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Exam 18: The Markets for the Factors of Production

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Question 1

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Table 18-9 The following table shows the production function for a particular business. The numbers represent the various labor and output combinations the firm may choose for its output on a daily basis. -Refer to Table 18-9. What is the marginal product of the fifth unit of labor?

A) 30 units
B) 40 units
C) 50 units
D) 250 units

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

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Question 2

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When an individual's income goes up, that individual may choose to supply less labor, resulting in a backward­sloping labor supply curve.

A) True
B) False

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Question 3

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Suppose that the labor market for life guards is initially in equilibrium. Whistles are an important safety tool that life guards use as a part of their jobs. A fire destroys the largest factory that produces whistles. What happens to the equilibrium wage and quantity of life guards?

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. What is the marginal product of the second mechanic?

Which of the following is an example of a firm's derived demand?

Table 18-7 -Refer to Table 18-7. To maximize its profit, how many workers will the firm hire?

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?

Average productivity can be measured as total output divided by total units of labor.

Consider the market for university economics professors. Suppose the opportunity cost of going to graduate school to get a Ph.D. in economics increases 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

Total income in the United States is comprised of

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

If the output price of a product rises, the demand for capital will increase, raising the rental price of capital.

How does increased immigration affect the labor market? How would the equilibrium wage and the equilibrium quantity of labor be affected?

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 quantity of university economics professors will

The rental price of capital is determined by the

Suppose that a competitive firm hires labor up to the point at which the value of the marginal product equals the wage and that labor is the only input that varies for the firm. If the firm pays a wage of $700 per week and the marginal product of labor equals 10 units per week, then the marginal cost of producing an additional unit of output is

A highly-paid research scientist works 12 hours a day, while a common laborer works only 5 hours a day. Offer a likely explanation, using the concept of opportunity cost.

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

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximizing competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

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 Gertrude is a competitor in both the fresh Pacific salmon market and in the market for crew members, she is called a price