Question 1

Changes in supply and demand in the labor market will cause changes in wages.

Accepted Answer

If there is an increase in demand for a certain type of labor but the supply remains the same, the wages for that type of labor will increase. Conversely, if there is a decrease in demand for a certain type of labor and the supply remains the same, the wages for that type of labor will decrease. Additionally, if there is an increase in the supply of a certain type of labor but the demand remains the same, the wages for that type of labor will decrease. Similarly, if there is a decrease in the supply of a certain type of labor and the demand remains the same, the wages for that type of labor will increase.

Question 2

For a lawn mowing and yard maintenance business,the capital stock would include lawn mowers,rakes,shovels,and hoses.

Accepted Answer

Capital stock refers to the assets or equipment that a business owns and uses to generate revenue. Lawn mowers, rakes, shovels, and hoses are all equipment commonly used by a lawn mowing and yard maintenance business, thus making them part of the capital stock.

Question 3

Increases in productivity are not responsible for increased standards of living in the United States.

Accepted Answer

Increases in productivity have been a major driver of economic growth and higher living standards in the United States. As productivity increases, workers can produce more goods and services in the same amount of time, leading to higher output, wages, and profits. This contributes to a higher standard of living as people have access to more and better goods and services.

Question 4

Describe the difference between a diminishing marginal product of labor and a negative marginal product of labor.Why would a profit-maximizing firm always choose to operate where the marginal product of labor is decreasing (but not negative)?

Accepted Answer

The answer of Describe the difference between a diminishing marginal...

Question 5

Average productivity can be measured as total output divided by total units of labor.

Accepted Answer

This is a correct method of measuring average productivity as it considers the total output produced by all the labor inputs.

Question 6

Oil field workers' wages are directly tied to the world price of oil.

Accepted Answer

Oil field workers' wages are often tied to the world price of oil as their industry is directly affected by the demand and production of oil. When the global oil price is high, oil companies can afford to provide higher wages to their workers, and when the oil price is low, the companies may have to reduce wages or lay off workers to cut costs.

Question 7

In the 1980s,the dangerous Ebola virus entered the United States through contaminated monkeys that were imported for use in medical experiments.Suppose this virus had not been contained but had spread to the general population.Assume that the virus is lethal in half of the people who are exposed to it.Describe the resulting effect on labor productivity.

Accepted Answer

The answer of In the 1980s,the dangerous Ebola virus entered...

Question 8

As the rental price of capital decreases,more capital is used in production and the marginal product of capital increases.

Accepted Answer

The answer of As the rental price of capital decreases,more...

Question 9

Capital owners are compensated according to the value of the marginal product of that capital.

Accepted Answer

This is a fundamental principle of neoclassical economics, which states that in a competitive market, capital owners will be paid according to the marginal product of their capital, i.e. the additional output that is generated by an extra unit of capital.

Question 10

If a disease,like the Black Death,were to significantly decrease the population of a country,we would predict a decrease in the marginal product of land.

Accepted Answer

The Black Death, being a major epidemic disease, would result in a decrease in the population of a country. This would mean that there would be fewer people to work on the land. As a result, the marginal product of land, which is the additional output produced by an additional unit of land, would decrease since there would be a shortage of labor to cultivate it.

Question 11

A change in the supply of any one factor alters the earnings of all the other factors.

Accepted Answer

This is because a change in the supply of a factor can affect the production process and thus the demand for other factors of production, leading to changes in their earnings. For example, if there is an increase in the supply of labor, it may lower the wage rate, which in turn could lead to an increase in the demand for capital, as firms might substitute capital for labor to maintain their level of output. This could lead to an increase in the return on capital, affecting the earnings of capital owners.

Question 12

As the number of concrete workers in the United States falls,the wage paid to the remaining concrete workers will necessarily fall as well.

Accepted Answer

The statement is not necessarily true. The wage paid to the remaining concrete workers may not necessarily fall as it depends on the supply and demand of concrete workers and other factors such as union negotiations and government regulations. If the demand for concrete work remains high and there is a shortage of workers, the remaining workers may see an increase in their wages.

Question 13

Explain how a firm values the contribution of workers to its profitability.Would a profit-maximizing competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

Accepted Answer

The answer of Explain how a firm values the contribution...

Question 14

Movements of workers from country to country can cause shifts in the labor supply curves for both countries.

Accepted Answer

When workers move from one country to another, it can increase the labor supply in the receiving country and decrease it in the sending country, causing shifts in the labor supply curves for both. This can have implications for wages, prices, and productivity in both countries.

Question 15

Firms pay out a portion of their earnings in the form of interest and dividends,and those payments are a portion of the economy's capital income.

Accepted Answer

Firms do pay out a portion of their earnings in the form of interest and dividends, and these payments are considered part of the capital income of the economy.

Question 16

In general,less productive workers are paid less than more productive workers.

Accepted Answer

This statement is generally true. Employers tend to pay workers based on their productivity and value to the company. Workers who are less productive may receive less pay compared to their more productive counterparts.

Question 17

Capital income does not include income paid to households for the use of their capital.

Accepted Answer

Capital income includes income paid to households for the use of their capital, such as rent, interest, dividends, and capital gains.

Question 18

The demand curve for each factor of production reflects the marginal productivity of that factor.

Accepted Answer

This statement is true. The marginal productivity of a factor of production represents the additional output that can be produced by adding one unit of that factor while holding all other factors constant. In a competitive market, the demand curve for a factor of production reflects the marginal productivity of that factor, as firms are willing to pay a price that reflects the value of the additional output that can be produced by employing one more unit of that factor.

Question 19

When a firm decides to retain its earnings instead of paying dividends,the stockholders necessarily suffer.

Accepted Answer

Retaining earnings can benefit the firm in terms of future growth and investment opportunities, which can ultimately lead to increased stock prices and higher returns for stockholders. However, if the firm consistently retains earnings without demonstrating profitable growth potential, stockholders may suffer from missed opportunities for dividend income.

Question 20

As the rental price of capital increases,less capital is used in production.

Accepted Answer

This is because as the rental price of capital increases, it becomes more expensive to use capital in production. Firms will then substitute capital with other factors of production (such as labor), which results in less capital being used in production.

Quiz 18: The Markets for the Factors of Production