Deck 19: Markets for Factors of Production

Question 1

As a factor of production, any of the gifts of nature are called

A)land.
B)labor.
C)capital.
D)entrepreneurial ability.
E)physical capital.

Answer 1

A

Question 2

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

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

Answer 2

C

Question 3

The demand for a resource is derived from the

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

Answer 3

D

Question 4

The value of marginal product is equal to the

A)additional revenue from selling one more unit of the product.
B)change in total revenue from selling one more unit of product.
C)additional cost of hiring one more unit of a factor of production.
D)change in revenue from hiring one more unit of a factor of production.
E)change in total cost when one more unit of the product is produced.

Question 5

The value of the marginal product is equal to

A)marginal product × marginal cost.
B)marginal product × product price.
C)marginal revenue × marginal cost.
D)marginal cost × product price.
E)marginal product ÷ product price.

Question 6

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

A)increases.
B)decreases.
C)stays the same.
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 7

The demand for carpenters needed to build houses represents a

A)direct demand.
B)derived demand.
C)marginal demand/cost for input.
D)supplied demand.
E)directed supply.

Question 8

In the labor market,

A)households demand labor.
B)firms demand labor.
C)firms supply labor.
D)wage are determined only by firms alone.
E)None of the above answers is correct.

Question 9

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

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

Question 10

The total output of candles in Nick's Wicks candle shop increases from 20 per hour to 30 per hour as he hires the second worker.The price of each candle is $2.The

A)marginal product of the second worker is 20 candles.
B)marginal product of the second worker is 30 candles.
C)value of marginal product of the second worker is $20.
D)value of marginal product of the second worker is $30.
E)value of marginal product of the second worker is $60.

Question 11

Which of the following represents a derived demand? Demand for

A)a taco by Sam when she is hungry.
B)golf balls by Jose, who is planning on going golfing with his boss.
C)a grocery clerk by the local Safeway.
D)an automobile by Jack, who wants a car to get to school.
E)new clothing by Shaniq, who is starting a new job.

Question 12

Which of the following is NOT a factor of production?

A)labor
B)capital
C)entrepreneurship
D)bonds
E)land

Question 13

The four factors of production that produce goods and services are

A)labor, money, machinery, and land.
B)labor, capital, money, and entrepreneurship.
C)labor, capital, land, and entrepreneurship.
D)labor, investment capital, machinery, and land.
E)labor, stocks, money, and bonds.

Question 14

Which of the following factors have a derived demand?
I∙labor
Ii∙capital
Iii∙raw materials

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

Question 15

Derived demand means that the demand for a factor of production is derived from the

A)supply of that factor of production.
B)price of that factor of production.
C)demand for the goods and services the factor of production is used to produce.
D)costs of production.
E)government, which forces large firms to hire at least some minimum number of different resources.

Question 16

The value of marginal product of labor

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

Question 17

Entrepreneurship differs from the other factors of production because it

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

Question 18

What is meant by derived demand?

A)The demand is derived from income, tastes, etc. of sellers.
B)The demand for a resource is derived from the demand for what it can produce.
C)The demand is derived from the price elasticity of demand.
D)The demand exists because the government mandates production of the good.
E)The demand for a good is derived from the supply of the good.

Question 19

As the quantity of land used increases, its value of marginal product

A)decreases and then eventually increases.
B)increases and then eventually decreases.
C)remains constant.
D)might increase, decrease, or remain constant depending if the rent for the land rises, falls, or does not change.
E)The premise of the question is wrong because land does not have a value of marginal product.

Question 20

If UPS hires another worker, UPS 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)$4.
D)20 packages.
E)$20.

Question 21

The table has the marginal products for workers at Bart's Bats, a baseball bat factory.
Using the above table, if the wage rate for a worker in a baseball 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 22

Kevin owns a personal training gym in Laredo, Texas.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)2 clients.
B)$82.
C)9 clients.
D)$369.
E)$123.

Question 23

Suppose Mongo runs a glue factory in Knuckle, North Dakota.Mongo wants to fire his cousin Beevo for not working very hard at making glue.If firing Beevo would save Mongo $6.11 per hour in wages and the value of Beevo's marginal product equals $7.29 per hour, to maximize his profit, Mongo should

A)fire Beevo.
B)keep Beevo employed.
C)add another worker, Teevo, Beevo's sister, whose value of the marginal product would be $4.83 per hour and whose wage would be $6.11 per hour.
D)increase the wage he pays Beevo to $7.29 per hour.
E)There is not enough information given to determine what Mongo should do.

Question 24

The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a nearby college town.Suppose workers are paid $12 per hour and the price per pizza is $10.The value of marginal product of the fourth worker is ________ per hour.

A)$240
B)$220
C)$20
D)$12
E)$24

Question 25

Kevin owns a personal training gym in Laredo, Texas.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)10 clients.
B)$410.
C)$41.
D)1 client.
E)$10.25.

Question 26

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

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

Question 27

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-maximizing quantity of labor.
B)Too much labor 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 to determine if the firm is hiring the profit-maximizing amount of labor.

Question 28

The table has the marginal products for workers at Bart's Bats, a baseball bat factory.
Using the above table, if the wage rate for a worker in a baseball 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 to determine how many workers will be hired.

Question 29

A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $45.Which of the following is correct?

A)The firm is employing the profit-maximizing quantity of labor.
B)Too much labor 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 to determine if the firm is hiring the profit-maximizing amount of labor.

Question 30

The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a nearby college town.Suppose workers are paid $12 per hour and the price per pizza is $10.The value of marginal product of the fifth worker is ________ per hour.

A)$240
B)$220
C)$24
D)$10
E)$12

Question 31

When hiring labor, to maximize profit a firm hires labor

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

Question 32

The table has the marginal products for workers at Bart's Bats, a baseball bat factory.
Using the above table, suppose the price of a bat is $3.If the wage rate for a worker in a baseball 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)1; 2
B)2; 4
C)3; 3
D)5; 4
E)3; 5

Question 33

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

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

Question 34

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

A)quantity of labor demanded when the wage rate is $60 will be 10 workers.
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)marginal cost of the 10th worker will be $6.
E)quantity of labor demanded when the wage rate is $6 will be 10 workers.

Question 35

Suppose the Miami Dolphins are considering adding another backup quarterback to their roster.If the salary the Dolphins would have to pay equals $1,000,000 and the value of marginal product of the new quarterback equals $1,200,000, to maximize their profit the Dolphins should

A)add the new quarterback.
B)add two new quarterbacks.
C)not add the new quarterback.
D)not add the new quarterback and, in fact, get rid of at least one other backup quarterback.
E)Not enough information is given to determine if the Dolphins should hire the quarterback.

Question 36

If a firm finds itself at the point where the value of marginal product of labor is greater than its wage rate, then the firm

A)stops hiring more workers but does not fire any because the firm is maximizing its profit.
B)decreases the number of workers it has hired in order to increase its profit.
C)increases the number of workers it hires in order to increase its profit.
D)increases sales to keep its employees busy.
E)changes its employment of workers and maximizes its profit by hiring the number of workers that makes the difference between the value of the marginal product and the wage rate as large as possible.

Question 37

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

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

Question 38

Kevin owns a personal training gym in Laredo, Texas.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)$164.
C)$410.
D)$41.
E)None of the above answers is correct.

Question 39

A profit-maximizing firm hires labor up to the point where

A)price of the product equals the value of marginal product.
B)price of the product equals the wage rate.
C)the wage rate multiplied by the quantity of labor equals the marginal product.
D)the wage rate equals the value of marginal product.
E)marginal revenue equals the wage rate.

Question 40

The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a nearby college town.Suppose workers are paid $10 per hour and the price per pizza is $10.The marginal product of the third worker is

A)5 pizzas per hour.
B)17 pizzas per hour.
C)$220 per hour.
D)7 1/3 pizzas per hour.
E)None of the above answers is correct.

Question 41

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

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

Question 42

The demand for labor curve slopes downward because

A)it takes more workers to produce more output.
B)the value of marginal product of labor diminishes as the quantity of labor employed increases.
C)at lower wages, people are not willing to work as many hours.
D)wages are fixed.
E)the supply of labor curve is upward sloping.

Question 43

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

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

Question 44

The above figure shows the demand for labor curve for workers at a Pizza Hut in Canada.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 they 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 45

A firm's demand for labor curve shifts when there is a change in
I∙the supply of labor.
Ii∙population
Iii∙the equilibrium wage rate.

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

Question 46

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

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

Question 47

Robotic technology is a substitute for labor 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 labor.
B)an increase in the demand for labor.
C)no change in the demand for labor.
D)an increase in the supply of labor.
E)a decrease in the supply of labor.

Question 48

A firm's demand for labor curve is also

A)its value of marginal product of labor curve.
B)the demand curve for the good it produces.
C)the supply of labor curve.
D)its marginal cost curve.
E)the supply curve for the good it produces.

Question 49

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

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

Question 50

A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $75.Which of the following is correct?

A)The firm is employing the profit-maximizing quantity of labor.
B)Too much labor 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 to determine if the firm is hiring the profit-maximizing amount of labor.

Question 51

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

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

Question 52

If the price of a firm's product falls, the firm's demand for labor curve

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

Question 53

The demand curve for a factor of production is

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

Question 54

If the wage rate increases, a firm's demand for labor curve

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

Question 55

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 labor curve

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

Question 56

Which of the following statements about a firm's demand for labor curve and its value of marginal product of labor curve is true?

A)The value of marginal product curve slopes upward and the demand for labor curve slopes downward.
B)The demand for labor curve shows the amount of labor firms will hire based on the wage rate while the value of marginal product curve shows the amount of output supplied based on the wage rate.
C)The value of marginal product curve is steeper than the demand for labor curve.
D)The demand for labor curve is the same as the value of marginal product curve.
E)The value of marginal product curve lies above the demand for labor curve.

Question 57

In part, the demand for labor depends on the

A)supply of labor.
B)number of workers available.
C)price of the firm's output.
D)worker's income.
E)wage rate at which the labor supply curve starts to bend backwards.

Question 58

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

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

Question 59

If the price of movie tickets increases, there is

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

Question 60

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

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

Question 61

A change in the wage rate

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

Question 62

Which of the following shift the supply of labor curve leftward?
I∙an advancement in technology
Ii∙a decrease in the price of the product that the labor produces
Iii∙a decrease in the adult population

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

Question 63

When more people remain in school for full-time education and training, the supply of low-skilled labor ________ and the supply of high-skilled labor ________.

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

Question 64

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

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

Question 65

The four factors of production that produce goods and services are

A)labor, capital, profits, and entrepreneurship.
B)money, labor, rent, and profit.
C)labor, capital, land, and entrepreneurship.
D)wages, interest, rent, and profit.
E)wages, prices, quantities, and employment.

Question 66

The value of marginal product of labor is equal to the marginal product of labor ________ the price of a unit of output.

A)divided by
B)multiplied by
C)minus
D)plus
E)squared and then multiplied by

Question 67

If the price of capital falls, in the long run under what circumstance could the demand for labor increase?

A)The demand for labor can never increase when the price of capital falls.
B)The demand for labor will always increase when the price of capital falls.
C)It increases if the scale of production increases enough.
D)It increases if the demand for labor is inelastic.
E)None of the above answers is correct.

Question 68

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

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

Question 69

The wage paid to labor is

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

Question 70

Which of the following is true?

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

Question 71

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

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

Question 72

An increase in the price of the firm's output leads to a

A)movement up along the demand for labor curve.
B)movement down along the demand for labor curve.
C)rightward shift of the demand for labor curve.
D)leftward shift of the demand for labor curve.
E)rightward shift of the supply of labor curve.

Question 73

The demand for labor is derived from the

A)supply of labor.
B)wage rate.
C)supply of the good the labor is used to produce.
D)demand for the goods and services the labor helps produce.
E)supply of all the other factors of production that can be substituted for labor.

Question 74

If the wage rate increases, then

A)the quantity of labor supplied definitely decreases.
B)there is a movement upward along the supply of labor curve.
C)the supply of labor curve shifts rightward.
D)the supply of labor curve shifts left ward.
E)the quantity of labor supplied definitely increases.

Question 75

The supply of labor curve for an individual is

A)upward sloping at all wage rates.
B)downward sloping at all wage rates.
C)upward sloping for lower wage rates and begins to slope downward at higher wage rates.
D)downward sloping for lower wage rates and begins to slope upward at higher wage rates.
E)an upside-down U-shape.

Question 76

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

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

Question 77

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

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

Question 78

According to a recent prediction in The Wall Street Journal the adult population of Russia will decline dramatically over the next few decades.If this prediction is correct, the supply of labor in Russia will

A)increase.
B)not change.
C)decrease.
D)become less elastic.
E)become more elastic.

Question 79

Which of the following is a correct statement of the relationship between advances in technology and the demand for labor?

A)The demand decreases for some types of labor and increases for other types of labor.
B)The demand for labor always decreases when technology advances.
C)The demand for labor always increases when technology advances.
D)Technology advances when the demand for labor advances.
E)None of the above answers is correct.

Question 80

Which of the following statements about the supply of labor is correct?

A)It is perfectly inelastic at whatever quantity individuals are willing to work.
B)An individual's supply of labor curve is always upward sloping, like the supply curves of other items.
C)It is perfectly price elastic at the current wage rate.
D)An individual's supply of labor curve can bend backwards.
E)The supply of labor curve is shaped like an upside-down U.