Question 1

An increase in labor productivity would cause a rightward shift of the labor demand curve.

Accepted Answer

An increase in labor productivity makes workers more valuable to employers, leading to a higher demand for labor at each wage level, thus shifting the labor demand curve to the right.

Question 2

An increase in labor productivity would cause a rightward shift of the labor supply curve.

Accepted Answer

An increase in labor productivity makes workers able to produce more goods and services per unit of time, which typically affects the demand for labor rather than the supply. It makes labor more valuable to employers, potentially shifting the labor demand curve to the right, not the labor supply curve.

Question 3

A technological change would cause a shift of the demand curve for inputs.

Accepted Answer

A technological change can affect the demand for inputs. For example, if a new technology is developed that makes it possible to produce more output with the same amount of inputs, the demand for inputs will decrease.

Question 4

In general, the production and use of capital ________ the productivity of labor and normally ________ wages.

Accepted Answer

The production and use of capital generally enhance the productivity of labor, which in turn normally drives up wages due to increased efficiency and output.

Question 5

Shifts in factor demand result from changes in

Accepted Answer

The answer of Shifts in factor demand result from changes...

Question 6

A firm is currently hiring capital and labor so that MP_L/P_L < MP_K/P_K. If the firm wishes to maximize profits it should hire

Accepted Answer

The given condition MPS_L/PS_L < MPS_K/PS_K suggests that the marginal product of labor per dollar spent (MPS_L/PS_L) is less than the marginal product of capital per dollar spent (MPS_K/PS_K). To maximize profits, the firm should allocate more resources to the input with the higher marginal product per dollar spent, which means hiring less labor and more capital.

Question 7

The demand for land is upward sloping.

Accepted Answer

The demand for land, like the demand for most goods and services, is downward slooping, meaning as the price increases, the quantity demanded decreases, and vice versa.

Question 8

For a firm to maximize profits, the marginal product of the last dollar spent on each resource must be equal.

Accepted Answer

This principle ensures that the firm is allocating its resources in the most efficient way possible, by equalizing the marginal benefit received from each resource, thus maximizing profits.

Question 9

Because marginal revenue product reflects productivity, increases in productivity directly shift

Accepted Answer

Increases in productivity make an input more valuable to a firm, thus increasing the firm's willingness to pay for an additional unit of the input. This is reflected in a rightward shift of the input demand curve.

Question 10

Rent depends on what the potential users of the land are willing to pay for it.

Accepted Answer

Rent is determined by the demand for the land, which is reflected in what potential users are willing to pay for its use, based on its location, quality, and the income they expect to generate from it.

Question 11

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

Accepted Answer

The correct condition for the optimal combination of inputs in production is when the marginal product of an input divided by its price is equal for all inputs. This ensures that the last dollar spent on each input yields the same amount of additional output, achieving cost minimization.

Question 12

If the price of a unit of output for a perfectly competitive firm is $5 and the profit-maximizing condition is met, then MP_L/P_L = MP_K/P_K = MP_A/P_A will be equal to

Accepted Answer

The answer of If the price of a unit of...

Question 13

Firms will employ each input up to the point that its price equals its marginal revenue product.

Accepted Answer

Firms aim to maximize profit by employing inputs until the cost of the input equals the additional revenue generated by that input, known as the marginal revenue product.

Question 14

A firm will use land up to the point at which MRP_A = P_A, where A is acres of land.

Accepted Answer

The marginal revenue product of land (MRP_A) is the additional revenue generated by using one more acre of land. The price of land (P_A) is the cost of using one more acre of land. A firm will use land up to the point at which the additional revenue generated by using one more acre of land is equal to the cost of using that acre of land.

Question 15

Because marginal revenue product reflects productivity, decreases in productivity directly shift

Accepted Answer

Marginal revenue product (MRP) is a measure of the additional revenue generated by employing one more unit of a factor of production, reflecting the productivity of that factor. When productivity decreases, the value of the additional output produced by the last unit of input decreases, making firms less willing to pay for more of that input. This results in a leftward shift of the input demand curve, as firms demand less of the input at each possible price.

Question 16

If the marginal product of the last dollar spent on labor is less than the marginal product of the last dollar spent on capital, the firm can produce more output by spending less on capital and more on labor.

Accepted Answer

The firm should spend more on labor and less on capital to equalize the marginal products per dollar spent, thereby increasing output.

Question 17

A firm is currently hiring capital and labor so that MP_L/P_L > MP_K/P_K. If the firm wishes to maximize profits it should hire

Accepted Answer

The inequality given in the question indicates that the marginal product of labor (MPL) is greater than the marginal product of capital (MPK). This means that the firm can increase its profits by hiring more labor and less capital. This is because each additional unit of labor will add more to the production output than each additional unit of capital, and therefore will be more cost-effective. Therefore, Choice C, more labor and less capital, is the best choice for maximizing profits.

Question 18

A technological change would cause movement along the demand curve for inputs.

Accepted Answer

A technological change would shift the demand curve for inputs, not cause movement along the demand curve. This is because technological advancements typically change the quantity of inputs firms want to use at all price levels, rather than changing the quantity demanded at a specific price.

Question 19

A firm hires labor, capital, and land to produce grapefruits. Currently the marginal product of the last unit of labor input is 40, the marginal product of the last unit of capital input is 60, and the marginal product of the last unit of land input is 200. The market wage is $20 and the market price for capital is $30. If the firm is using the optimal combination of inputs, then the price of land is

Accepted Answer

For a firm to be using an optimal combination of inputs, the ratio of the marginal product of each input to its price must be equal across all inputs. This condition is derived from the principle of cost minimization or profit maximization, where a firm adjusts its input combination such that the last dollar spent on each input yields the same marginal product. Mathematically, this is represented as MP_L / P_L = MP_K / P_K = MP_T / P_T, where MP represents marginal product and P represents price for Labor (L), Capital (K), and Land (T).Given:- MP_L = 40, P_L = $20- MP_K = 60, P_K = $30- MP_T = 200, P_T = ?Using the formula, we find the price of land (P_T) that equalizes the ratio across all inputs. For labor, the ratio is 40/20 = 2. For capital, the ratio is 60/30 = 2. To find the price of land that makes its ratio equal to 2, we set 200/P_T = 2, solving for P_T gives us P_T = 200/2 = $100.

Question 20

A firm hires labor, capital, and land to produce tomatoes. Currently the marginal product of the last unit of labor input is 20, the marginal product of the last unit of capital input is 30, and the marginal product of the last unit of land input is 100. The market wage is $10 and the market price for capital is $15. If the firm is using the optimal combination of inputs, then the price of land is

Accepted Answer

The firm is using the optimal combination of inputs when the ratio of the marginal product to the price of each input is equal across all inputs. For labor, this ratio is 20/$10 = 2. For capital, it's 30/$15 = 2. For land, to maintain this ratio of 2, the marginal product of 100 must be divided by the price of land, leading to 100/Price of Land = 2. Solving for the Price of Land gives $50.

Quiz 10: Input Demand: the Labor and Land Markets

An increase in labor productivity would cause a rightward shift of the labor demand curve.

An increase in labor productivity would cause a rightward shift of the labor supply curve.

A technological change would cause a shift of the demand curve for inputs.

In general, the production and use of capital the productivity of labor and normally wages.

Shifts in factor demand result from changes in

A firm is currently hiring capital and labor so that MP_L/P_L < MP_K/P_K. If the firm wishes to maximize profits it should hire

The demand for land is upward sloping.

For a firm to maximize profits, the marginal product of the last dollar spent on each resource must be equal.

Because marginal revenue product reflects productivity, increases in productivity directly shift

Rent depends on what the potential users of the land are willing to pay for it.

Assume the Backwoods Shoe Company hires three inputs: labor (L) , capital (K) , and land (A) to produce shoes (X) . Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

If the price of a unit of output for a perfectly competitive firm is $5 and the profit-maximizing condition is met, then MP_L/P_L = MP_K/P_K = MP_A/P_A will be equal to

Firms will employ each input up to the point that its price equals its marginal revenue product.

A firm will use land up to the point at which MRP_A = P_A, where A is acres of land.

Because marginal revenue product reflects productivity, decreases in productivity directly shift

If the marginal product of the last dollar spent on labor is less than the marginal product of the last dollar spent on capital, the firm can produce more output by spending less on capital and more on labor.

A firm is currently hiring capital and labor so that MP_L/P_L > MP_K/P_K. If the firm wishes to maximize profits it should hire

A technological change would cause movement along the demand curve for inputs.

Quiz 10: Input Demand: the Labor and Land Markets

An increase in labor productivity would cause a rightward shift of the labor demand curve.

An increase in labor productivity would cause a rightward shift of the labor supply curve.

A technological change would cause a shift of the demand curve for inputs.

In general, the production and use of capital ________ the productivity of labor and normally ________ wages.

Shifts in factor demand result from changes in

A firm is currently hiring capital and labor so that MPL/PL < MPK/PK. If the firm wishes to maximize profits it should hire

The demand for land is upward sloping.

For a firm to maximize profits, the marginal product of the last dollar spent on each resource must be equal.

Because marginal revenue product reflects productivity, increases in productivity directly shift

Rent depends on what the potential users of the land are willing to pay for it.

Assume the Backwoods Shoe Company hires three inputs: labor (L) , capital (K) , and land (A) to produce shoes (X) . Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

If the price of a unit of output for a perfectly competitive firm is $5 and the profit-maximizing condition is met, then MPL/PL = MPK/PK = MPA/PA will be equal to

Firms will employ each input up to the point that its price equals its marginal revenue product.

A firm will use land up to the point at which MRPA = PA, where A is acres of land.

Because marginal revenue product reflects productivity, decreases in productivity directly shift

If the marginal product of the last dollar spent on labor is less than the marginal product of the last dollar spent on capital, the firm can produce more output by spending less on capital and more on labor.

A firm is currently hiring capital and labor so that MPL/PL > MPK/PK. If the firm wishes to maximize profits it should hire

A technological change would cause movement along the demand curve for inputs.

In general, the production and use of capital the productivity of labor and normally wages.

A firm is currently hiring capital and labor so that MP_L/P_L < MP_K/P_K. If the firm wishes to maximize profits it should hire

If the price of a unit of output for a perfectly competitive firm is $5 and the profit-maximizing condition is met, then MP_L/P_L = MP_K/P_K = MP_A/P_A will be equal to

A firm will use land up to the point at which MRP_A = P_A, where A is acres of land.

A firm is currently hiring capital and labor so that MP_L/P_L > MP_K/P_K. If the firm wishes to maximize profits it should hire