost.
D)has the lowest average total cost.

Question 28

Farming in poor countries is considered to be _______ intensive because _______.

A)labor; labor is relatively cheaper than machinery in poor countries
B)capital; the labor used is concentrated and shared across a lot of capital
C)labor; the tools in poor countries are more plentiful than the people
D)capital; the tools in poor countries are relatively cheaper than the cost of hiring labor

Question 29

A profit-seeking firm will choose the combination of inputs that maximizes profit, based on the:

A)ratio of one factor of production to another.
B)substitutability of each factor of production.
C)price of each factor of production.
D)total productivity of each factor of production.

Question 30

The table shown displays the production schedule for a bakery in a competitive market that sells cookies for $2 each.

If each worker is paid $90 per day, how many workers should the bakery hire?

A)1
B)4
C)6
D)9

Question 31

The question of how much labor a firm will hire comes down to:

A)whether added workers are going to generate more revenue or not.
B)if the added workers are going to add profits to the firm.
C)whether the value of the marginal product is greater than, less than, or equal to the average total cost.
D)the amount of capital that will be required in order to ensure the worker is productive.

Question 32

The table shown displays the production schedule for an apple orchard in a competitive market that sells a bushel of apples for $50.

What is the value of the marginal product of labor for the seventh worker?

A)$800
B)$3,750
C)$4,250
D)$400

Question 33

Firms in _______ countries tend to have more labor-intensive production processes, while firms in _______ countries tend to have more capital-intensive production processes.

A)small; large
B)large; small
C)rich; poor
D)poor; rich

Question 34

The table shown displays the production schedule for a bakery in a competitive market that sells loaves of bread for $5 each.

What is the value of the marginal product of labor for the fifth worker?

A)$250
B)$7
C)$25
D)$35

Question 35

In the market for labor:

A)workers make up the demand.
B)firms are the suppliers.
C)the price in the market is the wage.
D)individuals are never paid above their productivity.

Question 36

In the graph of supply and demand in the market for labor:

A)individuals make up the demand curve.
B)the equilibrium price of labor is the price of the output.
C)firms are the demanders.
D)equilibrium is rarely achieved.

Question 37

For a competitive firm, the value of the marginal product:

A)is always positive, nearing zero as quantity increases.
B)is always negative, nearing zero as quantity increases.
C)becomes zero when profits are maximized.
D)eventually decreases as quantity increases.

Question 38

The question of how much labor a firm will hire comes down to:

A)whether added workers are going to generate more revenue than what it costs to hire them.
B)if the added workers are going to add revenues to the firm.
C)whether the value of the marginal product is greater than, less than, or equal to the average total cost.
D)the healthcare costs the firm will incur by hiring added workers.

Question 39

The value of the marginal product is the:

A)marginal product generated by an additional unit of input multiplied by the price of output.
B)marginal revenue generated by an additional unit of output multiplied by the number of workers hired.
C)additional inputs required to produce one more additional unit of output.
D)average revenue generated by workers at a firm.

Question 40

The table shown displays the production schedule for an apple orchard in a competitive market that sells a bushel of apples for $50.

What is the value of the marginal product of labor for the third worker?

A)$40
B)$750
C)$2,000
D)$1,250

Question 41

In economics, the term "leisure" refers to:

A)nonwork activities that individuals enjoy doing.
B)any activities that individuals enjoy doing.
C)all nonwork activities.
D)the vacation time one receives when working.

Question 42

The curve formed by plotting the value of the marginal product for workers against the quantity of labor is:

A)downward sloping.
B)upward sloping.
C)perfectly elastic for competitive firms.
D)perfectly inelastic.

Question 43

Eli earns $8 an hour working at a local vineyard. He is scheduled to work two hours later today, but his friend calls and invites him to go rock climbing. Eli cannot decide between the two activities. His indecision implies that he values rock climbing for two hours:

A)more than $16.
B)less than $16.
C)at exactly $16.
D)at no more than $8.

Question 44

In the market for labor:

A)firms are the suppliers.
B)the price in the market is the interest rate.
C)workers are the suppliers.
D)there is never disequilibrium.

Question 45

By comparing the value of marginal product with the cost of each input, a firm can find the _______ quantity of inputs to use.

A)cost-maximizing
B)profit-maximizing
C)revenue-maximizing
D)output-maximizing

Question 46

The value of marginal product graphed against the quantity of a given input used gives us the value of marginal product curve, which is the same as the _______ curve.

A)total product
B)total revenue
C)demand
D)value product

Question 47

At the competitive firm's profit-maximizing quantity of labor:

A)the value of the last worker's marginal product is greater than or equal to the marginal cost of that input.
B)the value of the last worker's marginal product is less than the marginal cost of that input.
C)marginal profits are always positive.
D)the average product of labor is equal to the wage rate.

Question 48

Sadie earns $70 a day at her job. Sadie's friend Caroline invites her to go swimming with sharks on a day that Sadie is scheduled to work. Sadie decides to call off work and swim with sharks instead. Sadie's choice implies that her opportunity cost of working is:

A)less than $70.
B)greater than $70.
C)equal to $70.
D)This cannot be answered without more information.

Question 49

When the competitive firm's value of the marginal product of labor intersects the market-wage level, the firm:

A)can increase its profits by hiring any amount less than this point.
B)can increase its profits by hiring any amount greater than this point.
C)should consider shutting down because it is not earning profit.
D)has found the profit-maximizing quantity of labor to hire.

Question 50

The competitive firm's profit-maximizing quantity of labor occurs where:

A)the quantity of the marginal product of labor is equal to the market wage.
B)the value of the marginal product of labor is equal to the market wage.
C)the quantity of the marginal product of labor is equal to zero.
D)the value of the marginal product of labor is equal to the profit.

Question 51

We think about the cost of supplying labor as the:

A)opportunity cost of the individual's time.
B)input costs that go into producing a unit of labor.
C)average wage in the labor market.
D)the additional equipment and training that is required when an individual is hired.

Question 52

For a competitive firm, the price of its output _______ with each additional worker hired, and the marginal product of labor _______ with each additional worker hired.

A)stays constant; decreases
B)increases; decreases
C)increases; increases
D)decreases; stays constant

Question 53

For a competitive firm, the value of the marginal product of labor:

A)increases for each additional worker.
B)remains constant across workers.
C)decreases for each additional worker.
D)is zero when profits are maximized.

Question 54

Enzo currently works two part-time jobs. As a harvester at the local vineyard he earns $9 an hour, and as a bagger at the grocery store he earns $8 an hour. The benefits of working each job are the same. When Enzo decides to work at the vineyard instead of the grocery store, this implies that his opportunity cost of doing so is _______ per hour.

A)more than $8
B)less than $8
C)exactly $8
D)more than $8.

Question 55

A worker will be indifferent between spending the next hour on work or leisure if the benefit of another hour of work is:

A)greater than the opportunity cost.
B)exactly equal to the opportunity cost.
C)less than the opportunity cost.
D)constant for each additional hour worked.

Question 56

Suhani works at a call center where she can choose her hours, earning $12 per hour worked. Suhani is planning to spend three hours working on Friday, but a friend calls and invites her to go bungee jumping instead. If Suhani decides to go bungee jumping instead of working, we know that her opportunity cost of working for three hours is:

A)greater than $36.
B)greater than $12.
C)less than $36.
D)less than $12.

Question 57

A person will choose to work another hour if the benefit of doing so is:

A)greater than the opportunity cost.
B)exactly equal to the opportunity cost.
C)less than the opportunity cost.
D)greater than the benefit of the previous hour worked.

Question 58

Gabriel works as a waiter for a catering business. He is scheduled to work an event on Saturday that would earn him $100, Gabriel's sister invites him to go horseback riding on Saturday instead, but Gabriel decides to go to work. This implies that Gabriel's opportunity cost of working is:

A)greater than $100.
B)less than $100.
C)equal to $100.
D)no more than $100.

Question 59

When individuals are debating whether to supply labor in a competitive market, they think about all of the following except:

A)the cost in terms of forgone leisure.
B)the benefit of more income for each hour worked.
C)whether the benefits outweigh the costs.
D)the level of profits they bring to the firm.

Question 60

Enzo has been offered two jobs. As a harvester at the local vineyard he would earn $9 an hour, and as a bagger at the grocery store he would earn $8 an hour. The benefits of working each job are the same. The opportunity cost of working at the grocery store is _______ per hour.

A)more than $9
B)less than $9
C)exactly $9
D)exactly $8

Question 61

The labor supply price effect describes the _______ in the quantity of labor supplied in response to a _______ wage.

A)decrease; higher
B)increase; lower
C)increase; higher
D)None of these are correct.

Question 62

The market labor supply curve is typically:

A)upward sloping.
B)downward sloping.
C)perfectly elastic.
D)perfectly inelastic.

Question 63

A decrease in the quantity of labor supplied in response to a higher wage occurs due to the:

A)substitution effect.
B)price effect.
C)income effect.
D)tax effect.

Question 64

If the income effect outweighs the price effect of a wage increase, the labor supply curve will:

A)slope upward.
B)slope downward.
C)be perfectly flat.
D)be perfectly vertical.

Question 65

Labor supply will decrease when wages increase if the _______ effect outweighs the _______ effect.

A)price; income
B)income; price
C)substitution; income
D)price; substitution

Question 66

Which of the following is not a characteristic of the market labor supply curve?

A)It is always upward sloping.
B)It reflects people's willingness to work more when wages are higher.
C)It shows the relationship between the price of labor and the quantity of labor supplied.
D)It shifts with changes in the opportunity cost for work.

Question 67

The labor supply income effect describes the _______ in the quantity of labor supplied due to _______.

A)increase; a higher wage
B)decrease; the greater demand for leisure caused by a higher income
C)decrease; a lower wage
D)increase; the greater demand for leisure caused by a higher income

Question 68

Which of the following would be considered a "leisure" activity by economists?

A)Mopping the floor at McDonald's for minimum wage
B)Mopping your kitchen floor
C)Folding sweaters while working at the Gap
D)None of these activities would be considered leisure.

Question 69

If the price effect outweighs the income effect of a wage increase, the quantity of labor supplied will:

A)increase.
B)decrease.
C)remain the same.
D)be negative.

Question 70

In general, as wages go up:

A)people are willing to work less.
B)people are willing to work more.
C)the opportunity cost of working increases.
D)the benefit of working goes down.

Question 71

Which of the following would not be considered a "leisure" activity by economists?

A)Making dinner
B)Going skiing
C)Cleaning the bathroom floor
D)Making a work call from home

Question 72

Safiya works at a factory for $15 an hour and typically works 40 hours a week. Safiya gets a pay raise and now earns $20 an hour. She decides to work 45 hours a week at her new wage. Safiya's response to the pay increase demonstrates that the _______ effect outweighs the _______ effect.

A)income; prices
B)price; income
C)income; substitution
D)labor; price

Question 73

The labor supply curve will be downward sloping if the _______ effect outweighs the _______ effect.

A)income; price
B)price; income
C)substitution; income
D)price; substitution

Question 74

If the price effect outweighs the income effect of a wage increase, the labor supply curve will:

A)slope downward.
B)slope upward.
C)be perfectly horizontal.
D)be perfectly vertical.

Question 75

The increase in the quantity of labor supplied in response to a higher wage is called the:

A)price effect.
B)labor effect.
C)income effect.
D)substitution effect.

Question 76

Which of the following would be considered a "leisure" activity by economists?

A)Driving an on-duty taxi
B)Driving to the movies
C)Driving a forklift for work
D)Driving a city bus

Question 77

Safiya works at a factory for $15 an hour and typically works 40 hours a week. Safiya receives a pay raise and now earns $20 an hour. She decides to work 45 hours a week at her new wage. Which of the following statements is true about her decision to increase her hours worked upon receiving a wage increase?

A)The price effect outweighed the income effect of her pay raise.
B)Her labor supply curve is upward sloping.
C)This type of outcome is typically observed.
D)All of these statements are true.

Question 78

If the income effect outweighs the price effect of a wage increase, the quantity of labor supplied will:

A)increase.
B)decrease.
C)remain constant.
D)drop to zero.

Question 79

The decrease in the quantity of labor supplied due to the greater demand for leisure caused by a higher income is called the:

A)income effect.
B)price effect.
C)substitution effect.
D)labor effect.

Question 80

In general, as wages go up:

A)people are willing to work less.
B)the opportunity cost of leisure goes up.
C)the opportunity cost of leisure goes down.
D)people will always work more.