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Exam 18: The Markets for the Factors of Production

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Question 61

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Suppose that the labor market for life guards is initially in equilibrium. Then the marginal productivity of life guards increases. What happens to the equilibrium wage and quantity of life guards?

A) Both the equilibrium wage and quantity increase.
B) Both the equilibrium wage and quantity decrease.
C) The equilibrium wage increases, and the equilibrium quantity decreases.
D) The equilibrium wage decreases, and the equilibrium quantity increases.

E) B) and C)
F) C) and D)

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Question 62

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The rental price of land is

A) the price paid for ownership of the land.
B) the price paid for the flow of services from land over a specified time period.
C) always more than the purchase price.
D) All of the above are correct.

E) B) and D)
F) A) and B)

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Question 63

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Does an upward-sloping labor-supply curve mean that people respond to a decrease in the wage by enjoying more leisure or less leisure?

Your college roommate receives a pay raise at her part-time job from $9 to $11 per hour. She used to work 10 hours per week, but now she decides to work 15 hours per week. For this price range, her labor supply curve is

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. Labor-market theory assumes that Gertrude's demand for crew members and her supply of fresh Pacific salmon result from her

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. Assume that two points on the firm's production function are (L = 2, Q = 180) and (L = 3, Q = 228) , where L = number of workers and Q = quantity of output. The firm pays its workers $120 per day. The firm's non­labor costs are fixed, and they amount to $250 per day. We can conclude that

Rob was the last worker hired by a firm that is competitive in the labor market. The labor market always is in equilibrium. Rob's wage is $30 per hour. When Rob was hired, the firm's output increased by 4 units per hour as a result. For what price does the firm sell its output?

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

Which of the following is not correct?

The quantity available of one factor of production can affect the marginal product of other factors.

Table 18-10 -Refer to Table 18-10. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?

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?

The effect of the Black Death in 14th-century Europe was to

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 twelve 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 total productivity of three workers?

The production function is the

In general, less productive workers are paid less than more productive workers.

An upward-sloping labor-supply curve implies that an increase in the wage induces

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

Table 18-1 -Refer to Table 18-1. Suppose that the firm pays its workers $45 per day. Each unit of output sells for $10. How many days of labor should the firm hire?

If Ernie's individual labor supply curve is upward sloping, then Ernie responds to an increase in the