Deck 18: Markets for Factors of Production

Question 1

Consider the demand for labor in the computer chip industry. The demand for labor

A) is derived from the demand for computer chips.
B) is shown by a perfectly elastic demand for labor.
C) is shown by a perfectly inelastic demand for labor.
D) has a demand curve that is backward bending.

Answer 1

is derived from the demand for computer chips.

Question 2

Coal is an example of

A) a nonrenewable natural resource.
B) a renewable natural resource.
C) capital.
D) a casual resource.

Answer 2

a nonrenewable natural resource.

Question 3

Profit is the factor price for ________.

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

Answer 3

entrepreneurship

Question 4

Jose owns a local coffee shop. When Jose calculates how his total revenue changes in response to hiring an extra worker, Jose is calculating the

A) marginal revenue.
B) value of marginal product of labor.
C) marginal product of labor.
D) total revenue.

Question 5

The value of marginal product equals marginal product

A) multiplied by the quantity of labor.
B) divided by the quantity of labor.
C) multiplied by the good's market price.
D) divided by the good's market price.

Question 6

The value of marginal product of labor is the change in

A) profit from hiring one more worker.
B) output from hiring one more worker.
C) total revenue from hiring one more worker.
D) profit from producing one more unit of output.

Question 7

The marginal product of labor is the

A) change in total product produced by hiring an additional unit of labor.
B) total revenue divided by units of labor.
C) extra revenue gained by selling one more unit of output produced by hiring additional units of labor.
D) extra revenue gained by employing one more unit of labor.

Question 8

The value of marginal product (VMP) of labor is the extra revenue generated by

A) selling one additional unit of output.
B) raising the price of the good by one dollar.
C) hiring one additional unit of labor.
D) price discrimination.

Question 9

The demand for the services of labor ________ a derived demand and the demand for the services of land ________ a derived demand.

A) is; is
B) is; is not
C) is not; is
D) is not; is not

Question 10

The demand for factor is driven by the demand for goods and services produced by that factor of production. This phenomenon is referred to as

A) elastic demand.
B) joint demand.
C) inverse demand.
D) derived demand.

Question 11

Which of the following groups lists the four factors of production?

A) labor, capital, land, entrepreneurship
B) labor, capital, land, money
C) labor, money, land, entrepreneurship
D) labor, capital, money, entrepreneurship

Question 12

The value of marginal product of labor is the increase in

A) revenue created by producing one more unit of output.
B) revenue created by hiring one more unit of labor.
C) total product necessary to make revenue increase by one dollar.
D) total product generated by hiring one more unit of labor.

Question 13

The demand for a productive resource, not for its own sake, but for use in the production of goods and services is called a ________.

A) goods and services demand
B) production demand
C) derived demand
D) resource demand

Question 14

The demand for labor is a derived demand because it is derived from

A) the supply of labor.
B) union pressure.
C) the demand for the output the labor produces.
D) natural law.

Question 15

The value of marginal product of labor

A) is the change in total product that results from selling one more unit of a good.
B) is equal to the price of the good produced multiplied by the marginal product of labor.
C) is equal to marginal revenue multiplied by the quantity.
D) increases as the amount of labor employed increases.

Question 16

The value of marginal product (VMP) of an input such as labor is the

A) additional output produced by the last unit of an input.
B) total revenue divided by the units of the input employed.
C) extra revenue gained by selling one more unit of output.
D) extra revenue gained by employing one more unit of the input.

Question 17

The value of an additional baker to a bakery is equal to the

A) price of bread.
B) value of marginal product of the baker.
C) baker's marginal productivity in terms of loaves of bread.
D) marginal cost of making an additional loaf of bread.

Question 18

Water from the Mississippi river is an example of

A) a nonrenewable natural resource.
B) a renewable natural resource.
C) capital.
D) a static resource.

Question 19

The increase in revenue created by hiring one more unit of labor is the

A) marginal product of labor.
B) marginal revenue of labor.
C) marginal product revenue of labor.
D) value of marginal product of labor.

Question 20

The change in total revenue that results from employing one more unit of labor is called the

A) wage rate.
B) value of marginal product of labor.
C) average revenue.
D) marginal product of labor.

Question 21

Intel hired a consultant who found that the value of marginal product of Intel's workers decreased as more workers were hired. Suppose Intel is a monopolistically competitive firm. Then the value of marginal product decreases because the I. workers' marginal product of labor decreased as more workers were hired.
II) marginal revenue of Intel's chips decreased as more chips were sold.

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question 22

Sun's Gas Station is a firm operating in a perfectly competitive industry. Sun's Gas Station sells each gallon of gas for $3. What is the value of marginal product from hiring the fourth worker?

A) $2,400
B) $840
C) $120
D) $60

Question 23

In the table above, if the wage rate is $8.00 per hour, the profit-maximizing number of workers is

A) 1.
B) 2.
C) 4.
D) 5.

Question 24

The value of marginal product equals ________ multiplied by ________.

A) the good's market price; marginal cost
B) the good's market price; marginal product
C) marginal cost; marginal product
D) marginal revenue; total product

Question 25

A firm that can sell its output for $40 per unit. When it increases its labor force from 4 workers to 5 workers its output increases from 15 to 17 units. The value of marginal product of the 5th worker is

A) $680.
B) $340.
C) $80.
D) $40.

Question 26

As the quantity of labor employed by a firm decreases, labor's ________ increases.

A) marginal cost
B) value of marginal product
C) marginal revenue
D) average cost

Question 27

When Sam's Scarves uses 2 knitting machines and employs 3 people, total revenue is $330 a day. When Sam's Scarves uses 2 knitting machines and employs 4 people, total revenue is $360 a day. The value of marginal product of the third worker is ________.

A) $110
B) $30
C) $360
D) $90

Question 28

In the table above, the marginal product of the first unit of labor is ________ units of output.

A) 4
B) 5
C) 16
D) 20

Question 29

In the table above, the value of marginal product of the third unit of labor is

A) $3.
B) $4.
C) $12.
D) $16.

Question 30

The value of marginal product equals

A) total revenue divided by total product (output).
B) marginal revenue divided by marginal product.
C) total revenue multiplied by total product (output).
D) good's market price multiplied by marginal product.

Question 31

Sun's Gas Station is a firm operating in a perfectly competitive industry. Sun's Gas Station sells each gallon of gas for $3. What is the marginal product from hiring the fourth worker?

A) 70 gallons of gasoline
B) 280 gallons of gasoline
C) 40 gallons of gasoline
D) 80 gallons of gasoline

Question 32

Sun's Gas Station is a firm operating in a perfectly competitive industry. Sun's Gas Station sells each gallon of gas for $3. What is the total revenue earned by selling 180 gallons of gas?

A) $240
B) $540
C) $840
D) $3,300

Question 33

In the table above, the marginal product of the third unit of labor is ________ units of output.

A) 3
B) 4
C) 12
D) 16

Question 34

As a competitive firm hires increasing amounts of labor, the value of marginal product of labor

A) decreases.
B) increases.
C) remains constant.
D) decreases then increases.

Question 35

The value of marginal product of labor is the ________ when one additional unit of a labor is employed, all other things remaining the same.

A) change in marginal revenue
B) change in marginal product
C) change in total revenue
D) total revenue

Question 36

Sam's Scarves has 2 knitting machines and employs 2 people. They produce 15 scarves a day. If the firm hires an additional person, the 3 workers can produce 19 scarves a day other things remaining the same. The market for scarves is perfectly competitive and the price of a scarf is $20. The value of marginal product of the third worker is ________.

A) $80
B) $300
C) $380
D) 4 scarves

Question 37

Joe manages a company that produces lawn mowers. Joe knows that the value of marginal product

A) decreases as he hires more labor to produce lawn mowers.
B) does not change as he sells more lawn mowers.
C) increases as he hires more labor to produce lawn mowers.
D) increases as he sells more lawn mowers.

Question 38

For a perfectly competitive firm, the value of marginal product diminishes as employment increases because the

A) price falls as the firm's production increases.
B) marginal revenue decreases as the firm's production increases.
C) marginal product decreases as the firm's production increases.
D) None of the above answers is correct.

Question 39

As the quantity of labor increases, value of marginal product for a perfectly competitive firm

A) decreases because the firm must lower its price to sell a larger quantity.
B) decreases because the marginal product of labor decreases.
C) decreases because marginal revenue decreases.
D) is constant because marginal revenue is constant.

Question 40

In the table above, the firm producing the product is

A) a monopoly.
B) an oligopoly.
C) a duopoly.
D) perfectly competitive.

Question 41

If the value of marginal product of a factor of production exceeds the price of the factor, the

A) firm should hire more of that factor.
B) firm should hire less of that factor.
C) firm is maximizing profits.
D) firm should shut down.

Question 42

If the value of marginal product of the last worker hired is $24 and the wage rate is $25, then

A) more workers should be hired.
B) the worker should be fired.
C) the firm has hired the profit maximizing number of workers.
D) the firm is earning $1 of profit from this worker.

Question 43

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, what is the value of marginal product of the second worker?

A) $80
B) $20
C) $30
D) $180

Question 44

If a firm finds that, at its current level of employment, VMP > W, it will

A) be maximizing profits.
B) be minimizing profits.
C) increase the amount of labor it hires.
D) decrease the amount of labor it hires.

Question 45

The quantity of labor demanded by the firm is such that the

A) wage rate equals the marginal cost.
B) wage rate equals the value of marginal product of labor.
C) wage rate equals the marginal product of labor.
D) marginal revenue equals the marginal product.

Question 46

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. What is the marginal product of labor when the 5th worker is hired?

A) 72.5 car washes
B) 75 car washes
C) 5 car washes
D) 3 car washes

Question 47

If the wage that a competitive firm must pay its workers exceeds their value of marginal product, the firm will

A) decrease the quantity of labor it employs.
B) increase the quantity of labor it employs.
C) lower the price of the good.
D) raise the price of the good.

Question 48

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5, what is the value of marginal product of the 4th worker?

A) $300
B) $50
C) $70
D) $10

Question 49

In the table above, if the wage rate is $12.00 per hour, the profit-maximizing number of workers is

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

Question 50

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5, what is the value of marginal product of the second worker?

A) $100
B) $20
C) $30
D) $125

Question 51

A firm in a competitive labor market will hire labor until the value of marginal product of labor equals the

A) firm's marginal revenue.
B) firm's marginal cost.
C) firm's average cost.
D) wage rate.

Question 52

Which of the following is a condition for maximum profit?

A) VMP = W.
B) VMP = MC.
C) MP = W.
D) MC = W.

Question 53

To maximize its profit, a firm will hire more workers as long as

A) marginal revenue exceeds the wage rate.
B) marginal revenue is less than the wage rate.
C) value of marginal product exceeds the wage rate.
D) marginal product exceeds the wage rate.

Question 54

A perfectly competitive firm in a competitive labor market will hire more labor whenever

A) its average revenue product of labor exceeds the wage rate.
B) the wage rate exceeds its average revenue product of labor.
C) its value of marginal product of labor exceeds the wage rate.
D) the wage rate exceeds its value of marginal product of labor.

Question 55

To maximize profit, a firm hires the quantity of labor that makes the ________ of labor equal to the ________.

A) value of marginal product; wage rate
B) total revenue; total cost of labor
C) marginal product; total cost of labor
D) marginal product; marginal revenue

Question 56

If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire

A) less labor, which will increase the VMP.
B) more labor, which will decrease the VMP.
C) no more or less labor, because profits are greatest when W < VMP.
D) more labor, because hiring more labor will increase both W and VMP until they are equal.

Question 57

If a firm finds that, at its current level of employment, VMP < W, then it has

A) reached maximum profits.
B) reached minimum profits.
C) not hired enough labor to maximize its profit.
D) hired too much labor to maximize its profit.

Question 58

If the wage rate is ________ the value of marginal product, a firm can increase its profit by ________.

A) greater than; selling an extra unit of output
B) less than; selling one less unit of output
C) less than; hiring an extra worker
D) less than; hiring one less worker

Question 59

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $50 per day, how many workers should Winnie employ to maximize his profit?

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

Question 60

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, what is the value of marginal product of the 4th worker?

A) $240
B) $70
C) $10
D) $40

Question 61

Based on the production and revenue data in the above table, what is the marginal product of the 4th worker?

A) 28
B) 6
C) 4
D) 2

Question 62

A firm's demand for labor curve

A) is the same as its value of marginal product curve.
B) is steeper than its value of marginal product curve.
C) is flatter than its value of marginal product curve.
D) intersects its value of marginal product curve at the profit-maximizing quantity of employment.

Question 63

Based on the production and revenue data in the above table, if the wage rate is $20 per worker, how many workers will be hired?

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

Question 64

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

A) marginal product curve.
B) marginal cost curve.
C) marginal revenue curve.
D) value of marginal product curve.

Question 65

The firm's demand for labor is derived directly from ________.

A) the wage rate
B) the supply of labor
C) labor's cost
D) labor's value of marginal product

Question 66

Based on the production and revenue data in the above table, what is the price of the product?

A) $100
B) $10
C) $1
D) More information is needed to determine the price of the product.

Question 67

The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. The firm's value of marginal product of labor for the third worker is equal to

A) $264.
B) $48.
C) $8.
D) $6.

Question 68

Based on the production and revenue data in the above table, if the wage rate is $35 per worker, how many workers will be hired?

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

Question 69

The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate is $24 per worker, what quantity of labor will maximize profits?

A) 1 worker
B) 2 workers
C) 4 workers
D) 5 workers

Question 70

The table above shows the number of pounds of bricks that can be produced by the Red Brick Company as the number of workers hired increases. The brick market is perfectly competitive and each pound of bricks sells for $20. The labor market is competitive and the wage rate is $30 an hour. When the Red Brick Company maximizes its profit, it produces ________ bricks an hour.

A) 19
B) 21
C) 22
D) 10

Question 71

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, and Winnie maximizes his profit when he employs 4 workers, the wage rate is

A) $90 per day.
B) $30 per day.
C) $70 per day.
D) $50 per day.

Question 72

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5 and the wage rate is $62.50 per day, how many workers should Winnie employ to maximize his profit?

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

Question 73

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $70 per day, how many workers should Winnie employ to maximize his profit?

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

Question 74

Doug's Dog Grooming is a perfectly competitive firm charging $5 per dog grooming. Doug's Dog Grooming has the total and marginal product of labor schedules in the above table and can hire workers from a perfectly competitive labor market for $15 per hour. What is the value of marginal product of the third worker?

A) $5
B) $25
C) $15
D) $375

Question 75

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4, and Winnie maximizes his profit when he employs 3 workers, the wage rate is

A) $25 per day.
B) $30 per day.
C) $70 per day.
D) $50 per day.

Question 76

Which answer below CORRECTLY describes the relationship between the demand for labor curve and the value of marginal product curve?

A) The curves intersect to determine the equilibrium quantity of labor.
B) The value of marginal product curve lies to the right and above the demand for labor curve.
C) The curves are the same.
D) The value of marginal product curve lies to the left of the demand for labor curve.

Question 77

Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $5 and the wage rate is $37.50 per day, how many workers should Winnie employ to maximize his profit?

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

Question 78

The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate falls from $24 per worker to $12 per worker, the quantity of labor hired ________ and the new number of workers employed is ________.

A) increases; 2
B) decreases; 2
C) increases; 5
D) increase; 3

Question 79

A firm's value of marginal product of labor curve

A) is flatter than its demand for labor curve.
B) is steeper than its demand for labor curve.
C) is its demand for labor curve.
D) bends backward.

Question 80

Doug's Dog Grooming is a perfectly competitive firm charging $5 per dog grooming. Doug's Dog Grooming has the total and marginal product of labor schedules in the above table and can hire workers from a perfectly competitive labor market for $15 per hour. The profit-maximizing level of employment for Doug's Dog Grooming is

A) 1 worker.
B) 2 workers.
C) 4 workers.
D) 6 workers.