Question 1

Labor supply curves are always upward sloping.

Accepted Answer

Labor supply curves can be backward bending, meaning that at higher wage rates, individuals might choose to work fewer hours, valuing leisure more than the additional income.

Question 2

Because of diminishing returns,a factor in abundant supply has a

Accepted Answer

The principle of diminishing returns suggests that as more of a factor is used, holding other factors constant, its marginal product declines. When a factor is in abundant supply, its marginal product is low because additional units of the factor contribute less to total output. Consequently, its rental price is also low, reflecting its lower productivity.

Question 3

Consider the market for capital equipment.Suppose the price of firms' output increases.Holding all else constant,the equilibrium rental price of capital equipment will

Accepted Answer

When the price of firms' output increases, firms will have more revenue to invest in their production process, including renting more capital equipment. This increase in demand for capital equipment will cause the equilibrium rental price to increase.

Question 4

An increase in the output price will increase the firm's demand for labor,all else equal.

Accepted Answer

When the output price increases, the firm's revenue increases. This leads to an increase in the firm's demand for labor as they need more workers to increase production to meet the increased demand for their products.

Question 5

Let L represent the quantity of labor,and let Q represent the quantity of output.Suppose a certain production function includes the points (L = 7,Q = 27),(L = 8,Q = 35),and
(L = 9,Q = 45).Based on these three points,this production function exhibits diminishing marginal product.

Accepted Answer

The marginal product of labor increases as labor increases from 7 to 8 (an increase of 8 units of output) and from 8 to 9 (an increase of 10 units of output), indicating increasing marginal product, not diminishing.

Question 6

As a result of a fire,a small business owner loses some of her computers and other equipment.If the property of diminishing returns applies to all factors of production,she should expect to see

Accepted Answer

The property of diminishing returns states that as the amount of one factor of production is increased, holding other factors constant, the marginal productivity of the additional unit of that factor will eventually diminish. In this case, the small business owner has lost some of her capital (computers and other equipment), which means she has fewer units of capital to work with. As a result, the marginal productivity of her remaining capital should increase since there are now fewer units for the same amount of labor. However, the marginal productivity of labor may decrease because the remaining capital may not be as efficient without the lost equipment. Therefore, the best choice is B.

Question 7

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the marginal product of labor.

Accepted Answer

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the marginal revenue product of labor, not just the marginal product of labor.

Question 8

Which of the following would be an example of capital for a computer software firm?
(i)the firm's computer programmers
(ii)the wages the firm pays to its computer programmers
(iii)computer equipment

Accepted Answer

Capital refers to the long-term assets of a company that are used to generate income. In the case of a computer software firm, computer equipment would be considered capital as it is an asset used to create and sell software products. The firm's computer programmers and their wages are part of the labor factor of production.

Question 9

When economists refer to a firm's capital,they are describing the

Accepted Answer

Capital refers to the stock of equipment and buildings used in production, which are considered long-term assets of a firm. It does not refer to markets for final goods and services, bank financing or equity markets.

Question 10

Suppose that the labor market for life guards is initially in equilibrium.Then a new television series debuts which glamorizes the social opportunities for life guards.What happens to the equilibrium wage and quantity of life guards?

Accepted Answer

The answer of Suppose that the labor market for life...

Question 11

In economics,the term capital refers to

Accepted Answer

Capital refers to physical equipment, structures, and infrastructure used in production, such as machinery, buildings, and roads. Money (A) is a medium of exchange and stocks and bonds (B) are financial instruments used to raise capital.

Question 12

The rental price of land is

Accepted Answer

The rental price of land refers to the price paid for the flow of services from the land over a specified time period, such as the use of the land for farming, mining, or building. It is not the price paid for ownership of the land (choice A), and it is not always more than the purchase price (choice C).

Question 13

Land,labor,and capital are examples of factors of production.

Accepted Answer

Land, labor, and capital are three traditional factors of production in economics.

Question 14

For competitive firms,the curve that represents the value of marginal product of labor is the same as the demand for labor curve.

Accepted Answer

This is true for competitive firms because in a competitive labor market, firms are price-takers and the marginal productivity of labor equals the wage rate. Therefore, the marginal product of labor curve and the demand for labor curve are the same.

Question 15

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, they bring their skills, knowledge, and labor force to a new market. This can cause shifts in the labor supply curves in both countries. In the country of origin, the labor supply curve will shift leftward (decrease) as a result of the loss of labor force. In the destination country, the labor supply curve will shift rightward (increase) as a result of the influx of new workers.

Question 16

According to the neoclassical theory of distribution,the wages paid to workers depend on the

Accepted Answer

The answer of According to the neoclassical theory of distribution,the...

Question 17

The value of the marginal product of labor can be calculated as the price of the final good minus the marginal product of labor.

Accepted Answer

The value of the marginal product of labor is calculated as the marginal product of labor multiplied by the price of the final good.

Question 18

In a competitive market for labor,the equilibrium wage always equals the value of the marginal product.

Accepted Answer

In a competitive market for labor, firms will hire workers up to the point where the value of the marginal product (VMP) equals the wage rate. This is because firms will continue to hire workers as long as the VMP is greater than or equal to the cost of hiring the worker (wage rate). At the point where the VMP is exactly equal to the wage rate, the firm is indifferent between hiring another worker or not, since the additional output the worker creates would just be offset by the additional cost of hiring. Therefore, in equilibrium, the wage rate will always equal the VMP of labor.

Question 19

Technological advances can cause the labor demand curve to shift.

Accepted Answer

Technological advances can increase productivity and efficiency, reducing the need for labor and causing the labor demand curve to shift to the left. This can result in job displacement and changes in the structure of industries and occupations. However, technological advances can also create new job opportunities and increase demand for skilled workers.

Question 20

When firms are able to increase the amount of physical capital available to workers,the

Accepted Answer

When firms are able to increase the amount of physical capital available to workers, the efficiency of labor increases, leading to an increase in the value of the marginal product of labor. Therefore, choice C is correct.

Quiz 18: The Market for the Factors of Production