Question 1

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

Accepted Answer

An increase in the price of a good the factor produces will lead to an increase in demand for that factor as producers would want to produce more of the good and will require more of that factor. A decrease in the price of the good the factor produces will lead to a decrease in demand for that factor. Option A and C are incorrect because an increase in price will not lead to a decrease in factor demand and a decrease in price will not lead to an increase in factor demand. Option D is incorrect because a decrease in the price of the good the factor produces will not lead to an increase in factor demand.

Question 2

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:

Accepted Answer

If the price of candy bars rises, Benny's revenue will increase and his profit margin will expand. This will enable him to hire additional workers to sell more candy bars, which will increase the demand for labor.

Question 3

Which statement is TRUE?

Accepted Answer

The correct statement is "If W < VMPL, the firm should hire more labor." VMPL (or Marginal Revenue Product of Labor) is the additional revenue generated by each unit of labor. In order to maximize profit, a firm should continue to hire labor as long as the wage rate (W) is less than the VMPL. This means that the revenue generated by the extra worker is greater than the cost of hiring the worker. Therefore, the firm should hire more labor as long as W < VMPL.

Question 4

Labor 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 labor?

Accepted Answer

The publication of a report asserting the health benefits of grape or cranberry juice would likely increase the demand for grape and cranberry cultivation as the demand for the juice would increase. This increase in demand would require more labor. Improved technology (A) would likely decrease the demand for labor as it makes the process more efficient. A report on pesticide contamination (C) would likely decrease demand as consumers may not want to buy contaminated products. A decrease in acreage (D) would also likely decrease demand as there would be less need for labor.

Question 5

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

Accepted Answer

With the entry of new workers into the market, the supply of plumbers will increase, which will decrease the equilibrium wage for plumbers.

Question 6

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

Accepted Answer

An increase in the market demand for electricians would occur if the price of electrical repair and installation services rises. As the demand for these services increases, the need for electricians to perform those services will also increase.

Question 7

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?

Accepted Answer

The increase in the price of poster-size copies will lead to an increase in the demand for labor, as more workers will be needed to produce the increased number of copies.

Question 8

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

Accepted Answer

The increase in the number of automated answering services has replaced the need for human phone operators, which has resulted in a decrease in demand for phone operators.

Question 9

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

Accepted Answer

The firm is already maximizing its profit by hiring labor up to the point where the wage equals the value of the marginal product of labor. Any deviation from this point would result in a decrease in profit. Therefore, hiring less labor (B) or increasing the wage rate (D) would lead to a decrease in profit, while hiring more labor (C) would not make sense as the additional labor would not generate enough value to compensate for the wage paid.

Question 10

A factor demand curve will shift because:

Accepted Answer

A factor demand curve will shift due to a change in the price of the good the factor produces, as this affects the marginal revenue product of the factor, altering the demand for the factor.

Question 11

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

Accepted Answer

An increase in the demand for autoworkers is most likely to come about as a result of an increase in the price of cars, as higher prices will lead to higher revenues for car manufacturers, and therefore a greater need for autoworkers to meet this increased demand. A decrease in the price of cars, decrease in productivity of autoworkers, or decrease in supply of other factors would not necessarily lead to an increase in demand for autoworkers.

Question 12

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

Accepted Answer

As people become more health-conscious, they may be less likely to consume pastries and other baked goods that are typically prepared by pastry chefs, leading to a decrease in demand for their services.

Question 13

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

Accepted Answer

With an increase in sales tax, the cost of production for firms will increase which will lead to a decrease in the demand for output. As a result, firms will produce less which means that they will demand fewer workers. This will reduce the demand for labor, causing a decrease in employment and wages. Therefore, the correct option is B.

Question 14

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

Accepted Answer

A decrease in the market wage rate would not increase the demand for autoworkers; it might increase the quantity of labor demanded but not the demand itself. Demand is influenced by factors like productivity and the price of the product being produced.

Question 15

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

Accepted Answer

A factor demand curve shifts to the left when there is a decrease in the price of the good the factor produces, as this reduces the profitability and thus the demand for the factor.

Question 16

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

Accepted Answer

When a firm hires labor such that the wage (W) is less than the value of the marginal product of labor (VMPL), it means the firm is paying less for the labor than the value the labor adds to the product. Therefore, the firm can increase its profit by hiring more labor until W equals VMPL.

Question 17

If the wage rate rises,firms will find that:

Accepted Answer

When the wage rate rises, firms will move upward and to the left along the labor demand curve because they will demand less labor at the higher wage, assuming all other factors remain constant. This movement reflects a decrease in the quantity of labor demanded as the cost of labor increases.

Question 18

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

Accepted Answer

The value of the marginal product (VMP) of labor curve represents the additional output the firm receives for each additional unit of labor hired. The firm will hire labor as long as the VMP is greater than or equal to the wage rate. The firm's demand for labor is thus determined by the downward-sloping portion of the VMP curve. The other choices are not directly related to the firm's demand for labor.

Question 19

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:

Accepted Answer

The demand for labor is determined by the marginal revenue product (MRP) of labor, which is the additional revenue a firm generates from hiring an additional worker. In this case, the MRP is equal to the marginal product of labor (MPL) multiplied by the price of the output (which is $10 per print). Assuming that MPL does not change, an increase in the market wage rate from $60 to $70 would increase the cost of hiring workers, thereby reducing the MRP of labor. As a result, the firm would reduce the quantity demanded of labor (i.e., hire fewer workers) in order to equate the MRP with the wage rate. However, this would not cause a shift in the demand curve for labor, since the MRP curve (which determines the demand for labor) has not shifted.

Question 20

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

Accepted Answer

If a firm hires labor such that W > VMPL (where W is the wage rate and VMPL is the value of the marginal product of labor), it means that the firm is paying more to hire an additional unit of labor than the extra revenue it will generate. As a result, the firm is operating at a suboptimal level and can increase its profits by hiring less labor until W = VMPL. Therefore, the correct choice is B.

Quiz 19: Factor Markets and the Distribution of Income

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

Which statement is TRUE?

Labor 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 labor?

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

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

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?

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

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

A factor demand curve will shift because:

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

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

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

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

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

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

If the wage rate rises,firms will find that:

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

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:

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

Quiz 19: Factor Markets and the Distribution of Income

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

Which statement is TRUE?

Labor 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 labor?

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

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

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?

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

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

A factor demand curve will shift because:

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

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

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

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

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

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

If the wage rate rises,firms will find that:

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

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:

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

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

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