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Exam 18: The Markets for the Factors of Production

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Question 101

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Scenario 18-2 Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude 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 18-2. In the fresh Pacific salmon product market, Gertrude has some control over the

A) price she charges for her fresh salmon.
B) quantity of fresh salmon that she supplies to the market.
C) competitive environment of the market.
D) supply of labor in the market.

E) A) and B)
F) None of the above

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Question 102

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Figure 18-10 -Refer to Figure 18-10. Assume W1 = $20 and W2 = $22, and the market is always in equilibrium. A shift of the labor demand curve from D1 to D2 would

A) increase the value of the marginal product of labor by $2.
B) increase the value of the marginal product of labor by less than $2.
C) decrease the value of the marginal product of labor by more than $2.
D) not change the value of the marginal product of labor.

E) A) and D)
F) None of the above

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Question 103

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As a result of increasing its workforce from 9 workers to 10 workers, a firm's total revenue per day increases from $60,000 to $60,250 and its total cost per day increases from $58,500 to $58,700. The marginal profit of the 10th worker is

Why do we say that the demand for labor is a derived demand?

Labor supply curves are always upward sloping.

Value of marginal product is defined as the additional

Suppose that a rare virus infects and kills a significant percentage of the population. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners?

Figure 18-10 -Refer to Figure 18-10. If the relevant labor demand curve is D2 and the current wage is W1,

Along the vertical axis of the production function we typically measure

Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium quantity of capital equipment will

If the demand for labor in a particular industry increases, the equilibrium wage in that industry will also increase.

Labor-saving technological advances increase the marginal productivity of labor.

Table 18-6 -Refer to Table 18-6. What is the value for the cell labeled DD?

Suppose that a large tornado destroys the fleet of fire trucks for the city of Omaha, Nebraska. What happens to the earnings of firefighters in Omaha?

Figure 18-2 The figure below shows the production function for a particular firm. -Refer to Figure 18-2. Suppose the firm pays a wage equal to $320 per unit of labor and sells its output at $15 per unit. How many units of labor should the firm hire to maximize profit?

Suppose the government designates certain areas within a community to be "wetlands," making it illegal to build on the land. What happens to land not classified as "wetlands" within the community? (i) The price of non-wetland land will rise. (ii) The marginal product of non-wetland land will fall. (iii) The marginal product of non-wetland land will rise.

The value of the marginal product of labor can be calculated as the price of the final good minus the marginal product of labor.

Diane's Auto World installs tires on automobiles, light trucks, and sport utility vehicles. She is a profit-maximizing business owner whose firm operates in a competitive market. The marginal cost of installing a tire is $20. The marginal productivity of the last worker that Diane hired was 2 tires per hour. What is the maximum hourly wage that Diane was willing to pay the last worker hired?

Which of the following would be an example of capital for a computer software firm? (i) the firm's computer programmers (ii) the wages the firm pays to its computer programmers (iii) computer equipment

Figure 18-5 The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily. -Refer to Figure 18-5. The value­of­marginal­product curve that is drawn could be relabeled as the firm's