Deck 18: The Markets for the Factors of Production

Question 1

For competitive firms, the curve that represents the value of marginal product of labor is the same as the demand for labor curve.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

In order to calculate the value of the marginal product of labor, a manager must know the marginal product of labor and the wage rate of the worker.

Answer 3

False

Question 4

Daryn is raking leaves to earn money for his university's economics club. In the first hour, he rakes 8 bags of leaves. In the second hour, he rakes 6 bags of leaves. If he earns $8 per hour, the value of the marginal product of the second hour of labor is $48.

Question 5

In a competitive market for labor, the equilibrium wage always equals the value of the marginal product.

Question 6

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

Question 7

The value of the marginal product of labor can be calculated as the price of the final good minus the marginal product of labor.

Question 8

The demand for computer programmers is inseparably tied to the supply of computer software.

Question 9

If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will decrease to offset the higher price.

Question 10

Stock dividends and interest payments are examples of factors of production.

Question 11

The value of the marginal product of capital can be calculated as the market price of the good multiplied by the marginal product of capital.

Question 12

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

Question 13

When a competitive firm hires labor up to the point at which the value of the marginal product of labor equals the wage, it also produces up to the point at which the price of output equals average variable cost.

Question 14

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

Question 15

Let L represent the quantity of labor, and let Q represent the quantity of output. Suppose a certain production function includes the points (L = 7, Q = 27), (L = 8, Q = 35), and
(L = 9, Q = 45). Based on these three points, this production function exhibits diminishing marginal product.

Question 16

A firm's demand for labor is derived from its decision to supply a good in another market.

Question 17

If the marginal productivity of the sixth worker hired is less than the marginal productivity of the fifth worker hired, then the addition of the sixth worker causes total output to decline.

Question 18

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the marginal product of labor.

Question 19

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

Question 20

Daryn is raking leaves to earn money for his university's economics club. In the first hour, he rakes 8 bags of leaves. In the second hour, he rakes 6 bags of leaves. If he earns $8 per hour, the value of the marginal product of the second hour of labor is $16.

Question 21

Technological advances can cause the labor demand curve to shift.

Question 22

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

Question 23

An increase in the output price will increase the firm's demand for labor, all else equal.

Question 24

Labor-saving technological advances increase the marginal productivity of labor.

Question 25

The labor-supply curve is affected by the trade-off between labor and leisure.

Question 26

An increase in the wages paid to high-school student who detassle corn will increase the labor supply of high-school students who weed soybean fields, all else equal.

Question 27

From 1960 to 2015, inflation-adjusted wages increased by 165 percent in the U.S., and yet firms more than doubled the amount of labor they employed.

Question 28

An increase in a product's price will shift the labor demand curve for workers who produce that product to the left.

Question 29

Labor supply curves are always upward sloping.

Question 30

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.

Question 31

Labor-augmenting technological advances increase the marginal productivity of labor.

Question 32

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

Question 33

The opportunity cost of leisure is impossible to measure because we cannot measure leisure time in dollars.

Question 34

Labor-saving technological advances decrease the marginal productivity of labor.

Question 35

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

Question 36

The supply of labor in any one market depends on the opportunities available in other markets.

Question 37

Ellen receives a raise at her current part-time job from $8 to $10 per hour. If her labor supply curve is upward sloping, she will work fewer hours after receiving the pay raise.

Question 38

In the United States, technological advances help explain persistently rising employment in the face of rising wages.

Question 39

Labor-augmenting technological advances decrease the marginal productivity of labor.

Question 40

The labor supply curve reflects how workers' decisions about the labor-leisure tradeoff respond to changes in the opportunity cost of leisure.

Question 41

The rental price of capital is the price a person pays to own the capital indefinitely.

Question 42

If the demand for labor decreases and the supply of labor is unchanged, then the opportunity cost of leisure will decrease.

Question 43

Increases in productivity are not responsible for increased standards of living in the United States.

Question 44

Oil field workers' wages are directly tied to the world price of oil.

Question 45

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

Question 46

As the number of concrete workers in the United States falls, the wage paid to the remaining concrete workers will necessarily fall as well.

Question 47

Capital income does not include income paid to households for the use of their capital.

Question 48

Suppose the supply of capital decreases. As a result, the quantity of capital used in production and the rental price of capital will both fall.

Question 49

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

Question 50

For a snow-removal business, the capital stock would include inputs such as snow blowers and shovels.

Question 51

If the demand for labor in a particular industry increases, the equilibrium wage in that industry will also increase.

Question 52

Movements of workers from country to country can cause shifts in the labor supply curves for both countries.

Question 53

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

Question 54

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

Question 55

When a firm decides to retain its earnings instead of paying dividends, the stockholders necessarily suffer.

Question 56

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

Question 57

Firms pay out a portion of their earnings in the form of interest and dividends, and those payments are a portion of the economy's capital income.

Question 58

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

Question 59

Capital owners are compensated according to the value of the marginal product of that capital.

Question 60

If men's preferences for work change such that more men want to be stay-at-home fathers, the wages paid to men who remain in the workplace would rise, all else equal.

Question 61

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 and a corresponding decrease in wages.

Question 62

The demand for rocket scientists is inseparably linked to the supply of __________.

Question 63

The marginal product of land depends on the quantity of land that is available.

Question 64

Restaurants' demand for cooks and waiters is inseparably linked to the supply of __________.

Question 65

U.S. immigrants are less likely to be working than immigrants in other developed countries.

Question 66

The marginal product of land depends only on the quantity of land available.

Question 67

The value of the marginal product of capital can be calculated as the marginal product of capital multiplied by the cost of the capital input.

Question 68

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the price of the final good multiplied by the marginal product of the last worker hired.

Question 69

The U.S. economy has been very successful in absorbing immigrants and putting them to work.

Question 70

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.

Question 71

A firm hires some number of custodians to clean a large warehouse. When only a few custodians are hired, they can quickly find and remove a lot of dust and debris. As the number of custodians increases, additional custodians have to go to greater lengths and spend more time to find and remove additional dust and debris. What property of production functions is relevant to the custodians' situation?

Question 72

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 and a corresponding increase in wages.

Question 73

Why do we say that the demand for labor is a derived demand?

Question 74

An event that changes the supply of any factor of production can alter the earnings of all the factors.

Question 75

What are the three most important factors of production?

Question 76

Suppose Cassie's Candles is a profit-maximizing competitive firm. Cassie sells hand-made candles for $10 each. She will pay an hourly wage of $20 so long as the marginal productivity of a worker equals or exceeds two candles per hour.

Question 77

Suppose an influenza pandemic were to significantly decrease the population of a country. We would predict a decrease in the marginal product of land in that country.

Question 78

A monopsony firm in a labor market hires fewer workers than would a competitive firm.

Question 79

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

Question 80

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