Question 1

The equilibrium value of the marginal product of a factor is the additional value produced by the most productive unit of that factor employed in the factor market as a whole.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions:
Figure: The Time Allocation Budget Line 
-(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate rises, then the time allocation budget line will rotate _____ along the _____ axis.

Accepted Answer

A)  left; leisure 
B)  up; income 
C)  right; leisure 
D)  down; income

Question 3

Which of the following best describes the value of the marginal product?

Accepted Answer

A)  the change in total output generated by a unit change in the quantity of a factor 
B)  the change in total revenue generated by a unit change in the quantity of a factor 
C)  the change in marginal cost generated by a unit change in the quantity of a factor 
D)  the ratio of total revenue to the quantity of a factor employed

Question 4

Manufactured resources such as equipment, buildings, and tools are also known as:

Accepted Answer

A)  human capital. 
B)  labor. 
C)  physical capital. 
D)  natural resources.

Question 5

Actual wage differentials can be partially explained by:

Accepted Answer

A)  differences in talent. 
B)  different amounts of human capital. 
C)  compensating differentials. 
D)  differences in talent, different amounts of human capital, and compensating differentials.

Question 6

Which of the following statements is TRUE?

Accepted Answer

A)  The marginal product is the change in total revenue divided by a one-unit change in a factor. 
B)  The marginal revenue is the change in total output divided by the change in output. 
C)  The value of the marginal product is the marginal product times the price. 
D)  The marginal cost is equal to the average total cost.

Question 7

Holly and Emily both have a bachelor's degree in nursing from the same college. Both have been nurses for eight years. Holly works from 11 P.M. until 7 A.M., and Emily works from 7 A.M. until 3 P.M. Holly's salary is $1,000 per month higher than Emily's salary. This is an example of an efficiency wage disparity.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions: 
-(Table: Total Product of Labor at Debbie's Bakery) Look at the table Total Product of Labor at Debbie's Bakery. Debbie can sell cakes at $8 each. Debbie must pay each worker $45 per day. How many workers will she hire to maximize profit?

Accepted Answer

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

Question 9

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is equal to the value of the marginal product of capital.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions: 
-(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords. Assume that the market for power cords is perfectly competitive. If the price of a power cord is $4 and the market wage rate is $80 per hour, the profit-maximizing quantity of labor is _____ worker(s).

Accepted Answer

A)  one 
B)  three 
C)  five 
D)  seven

Question 11

Use the following to answer questions: 
-(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords. Assume that the market for power cords is perfectly competitive. The price of a power cord is $2, the market wage rate is $40 per hour, and four workers are hired. Profit can be maximized by hiring _____ worker(s).

Accepted Answer

A)  one more 
B)  two more 
C)  one fewer 
D)  two fewer

Question 12

Which of the following is an example of wage disparity due to compensating differentials?

Accepted Answer

A)  The median earnings of White men are more than the median earnings of African Americans. 
B)  People with graduate degrees usually have higher earnings than people who did not graduate from high school. 
C)  Nick Saban, the football coach at the University of Alabama, earns more than an economics professor. 
D)  Crab fishermen on the Bering Sea earn more than clerks who sell goldfish at a pet store.

Question 13

Use the following to answer questions:
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive. The price of this firm's product is $5. The firm's total product with respect to labor is given in the table that follows. 
-(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. Holding everything else constant, if the demand for this firm's product decreases:

Accepted Answer

A)  its value of marginal product curve shifts to the right, and it will hire more workers. 
B)  its value of marginal product curve shifts to the left, and it will hire more workers. 
C)  its value of marginal product curve shifts to the left, and it will hire fewer workers. 
D)  the firm will not change its hiring, since it is a perfectly competitive firm.

Question 14

Oscar's Flower Shop maximizes profits by hiring four workers in a perfectly competitive labor market. The workers and their value of the marginal product of labor are Noe, $40; Barbara, $35; Calvin, $27; and Diana, $15. According to the marginal productivity theory of income distribution, which of the following statements is TRUE?

Accepted Answer

A)  In equilibrium, each worker is paid his or her value of the marginal product of labor. 
B)  Each worker is paid a wage equal to the highest value of the marginal product of labor . 
C)  Each worker is paid $15. 
D)  We need to know the product price before we can figure out the wage rate.

Question 15

Use the following to answer questions:
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive. The price of this firm's product is $5. The firm's total product with respect to labor is given in the table that follows. 
-(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. If this profit-maximizing firm hires two workers, what is a possible equilibrium wage rate in the labor market?

Accepted Answer

A)  $30 
B)  $5 
C)  $13 
D)  $6

Question 16

In 2012, fewer than 10% of the employees of private businesses were represented by unions.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is most likely an example of wage disparity due to differences in talent and ability?

Accepted Answer

A)  The median earnings of White men are more than the median earnings of African Americans. 
B)  People with graduate degrees usually have higher earnings than people who did not graduate from high school. 
C)  Nick Saban, the football coach at the University of Alabama, earns more than the local high school football coach. 
D)  Crab fishermen on the Bering Sea earn more than clerks who sell goldfish at a pet store.

Question 18

The marginal productivity theory of income distribution assumes that factor markets are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions: 
-(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords. Assume that the market for power cords is perfectly competitive. If the price of a power cord is $2 and the wage rate is $90 per hour, the profit-maximizing quantity of labor is _____ workers.

Accepted Answer

A)  zero 
B)  two 
C)  four 
D)  six

Question 20

If a firm hires labor such that W > VMPL, then profit:

Accepted Answer

A)  is maximized. 
B)  can be increased by hiring less labor. 
C)  can be increased by hiring more labor. 
D)  can be increased by decreasing the price of the output.

Exam 19: Factor Markets and the Distribution of Income

The equilibrium value of the marginal product of a factor is the additional value produced by the most productive unit of that factor employed in the factor market as a whole.

Use the following to answer questions: Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate rises, then the time allocation budget line will rotate _ along the _ axis.

Which of the following best describes the value of the marginal product?

Manufactured resources such as equipment, buildings, and tools are also known as:

Actual wage differentials can be partially explained by:

Which of the following statements is TRUE?

Use the following to answer questions: -(Table: Total Product of Labor at Debbie's Bakery) Look at the table Total Product of Labor at Debbie's Bakery. Debbie can sell cakes at $8 each. Debbie must pay each worker $45 per day. How many workers will she hire to maximize profit?

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is equal to the value of the marginal product of capital.

Which of the following is an example of wage disparity due to compensating differentials?

In 2012, fewer than 10% of the employees of private businesses were represented by unions.

Which of the following is most likely an example of wage disparity due to differences in talent and ability?

The marginal productivity theory of income distribution assumes that factor markets are perfectly competitive.

If a firm hires labor such that W > VMPL, then profit:

Exam 19: Factor Markets and the Distribution of Income

The equilibrium value of the marginal product of a factor is the additional value produced by the most productive unit of that factor employed in the factor market as a whole.

Use the following to answer questions: Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate rises, then the time allocation budget line will rotate _____ along the _____ axis.

Which of the following best describes the value of the marginal product?

Manufactured resources such as equipment, buildings, and tools are also known as:

Actual wage differentials can be partially explained by:

Which of the following statements is TRUE?

Use the following to answer questions: -(Table: Total Product of Labor at Debbie's Bakery) Look at the table Total Product of Labor at Debbie's Bakery. Debbie can sell cakes at $8 each. Debbie must pay each worker $45 per day. How many workers will she hire to maximize profit?

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is equal to the value of the marginal product of capital.

Which of the following is an example of wage disparity due to compensating differentials?

In 2012, fewer than 10% of the employees of private businesses were represented by unions.

Which of the following is most likely an example of wage disparity due to differences in talent and ability?

The marginal productivity theory of income distribution assumes that factor markets are perfectly competitive.

If a firm hires labor such that W > VMPL, then profit:

Use the following to answer questions: Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate rises, then the time allocation budget line will rotate _ along the _ axis.