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Exam 18: The Markets for the Factors of Production

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Question 271

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We observe a profit-maximizing firm hiring its 75th employee. It is possible to infer that, when 74 employees are hired, the

A) wage exceeds the value of the marginal product of labor.
B) value of the marginal product of labor exceeds the wage.
C) marginal product of labor is increasing.
D) firm is attempting to increase its market share.

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

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Question 272

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A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the price of the final good.

A) True
B) False

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Question 273

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Changes in supply and demand in the labor market will cause changes in wages.

Labor-augmenting technology causes which of the following?

Both theory and history point to a close relationship between increases in

Figure 18-12. The figure shows the relationship between the number of mechanics hired and the number of car repairs performed per day at a car-repair shop. -Refer to Figure 18-12. If the shop charges $120 per repair and pays each of its mechanics a wage of $400 per day, then what is the marginal profit of the third mechanic?

Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. Assume that MadeFromScratch is a competitive, profit-maximizing firm. If the market price of cupcakes increases from $2.00 to $2.50, how many workers would the firm then hire?

Table 18-11 Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $2 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the value of the marginal product of the fifth worker?

For profit-maximizing, competitive firms, the demand curve for each factor of production equals the value of the marginal product of that factor.

Which of the following statements is correct?

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)?

If Firm X is a competitive firm in the market for labor, it has little influence over the wage it pays its employees.

The equilibrium purchase price of an acre of land depends upon the current value of the marginal product of land and upon the __________.

Figure 18-12. The figure shows the relationship between the number of mechanics hired and the number of car repairs performed per day at a car-repair shop. -Refer to Figure 18-12. Suppose the shop pays each of its mechanics $210 per day. Over what interval of prices (that is, charges per car repair, P) would the shop maximize its profit by hiring exactly 3 mechanics? (Determine P1 and P2 such that P1 < P < P2.)

Christine works for a firm that makes tires for cars. How is Christine's wage affected if the price of tires decreases?

Which of the following events would lead to an increase in the supply of labor?

Suppose the prices of agricultural products such as corn and soybeans increase. What is the effect of these price increases on the marginal product of the 1,000th farm worker? What is the effect on the value of the marginal product of the 1,000th farm worker?

Figure 18-7 -Refer to Figure 18-7. Assume W1 = $15 and W2 = $12, and the market is always in equilibrium. A shift of the labor supply curve from S1 to S2 would

Scenario 18-3 Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $13 per hour. During the summer, he drives a tour bus around the ski resort, earning $11 per hour. -Refer to Scenario 18-3. During the summer months, what is Sam's opportunity cost of taking an hour off work to go hiking?

Most of the total income earned in the U.S. economy is ultimately paid to