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Exam 18: The Markets for the Factors of Production

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Question 61

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To say that a firm is competitive in the labor market is to say that the firm

A) has little or no control over the number of workers it hires.
B) has little or no control over the wage it pays its workers.
C) is aggressive in pursuing the most skilled workers in the labor market.
D) is aggressive in trying to keep its workers' wages low.

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

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Question 62

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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)?

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Diminishing marginal product of labor me...

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Question 63

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Jessica receives a raise at her current part-time job from $9 to $11 per hour. If her labor supply curve is backward sloping, she will work fewer hours after receiving the pay raise.

Land, labor, and capital are examples of factors of production.

As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of diminishing returns applies to all factors of production, she should expect to see

Scenario 18-3 Gabrielle has two jobs, one for the winter and one for the summer. In the winter, she works as a lift attendant at a ski resort where she earns $16 per hour. During the summer, she drives a tour bus around the ski resort, earning $11 per hour. -Refer to Scenario 18-3. Assume that Gabrielle has an upward-sloping labor supply curve. If the opportunity cost of Gabrielle's leisure time increases, she will respond by working

Suppose a shift of the labor-demand curve results in an increase of $5 in the equilibrium wage. How does this shift affect the value of the marginal product of labor?

Profit maximization by firms ensures that the equilibrium wage always equals the value of the marginal product of capital.

Does history suggest that most technological progress is labor-saving or labor-augmenting?

In 2015, the total income of all U.S. residents was approximately $16 billion.

Describe the difference between the purchase price of capital and the rental price of capital. If you know the value of marginal product from the flow of capital services, how would you determine the market price for the capital stock?

An increase in immigration will lower the equilibrium wage, all else held constant.

If one were to consider a university as a business, the computers in the computer labs would be regarded by economists as

Over time, there have been technological advances in the production of radios. At the same time, it has become less popular to listen to radio. Taking these two events into account, what would be the likely effect on the wages of workers who manufacture radios?

Suppose a shift of the demand curve for strawberry pickers causes the equilibrium wage of strawberry pickers to increase by $2. The price of strawberries is $3 per pound before and after the shift. Does the shift increase the marginal product of the last picker hired, or does it decrease it? What is the amount of the increase or decrease?

Scenario 18-1 Harry owns a snow-removal business. He hires workers to shovel driveways for him during the winter. The first worker he hires can shovel 12 driveways in one day. When Harry hires two workers, they can shovel a total of 22 driveways in one day. When Harry hires a third worker, he shovels an additional eight driveways in one day. -Refer to Scenario 18-1. What is the marginal productivity of the second worker?

Because of diminishing returns, a factor in abundant supply has a

Suppose that a college physics experiment goes horribly wrong and releases an electronic pulse that renders all electronic equipment in the cities of Columbus, Cleveland and Cincinnati, Ohio permanently useless. No people are hurt, and no buildings are damaged. After the accident, the wages earned by Ohio workers will

The idea that rational employers think at the margin is central to understanding how many units of labor they choose to employ.

A change in the supply of one factor of production