Deck 18: The Markets for the Factors of Production

Question 1

In the Canadian economy,what factor of production is considered to be the most important in terms of the magnitude of income earned by that factor of production

A)land
B)labour
C)profit
D)capital

Answer 1

labour

Question 2

Scenario 18-1
Madison Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of British Columbia.As part of her business, she hires a captain and several crewmembers for each boat.In the market for fresh Pacific salmon, there are thousands of firms like Madison's.While Madison usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
Refer to Scenario 18-1.In the fresh Pacific salmon product market,what does Madison control

A)the price she charges for her fresh salmon
B)the quantity of fresh salmon that she catches and supplies to the market
C)the competitive environment of the market
D)the wage she pays her workers

Answer 2

the quantity of fresh salmon that she catches and supplies to the market

Question 3

When a firm is a profit maximizer,what will be the effect on the labour market

A)It is driven to have the workers to produce as much product as possible.
B)It will measure its success by the number of employees it has.
C)Its labour cost will be minimized.
D)It does not care directly about the number of workers it hires.

Answer 3

It does not care directly about the number of workers it hires.

Question 4

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

A)aggregate stock
B)aggregate output
C)firms and not-for-profit organizations
D)land and capital

Question 5

What are the factors of production best defined as

A)the output produced from raw materials
B)the inputs used to produce goods and services
C)the wages paid to the workforce
D)the opportunity of producing goods and services

Question 6

Scenario 18-1
Madison Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of British Columbia.As part of her business, she hires a captain and several crewmembers for each boat.In the market for fresh Pacific salmon, there are thousands of firms like Madison's.While Madison usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
Refer to Scenario 18-1.If Madison is a competitor in both the fresh Pacific salmon market and in the market for crewmembers,what is she called in the salmon market and the crew market

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

Question 7

Which example best illustrates the concept of "derived demand"

A)An increase in the wages of autoworkers will lead to an increase in the demand for robots in automobile factories.
B)An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.
C)An automobile producer's decision to supply more minivans results from a decrease in the demand for station wagons.
D)A decrease in the wages of autoworkers will lead to an increase in the demand for robots in automobile factories.

Question 8

When we focus on the firm as a supplier of a good or a service,we assume that the firm is a profit maximizer.When we focus on the firm as a demander of labour,what do we assume the firm's objective to be

A)minimize wages
B)minimize variable costs
C)maximize the number of workers hired
D)maximize profit

Question 9

Scenario 18-1
Madison Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of British Columbia.As part of her business, she hires a captain and several crewmembers for each boat.In the market for fresh Pacific salmon, there are thousands of firms like Madison's.While Madison usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
Refer to Scenario 18-1.If the price of fresh Pacific salmon were to decrease significantly,what would Madison most likely do

A)She would reduce her demand for crewmembers.
B)She would try to increase her catch to make up for lost revenue.
C)She would become a seller in at least one factor market.
D)She would shut down her fishing business.

Question 10

Given that wheat is an important ingredient in bread,what can we say about the demand of wheat

A)The demand of wheat is derived from consumers' choices, which determine the demand for bread.
B)The demand for wheat is derived from firms' choices, which determine the supply of bread.
C)The demand for wheat and the demand for bread are both derived demands.
D)Neither the demand for wheat nor the demand for bread is a derived demand.

Question 11

Which markets do the basic tools of supply and demand apply to

A)markets for goods and services and markets for labour services
B)markets for goods and services but not markets for labour services
C)markets for labour services but not markets for factors of production
D)markets for factors of production but not markets for goods and services

Question 12

Scenario 18-1
Madison Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of British Columbia.As part of her business, she hires a captain and several crewmembers for each boat.In the market for fresh Pacific salmon, there are thousands of firms like Madison's.While Madison usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
Refer to Scenario 18-1.When Madison participates in the labour market to hire crewmembers for her boats,what is she most likely considered to be

A)a demander of labour services
B)a supplier of labour services
C)a buyer of capital
D)a demander of capital

Question 13

A donair shop hires workers to make donairs and sell them to customers.If the firm is competitive in both the market for donairs and in the market for donair makers,what control does it have over the price of donairs and the wage it pays to its workers

A)some control over both the price of donairs and the wage it pays to its workers
B)no control over the price of donairs but some control over the wage it pays to its workers
C)some control over the price of donairs but no control over the wage it pays to its workers
D)no control over either the price of donairs or the wage it pays to its workers

Question 14

A firm's demand for a factor of production is linked to its decision to supply a good in the market.What do we call this type of demand

A)differentiated demand
B)secondary demand
C)derived demand
D)hybrid demand-supply

Question 15

Why are labour markets different from most other markets

A)Labour demand is represented by a vertical line on a supply-demand diagram.
B)Labour demand is represented by an upward-sloping line on a supply-demand diagram.
C)Labour demand is derived.
D)Labour demand is differentiated.

Question 16

Scenario 18-1
Madison Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of British Columbia.As part of her business, she hires a captain and several crewmembers for each boat.In the market for fresh Pacific salmon, there are thousands of firms like Madison's.While Madison usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
Refer to Scenario 18-1.According to the labour market theory,which one of Madison's incentives does her demand for crewmembers and her supply of fresh Pacific salmon result from

A)intrinsic desire to hire crewmembers
B)primary goal of maximizing profit
C)altruistic motives to provide fresh salmon to consumers
D)desire to supply fresh salmon to local restaurants

Question 17

What is a characteristic of the demand for a factor of production

A)It is based on the supply curve of the product market.
B)It is a derived demand.
C)It is a differentiated demand.
D)It is likely to be upward sloping, in violation of the law of demand.

Question 18

Scenario 18-1
Madison Kelp owns three boats, which participate in commercial fishing for fresh Pacific salmon off the coast of British Columbia.As part of her business, she hires a captain and several crewmembers for each boat.In the market for fresh Pacific salmon, there are thousands of firms like Madison's.While Madison usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
Refer to Scenario 18-1.Based on the given information,what is likely the role that Madison's firm plays over wages to crewmembers on the labour market and the price of salmon on the salmon market

A)Madison's firm is a price taker on the salmon market but a wager setter on the labour market.
B)Madison's firm is a price setter on the salmon market but a wager taker on the labour market.
C)Madison's firm is a price setter on the salmon market and a wager setter on the labour market.
D)Madison's firm is a price taker on the salmon market and a wager taker on the labour market.

Question 19

In what form is most of the total income earned in the Canadian economy ultimately paid to households

A)profit
B)interest
C)wages
D)government transfers

Question 20

What terms best describes the economy's stock of equipment and structures

A)capital
B)aggregate expenditure
C)long-term inventory
D)aggregate stock

Question 21

Table 18-1

Refer to Table 18-1.To maximize its profit,the firm will hire workers as long as the value of the marginal product of labour equals or exceeds what amount

A)$200
B)$400
C)$600
D)$800

Question 22

What effect does diminishing marginal product have on the shape of the production function

A)The slope of the production function decreases as the quantity of input increases.
B)The production function becomes steeper as the quantity of input increases.
C)The production function slopes downward.
D)The production function is horizontal beyond a certain quantity of input.

Question 23

Table 18-1

Refer to Table 18-1.To maximize its profit,how many workers will the firm hire

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

Question 24

Along the horizontal axis of the production function,what do we typically measure

A)the total revenue
B)the marginal product
C)the total product
D)the quantity of inputs

Question 25

Table 18-1

Refer to Table 18-1.If the firm hires three workers,what do the three workers together produce

A)80 units
B)100 units
C)180 units
D)240 units

Question 26

Table 18-1

Refer to Table 18-1.What is the marginal profit of the fourth worker

A)-$500
B)-$100
C)$0
D)$500

Question 27

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

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

Question 28

What is the value of the marginal product of labour equal to

A)the change in marginal cost caused by the addition of the last worker
B)the change in total cost caused by the addition of the last worker
C)the change in total revenue caused by the addition of the last worker
D)the change in total profit caused by the addition of the last worker

Question 29

Table 18-1

Refer to Table 18-1.What is the market price of the final good

A)$8
B)$10
C)$12
D)$15

Question 30

Table 18-1

Refer to Table 18-1.What is the fourth worker's contribution to total revenue

A)-$200
B)$300
C)$600
D)$800

Question 31

If hiring more workers results in each additional worker contributing successively smaller amounts of output,then which of the following applies

A)diminishing profitability
B)diminishing marginal cost
C)diminishing marginal product
D)diminishing average product

Question 32

Table 18-1

Refer to Table 18-1.What is the name of the property exemplified by the fact that the marginal product changes as the number of workers increases

A)diminishing marginal product
B)diminishing marginal utility
C)supply and demand
D)profit maximization

Question 33

How is the marginal product of labour defined

A)the change in output per additional unit of revenue
B)the change in output per additional unit of labour
C)the change in revenue per additional unit of labour
D)the change in revenue per additional unit of output

Question 34

What directly measures a worker's contribution to a firm's revenue

A)the worker's marginal product
B)the worker's value of marginal product
C)the worker's marginal product multiplied by his/her wage
D)the worker's value of marginal product multiplied by his/her wage

Question 35

When a production function exhibits a diminishing,but positive,marginal product of labour,which scenario results

A)Profit generally increases as output increases.
B)Profit generally remains constant as output increases.
C)Output declines as more workers are employed.
D)Output increases, but at a decreasing rate, as more workers are employed.

Question 36

How is the value of the marginal product of labour calculated

A)by multiplying the price of output by the quantity of labour
B)by multiplying the price of output by the marginal product of labour
C)by multiplying the wage by the quantity of labour
D)by multiplying the wage by the marginal product of labour

Question 37

When deciding whether to hire an additional worker,firms look at how the additional worker would affect which of the following

A)costs only
B)revenue only
C)output only
D)profit only

Question 38

Table 18-1

Refer to Table 18-1.What is the marginal product of the fifth worker

A)20
B)40
C)60
D)100

Question 39

The profit from an additional worker is equal to which value

A)profit minus the worker's wage
B)cost plus the worker's wage
C)revenue minus the worker's wage
D)output minus the worker's wage

Question 40

Table 18-1

Refer to Table 18-1.When does increasing marginal product occur

A)It occurs when the first worker is hired.
B)It occurs after the second worker is hired.
C)It occurs when the fifth worker is hired.
D)It does not occur.

Question 41

A profit-maximizing firm starts with 100 employees and then increases employment.What occurs when 100 more employees are hired

A)The wage exceeds the value of the marginal product of labour.
B)The value of the marginal product of labour exceeds the wage.
C)The marginal product of labour is increasing.
D)The marginal product of labour is decreasing.

Question 42

A profit-maximizing,competitive firm will hire an additional worker when the additional worker makes a positive contribution to which of the following

A)total revenue
B)total profit
C)the value of the marginal product of labour
D)marginal revenue

Question 43

Figure 18-1
The figure represents the value of marginal product for a firm that sells its product in a competitive market.

Refer to Figure 18-1.The value of the marginal-product curve shown in this figure is the same as which of the following

A)the labour-supply curve
B)the labour-demand curve
C)the marginal-revenue curve
D)the total-revenue curve

Question 44

What does a profit-maximizing competitive firm experience when the marginal product of labour is diminishing

A)a perfectly inelastic supply of labour
B)a perfectly elastic supply of labour
C)a downward-sloping demand for labour
D)an upward-sloping demand for labour

Question 45

Up to what point does a competitive,profit-maximizing firm hire workers

A)where the marginal product equals zero
B)where the marginal revenue product equals zero
C)where the marginal product equals the wage
D)where the value of the marginal product equals the wage

Question 46

What is diminishing marginal product closely related to

A)diminishing average cost
B)diminishing variable cost
C)increasing marginal cost
D)increasing total cost

Question 47

What is the shape of the curve that represents the value of the marginal product of labour

A)U-shaped
B)flat
C)downward sloping
D)upward sloping

Question 48

What is most likely if a profit-maximizing firm starts with 50 employees and then decreases employment

A)The firm is losing market share.
B)The firm is not likely to be minimizing losses.
C)The wage exceeds the value of the marginal product of labour.
D)The value of the marginal product of labour exceeds the wage.

Question 49

When a firm hires labour up to the point where the wage is equal to the value of the marginal product of labour,what is it doing

A)It is minimizing labour costs.
B)It is minimizing the number of workers it can hire.
C)It is maximizing the number of workers it can hire.
D)It is maximizing profit.

Question 50

Letting
Δ denote "change," when will a competitive firm hire an additional worker

A)only if a Δ in the firm's revenue > a Δ in the firm's cost
B)only if a Δ in the firm's marginal product > a Δ in the firm's profit
C)only if a Δ in the firm's profit > a Δ in the firm's cost
D)only if a Δ in the marginal product > a Δ in the firm's cost

Question 51

For a competitive,profit-maximizing firm,what is the labour demand curve also known as

A)the marginal cost curve
B)the value of marginal product curve
C)the production function
D)the profit function

Question 52

When a firm's only input is labour,what can the marginal cost of a unit of output be defined as

A)marginal revenue minus wage
B)marginal product of labour minus wage
C)wage divided by marginal product of labour
D)marginal product of labour divided by wage

Question 53

Figure 18-1
The figure represents the value of marginal product for a firm that sells its product in a competitive market.

Refer to Figure 18-1.If a firm were employing fewer than Q* workers,what would hiring more workers do

A)It would increase marginal product.
B)It would decrease the price of the final good.
C)It would increase profit.
D)It would decrease marginal revenue.

Question 54

For the profit-maximizing,competitive firm,what do we know about the value-of-marginal-product curve

A)It is continually rising.
B)It is falling only when marginal product is rising.
C)It is the same as the labour supply curve.
D)It is the same as the labour demand curve.

Question 55

What most easily explains the shape of the value-of-marginal-product curve

A)tight labour markets
B)a surplus of workers
C)diminishing marginal product
D)downward-sloping labour demand

Question 56

A competitive firm will hire workers up to the point at which the value of the marginal product of labour equals which of the following

A)average total cost
B)average variable cost
C)wage
D)price per unit of output

Question 57

Figure 18-1
The figure represents the value of marginal product for a firm that sells its product in a competitive market.

Refer to Figure 18-1.The shape of the curve suggests the presence of which of the following

A)increased productivity with increased labour
B)diminishing returns to scale
C)increasing marginal utility
D)diminishing marginal product

Question 58

Typically,as a firm hires additional workers,what happens to the marginal product of labour and the value of the marginal product of labour

A)The marginal product of labour and the value of the marginal product of labour both decrease.
B)The marginal product of labour stays constant, and the value of the marginal product of labour decreases.
C)The marginal product of labour decreases, and the value of the marginal product of labour stays constant.
D)The marginal product of labour decreases, and the value of the marginal product of labour increases.

Question 59

Figure 18-1
The figure represents the value of marginal product for a firm that sells its product in a competitive market.

Refer to Figure 18-1.To maximize profit,what quantity of labour will a firm hire

A)0
B)equal to Q*
C)a quantity less than Q*
D)a quantity greater than Q*

Question 60

To maximize profit,a competitive firm will hire workers up to the point of what intersection

A)the total-revenue curve and the marginal-cost curve
B)the value-of-marginal-product curve and the wage line
C)the value-of-marginal-product curve and the marginal-revenue curve
D)the total-revenue curve and the wage line

Question 61

A competitive firm sells its output for $45 per unit.It employs 30 workers,and the marginal product of the 30th worker is four units of output per day.It pays its workers a wage of $150 per day.Which statement will help the firm make the right decision regarding hiring a 31st worker

A)The firm's profit would increase if it hired a 31st worker.
B)For the 30th worker, the value of the marginal product of labour is $600.
C)For the 30th worker, the marginal revenue product is $600.
D)Workers are consistently becoming more productive.

Question 62

If consumers demand more genetically engineered foods,what will happen to the value of genetic engineers' marginal product of labour

A)Price of the genetically engineered foods increases, therefore the value of marginal product of labour will rise.
B)Price of the genetically engineered foods decreases, therefore the value of marginal product of labour will fall.
C)Price of the genetically engineered foods increases, therefore the value of marginal product of labour will fall.
D)Price of the genetically engineered foods decreases, therefore the value of marginal product of labour will rise.

Question 63

Which event could decrease the demand for labour

A)an increase in migrant workers
B)an increase in the marginal productivity of workers
C)a decrease in demand for the final product produced by labour
D)a decrease in the labour supply

Question 64

Scenario 18-2
George has two jobs, one for the winter and one for the summer.In the winter, he works as a lift operator at a ski resort where he earns $15 per hour.During the summer, George drives a tour bus from the resort to a nearby town and back several times a day, earning $18 per hour.
Refer to Scenario 18-2.During the summer months,what is George's opportunity cost of taking an hour off work to go hiking

A)less than $15
B)$15
C)between $15 and $18
D)$18

Question 65

When firms are able to increase the amount of physical capital available to workers,what will occur

A)The marginal product of labour will decrease.
B)The profits of the firm will increase.
C)The value of the marginal product of labour will increase.
D)The final product price will increase.

Question 66

What does an upward-sloping supply curve mean

A)It means that workers prefer to buy more leisure time when their incomes increase.
B)It means that workers prefer to supply less labour when wages are high.
C)It means that an increase in the opportunity cost of leisure leads workers to increase the quantity of labour they supply.
D)It means that workers will be more productive at higher wages.

Question 67

Which event would NOT bring about a change in the value of the marginal product of labour

A)technological stability
B)a change in the marginal product of labour
C)a change in the price of the product that the firm sells
D)an increase in product demand

Question 68

Competitive firms decide how much output to sell by producing output until the price of the good equals which of the following

A)marginal product
B)the value of marginal product
C)marginal cost
D)marginal profit

Question 69

Which event could increase the demand for labour

A)a decrease in output price
B)a decrease in the amount of capital available for workers to use
C)an increase in the marginal productivity of workers
D)an increase in the size of the labour force

Question 70

Charles owns one of many bakeries in Montreal.Which event will lead to a decrease in Charles's demand for the services of bakers

A)The supply of wheat increases.
B)The price of baked goods falls.
C)The local bakers form a union.
D)Bakers become more productive.

Question 71

Scenario 18-2
George has two jobs, one for the winter and one for the summer.In the winter, he works as a lift operator at a ski resort where he earns $15 per hour.During the summer, George drives a tour bus from the resort to a nearby town and back several times a day, earning $18 per hour.
Refer to Scenario 18-2.If George takes fewer hours of leisure in the summer than in the winter,we can assume that his labour supply curve is what shape

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

Question 72

Scenario 18-2
George has two jobs, one for the winter and one for the summer.In the winter, he works as a lift operator at a ski resort where he earns $15 per hour.During the summer, George drives a tour bus from the resort to a nearby town and back several times a day, earning $18 per hour.
Refer to Scenario 18-2.Assume that George has an upward-sloping labour supply curve.If the opportunity cost of George's leisure time increases,how will he respond

A)by working more hours
B)by working fewer hours
C)by working an equal number of hours
D)by dividing his time equally between work and leisure

Question 73

For a competitive,profit-maximizing firm,what will cause the demand curve for labour to shift in response

A)a change in wage rate
B)a change in quantity of labour demanded
C)a change in price of the product that the firm sells
D)a change in the size of the labour force

Question 74

Aurora Custom Cabinets produces and sells custom kitchen cabinets.The firm has determined that if it hires 10 workers,it can produce 4 sets of cabinets per day.Alternatively,if it hires 11 workers,it can produce 4.2 sets of cabinets per day.It sells each set of cabinets for $2000,and it pays each of its workers $200 per day.What will help the firm to make the right decision regarding hiring the 11th worker

A)For the 11th worker, the value of the marginal product of labour is $500.
B)For the 11th worker, the marginal revenue product is $400.
C)If the firm hires 11 workers, the firm is maximizing its profit.
D)If the firm hires 11 workers, then its profit would decrease.

Question 75

If workers respond to an increase in the opportunity cost of leisure by taking less leisure,then what is the shape of their labour supply curve

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

Question 76

What is diminishing marginal product closely related to

A)diminishing total cost
B)diminishing variable cost
C)increasing average cost
D)increasing marginal cost

Question 77

The labour supply curve is fundamentally a representation of the trade-off people face.What is this trade-off between

A)work and the wage rate
B)work and leisure
C)the wage rate and productivity
D)technology and the wage rate

Question 78

If the price of airline tickets falls,what will happen to the demand curve for flight attendants

A)The slope of the demand curve will increase.
B)The slope of the demand curve will decrease.
C)It will shift to the right.
D)It will shift to the left.

Question 79

What does a firm's labour-demand curve represent

A)the quantity of labour supplied at the market wage
B)the marginal product of labour
C)the quantity of labour supplied based on the product demand
D)the number of workers that the firm is willing to hire at any given wage

Question 80

Scenario 18-2
George has two jobs, one for the winter and one for the summer.In the winter, he works as a lift operator at a ski resort where he earns $15 per hour.During the summer, George drives a tour bus from the resort to a nearby town and back several times a day, earning $18 per hour.
Refer to Scenario 18-2.During the winter months,what is George's opportunity cost of taking an hour off work to go skiing

A)less than $15
B)$15
C)between $15 and $18
D)$18