Deck 16: The Markets for Labor, Capital, and Land

Question 1

The demand for cake decorators has no relationship to the demand for cakes.

Answer 1

False

Question 2

At higher interest rates,fewer people or firms will want to borrow.At lower interest rates,fewer people or firms will want to save.

Answer 2

True

Question 3

The intersection of the market demand for labor and the market supply for labor determines the equilibrium wage rate.

Answer 3

True

Question 4

The additional revenue a firm obtains from hiring one more unit of input is called the marginal revenue product.

Question 5

The law of diminishing marginal product is a reason why the demand curve for labor is downward sloping.

Question 6

The demand for labor is derived from the demand for final goods which that labor is used to produce.

Question 7

If the demand for opera singers increases faster than the supply,wages will rise.

Question 8

As more workers are hired to harvest grapes in a vineyard,the fields become overcrowded.As a result,the marginal product of labor is likely to diminish.

Question 9

Increases in income from sources other than employment can cause the labor supply curve to shift to the left.

Question 10

The salaries of college professors are partly determined by the demand for college education.

Question 11

An increase in the price of a firm's output will shift the firm's demand curve for labor to the right,other things being equal.

Question 12

A decrease in the price of a firm's output will shift the firm's demand curve for labor to the right,other things being equal.

Question 13

While unions represent only a fraction of the unskilled workers in the U.S.labor market,any wage increase won by unionized workers is most likely shared with non-union unskilled workers.

Question 14

The demand curve for capital is downward sloping because of the increasing marginal cost of capital.

Question 15

Ultimately,the source of growth in real wages is the growth in labor productivity.

Question 16

The marginal resource cost of input is the amount that an extra unit of that input adds to the firm's total costs.

Question 17

Other things being equal,if the quantity of labor supplied is less than the quantity of labor demanded,wages will tend to fall.

Question 18

A decrease in the productivity of labor will shift the demand curve for labor to the left,other things being equal.

Question 19

The marginal resource cost is the amount by which an additional unit of input decreases the firm's variable costs.

Question 20

The concept of derived demand indicated that the demand for a final good or service will be determined by the price of the inputs used to produce that final good or service.

Question 21

Mr.Calhoun owned land on which cotton could be grown,but which he had been unable to rent for years.Suddenly he was getting offers from cotton farmers to lease his land.Which of the following best explains this change in circumstances?

A) The price of cotton decreased.
B) The price of cotton increased.
C) The productivity of the land increased.
D) Property taxes on the land increased.

Question 22

The contribution of an additional worker to a firm's ____,is the worker's contribution to revenue minus the worker's ____.

A) profits; wage
B) output; wage
C) profits; marginal productivity
D) output; marginal productivity

Question 23

If the demand for softballs increases,one could expect the demand for leather to increase.This is due to the:

A) principle of diminishing marginal product.
B) change in the opportunity cost of producing a softball.
C) reduction in the cost of producing softballs.
D) demand for an input being a derived demand.

Question 24

The price of any productive resource is ____ related to ____ the final good or service:

A) inversely; demand for
B) directly; demand for
C) directly; supply of
D) not; supply of

Question 25

Based on the table below,how many workers will the firm employ in order to maximize profits?

A) 4
B) 5
C) 6
D) 7

Question 26

The demand curve for labor slopes downward because:

A) few workers are willing to work at low wages.
B) capital has been substituted for labor in most industries.
C) of the diminishing marginal product of labor.
D) of all of the above.

Question 27

When labor is a firm's only variable input in its production process,a profit-maximizing firm will continue to employ additional workers as long as:

A) the marginal product of labor > 0.
B) the marginal revenue product of labor < the marginal resource cost.
C) the marginal revenue product of labor > the marginal resource cost.
D) none of the above.

Question 28

For a firm that is competitive in both product and factor markets,the value of the marginal product of labor:

A) is constant and equal to the market wage.
B) increases, causing the labor supply curve to slope upward.
C) declines because the marginal product of labor diminishes as the number of workers rises.
D) declines because a competitive firm must lower product price in order to increase sales.

Question 29

The major reason the market demand curve for labor slopes downward is because:

A) at lower wage rates, workers are less willing to supply labor to the market.
B) at lower wage rates, workers are more willing to supply labor to the market.
C) of the law of diminishing marginal product.
D) of the law of diminishing marginal resource cost.

Question 30

Which of the following best illustrates the concept of "derived demand"?

A) An increase in the wages of autoworkers leads to an increase in the demand for robots in automobile factories.
B) An auto firm decides to supply more minivans when there is a decrease in the demand for station wagons.
C) An increase in the price of gasoline leads to an increase in the demand for small cars.
D) An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.

Question 31

Based on the table below,how many workers will the firm employ in order to maximize profits?

A) 14
B) 15
C) 16
D) 17

Question 32

The marginal product of labor measures:

A) the total amount of output produced by all workers combined.
B) the quantity of an intermediate product that is combined with labor to produce output.
C) the amount of output an additional worker contributes to a firm's total output.
D) the average productivity of workers hired by a firm.

Question 33

A worker's contribution to the firm's revenue is measured directly by the worker's:

A) value of marginal product.
B) marginal product multiplied by his/her wage.
C) marginal product minus his/her wage.
D) contribution to total output.

Question 34

Labor unions create barriers to entry in certain work settings.

Question 35

In the last 60 years,the percentage of workers in union jobs has increased substantially.

Question 36

When a profit-maximizing firm makes a decision to employ a worker,that decision is based on:

A) the individual contribution that the worker makes to the profit of the firm.
B) the average productivity of the firm's labor force.
C) the familial relationship between the employer and the employee.
D) the total output produced by the firm.

Question 37

Other things being equal,an increase in labor productivity will shift the labor supply curve to the right.

Question 38

The supply curve for land is perfectly elastic.

Question 39

Demand for inputs is a derived demand because:

A) it is derived from the need for income.
B) it corresponds to the derived supply of the inputs.
C) the demand for output leads producers to demand inputs used to produce finished goods.
D) of the diminishing marginal product of inputs.

Question 40

The demand for labor is a derived demand.Employers hire workers until the:

A) wage rate equals the average product of labor.
B) wage rate equals the marginal revenue product of labor.
C) average product of labor is zero.
D) marginal product of labor is zero.

Question 41

The profit-maximizing firm should continue hiring additional labor as long as:

A) MRC < MRP.
B) MRC > MRP.
C) MRC = MRP.
D) the MP of labor > 0.

Question 42

Which of the following would cause the demand for carpenters to increase?

A) a decrease in immigration
B) an increase in the demand for housing
C) an increase in the price of lumber
D) a decrease in the productivity of carpenters

Question 43

Which of the following would certainly increase the demand for labor?

A) an increase in demand for the final product and an increase in the productivity of labor
B) an increase in demand for the final product and a decrease in the productivity of labor
C) a decrease in demand for the final product and an increase in the productivity of labor
D) a decrease in demand for the final product and a decrease in the productivity of labor

Question 44

Improvements in the productivity of labor will tend to:

A) increase the supply of labor.
B) increase the demand for labor.
C) decrease the supply of labor.
D) decrease the demand for labor.

Question 45

The income effect of a wage increase:

A) results in an increase in the quantity of labor supplied.
B) results in a decrease in the quantity of labor supplied.
C) has no impact on the quantity of labor supplied.
D) results in a decrease in the quantity of leisure enjoyed.

Question 46

If leisure is a normal good for a worker,and the income effect of a wage change dominates the substitution effect,then if wages increase:

A) there will be a decrease in the quantity of labor supplied by the worker.
B) there will be an increase in the quantity of labor supplied by the worker.
C) there will be no change in the quantity of labor supplied by the worker.
D) the worker's individual supply curve will shift to the left.

Question 47

A backward-bending portion of an individual labor supply curve is most likely to be observed:

A) at lower wages.
B) at higher wages.
C) in manufacturing industries.
D) in service industries.

Question 48

The market supply curve for labor:

A) shows the relationship between the wage rate and the number of employees firms are willing to hire.
B) shows the relationship between the price of output and the number of employees firms are willing to hire.
C) shows the relationship between the wage rate and the quantity of labor that workers are willing to supply.
D) shows the relationship between the price of output and the quantity of labor that workers are willing to supply.

Question 49

Improvements in the productivity of labor will tend to:

A) increase the supply of labor.
B) increase wages.
C) decrease the supply of labor.
D) decrease wages.

Question 50

When wages increase:

A) the quantity of labor supplied by an individual always increases.
B) the quantity of labor supplied by an individual always decreases.
C) the opportunity cost of leisure time increases.
D) the opportunity cost of leisure time decreases.

Question 51

Based on the table below,how many workers will the firm employ in order to maximize profits?

A) 12
B) 13
C) 14
D) 15

Question 52

The relationship between the wage rate and the quantity of labor that employers wish to hire in total is called:

A) the market supply curve for labor.
B) the market demand curve for labor.
C) an individual demand curve for labor.
D) an individual supply curve for labor.

Question 53

The profit-maximizing firm should lay off workers when:

A) MRC < MRP.
B) MRC > MRP.
C) MRC = MRP.
D) the MP of labor begins to diminish.

Question 54

At a higher wage rate:

A) the opportunity cost of working increases.
B) the opportunity cost of leisure increases.
C) the opportunity cost of working decreases.
D) the opportunity cost of leisure decreases.

Question 55

Which of the following statements are true regarding profit maximizing firms?

A) They will attempt to maximize the difference between total revenues and total costs.
B) They will use more of a resource as long as the MRC is greater than the MRP.
C) They will only produce where MRP is positive and MRC is negative.
D) none of the above.

Question 56

In the backward-bending portion of a labor supply curve:

A) a worker will increase the quantity of labor supplied in response to an increase in the wage.
B) the substitution effect of a wage change outweighs the income effect.
C) the income effect of a wage change outweighs the substitution effect.
D) the substitution effect of a wage change equals the income effect.

Question 57

Based on the table below,how many workers will the firm employ in order to maximize profits?

A) 10
B) 11
C) 12
D) 13

Question 58

When the wage rate increases:

A) all workers wish to work more hours.
B) all workers wish to work fewer hours.
C) the number of hours laborers wish to work does not change.
D) some workers will wish to work more hours, and some will wish to work fewer hours.

Question 59

The substitution effect of a wage increase:

A) results in an increase in the quantity of labor supplied.
B) results in a decrease in the quantity of labor supplied.
C) has no impact on the quantity of labor supplied.
D) results in an increase in the quantity of leisure enjoyed.

Question 60

The relationship between the wage rate and the quantity of labor that workers wish to supply in total is called:

A) the market supply curve for labor.
B) the market demand curve for labor.
C) an individual demand curve for labor.
D) an individual supply curve for labor.

Question 61

Exhibit 16-1 Several congressmen and senators have been greatly concerned about the fairness of salaries in the marketplace.They are contemplating enacting a law that would fix the wage rate at W_A.Their aides,who were all excellent economics students,have returned with the results of an investigation into the matter,as portrayed below. Refer to Exhibit 16-1.If the government was to impose a wage rate of W_A on the computer software programming industry:

A) the imposed wage would have no effect on the market for computer programmers.
B) a shortage of software programmers would result.
C) a quantity of Q₄ software programmers would be demanded in the marketplace.
D) there would be pressure from market forces for the wage to fall.

Question 62

Which of the following will not result in a rightward shift of the market supply curve for labor?

A) an increase in immigration
B) an increase in labor productivity
C) an increase in the working-age population
D) a decrease in nonwage income

Question 63

Exhibit 16-1 Several congressmen and senators have been greatly concerned about the fairness of salaries in the marketplace.They are contemplating enacting a law that would fix the wage rate at W_A.Their aides,who were all excellent economics students,have returned with the results of an investigation into the matter,as portrayed below. Refer to Exhibit 16-1.If the law was to impose a wage rate of W_A on the K-12 teachers market:

A) the quantity of K-12 teachers demanded would decrease.
B) a surplus of K-12 teachers would soon result.
C) a quantity of Q₃ teachers would be supplied to the marketplace.
D) all of the above would occur.

Question 64

Exhibit 16-1 Several congressmen and senators have been greatly concerned about the fairness of salaries in the marketplace.They are contemplating enacting a law that would fix the wage rate at W_A.Their aides,who were all excellent economics students,have returned with the results of an investigation into the matter,as portrayed below. Refer to Exhibit 16-1.If the wage law were enacted,in the market for computer programmers a ____ would result.

A) shortage of Q₆ - Q₅
B) shortage of Q₆ - Q₄
C) surplus of Q₆ - Q₅
D) surplus of Q₆ - Q₄

Question 65

Exhibit 16-1 Several congressmen and senators have been greatly concerned about the fairness of salaries in the marketplace.They are contemplating enacting a law that would fix the wage rate at W_A.Their aides,who were all excellent economics students,have returned with the results of an investigation into the matter,as portrayed below. Refer to Exhibit 16-1.If the wage law was not enacted,the prevailing wage rate and quantity of labor in the marketplace for K-12 teachers at equilibrium would be:

A) W_B and Q₂, respectively.
B) W_A and Q₂, respectively.
C) W_A and Q₃, respectively.
D) W_B and Q₁, respectively.

Question 66

Which of the following is likely to increase the supply of labor?

A) a decrease in the population
B) a relaxation of restrictions on immigration
C) a decrease in fringe benefits
D) an increase in the value placed on leisure

Question 67

Which of the following is the best example of an investment in human capital?

A) the purchase of an industrial development bond
B) a graduate student who completed 24 semester units in economics last year
C) the purchase of a lawn mower by a homeowner
D) an unemployed stockbroker who drives a cab in order to pay his bills

Question 68

Which of the following are examples of job amenities?

A) a child-care center at work
B) a pleasant view
C) a workplace gymnasium
D) all of the above

Question 69

Exhibit 16-1 Several congressmen and senators have been greatly concerned about the fairness of salaries in the marketplace.They are contemplating enacting a law that would fix the wage rate at W_A.Their aides,who were all excellent economics students,have returned with the results of an investigation into the matter,as portrayed below. Refer to Exhibit 16-1.If a wage rate of W_A for teachers were imposed by the government on schools,the expected result would be:

A) a teacher shortage of Q₃ - Q₁.
B) a teacher shortage of Q₃ - Q₂.
C) a teacher surplus of Q₂ - Q₁.
D) a teacher surplus of Q₃ - Q₁.

Question 70

Economists refer to expenditures on training,education,and skill development designed to increase the productivity of an individual as:

A) overhead expenditures.
B) investments in human capital.
C) marginal revenue product.
D) investments in social capital.

Question 71

Which of the following is the best example of an investment in human capital?

A) an increase in the number of hours worked per week by worker in a job employing low-skilled labor
B) the purchase of company stock by a worker
C) a summer internship at a law firm filled by someone attending law school
D) payments into a retirement pension plan by a skilled laborer

Question 72

An increase in the price of a resource would cause:

A) producers to substitute other inputs for the resource.
B) consumers to substitute other products for goods that increase in price as the result of the higher resource price.
C) an increase in the demand for products that use the resource intensely.
D) both (a) and (b) to occur.

Question 73

An increase in the demand for a product will cause output to:

A) increase and the demand for the resources used to produce the product to rise.
B) increase and the demand for the resources used to produce the product to fall.
C) decline, while the demand for the resources used to produce the product remains constant.
D) increase and the price of resources used to produce the product to increase if their supply is perfectly elastic.

Question 74

Which of the following will result in a leftward shift of the market supply curve for labor?

A) an increase in immigration
B) a decrease in labor productivity
C) an increase in the working-age population
D) an increase in nonwage income

Question 75

Exhibit 16-1 Several congressmen and senators have been greatly concerned about the fairness of salaries in the marketplace.They are contemplating enacting a law that would fix the wage rate at W_A.Their aides,who were all excellent economics students,have returned with the results of an investigation into the matter,as portrayed below. Refer to Exhibit 16-1.If the law were not enacted,the prevailing wage rate and quantity of labor at equilibrium in the market for computer software programmers would be:

A) W_A and Q₄, respectively.
B) W_A and Q₅, respectively.
C) W_A and Q₆, respectively.
D) W_C and Q₅, respectively.

Question 76

Other things being equal,an increase in the labor force resulting from increased immigration tends to:

A) increase wages.
B) decrease wages.
C) decrease the demand for labor.
D) increase the demand for labor.

Question 77

Which of the following will not result in a leftward shift of the market demand curve for labor?

A) a decrease in labor productivity
B) a decrease in demand for the firm's product
C) an increase in the wage rate
D) a decrease in the firm's product price

Question 78

Job amenities:

A) have no impact on the supply of labor.
B) are not part of the compensation workers receive from employers.
C) help determine the position of the labor supply curve.
D) never affect the monetary wages paid to workers.

Question 79

Which of the following most clearly illustrates the concept of "derived demand"?

A) An increase in the price of steak causes the demand for poultry to increase.
B) An increase in the demand for new houses leads to an increase in the demand for construction workers.
C) An increase in consumer income leads to an increase in the demand for services provided by the government.
D) An increase in the demand for new cars causes the demand for used automobiles to rise.

Question 80

The labor supply curve will shift to the right under which of the following conditions?

A) other things being equal, workers are willing to supply more hours of labor each week
B) new workers enter the labor market
C) a new law relaxes immigration quotas
D) all of the above