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Exam 18: The Market for the Factors of Production

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Question 1

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The marginal product of land depends on the quantity of land that is available.

A) True
B) False

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Question 2

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Economists refer to the inputs that firms use to produce goods and services as

A) derived factors.
B) derived resources.
C) factors of production.
D) instruments of revenue.

E) All of the above
F) C) and D)

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C

Question 3

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Using the theory of wage determination,explain why wages in developing countries,where levels of capital are small,are typically quite low.

Suppose that the labor market for life guards is initially in equilibrium.Then a new television series debuts which glamorizes the social opportunities for life guards.What happens to the equilibrium wage and quantity of life guards?

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the marginal product of labor.

For competitive firms,the curve that represents the value of marginal product of labor is the same as the demand for labor curve.

Figure 18-5 The figure shows a particular profit-maximizing,competitive firm's value-of-marginal-product (VMP) curve.On the horizontal axis,L represents the number of workers.The time frame is daily. -Refer to Figure 18-5.Suppose one point on the firm's production function is (L = 3,Q = 180) ,where L = number of workers and Q = quantity of output.If the firm sells its output for $5 per unit,then

For a competitive firm experiencing diminishing marginal productivity,the value of the marginal product (i) increases when the price of output decreases. (ii) changes when marginal product changes. (iii) diminishes as the number of workers rises.

The marginal product of labor is defined as the change in

Capital income does not include income paid to households for the use of their capital.

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.Based on the given information,it is likely that Gertrude's firm has

When we focus on the firm as a supplier of a good or a service,we assume that the firm is a profit maximizer.When we focus on the firm as a demander of labor,we assume that the firm's objective is to

Consider the market for university economics professors.Suppose the opportunity cost of going to graduate school to get a Ph.D.in economics decreases for many individuals.Suppose it generally takes about five years to get a Ph.D.in economics.Holding all else constant,in five years the equilibrium wage for university economics professors will

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.If the price of fresh Pacific salmon were to decrease significantly,it is most likely that Gertrude would

Which of the following would shift a market labor supply curve to the right?

Movements of workers from country to country can cause shifts in the labor supply curves for both countries.

For a competitive,profit-maximizing firm,the labor demand curve is the same as the

Suppose that the market for labor is initially in equilibrium.An increase in the price of output will cause the equilibrium wage

Describe the difference between a diminishing marginal product of labor and a negative marginal product of labor.Why would a profit-maximizing firm always choose to operate where the marginal product of labor is decreasing (but not negative)?

Your best friend receives a pay raise at her part-time job from 8 dollars to 10 dollars per hour.She used to work 20 hours per week,but now she decides to work 16 hours per week in order to spend more time studying economics.For this price range,her labor supply curve is