Chapter 18 The Markets for the Factors of Production

Test A
1

Factors of production are best defined as the a. wages paid to the workforce. b. goods and services sold in the market. c. output produced from raw materials. d. inputs used to produce goods and services. ANSWER d. inputs used to produce goods and services. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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Since a firm.s demand for a factor of production comes from its decision to suppl/ a good in the market0 we refer to this t/pe of demand as a. supplied demand. b. derived demand. c. secondar/ demand. d. differentiated demand. ANSWER b. derived demand. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
1

$ost of the total income earned in the 2.S. econom/ is ultimatel/ paid to households in the form of a. rent. b. wages. c. interest. d. profit. ANSWER b. wages. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
3

!he production function describes the relationship between a. inputs and cost. b. outputs and profit. c. inputs and outputs. d. inputs and revenue. ANSWER c. inputs and outputs. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
4

!he marginal product of labor is defined as the increase in a. revenue per additional unit of input. b. output per additional unit of input. c. revenue per additional unit of output. d. output per additional unit of revenue. ANSWER b. output per additional unit of input. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

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-88 'hapter 19:!he $arkets for the Factors of #roduction

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(f hiring more workers causes each additional worker to contribute less to the total output0 a. diminishing profitabilit/ is present. b. increasing marginal product is present. c. diminishing marginal product is present. d. diminishing marginal cost is present. ANSWER c. diminishing marginal product is present. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
<

!he value of the marginal product of labor is e=ual to the change in a. marginal cost with the addition of the last worker. b. total cost with the addition of the last worker. c. total profit with the addition of the last worker. d. total revenue with the addition of the last worker. ANSWER d. total revenue with the addition of the last worker. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
9

A competitive0 profit>ma?imi@ing firm hires workers until a. the value of the marginal product e=uals the wage. b. unemplo/ment rates are @ero. c. marginal product e=uals @ero. d. marginal revenue e=uals @ero. ANSWER a. the value of the marginal product e=uals the wage. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
7

A worker.s contribution to a firm.s revenue is measured directl/ b/ the worker.s a. contribution to output. b. value of marginal product. c. marginal product minus his:her wage. d. marginal product multiplied b/ his:her wage. ANSWER b. value of marginal product. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
18

A profit>ma?imi@ing competitive firm that e?periences diminishing marginal product of labor is also e?periencing a. an upward>sloping demand for labor. b. a downward>sloping demand for labor. c. a perfectl/ elastic suppl/ of labor. d. a perfectl/ inelastic suppl/ of labor. ANSWER b. a downward>sloping demand for labor. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
11

(f one observes a profit>ma?imi@ing firm increasing emplo/ment0 it is possible to infer that the a. firm is increasing its market share. b. marginal product is rising. c. wage e?ceeds the value of the marginal product. d. value of the marginal product e?ceeds the wage. ANSWER d. value of the marginal product e?ceeds the wage. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

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'hapter 19:!he $arkets for the Factors of #roduction -81

1-

(f the price of airline tickets rises0 what will happen to the demand curve for flight attendantsA a. (t will shift to the left. b. (t will shift to the right. c. !here will be a movement along the curve. d. (t will remain unchangedB price changes do not shift demand curves. ANSWER b. (t will shift to the right. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
11

Which of the following events would cause an increase in the labor suppl/ curveA a. more married women deciding to work b. a lower Social Securit/ retirement age c. fewer married men deciding to work d. tighter restrictions on immigration polic/ ANSWER a. more married women deciding to work !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
13

When labor suppl/ increases0 a. profit>ma?imi@ing firms reduce emplo/ment. b. the marginal productivit/ of workers alwa/s increases. c. wages increase as long as suppl/ is upward sloping. d. wages decrease as long as labor demand is downward sloping. ANSWER d. wages decrease as long as labor demand is downward sloping. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
14

Which of the following could decrease labor demandA a. an increase in migrant workers b. a decrease in the labor suppl/ c. a decrease in demand for the final product produced b/ labor d. an increase in the marginal productivit/ of workers ANSWER c. a decrease in demand for the final product produced b/ labor !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
1;

When firms are able to increase the amount of ph/sical capital available to workers the a. value of the marginal product of labor will decrease. b. value of the marginal product of labor will increase. c. final product price will increase. d. marginal product of labor will decline. ANSWER b. value of the marginal product of labor will increase. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
1<

When economists refer to a firm.s capital0 the/ are likel/ to be using the term to describe the a. markets for final goods and services. b. amount of financing provided b/ the e=uit/ markets. c. stock of e=uipment and buildings used in production. d. amount of bank financing used b/ the firm. ANSWER c. stock of e=uipment and buildings used in production. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 3 RAN&)$ "
19

!he purchase price of land is a. the price received from the flow of some land services. b. the price a person pa/s to own the factor of production. c. alwa/s less than the rental price. d. the value of the land to the firm this time period. ANSWER b. the price a person pa/s to own the factor of production. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 3 RAN&)$ "

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-8- 'hapter 19:!he $arkets for the Factors of #roduction

17

!he marginal product of an/ factor of production depends on a. the price of the final good. b. the =uantit/ of the factor used. c. the demand for the final good. d. whether it is used to produce a good or a service. ANSWER b. the =uantit/ of the factor used. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 4 RAN&)$ "
-8

As a result of severe flooding0 a farmer loses one>half of his productive farmland. 6e should e?pect to see the marginal productivit/ of his land a. increase. b. decrease. c. become negative. d. remain unchanged. ANSWER a. increase. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 4 RAN&)$ "
-1

!he change in the suppl/ of one factor a. alters the earnings of all factors. b. will not alter the marginal productivit/ of other factors0 but ma/ lower their price. c. will not lower the price of other factors0 but ma/ alter their marginal productivit/. d. will not change the value of marginal product for other factors. ANSWER a. alters the earnings of all factors. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 4 RAN&)$ " Number of Workers 8 1 1 3 4
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)utput 8 188

$arginal #roduct of Cabor

,alue of $arginal #roduct of Cabor D1888 D988 D388

Wage D488 D488 D488 D488 D488

98 ;8 -98 -8

*ased on the table shown0 what is the marginal product of the fourth workerA a. -8 b. 38 c. ;8 d. 98 ANSWER b. 38 !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
-1

*ased on the table shown0 how man/ workers will a profit>ma?imi@ing firm hireA a. 4 b. 3 c. 1 d. ANSWER c. 1 !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

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'hapter 19:!he $arkets for the Factors of #roduction -81

-3

For the profit>ma?imi@ing competitive firm0 the value of marginal product curve is a. alwa/s rising. b. the labor suppl/ curve. c. the labor demand curve. d. falling onl/ when marginal product is rising. ANSWER c. the labor demand curve. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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!he labor suppl/ curve is fundamentall/ a representation of the trade>off people face between which of the followingA a. work and wage b. work and leisure c. wage and productivit/ d. technolog/ and wage. ANSWER b. work and leisure !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "

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ANSWER d. inputs used to produce goods and services. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. derived demand. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. wages. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

3

ANSWER c. inputs and outputs. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. output per additional unit of input. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER c. diminishing marginal product is present. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER d. total revenue with the addition of the last worker. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER a. the value of the marginal product e=uals the wage. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. value of marginal product. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. a downward>sloping demand for labor. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER d. value of the marginal product e?ceeds the wage. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. (t will shift to the right. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER a. more married women deciding to work !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
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ANSWER d. wages decrease as long as labor demand is downward sloping. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
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ANSWER c.

a decrease in demand for the final product produced b/ labor

!"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

1;

ANSWER b. value of the marginal product of labor will increase. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
1<

ANSWER c. stock of e=uipment and buildings used in production. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 3 RAN&)$ "
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ANSWER b. the price a person pa/s to own the factor of production. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 3 RAN&)$ "
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ANSWER b. the =uantit/ of the factor used. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 4 RAN&)$ "
-8

ANSWER a. increase. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 4 RAN&)$ "

-1

ANSWER a. alters the earnings of all factors. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 4 RAN&)$ "
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ANSWER b. 38 !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

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ANSWER c. 1 !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "

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ANSWER c. the labor demand curve. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER b. work and leisure !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "