Deck 11: Factor Markets

Question 1

The four different types of factors of production include, land, labor, capital, and:

A) intermediate goods.
B) raw material.
C) entrepreneurship.
D) natural resources.

Answer 1

C

Question 2

Which one of the following does NOT fall in the category of factors of production?

A) land
B) labor
C) entrepreneurship
D) natural resources

Answer 2

D

Question 3

Because the demand for a factor of production depends on the demand for the good or service that the factor produces, factor demand is referred to as _____ demand.

A) inelastic
B) elastic
C) derived
D) aggregate

Answer 3

C

Question 4

The term _____ demand is used to refer to demand for factors of production because their demand is based on the demand for the good or service that they are used to produce.

A) inelastic
B) elastic
C) derived
D) aggregate

Question 5

A firm's demand for labor is determined by the:

A) most that a firm is willing to pay for each unit of labor.
B) most that workers are willing to work at a given wage.
C) total number of workers who are available in an economy.
D) minimum wage that is mandated by the government.

Question 6

The marginal product of labor refers to the extra:

A) revenue that is generated by one more worker.
B) output that is produced by one more worker.
C) wage that is earned by one more worker.
D) capital that is needed to hire one more worker.

Question 7

According to the law of diminishing returns, all else equal, an increase in the number of workers leads to:

A) a decrease in the total output that is produced by the workers.
B) a decrease in total revenue that is generated by the workers.
C) an increase in the marginal product of workers.
D) a decrease in the marginal product of workers.

Question 8

The contribution of an additional worker to the total revenue of a firm is known as the:

A) marginal product.
B) marginal revenue product.
C) total product.
D) marginal revenue.

Question 9

A firm's labor demand curve is equivalent to its marginal _____ curve.

A) product
B) revenue
C) revenue product
D) cost

Question 10

A firm will be willing to hire additional workers if the _____ is greater than the:

A) marginal product; wage.
B) marginal revenue product; wage.
C) wage; marginal product.
D) wage; marginal revenue product.

Question 11

A firm will be willing to hire additional workers if the marginal _____ is _____ than the wage.

A) product; less
B) product; greater
C) revenue product; less
D) revenue product; greater

Question 12

Irrespective of the type of market, the marginal revenue product curve of a firm is:

A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.

Question 13

A firm in a perfectly competitive market is looking to hire an additional worker. The price of the good produced by the firm is $6, and the marginal product of the worker is 12. Therefore, the marginal revenue product of the worker is:

A) $2.
B) $6.
C) $18.
D) $72.

Question 14

A firm in a perfectly competitive market is looking to hire an additional worker. The marginal revenue from selling the good produced by the worker is $3, and the marginal product of the worker is 12. Therefore, the marginal revenue product of the worker is:

A) $4.
B) $9.
C) $15.
D) $36.

Question 15

All else equal, an increase in the marginal product of workers will lead to _____ in the marginal revenue product of the firm, and the firm will hire _____ workers.

A) a decrease; fewer
B) a decrease; more
C) an increase; fewer
D) an increase; more

Question 16

Use Table: Marginal Revenue Product. The table lists the number of workers and the marginal revenue product per hour that is generated by each worker for a firm in a perfectly competitive market. If the hourly wage of workers is $12 per hour, then the firm will hire _____ workers.

A) three
B) four
C) five
D) six

Question 17

Use Table: Marginal Revenue Product. The table lists the number of workers and the marginal revenue product per hour that is generated by each worker for a firm in a perfectly competitive market. If the hourly wage of workers is $10 per hour, then the firm will hire _____ workers.
​

A) three
B) four
C) five
D) six

Question 18

Use Table: Marginal Revenue Product. The table lists the number of workers and the marginal revenue product per hour that is generated by each worker for a firm in a perfectly competitive market. If the marginal product of the fourth worker is 6, then we can conclude that the price of the good is:
​

A) $2.
B) $3.
C) $4.
D) $5.

Question 19

Use Table: Marginal Revenue Product. The table lists the number of workers and the marginal revenue product per hour that is generated by each worker for a firm in a perfectly competitive market. If we know that the firm is hiring five workers, then the wage of labor is greater than _____ and less than or equal to:
​

A) $4; $10.
B) $10; $14.
C) $14; $18.
D) $18; $22.

Question 20

All else equal, if a technological improvement increases the marginal product of workers, then the marginal revenue product of workers will _____, and the firms will hire _____ workers.

A) increase; more
B) increase; fewer
C) decrease; more
D) decrease; fewer

Question 21

All else equal, if the price of the good that a firm produces decreases, then the marginal revenue product of workers will _____, and the firms will hire _____ workers.

A) increase; more
B) increase; fewer
C) decrease; more
D) decrease; fewer

Question 22

All else equal, if the price of the good that a firm produces decreases, then the marginal revenue product of workers will _____, and the marginal revenue product curve will shift:

A) increase; right.
B) decrease; left.
C) increase; left.
D) decrease; right.

Question 23

If a firm increases the total amount of capital that is used in production, then all else equal, the marginal revenue product curve will shift _____, and the firms will hire _____ workers.

A) right; fewer
B) right; more
C) left; fewer
D) left; more

Question 24

If a technological improvement increases the marginal product of all workers, then the marginal revenue product of workers will _____, and the market demand curve for labor will shift:

A) increase; right.
B) increase; left.
C) decrease; right.
D) decrease; left.

Question 25

Which of the following statement is FALSE?

A) The shape of the labor supply curve is based on the trade-off between income and free time.
B) If the opportunity cost of work decreases, then the labor supply curve shifts to the right.
C) The more time that an individual spends working, the more that the opportunity cost of work decreases.
D) As the wage rate increases, the quantity of labor supplied increases.

Question 26

Because the opportunity cost of work _____ as individuals spend more time working, the labor supply curve is _____ sloping.

A) increases; upward
B) decreases; upward
C) increases; downward
D) decreases; downward

Question 27

Which one of the following will NOT lead to a rightward shift of the labor supply curve?

A) a rise urbanization
B) a rise in immigration
C) a fall in the opportunity cost of work
D) a fall in the price of the good labor produces

Question 28

Which one of the following leads to an increase in the quantity of labor supplied and therefore a movement along the labor supply curve?

A) a rise in urbanization
B) a fall in immigration
C) a rise in wages
D) a fall in the productivity of workers

Question 29

In the nearly six decades between 1950 and 2018, female participation in the labor force increased from 34 percent to 57 percent. The impact of this can be shown though a _____ shift in the labor _____ curve.

A) leftward; supply
B) rightward; supply
C) rightward; demand
D) leftward; demand

Question 30

All else equal, the effect of a decrease in the overall rate of immigration can be shown through a _____ shift of the labor _____ curve.

A) leftward; supply
B) rightward; supply
C) leftward; demand
D) rightward; demand

Question 31

With increasing urbanization, there is usually a decrease in the opportunity cost of work. All else equal, the impact of increasing urbanization on the labor market can be shown by a _____ shift of the labor _____ curve.

A) leftward; supply
B) rightward; supply
C) leftward; demand
D) rightward; demand

Question 32

Which of the following statements is FALSE?

A) As people work more, the opportunity cost of work increases.
B) An increase in the immigration rate leads to an increase in the labor supply.
C) If the opportunity cost of work increases, then the labor supply will decrease.
D) An increase in the wage of labor shifts the labor supply curve to the right,

Question 33

All else equal, an increase in the immigration rate in the economy will lead to _____ in the quantity of labor hired and _____ in the wage rate.

A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question 34

All else equal, an increase in the productivity of workers in the economy will lead to _____ in the quantity of labor hired and _____ in the wage rate.

A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question 35

All else equal, a decrease in the productivity of workers will lead to _____ in the quantity of labor hired and _____ in the wage rate.

A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question 36

All else equal, an increase in the overall price level of goods and services in the economy will lead to _____ in the quantity of labor hired and _____ in the wage rate.

A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question 37

All else equal, a decrease in the overall price level of goods and services in the economy will lead to _____ in the quantity of labor hired and _____ in the wage rate.

A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question 38

Use Figure: Equilibrium in the Labor Market. Which one of the following can shift the equilibrium from point A to point B?
​
Figure: Equilibrium in the Labor Market

A) an increase in the rate of immigration into an economy
B) an increase in the productivity of workers in the economy
C) a decrease in the rate of immigration in the economy
D) a decrease in the productivity of workers in the economy

Question 39

Use Figure: Equilibrium in the Labor Market. Which one of the following can shift the equilibrium from point B to point A?
Figure: Equilibrium in the Labor Market

A) an increase in the rate of immigration into an economy
B) an increase in the productivity of workers in the economy
C) a decrease in the rate of immigration in the economy
D) a decrease in the productivity of workers in the economy

Question 40

Use Figure: Equilibrium in the Labor Market. Which one of the following can shift the equilibrium from point D to point A?
Figure: Equilibrium in the Labor Market

A) an increase in the rate of immigration into an economy
B) an increase in the productivity of workers in the economy
C) a decrease in the rate of immigration in the economy
D) a decrease in the productivity of workers in the economy

Question 41

Use Figure: Equilibrium in the Labor Market. Which one of the following can shift the equilibrium from point B to point A?
Figure: Equilibrium in the Labor Market

A) an increase in the rate of immigration into an economy
B) an increase in the price of goods and services in the economy
C) a decrease in the rate of immigration in the economy
D) a decrease in the price of goods and services in the economy

Question 42

Use Figure: Equilibrium in the Labor Market. Which one of the following can shift the equilibrium from point D to point A?
Figure: Equilibrium in the Labor Market

A) a change in demographics so that there are more retiring people in the economy
B) an increase in the productivity of workers in the economy
C) a change in demographics so that there are more working age people in the economy
D) a decrease in the productivity of workers in the economy

Question 43

A change in the demographics of an economy such that there is an increase in the workers of retiring age will, all else equal, lead to _____ in the equilibrium quantity of labor hired and _____ in the equilibrium wage rate.

A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question 44

Each firm in a perfectly competitive labor market faces a _____ labor _____ curve.

A) vertical; supply
B) vertical; demand
C) horizontal; supply
D) horizontal; demand

Question 45

Which of the following statements is TRUE for a firm in a perfectly competitive labor market?

A) It has unlimited demand for labor at a given wage.
B) It has an unlimited supply of labor at a given wage.
C) It can choose the wage that it wants to pay for labor.
D) It can hire more labor only by paying a higher wage.

Question 46

Which of the following can increase simultaneously the equilibrium quantity of workers hired and the equilibrium wage rate?

A) an increase in the productivity of workers
B) an increase in the rate of immigration
C) a decrease in the price level of goods
D) a decrease in the number of workers of retiring age

Question 47

Which of the following can increase simultaneously the equilibrium quantity of workers hired and the equilibrium wage rate?

A) a decrease in the productivity of workers
B) a decrease in the rate of immigration
C) an increase in the price level of goods
D) an increase in the number of workers of retiring age

Question 48

Which of the following can decrease simultaneously the equilibrium quantity of workers hired and the equilibrium wage rate?

A) a decrease in the productivity of workers
B) a decrease in the rate of immigration
C) an increase in the price level of goods
D) an increase in the number of workers of retiring age

Question 49

Which of the following can decrease simultaneously the equilibrium quantity of workers hired and the equilibrium wage rate?

A) an increase in the productivity of workers
B) an increase in the rate of immigration
C) a decrease in the price level of goods
D) a decrease in the number of workers of retiring age

Question 50

Which of the following will lead to an increase in the equilibrium quantity of workers hired and a decrease in the equilibrium wage rate?

A) an increase in the productivity of workers
B) an increase in the rate of immigration
C) a decrease in the price level of goods
D) a decrease in the rate of immigration

Question 51

Which of the following will lead to a decrease in the equilibrium quantity of workers hired and an increase in the equilibrium wage rate?

A) an increase in the productivity of workers
B) an increase in the rate of immigration
C) a decrease in the price level of goods
D) a decrease in the rate of immigration

Question 52

A premium that compensates workers for the burdens that are associated with a job is known as the:

A) risk premium.
B) liquidity premium.
C) compensating wage differential.
D) compensating risk differential.

Question 53

Mike and Alice work in different industries that have an identical demand for workers. Mike receives a wage of $12 per hour, and Alice receives a wage of $18 per hour. Based on this, we can conclude that the industry in which Mike works has a relatively ______ supply of workers and that the compensating wage differential for Alice is:

A) lower; $18.
B) higher; $18.
C) lower: $6.
D) higher; $6.

Question 54

Mike and Alice work in different industries that have identical demand for workers. Mike receives a wage of $18 per hour, and Alice receives a wage of $12 per hour. Based on this, we can conclude that the industry in which Mike works has a relatively ______ supply of workers and that the compensating wage differential for Mike is:

A) lower; $18.
B) higher; $18.
C) lower: $6.
D) higher; $6.

Question 55

Which one of the following statements is FALSE?

A) Industries where the relative demand for workers is lower than supply will pay a lower wage.
B) Two industries that have identical demand for workers will also pay the same wage.
C) Industries where the relative demand for workers is higher than supply will pay a higher wage.
D) A higher compensating wage differential in an industry implies a relatively lower supply of workers.

Question 56

Which one of the following statements is TRUE?

A) Industries where the relative demand for workers is lower than supply will pay a higher wage.
B) Industries that have identical demand for workers may not pay identical wages.
C) Industries where the relative demand for workers is higher than supply will pay a lower wage.
D) A higher compensating wage differential in an industry implies a relatively higher supply of workers.

Question 57

Anna and Bob are workers in two different industries. Anna's industry has a relatively lower supply of workers than Bob's for a given demand for workers. If Bob's wage is $12 per hour and the compensating wage differential is $2 per hour, then Anna's wage is _____ per hour.

A) $7
B) $10
C) $14
D) $24

Question 58

A minimum wage acts as a price _____ so that firms cannot pay a wage that is _____ than the minimum wage set by the government.

A) ceiling; lower
B) floor; lower
C) ceiling; higher
D) floor; higher

Question 59

If a government sets a minimum wage higher than the equilibrium wage rate, then the quantity demanded of labor _____, and the quantity supplied of labor:

A) increases; increases.
B) increases; decreases.
C) decreases; increases.
D) decreases; decreases.

Question 60

If a firm has a perfectly inelastic labor demand curve, then a minimum wage will lead to _____ in the number of workers hired and _____ in the wage of workers.

A) an increase; no change
B) a decrease; no change
C) no change; no change
D) no change; an increase

Question 61

If a firm has a perfectly inelastic labor demand curve, then an increase in minimum wage will lead to _____ in the quantity of workers hired and _____ in the wage of workers.

A) no change; an increase
B) increase; no change
C) no change; a decrease
D) decrease; no change

Question 62

Because in the long run, demand for labor is relatively more _____, an increase in the minimum wage in the long run leads to ____ job losses than in the short run.

A) elastic; fewer
B) elastic; more
C) inelastic; fewer
D) inelastic; more

Question 63

Because the demand for labor is more _____ in the long run, a minimum wage increase will lead to _____ job losses in the long run.

A) elastic; fewer
B) inelastic; fewer
C) elastic; more
D) inelastic; more

Question 64

Use Figure: Minimum Wage and Job Loss I. If the government sets a minimum wage of $14 per hour, then the total number of unemployed people in the economy will be:
​
Minimum Wage and Job Loss I

A) 500.
B) 1,000.
C) 1,500.
D) 2,000.

Question 65

Use Figure: Minimum Wage and Job Loss I. If the government sets a minimum wage of $14 per hour, then how many of the total number of unemployed workers are new entrants into the labor market who were not present at the competitive wage?
Minimum Wage and Job Loss I

A) 500
B) 1,000
C) 1,500
D) 2,000

Question 66

Use Figure: Minimum Wage and Job Loss I. If the government sets a minimum wage of $14 per hour, then how many of the total number of unemployed workers were previously employed and lost their jobs from the hike in minimum wage?
​
Minimum Wage and Job Loss I

A) 500
B) 1,000
C) 1,500
D) 2,000

Question 67

Use Figure: Minimum Wage and Job Loss I. If the government sets a minimum wage of $14 per hour, then how many workers are currently employed?
​
Minimum Wage and Job Loss I

A) 2,000
B) 1,500
C) 1,000
D) 500

Question 68

Use Figure: Minimum Wage and Job Loss II. At the competitive equilibrium, the quantity of labor demanded is _____, and the quantity of labor supplied is:
​
Minimum Wage and Job Loss II

A) 1,000; 1,200.
B) 1,200; 1,000.
C) 1,000; 1,000.
D) 900; 900.

Question 69

Use Figure: Minimum Wage and Job Loss II. If the government sets a minimum wage of $12 per hour, then the quantity of labor demanded is _____, and the quantity of labor supplied is:
​
Minimum Wage and Job Loss II

A) 1,000; 1,000.
B) 900; 1,200.
C) 1,200; 900.
D) 1,000; 1,200.

Question 70

Use Figure: Minimum Wage and Job Loss II. If the government sets a minimum wage of $12 per hour, then how many workers will be unemployed?
​
Minimum Wage and Job Loss II

A) 300
B) 600
C) 900
D) 1,200

Question 71

Use Figure: Minimum Wage and Job Loss II. If the government sets a minimum wage of $12 per hour, then how many of the total workers who are unemployed are new entrants into the labor market who were not present at the competitive wage?
​
Minimum Wage and Job Loss II

A) 100
B) 200
C) 300
D) 400

Question 72

Use Figure: Minimum Wage and Job Loss II. If the government sets a minimum wage of $12 per hour, then how many of the total workers who are unemployed were previously employed and lost their job after the hike in minimum wage?
​
Minimum Wage and Job Loss II

A) 100
B) 200
C) 300
D) 400

Question 73

Use Figure: Minimum Wage and Job Loss II. If the government sets a minimum wage of $12 per hour, then how many workers will be employed?
​
Minimum Wage and Job Loss II

A) 300
B) 600
C) 900
D) 1,200

Question 74

All else equal, if the demand for Starbucks coffee increases, then which of the following will follow in the labor market for baristas?

A) Labor demand will decrease.
B) Equilibrium wage will decrease.
C) Equilibrium quantity of labor hired will decrease.
D) Equilibrium wage will increase.

Question 75

Stewarton is a beach town with many restaurants. In the summer, tourists often visit Stewarton, which creates an increased demand for these restaurants. Given this, which of the following will NOT be true in the labor market for restaurant workers in the summer?

A) There will be an increase in the demand for labor.
B) The equilibrium quantity of workers who are hired will increase.
C) The equilibrium wage of restaurant workers will decrease.
D) The equilibrium quantity of labor supplied will increase.

Question 76

The availability of good substitutes for labor in the production process makes the demand curve for labor more _____, so increasing minimum wage in this case will lead to _____ unemployment.

A) elastic; higher
B) elastic; lower
C) inelastic; higher
D) inelastic; lower

Question 77

A local Starbucks needs exactly five baristas to make coffee during a shift. In this case, the demand curve for baristas is perfectly _____, and an increase in minimum wage will lead to _____ in the number of baristas employed by Starbucks.

A) elastic; no change
B) elastic; a decrease
C) inelastic; no change
D) inelastic; a decrease

Question 78

A local Starbucks needs exactly five baristas to make coffee during a shift. In this case, the demand curve for baristas is perfectly _____, and an increase in minimum wage above the equilibrium wage will lead to _____ in the wage of workers.

A) elastic; no change
B) elastic; an increase
C) inelastic; no change
D) inelastic; an increase

Question 79

If an increase in the minimum wage above the equilibrium wage does not lead to any additional unemployment and increases the wage of workers, then we know that the _____ curve for labor is perfectly _____.

A) supply; elastic
B) supply; inelastic
C) demand; elastic
D) demand; inelastic

Question 80

If workers are employed in an industry where they cannot be easily replaced, then the demand curve of labor will be relatively more _____, and an increase in minimum wage will lead to ____ job losses compared to industries where close substitutes of labor are available.

A) elastic; more
B) elastic; fewer
C) inelastic; more
D) inelastic; fewer