Question 1

Labor-saving technology causes which of the following?
(i)The marginal productivity of labor increases.
(ii)The marginal productivity of labor decreases.
(iii)Labor demand shifts to the right.
(iv)Labor demand shifts to the left.

Accepted Answer

The answer of Labor-saving technology causes which of the following?
(i)The...

Question 2

When we focus on the firm as a supplier of a good or a service,we assume that the firm is a profit maximizer.When we focus on the firm as a demander of labor,we assume that the firm's objective is to

Accepted Answer

When firms are demanders of labor, their objective is to maximize profit, not simply to minimize wages or variable costs, or to maximize the number of workers hired. Profit maximization is the primary objective of a firm, and this objective guides all of its decisions, including those related to hiring labor.

Question 3

For a worker,the opportunity cost of an hour of leisure

Accepted Answer

The opportunity cost of an hour of leisure is the wage the worker forgoes by not working that hour. If her wage rises by $5 per hour, the opportunity cost of taking an hour of leisure also rises by $5.

Question 4

Scenario 18-3
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $11 per hour. During the summer, he drives a tour bus around the ski resort, earning $13 per hour.
-Refer to Scenario 18-3.During the winter months,what is Sam's opportunity cost of taking an hour off work to go skiing?

Accepted Answer

Sam's opportunity cost of taking an hour off work to go skiing during the winter months would be the wages he would have earned if he had worked during that hour. Since he earns $11 per hour during the winter months, his opportunity cost would also be $11. Therefore, the answer is C.

Question 5

Wendy's hourly wage decreases from $15 to $12.Which of the following describes a consequence of the decrease in Wendy's wage?

Accepted Answer

A decrease in wage reduces the opportunity cost of leisure, potentially leading Wendy to work more or fewer hours, depending on her preferences and needs.

Question 6

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
 
-Refer to Figure 18-5.Suppose one point on the firm's production function is (L = 3,Q = 180),where L = number of workers and Q = quantity of output.If the firm sells its output for $5 per unit,then

Accepted Answer

From the VMP curve, we can see that when L=3, the VMP is $20. This means that the third worker adds $20 to the total revenue of the firm. If the firm sells its output for $5 per unit and produces 180 units, its total revenue is $900.

To determine the second point on the firm's production function, we need to find the point where the VMP is equal to the wage rate. From the VMP curve, we can see that this occurs when L=4. So, a second point on the firm's production function is (L=4, Q=216).

The fact that the VMP curve is downward sloping implies that the firm's production function exhibits the property of diminishing marginal product of labor.

To find the profit-maximizing level of employment, we need to compare the wage rate with the VMP of each additional worker. At L=3, the VMP is $20 and the wage rate would have to be less than $20 for the firm to want to hire another worker. At L=4, the VMP is $16, so the firm would only want to hire another worker if the wage rate was less than $16. At L=5, the VMP is $12, so the firm would only want to hire another worker if the wage rate was less than $12. Thus, if the firm pays workers $160 per day, it will hire four workers, which is the profit-maximizing level of employment.

Question 7

Suppose a labor-augmenting technology were developed for a product that increased the marginal product of labor for all workers.Which of the following would happen in the labor market for this product?

Accepted Answer

With an increase in the marginal product of labor, the firm's output would increase, causing an increase in demand for labor, thereby increasing wages and employment. Hence, the demand for labor would increase in the labor market for this product.

Question 8

Fiona's hourly wage increases from $8 to $10.Which of the following describes a consequence of the increase in Fiona's wage?

Accepted Answer

The answer of Fiona's hourly wage increases from $8 to...

Question 9

A Luddite would be expected to oppose

Accepted Answer

Luddites were a group of 19th-century English textile workers who protested against the mechanization of their industry, destroying new machinery they believed would negatively impact their livelihoods. A modern-day Luddite would likely still oppose technological advancement, as they view it as a threat to jobs and traditional ways of life.

Question 10

Suppose that a new invention increases the marginal productivity of labor,shifting labor demand to the right.Such an invention would be an example of

Accepted Answer

Labor-augmenting technology increases the productivity of labor, shifting the demand for labor to the right. Labor-saving technology reduces the need for labor and shifts the demand for labor to the left. Luddite technology opposes the use of technology and typically involves the destruction of machinery. "Supply-shifting technology" is not a commonly used term in economics.

Question 11

Suppose that a new invention decreases the marginal productivity of labor,shifting labor demand to the left.Such an invention would be an example of

Accepted Answer

Labor-saving technology reduces the marginal productivity of labor, resulting in a leftward shift in labor demand. This could be because the technology allows for automation or other efficiencies that reduce the need for human labor.

Question 12

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following?

Accepted Answer

The labor supply curve represents the trade-off individuals face between work (supplying labor) and leisure. As wages increase, individuals may choose to work more hours to earn more income, but at the same time, they may also choose to work less and enjoy more leisure time. Therefore, the labor supply curve slopes upward because at higher wages, the opportunity cost of leisure (foregone wages) increases, incentivizing individuals to work more.

Question 13

Scenario 18-3
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $11 per hour. During the summer, he drives a tour bus around the ski resort, earning $13 per hour.
-Refer to Scenario 18-3.During the summer months,what is Sam's opportunity cost of taking an hour off work to go hiking?

Accepted Answer

Since Sam earns $11 per hour during the summer, his opportunity cost of taking an hour off work to go hiking is also $11. This is because if he chooses to go hiking, he is giving up the chance to earn $11 during that hour. Therefore, the correct answer is option C.

Question 14

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
 
-Refer to Figure 18-5.Assume that two points on the firm's production function are (L = 2,Q = 180)and (L = 3,Q = 228),where L = number of workers and Q = quantity of output.The firm pays its workers $120 per day.The firm's non-labor costs are fixed,and they amount to $250 per day.We can conclude that

Accepted Answer

The VMP curve represents the firm's marginal revenue product, which is equal to the price of output when the firm is a price taker. So, from the figure, we can see that the price of output is $12 per unit (the height of the VMP curve at L=2). 
To calculate the marginal cost per unit of output, we need to find the change in total cost from producing 180 units to producing 228 units, which is the output associated with L=3. The cost of the two workers is $240 (2 x $120), and the non-labor costs are fixed at $250, so the total cost of producing 180 units is $490. The cost of the three workers is $360 (3 x $120), and the non-labor costs are still $250, so the total cost of producing 228 units is $610. The change in total cost is $610 - $490 = $120, so the marginal cost per unit of output is $120/48 = $2.50. 
We cannot determine the profit-maximizing level of employment from the information given, as that depends on the relationship between the VMP curve and the wage rate. However, we can say that if the firm is currently employing 2 workers per day (which corresponds to producing 180 units), then hiring a third worker (which corresponds to producing 228 units) would increase revenue by $228 - $180 = $48, while increasing costs by $120 (the wage paid to the third worker). So, the increase in profit from hiring the third worker would be $48 - $120 = -$72, and it would not be profitable to do so.

Question 15

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
 
-Refer to Figure 18-5.The value-of-marginal-product curve that is drawn could be relabeled as the firm's

Accepted Answer

The value-of-marginal-product (VMP) curve represents the additional revenue earned by a firm from hiring one more unit of labor. This is equivalent to the marginal product of labor (MPL) multiplied by the market price of the firm's output, which represents the firm's marginal revenue product (MRP). The VMP curve is downward-sloping due to diminishing marginal returns to labor. Therefore, the VMP curve can be relabeled as the firm's labor demand curve, which shows the quantity of labor the firm is willing to hire at different wage rates.

Question 16

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
 
-Refer to Figure 18-5.Suppose the marginal product of the fifth unit of labor is 30 units of output per day.The figure implies that the

Accepted Answer

The answer of Figure 18-5
The figure shows a particular profit-maximizing,...

Question 17

For a competitive,profit-maximizing firm,the demand curve for labor will shift in response to a change in the

Accepted Answer

For a competitive, profit-maximizing firm, the demand for labor is derived from the demand for its product. Therefore, a change in the price of the product that the firm sells will impact the demand for labor, as it will affect the firm's revenue and profitability. Changes in the wage rate or quantity of labor demanded will affect the firm's supply of labor and not the demand curve for labor. An increase in the supply of labor would shift the supply curve for labor, not the demand curve.

Question 18

Labor-augmenting technology causes which of the following?
(i)The marginal productivity of labor increases.
(ii)The marginal productivity of labor decreases.
(iii)Labor demand shifts to the right.
(iv)Labor demand shifts to the left.

Accepted Answer

Labor-augmenting technology increases the productivity of labor, thus increasing the marginal productivity of labor (i) and shifting the demand for labor to the right (iii). It does not decrease the marginal productivity of labor (ii) or shift the demand for labor to the left (iv).

Question 19

The term Luddite is used to describe

Accepted Answer

The term Luddite originates from a group of workers in England during the Industrial Revolution who destroyed machinery they believed was taking away their jobs. Today, the term is used to describe people who are opposed to technological advance and fear its potential negative social and economic impacts.

Question 20

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
 
-Refer to Figure 18-5.The firm would choose to hire three workers if

Accepted Answer