Deck 19: The Markets for the Factors of Production

Question 1

The supply of labour in any one market depends on the opportunities available in other markets.

Answer 1

True

Question 2

In general, less productive workers are paid less than more productive workers.

Answer 2

True

Question 3

If a factor market is competitive, then the product market must also be competitive.

Answer 3

False

Question 4

A decrease in the price of milk products will not have any effect on the wages of dairy-farm workers.

Question 5

A competitive profit-maximising firm hires workers up to the point where the wage equals the price of the final good.

Question 6

Labour supply curves are always upward sloping.

Question 7

The quantity available of one factor of production can affect the marginal product of other factors.

Question 8

Suppose there is a profit-maximising competitive firm.If it increases the number of workers it employs it will notice that the value of the marginal product of labour falling.

Question 9

The value of the marginal product curve is the labour demand curve for a competitive, profit-maximising firm.

Question 10

Assuming the standard criteria for profit maximisation, a competitive firm's final good price will equal the wage paid to labourers divided by their marginal product.

Question 11

The wage rate both balances the supply and demand for labour and equals the value of the marginal product of labour.

Question 12

To restore equilibrium, an increase in labour demand must be met with a rightwards shift in the labour supply curve.

Question 13

Technological progress has led to a decrease in the demand for labour.

Question 14

The demand for apple pickers is derived from the demand for apples.

Question 15

In a competitive market for labour, the equilibrium wage always equals the value of the marginal product.

Question 16

In a competitive labour market, wages will adjust to equal the marginal product of labour.

Question 17

In a competitive factor market, the price of labour will increase as a firm hires more workers.

Question 18

An upward sloping supply curve for labour means that to get workers to work, more wages must increase.

Question 19

Movements of workers from country to country can cause shifts in the labour supply curve.

Question 20

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

Question 21

The purchase price of capital is the price a person pays to own that factor of production indefinitely, while the rental price of capital is the price paid to use capital for a limited time period.

Question 22

A competitive, profit-maximising firm hires workers until marginal product equals zero.

Question 23

Capital income does not include income paid to households for the use of their capital.

Question 24

For any given quantity of labour, an increase in price will cause the value of the marginal product of labour to increase.

Question 25

In the fishing industry, the capital stock includes the fishing-boats, nets and lines.

Question 26

The basic purpose of the theory of factor markets is to explain how income is distributed among factors of production.

Question 27

If land used for forestry loses its fertility, then over time the value of the marginal product of land will fall and the rental price on that land will fall.

Question 28

Firms pay out all of their earnings in the form of interest and dividend payments.

Question 29

If workers respond to an increase in the opportunity cost of leisure by taking less of it, their labour supply curve is backward sloping, while if workers respond to an increase in the opportunity cost of leisure by taking more of it, their labour supply curve is upward-sloping.

Question 30

The demand curve for each factor reflects the marginal productivity of that factor.

Question 31

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the market price of the output.

Question 32

Changes in the capital stock will often lead to changes in wages.

Question 33

For any given quantity of labour, an increase in price will cause the marginal product of labour to increase.

Question 34

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

Question 35

Productivity is low in most Asian countries.

Question 36

A massive power surge wipes out half of all computers in Melbourne.This will result in a lower demand for office workers, increasing their marginal product of labour and, hence, raising the wage of office workers.

Question 37

When a firm decides to retain its earnings instead of pay dividends, the shareholders are not being rewarded.

Question 38

If there is a change in the supply of labour there is no change to the earnings from capital and land.

Question 39

Increases in productivity are not responsible for increased standards of living in Australia.

Question 40

During the Black Death, with fewer workers available to farm the land, employers were able to choose better skilled labour to employ.

Question 41

The factors of production are best defined as the:

A)the factual description of the production process
B)the labour used to produce goods and services
C)wages paid to the workforce
D)inputs used to produce goods and services

Question 42

When labour supply increases, the equilibrium wage rises and employment increases.

Question 43

Rent, interest and profit are all forms of income paid to the owners of:

A)aggregate stock
B)aggregate demand
C)land and capital
D)long-term inventory

Question 44

The term 'factor markets' is used to describe markets for:

A)labour only
B)all inputs into the production process
C)all factors determining supply and demand
D)fixed inputs only

Question 45

In the Australian economy most labour services are:

A)final goods
B)inputs into other goods
C)imports
D)outputs

Question 46

Owners of capital earn their income in the form of which of the following?
(i) interest
(ii) profit
(iii) wages

A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(i), (ii) and (iii)

Question 47

Labour markets are different from most product markets because labour demand is:

A)horizontal
B)upward-sloping
C)derived
D)based on social needs, not economic

Question 48

When a petrol station sells petrol, which of the following would qualify as capital?
(i) the service attendants' time
(ii) the physical space on which the station exists
(iii) the petrol tanks and pumps

A)(i) only
B)(iii) only
C)(i) and (iii)
D)(ii) and (iii)

Question 49

The demand for a factor of production is a derived demand.Derived demand means that:

A)a firm's demand for a factor of production is derived from its supply decision
B)the firm's demand can be mathematically derived
C)both the demand for and supply of factors of production is derived from an external market
D)the demand curve for a good is derived from the factors of production used to produce that good

Question 50

Factor market analysis could not be complete without some characterisation of:

A)the marginal productivities of the different factors
B)market prices for final goods and services
C)product market demand
D)all of the above

Question 51

According to the information provided, when Gertrude participates in the labour market to hire crew members for her boats, she is most likely considered a:

A)good employer
B)seller
C)buyer
D)discriminator

Question 52

Labour markets are generally governed by:

A)forces of supply and demand
B)a firm's wish to keep costs low
C)primarily the demand for labour
D)primarily the supply of labour

Question 53

What are the three most important factors of production?

A)land, labour and profit
B)labour, wages and interest
C)land, labour and capital
D)capital, wages and profit

Question 54

A firm's willingness to pay for a factor of production ultimately depends on the demand for the goods the input is used to produce.This type of demand is called:

A)ultimate demand
B)derived demand
C)labour demand
D)supplied demand

Question 55

Which of the following best illustrates the concept of 'derived demand'?

A)an increase in the wages of abalone fishers will lead to an increase in the demand for fishing boats in boat factories
B)an abalone farm's decision to supply more abalone results from a decrease in the demand for station abalone
C)an increase in the price of fuel will lead to an increase in the demand for smaller fishing boats
D)an abalone fishing firm's decision to supply more abalone will lead to an increase in the demand for abalone fishers

Question 56

An example of labour in the fishing industry would be the:

A)trawling time saved by using motorised winches
B)trawling time saved by employing larger nets
C)increase in catch from better fish-finding technology
D)time that a fisher takes to sort the catch

Question 57

Labour markets are governed by the force(s) of:

A)supply and demand
B)regulation and supply
C)demand only
D)supply only

Question 58

If the forestry sector decreases its demand for land, then the equilibrium land rental price will rise but the land made available for forestry will not change.

Question 59

The economy's stock of equipment and structures is best described as?

A)aggregate stock
B)aggregate structures
C)capital
D)shares and derivatives

Question 60

According to the information provided, what type of market structure is most likely to characterise the fresh tuna market?

A)natural resource
B)oligopolist
C)perfect competitor
D)monopolistic competitor

Question 61

The value of the marginal product of labour (VMPL) will be:

A)higher than the marginal product of labour
B)lower than the marginal product of labour
C)equal to the marginal product of labour
D)we cannot say without more information

Question 62

According to the information provided, labour market theory assumes that Gertrude's demand for crew workers and her supply of fresh tuna results from:

A)her intrinsic desire to provide people a living wage
B)altruistic motives to provide tuna to consumers
C)her primary goal of maximising profit
D)all of the above

Question 63

According to the information provided, if Gertrude is a price taker in the crew market she has only to decide:

A)how many crew members to hire
B)the wage to pay the crew she hires
C)the size of the boats others use to catch tuna
D)the price of the tuna she will catch

Question 64

The value of the marginal product of labour is equal to the change in:

A)total revenue with the addition of the last worker
B)total cost with the addition of the last worker
C)total profit with the addition of the last worker
D)marginal cost with the addition of the last worker

Question 65

Assume labour is the only factor of production in a competitive product market.If there are increasing returns to scale then:

A)marginal product of labour is constant
B)marginal product of labour is decreasing
C)marginal product of labour is increasing
D)we cannot say without more information

Question 66

The value of the marginal product curve gets its shape from:

A)diminishing marginal product
B)increasing marginal product
C)tight labour markets
D)a surplus of workers

Question 67

The x-axis of the production function typically measures:

A)revenue
B)inputs
C)outputs
D)marginal product

Question 68

The value of the marginal product of labour curve is:

A)S-shaped
B)upward-sloping
C)downward-sloping at the start, then upward-sloping at the middle
D)downward-sloping

Question 69

Refer to the information provided.Suppose the price of fresh tuna suddenly increases, Gertrude is likely to react by:

A)becoming a seller in the factor market
B)hiring less crew workers
C)increasing her demand for crew workers
D)trying to decrease her catch to preserve fish stocks

Question 70

Suppose that the value of the marginal product of labour is now less than the wage.Hiring an additional worker would be:

A)profitable
B)unprofitable
C)either profitable or unprofitable depending on other circumstances
D)a socially responsible thing to do

Question 71

A firm's demand for labour is derived out of:

A)profit maximisation
B)cost minimisation
C)revenue maximisation
D)the price of a good

Question 72

Diminishing marginal product serves to have what effect on the shape of the production function?

A)the slope of the production function increases as the units of input increases
B)the production function decreases at a decreasing rate
C)it becomes flatter as input usage increases
D)all of the above

Question 73

The Gippsland region in Victoria produces a lot of potatoes from many potato farms.Suppose the sole input into the production of potatoes is the labour required to harvest.Which of the following statements regarding market structure do you think is most likely the case?

A)the market for potatoes is competitive and the supply of potato pickers is a monopoly
B)the market for potatoes is competitive and the market for potato pickers is competitive
C)the market for potatoes is a monopoly and the market for potato pickers is competitive
D)the market for potatoes is a monopoly and the supply of potato pickers is a monopoly

Question 74

When deciding how much labour to hire, a profit-maximising firm should hire workers until:

A)marginal profit equals the wage rate
B)marginal revenue equals marginal profit
C)marginal product equals the wage rate
D)marginal profit is zero

Question 75

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the:

A)marginal cost of the output
B)change in total profit
C)market price of the output
D)additional revenue

Question 76

In labour markets, the supply curve represents:

A)the supply of workers
B)the supply of a firm's product
C)the equilibrium wage rate
D)the marginal profit of labour

Question 77

If an increase in the number of workers leads to all workers becoming less productive, this situation is called:

A)diminishing profitability
B)diminishing marginal product
C)increasing marginal product
D)lessening production

Question 78

Refer to the information provided.If Gertrude is a competitor in both the fresh tuna market and the market for crew workers, she is called a price:

A)taker in the tuna market and a wage setter in the crew market
B)taker in both markets
C)taker in the crew market and a price setter in the tuna market
D)setter in both markets

Question 79

According to the information provided, in the fresh tuna product market Gertrude only has control over the:

A)price she charges for her fresh tuna
B)quantity of fresh tuna to catch and sell in the market
C)overall number of boats used to harvest fresh tuna
D)competitive environment of the market

Question 80

To maximise profit, a competitive firm hires workers up to the point where the:

A)marginal product and marginal cost curves intersect
B)value of the marginal product and marginal revenue curves intersect
C)value of the marginal product and the wage curves intersect
D)wage and the total revenue curves intersect