Question 1

Which of the following is not correct?

Accepted Answer

A)  Earnings from capital may be paid to households in the form of dividends.
B)  Earnings from capital may be retained by firms to purchase additional capital.
C)  Firms may not pay out all of their earnings to households.
D)  Firms earn the highest profits when the owners of capital receive a value above the marginal product.E) B) and D)
F) A) and B)

Question 2

Consider the labor market for short-order cooks. An increase in immigration will cause

Accepted Answer

A)  both equilibrium wages and equilibrium employment to increase.
B)  both equilibrium wages and equilibrium employment to decrease.
C)  equilibrium wages to increase and equilibrium employment to decrease.
D)  equilibrium wages to decrease and equilibrium employment to increase.E) None of the above
F) B) and C)

Question 3

Which of the following events can cause the labor-supply curve to shift?

Accepted Answer

A)  an increase in the wage rate
B)  an increase in the price of output
C)  an increase in the rate of immigration
D)  a technological advanceE) None of the above
F) B) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output per week. 
-Refer to Figure 18-1. Suppose the firm sells its output for $12 per unit, and it pays each of its workers $700 per week. The value of the marginal product of the fifth worker is

Accepted Answer

A)  $540
B)  $700
C)  $720
D)  $1,080E) A) and C)
F) A) and B)

Question 6

According to the neoclassical theory of distribution, the wages paid to John Deere tractor assembly line workers are higher than those paid to fast food workers because assembly line workers

Accepted Answer

A)  have college degrees, on average, whereas fast food workers usually do not.
B)  produce a product of greater market value than do fast food workers.
C)  work in a less stressful environment than do fast food workers.
D)  are less likely to belong to a labor union than are fast food workers.E) All of the above
F) A) and D)

Question 7

Suppose that the "Millennial" generation values leisure more than past generations. We can expect a decrease in the labor supply as the Millennials enter their prime working ages.

Accepted Answer

A) True 
 B)False

Question 8

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the

Accepted Answer

A)  wage.
B)  marginal cost of the output.
C)  change in total profit.
D)  market price of the output.E) A) and D)
F) B) and C)

Question 9

A profit-maximizing, competitive firm for which the marginal product of labor is diminishing also experiences

Accepted Answer

A)  a perfectly inelastic supply of labor.
B)  a perfectly elastic supply of labor.
C)  a downward-sloping demand for labor.
D)  an upward-sloping demand for labor.E) None of the above
F) A) and D)

Question 10

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7.50. How many workers should the firm hire?

Accepted Answer

A)  2
B)  3
C)  4
D)  5E) All of the above
F) C) and D)

Question 11

Diminishing marginal product is closely related to

Accepted Answer

A)  diminishing total cost.
B)  diminishing marginal cost.
C)  increasing price.
D)  increasing marginal cost.E) None of the above
F) A) and B)

Question 12

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 $160 per unit of labor and sells its output at $10 per unit. What is the value of the marginal product of labor for the fourth worker?

Accepted Answer

A)  10 units
B)  $100
C)  $1,000
D)  $1,600E) B) and D)
F) A) and B)

Question 13

Figure 18-7 1 = $20 and W2 = $18, and the market is always in equilibrium. A shift of the labor supply curve from S1 to S2 would A) increase the value of the marginal product of labor by $2. B) decrease the value of the marginal product of labor by $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." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 18-7. Assume W1 = $20 and W2 = $18, and the market is always in equilibrium. A shift of the labor supply curve from S1 to S2 would

Accepted Answer

A)  increase the value of the marginal product of labor by $2.
B)  decrease the value of the marginal product of labor by $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) C) and D)
F) B) and D)

Question 14

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 $160 per unit of labor and sells its output at $10 per unit. How many units of labor should the firm hire to maximize profit?

Accepted Answer

A)  2 units
B)  3 units
C)  4 units
D)  5 unitsE) None of the above
F) C) and D)

Question 15

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-B. What is the second worker's marginal product of labor?

Accepted Answer

A)  350 cupcakes
B)  150 cupcakes
C)  125 cupcakes
D)  100 cupcakesE) All of the above
F) B) and C)

Question 16

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

Accepted Answer

A)  derived factors.
B)  derived resources.
C)  factors of production.
D)  instruments of revenue.E) C) and D)
F) None of the above

Question 17

Figure 18-3 
-Refer to Figure 18-3. Suppose that the price of the output is $20. What is the value of the marginal product of the fourth worker?

Accepted Answer

A)  $1
B)  $20
C)  $280
D)  $300E) B) and C)
F) A) and D)

Question 18

Who has a greater opportunity cost of leisure - a president of a major corporation or a babysitter?

Accepted Answer

The opportunity cost...

Question 19

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

Accepted Answer

A)  minimize wages.
B)  minimize variable costs.
C)  maximize the number of workers hired.
D)  maximize profit.E) A) and B)
F) B) and C)

Question 20

Growth in real wage rates is closely tied to growth in labor productivity.

Accepted Answer

A) True 
 B)False

Exam 18: The Markets for the Factors of Production

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the

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Growth in real wage rates is closely tied to growth in labor productivity.

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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 $160 per unit of labor and sells its output at $10 per unit. What is the value of the marginal product of labor for the fourth worker?

Correct AnswerverifiedShow Answer

Who has a greater opportunity cost of leisure - a president of a major corporation or a babysitter?

Correct AnswerverifiedThe opportunity cost...View AnswerShow Answer

Which of the following events can cause the labor-supply curve to shift?

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

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Which of the following is not correct?

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Figure 18-1 On the graph, L represents the quantity of labor and Q represents the quantity of output per week. -Refer to Figure 18-1. Suppose the firm sells its output for $12 per unit, and it pays each of its workers $700 per week. The value of the marginal product of the fifth worker is

Correct AnswerverifiedShow Answer

According to the neoclassical theory of distribution, the wages paid to John Deere tractor assembly line workers are higher than those paid to fast food workers because assembly line workers

Correct AnswerverifiedShow Answer

Consider the labor market for short-order cooks. An increase in immigration will cause

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7.50. How many workers should the firm hire?

Correct AnswerverifiedShow Answer

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-B. What is the second worker's marginal product of labor?

Correct AnswerverifiedShow Answer

A profit-maximizing, competitive firm for which the marginal product of labor is diminishing also experiences

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Figure 18-7 -Refer to Figure 18-7. Assume W1 = $20 and W2 = $18, and the market is always in equilibrium. A shift of the labor supply curve from S1 to S2 would

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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 $160 per unit of labor and sells its output at $10 per unit. How many units of labor should the firm hire to maximize profit?

Correct AnswerverifiedShow Answer

Suppose that the "Millennial" generation values leisure more than past generations. We can expect a decrease in the labor supply as the Millennials enter their prime working ages.

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Diminishing marginal product is closely related to

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Figure 18-3 -Refer to Figure 18-3. Suppose that the price of the output is $20. What is the value of the marginal product of the fourth worker?

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

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The opportunity cost...
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Figure 18-7 -Refer to Figure 18-7. Assume W₁ = $20 and W₂ = $18, and the market is always in equilibrium. A shift of the labor supply curve from S₁ to S₂ would

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