Deck 19: Factor Markets and the Distribution of Income

Question 1

The demand for a factor of production is a(n)_____ demand.

A) derived
B) implicit
C) direct
D) distributional

Answer 1

derived

Question 2

G.Reecy's Hamburger Joint is a fast-food restaurant.Which factor is associated with production?

A) the raw meat used for the hamburgers
B) the hamburger buns
C) the cook
D) the concentrate that is diluted to make the soft drinks

Answer 2

the cook

Question 3

Now that Naila has her bachelor's degree,she has decided to pursue her master's degree.Naila's choice of additional education is called an investment in:

A) natural resources.
B) human capital.
C) physical capital.
D) labour.

Answer 3

human capital.

Question 4

Manufactured resources such as equipment,buildings,and tools are also known as:

A) human capital.
B) labour.
C) physical capital.
D) natural resources.

Question 5

The demand for factors of production is called a derived demand because it is:

A) derived from the demand for the outputs that are produced by the factors of production.
B) derived from the available supply of factors,such as land,that can be overexploited.
C) not easy to determine and must be derived by a technical (and often complicated)process.
D) derived on the basis of questions posed to residents during the census.

Question 6

The LARGEST component of the factor distribution of income in Canada is:

A) interest and rents.
B) taxes.
C) corporate profits.
D) compensation of employees.

Question 7

Factor demand is called derived demand because it:

A) requires the use of other factors.
B) depends on demand for the product that the factor produces.
C) has a downward-sloping demand curve.
D) has a constant marginal factor cost.

Question 8

Which factor is NOT associated with production at a university?

A) the faculty
B) classroom buildings
C) electricity
D) the computer labs

Question 9

Which factor is associated with production at a university?

A) the faculty
B) lab concentrations to use in experiments
C) electricity
D) Scantron sheets

Question 10

Which statement is NOT true about the factor distribution of income?

A) It is the division of total income among labour,land,and capital.
B) Labour receives the bulk of the income in the modern Canadian economy.
C) The returns to human capital are easily measured.
D) A part of the proprietor's income should be considered wages that the business owners pay themselves.

Question 11

Human capital is the improvement in _____ produced by _____.

A) physical capital;technology
B) labour;education and knowledge
C) labour;physical capital
D) labour;management

Question 12

In Canada in 2016,approximately _____% of total income in the economy took the form of compensation of employees.

A) 47
B) 9
C) 90
D) 58

Question 13

Which factor is an input in the production of croissants?

A) ovens
B) pastry chefs
C) flour
D) dough mixers

Question 14

The category "compensation of employees" doesn't capture the full income of labour because:

A) it doesn't include the earnings of proprietors.
B) it doesn't include benefits such as health insurance.
C) a sizable fraction of it can be attributed to the return on human capital.
D) it excludes payments in kind that are common in rural areas.

Question 15

The category "compensation of employees":

A) includes the earnings of proprietors.
B) doesn't include benefits such as health insurance.
C) refers in large part to the return on human capital.
D) includes payments in kind that are common in rural areas.

Question 16

In terms of contribution to total income in Canada,the single MOST important factor of production is:

A) capital.
B) labour.
C) land.
D) entrepreneurship.

Question 17

In Canada in 2016,approximately 58% of total income,by far the largest share,took the form of:

A) compensation of employees.
B) corporate profits.
C) interest income.
D) rental income.

Question 18

Human capital:

A) consists of man-made resources such as buildings and machines.
B) is the improvement in labour produced by education and knowledge that is embodied in the workforce.
C) has become less important because of the progress in technology.
D) is the improvement in labour produced by education,which has become less important because of the progress in technology.

Question 19

When the demand for automobiles is high,the demand for workers who build automobiles is high.This relation between the market for automobiles and the market for the labour that builds automobiles is why demand in a factor market is called:

A) the marginal productivity theory of income distribution.
B) a compensating differential.
C) the factor distribution of income.
D) a derived demand.

Question 20

The key distinction between a factor of production and an input is that:

A) an input is an enduring source of income,but a factor of production is used up in production.
B) a factor of production earns income from selling its services over and over again,but an input does not.
C) an input earns income from selling its services over and over again,but a factor of production does not.
D) a factor of production has limited earning potential.

Question 21

The value of the marginal product is equal to:

A) marginal product times the wage rate.
B) average product times the wage rate.
C) marginal product times the price per unit of output.
D) average product times the price per unit of output.

Question 22

The marginal product times product price equals the:

A) marginal revenue.
B) value of the marginal product.
C) additional revenue product.
D) marginal cost.

Question 23

The amount that an additional unit of a factor adds to a firm's total revenue is called the:

A) marginal revenue.
B) marginal cost.
C) additional revenue product.
D) value of the marginal product.

Question 24

The amount by which the use of an additional unit of a factor of production increases a firm's total revenue during a period is called the:

A) value of the marginal product.
B) average product.
C) marginal factor cost.
D) marginal physical product.

Question 25

The amount by which an additional unit of a factor increases a firm's total _____ during a period is the _____.

A) revenue;value of the marginal product
B) revenue;marginal factor cost
C) cost;value of marginal product
D) cost;marginal product

Question 26

As a rule,a profit-maximizing restaurant owner employs each factor of production up to the point at which the value of the marginal product of the _____ unit of the factor employed is _____ that factor's price.

A) first;greater than
B) last;equal to
C) first;equal to
D) last;less than

Question 27

In terms of contribution to total Canadian income,the factor of production that receives the SMALLEST share is:

A) capital.
B) labour.
C) land.
D) entrepreneurship.

Question 28

When labour is hired in a competitive market,the value of the marginal product of labour is computed by:

A) multiplying the price of the output by the marginal product of labour.
B) multiplying the price of the output by the wage paid to labour.
C) multiplying the wage paid to labour by the marginal product of labour.
D) dividing the marginal product of labour by the price of the output.

Question 29

Which statement is TRUE?

A) The marginal product is the change in total revenue divided by a one-unit change in a factor.
B) The marginal revenue is the change in total output divided by the change in output.
C) The value of the marginal product is the marginal product times the price.
D) The marginal cost is equal to the average total cost.

Question 30

The value of the marginal product is the:

A) change in total output resulting from a unit change in the quantity of a factor.
B) change in total revenue resulting from a unit change in the quantity of a factor.
C) change in total cost resulting from a unit change in the quantity of a factor.
D) ratio of total revenue to the quantity of a factor employed.

Question 31

The Bountiful Bakery is considering hiring another pastry chef.The bakery knows that the average product of its chefs currently is 15 dozen croissants per day.It also believes that the next chef hired will produce an extra 12 dozen croissants per day.A dozen croissants sell for $30.The bakery should hire another worker:

A) only if the new chef's marginal product is 12 dozen or more.
B) only if the new chef's daily wage is $450 or less.
C) only if the new chef's daily wage is $360 or less.
D) because the marginal product is below the average product.

Question 32

Which expression BEST describes the value of the marginal product?

A) the change in total output generated by a unit change in the quantity of a factor
B) the change in total revenue generated by a unit change in the quantity of a factor
C) the change in marginal cost generated by a unit change in the quantity of a factor
D) the ratio of total revenue to the quantity of a factor employed

Question 33

Which formula is CORRECT?

A) VMPL = MC × P.
B) VMPL = MPL × P.
C) MPL = VMPL × P.
D) VMPL / MC = TR.

Question 34

Use the following to answer question 28: $$\begin{array}{l}\text { Table: Workers and Art Output }\\\begin{array} { l c } \hline \begin{array} { l } \text { Number of } \\\text { Workers (artists) }\end{array} & \begin{array} { c } \text { Output } \\\text { (mud statues) }\end{array} \\\hline 1 & 10 \\2 & 25 \\3 & 35 \\4 & 43 \\5 & 48 \\\hline\end{array}\end{array}$$

-(Table: Workers and Art Output)Use Table: Workers and Art Output.Suppose that you achieve your dream of opening an art studio specializing in selling mud statues.You pay $10 in fixed costs for equipment and $9 per day to each of your workers who make the mud statues.The industry is perfectly competitive,with a current market price of $1.How many statues should you produce?

A) 25
B) 35
C) 43
D) 3

Question 35

Which statement is TRUE?

A) The value of the marginal product of labour equals the marginal product of labour times price.
B) The value of the marginal product of labour equals a one-unit change in a factor divided by the change in total revenue.
C) Marginal cost equals change in total revenue divided by the one-unit change in a factor.
D) The value of the marginal product of labour equals the change in the quantity of a factor times the price of the factor.

Question 36

If the extra output that is produced by hiring one more unit of labour adds more to _____ than to _____,the firm will increase its profit by increasing the use of labour.

A) total cost;total revenue
B) total revenue;total cost
C) marginal cost;marginal revenue
D) marginal product;marginal cost

Question 37

Use the following to answer question 27: $$\begin{array}{l}\text { Table: Droids and Moisture Output }\\\begin{array} { l c } \hline \begin{array} { l } \text { Number } \\\text { of Droids }\end{array} & \begin{array} { c } \text { Output } \\\text { of Moisture } \\\text { (barrels per month) }\end{array} \\\hline 0 & 0 \\1 & 25 \\2 & 45 \\3 & 60 \\4 & 70 \\5 & 75 \\\hline\end{array}\end{array}$$

-(Table: Droids and Moisture Output)Use Table: Droids and Moisture Output.Luke Skywalker uses droids to operate a moisture farm in a perfectly competitive market on the planet Tatooine.A barrel of moisture sells for 50 republic credits.A droid costs 675 republic credits per month to rent.How many droids should Luke rent?

A) one
B) two
C) three
D) four

Question 38

Using standard economic theory,a firm should continue hiring workers until:

A) the marginal product of labour times price equals demand.
B) the quantity of labour supplied equals the quantity of labour demanded.
C) the marginal product of labour times price equals the workers' wage.
D) the marginal product of labour times the workers' wage equals price.

Question 39

Liyun owns a small flower shop,and the industry is perfectly competitive.She is considering whether to hire an additional worker.The wage rate for the worker is $500 per week,the marginal product of the additional worker would be 100 units per week,and the price of the units is $10 each.Liyun should:

A) hire the additional worker.
B) not hire the additional worker.
C) raise the price of the flower arrangements that she sells.
D) Not enough information is given to answer the question.

Question 40

The value of the marginal product is calculated as:

A) MP / MR.
B) MP / P.
C) MP × P.
D) MR / MP.

Question 41

If the marginal product is _____,the value of marginal product must be _____.

A) rising;falling
B) falling;falling
C) falling;rising
D) rising;zero

Question 42

The quantity demanded of labour will decrease if:

A) the price of the product that the labour produces increases.
B) the productivity of labour increases.
C) the price of labour rises.
D) there is an increase in the supply of a factor labour uses.

Question 43

Suppose that there are diminishing returns to labour.If the _____ of labour hired by a firm increases,holding everything else constant,the _____ labour will _____.

A) price;demand for;increase
B) quantity;marginal product of;fall
C) quantity;marginal product of;rise
D) quantity;value of the marginal product of;rise

Question 44

Suppose that Billy Bud's Bucking Broncos employs 20 workers at a daily wage of $60 each.The average product of labour is 30 bucking broncos per day,the marginal product of the last worker is 12 bucking broncos per day,and total fixed cost is $3 600 for equipment.What is the marginal cost of the last bucking bronco produced?

A) $0.20
B) $5.00
C) $240.00
D) $720.00

Question 45

All perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labour and are paying their workers $7 per hour.If the government raises the minimum wage to $8 per hour:

A) the value of the marginal product will exceed the wage,and firms will hire more workers.
B) the value of the marginal product will be less than the wage,and firms will lay off some workers.
C) firms will increase their prices to keep the value of the marginal product equal to the wage.
D) firms will have to exit the industry since the value of the marginal product is always less than the wage.

Question 46

For the Blue Jays baseball team,the value of the marginal product curve is the team's labour _____ curve.This means that the marginal product curve has a _____ slope.

A) demand;positive
B) supply;positive
C) demand;negative
D) supply;negative

Question 47

A firm's demand curve for labour is:

A) the upward-sloping portion of its value of the marginal product curve.
B) the downward-sloping portion of its marginal product curve.
C) the downward-sloping portion of its value of the marginal product curve.
D) horizontal for the firm in perfect competition.

Question 48

A profit-maximizing firm will hire workers up to the quantity of labour where:

A) VMPL > W.
B) VMPL = W.
C) VMPL < W.
D) MP × MR = VMPL.

Question 49

As the _____ of labour used in production increases,ceteris paribus,eventually the _____ of labour will _____.

A) price;supply;increase
B) quantity;marginal product;fall
C) quantity;marginal product;rise
D) quantity;value of the marginal product;rise

Question 50

Barry's Brewpub is considering hiring more brewmasters.The market wage for a brewmaster is $120 per day.The average brewmaster produces 40 pints of beer per day,but Barry expects the next brewmaster to produce only 20 pints per day.Assuming the market for beer is perfectly competitive,Barry's Brewpub will hire another brewmaster only if:

A) a pint of brew sells for $3.
B) the new brewmaster can produce 40 pints.
C) a pint of brew sells for $2.
D) a pint of brew sells for $6 or more.

Question 51

José,a corn farmer operating in a perfectly competitive market,pays his workers $8 an hour.At his current level of labour use,the marginal product of an additional hour of labour is 3 kilograms of corn.The market price of corn is $2.75.To maximize his profits,Jose should:

A) hire more labour.
B) hire less labour.
C) not change the amount of labour.
D) This question cannot be answered without knowing the average product of labour.

Question 52

A firm has hired the profit-maximizing number of workers when the wage is:

A) less than the price of the product.
B) greater than the average product of the last worker hired.
C) equal to the average product of the last worker hired.
D) equal to the value of the marginal product of labour of the last worker hired.

Question 53

When a firm is a perfect competitor in the product market,its demand curve for labour will _____ because the _____ product declines as additional workers are hired.

A) slope downward;marginal
B) be horizontal;average
C) slope upward;marginal
D) slope downward;average

Question 54

A firm's demand curve for labour is:

A) its marginal cost curve.
B) its marginal product curve.
C) its value of the marginal product of labour curve.
D) horizontal if it is in perfect competition.

Question 55

To maximize profits,a firm will employ workers until for the last worker employed:

A) marginal product of labour is equal to the nominal wage rate.
B) the value of the marginal product of labour is equal to the wage rate.
C) the value of the marginal product of labour is equal to the price per unit of output.
D) the value of the marginal product of labour is as high as possible.

Question 56

Barry's Brewpub is considering hiring more brewmasters.A pint of brew sells for $3.The market wage of a brewmaster is $150 per day.Assuming that the market for beer is perfectly competitive,Barry's Brewpub will hire another brewmaster only if Barry believes that the new brewmaster will:

A) produce the same number of pints per day as the last brewmaster hired.
B) produce 50 or more pints per day.
C) raise average production to 50 or more pints per day.
D) increase the marginal product by $150 per day.

Question 57

Mary is considering hiring another worker in an assembly line for Bluetooth speakers.Mary knows that the average product of labour is 15 speakers per day.She also believes that the next worker hired will produce an extra 12 speakers per day.A speaker sells for $10.Assuming that the market for speakers is perfectly competitive,Mary should hire another worker:

A) only if the new worker's marginal product is 12 or more.
B) only if the new worker's daily wage is $150 or less.
C) only if the new worker's daily wage is $120 or less.
D) since the marginal product is below the average product.

Question 58

A profit-maximizing firm will base its decision to hire workers on the additional costs and benefits of each worker.If the extra output that is produced by hiring one more unit of labour adds more to _____ than to _____,the firm will increase its profit by increasing the use of labour.

A) total cost;total revenue
B) total revenue;total cost
C) marginal cost;marginal revenue
D) marginal cost;total cost

Question 59

The individual producer's labour demand curve is the:

A) marginal product of labour curve.
B) value of the average product of labour curve.
C) average product curve.
D) value of the marginal product of labour curve.

Question 60

Maria operates a persimmon orchard in southeastern Ontario.She pays her workers $248 per week to pick and process persimmons,and she sells her persimmons for $6 per kilogram.If she adds one more worker and that worker can pick and process 44 kilograms per week,what will be the profit for Maria from hiring that worker?

A) $0
B) $16
C) $264
D) $544

Question 61

A decrease in the demand for pastry chefs may come about because of an increase in the:

A) concern for healthy living.
B) market wage rate for pastry chefs.
C) productivity of pastry chefs.
D) supply of other factors that pastry chefs use.

Question 62

Suppose that the labour market for plumbers is in equilibrium.Which occurrence might DECREASE the wage for plumbers?

A) An economic boom increases the demand for new homes.
B) The plumbers union establishes a rigorous certification test that is difficult for aspiring plumbers to pass.
C) Unemployed manufacturing workers attend technical schools to learn the plumbing trade.
D) A minimum wage is imposed in the market for plumbers.

Question 63

Benny employs people to sell candy bars at intersections.Assume that Benny can obtain candy bars to sell for no cost.The marginal product of the last worker Benny hired is 20 candy bars per hour.Benny pays $7 per worker per hour and sells the candy bars for $1 each.If the price of candy bars rises to $2,then the:

A) demand for labour increases.
B) demand for labour decreases.
C) quantity demanded of labour increases,but the demand for labour curve does not shift.
D) quantity demanded of labour decreases,but the demand for labour curve does not shift.

Question 64

If the wage rate rises,firms will find that:

A) their labour demand curve shifts leftward.
B) their labour demand curve shifts rightward.
C) they move upward and to the left along the labour demand curve.
D) they move downward and to the right along the labour demand curve.

Question 65

A firm's demand curve for labour in a perfectly competitive market is the downward-sloping portion of its _____ curve.

A) marginal revenue
B) average total cost
C) value of the marginal product of labour
D) total revenue

Question 66

Over the past several years,the demand for phone operators has fallen dramatically.Which factor would account for this development?

A) an increase in the number of automated answering services
B) a decrease in the quality of the technology associated with phone equipment
C) an increase in the supply of phone operators
D) higher prices for long-distance service

Question 67

A factor demand curve will shift to the left because of a(n)_____ in the price of the _____.

A) increase;factor
B) increase;good the factor produces
C) decrease;factor
D) decrease;good the factor produces

Question 68

Phil's Copy Studio pays its workers $60 per day and sells poster-size copies for $10 per print.If the market wage rises to $70,then the:

A) demand for labour increases.
B) demand for labour decreases.
C) quantity demanded of labour increases,but the demand for labour curve does not shift.
D) quantity demanded of labour decreases,but the demand for labour curve does not shift.

Question 69

If a firm hires labour and with its current employees W = VMPL,then profit:

A) is maximized.
B) can be increased by hiring less labour.
C) can be increased by hiring more labour.
D) can be increased by increasing the wage rate.

Question 70

An increase in the market demand for electricians in the factor market might occur if the:

A) price of electrical repair and installation services rises.
B) demand for new houses falls.
C) price of copper electrical wiring increases.
D) wage for electricians falls.

Question 71

There will be an increase in factor demand because of a(n)_____ in the price of the _____.

A) increase;factor
B) increase;good the factor produces
C) decrease;factor
D) decrease;good the factor produces

Question 72

Phil's Copy Studio pays its workers $60 per day and sells poster-size copies for $10 per print.Now suppose that during the holiday season,the price of poster-size copies increases to $12.What happens?

A) The demand for labour increases.
B) The demand for labour decreases.
C) The quantity demanded of labour increases,but the demand for labour curve does not shift.
D) The quantity demanded of labour decreases,but the demand for labour curve does not shift.

Question 73

Which statement is TRUE?

A) If W < VMPL,the firm should hire more labour.
B) If W > VMPL,the firm should hire more labour.
C) If W = VMPL,the firm should hire more labour.
D) If W > 0,the firm should shut down.

Question 74

An increase in the demand for autoworkers may come about because of a(n):

A) decrease in the price of cars.
B) decrease in the productivity of autoworkers.
C) decrease in the supply of other factors that autoworkers use in production.
D) increase in the price of cars.

Question 75

Labour with a particular skill level and training is used in only two industries: grape cultivation and cranberry cultivation.Which occurrence is likely to cause an INCREASE in the demand for this type of labour?

A) improved technology that leads to more efficient machines for grape picking
B) publication of a report asserting that drinking two glasses of grape or cranberry juice every day improves digestion and heart health
C) a report by the Agriculture Canada that an increasing proportion of grapes are contaminated with unacceptable pesticides
D) a decrease in the land size of cranberry bogs

Question 76

The government increases the sales tax on all goods but does not change the tax on income earned from labour.What happens?

A) The quantity of labour demanded decreases,but the demand for labour does not shift.
B) The demand for labour decreases.
C) The supply of labour increases.
D) There is no change in the labour market.

Question 77

If a firm hires labour such that W > VMPL,then profit:

A) is maximized.
B) can be increased by hiring less labour.
C) can be increased by hiring more labour.
D) can be increased by decreasing the price of the output.

Question 78

If a firm hires labour such that W < VMPL,then profit:

A) is maximized.
B) can be increased by hiring less labour.
C) can be increased by hiring more labour.
D) can be increased by increasing the wage.

Question 79

A factor demand curve will shift because:

A) of a change in the price of the good the factor produces.
B) the elasticity of demand for the final product is high.
C) of a change in the proportion of the factor's cost relative to total cost.
D) the slope of the MP curve is negative.

Question 80

An increase in the demand for autoworkers would NOT come about because of a(n):

A) increase in the price of cars.
B) decrease in the market wage rate.
C) increase in the productivity of autoworkers.
D) increase in the supply of other factors that autoworkers use in production.