Question 1

If the demand curve for wedding cakes shifts to the right, then the value of the marginal product of labor for bakers will

Accepted Answer

When the demand for wedding cakes shifts to the right, it means that there is an increase in demand for the product. As a result, the bakery will need to produce more cakes, requiring more labor. This will lead to an increase in the marginal product of labor for bakers. Therefore, the answer is A.

Question 2

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?...

Question 3

If the demand curve for economics textbooks shifts to the left, then the value of the marginal product of labor for economics textbook authors will

Accepted Answer

A leftward shift in the demand curve for economics textbooks indicates a decrease in demand for these textbooks. As a result, fewer economics textbooks will be sold and the revenue of economics textbook authors will decrease. This will lead to a decrease in the value of the marginal product of labor for these authors.

Question 4

Figure 18-5
The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (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 profit­maximizing,...

Question 5

Figure 18-5
The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (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 given VMP curve, we can see that the slope of the curve (which represents the wage rate) is equal to the marginal product of labor. Diminishing marginal product of labor occurs when the slope of the VMP curve is decreasing. In this case, we can see that the slope is initially increasing and then becomes constant, indicating constant marginal product of labor. Therefore, option B is incorrect.
Using the information from the production function point (L=3, Q=180), we can calculate the firm's value of marginal product at that point to be $15 (180/12). Since the firm sells its output for $5 per unit, it would be profitable to hire more workers as long as the wage rate is less than $15/worker. At a wage rate of $160 per day, the firm can hire 4 workers and make a profit of $80 ((4*180) - (4*$160) = $80), which is the maximum profit possible as indicated by the VMP curve. Therefore, option C is correct. By using the slope of the VMP curve, we can also find another point on the production function where L=4 and Q=216, as indicated in option A. Therefore, option D is correct.

Question 6

Which of the following events could increase the demand for labor?

Accepted Answer

An increase in the marginal productivity of workers would make workers more valuable to firms, increasing the demand for labor. A decrease in output price (A) or wage paid to workers (D) would likely decrease demand for labor, as firms would have less revenue or incentive to hire workers. A decrease in the amount of capital available (B) would limit the amount of resources workers have to do their job, also likely decreasing demand for labor.

Question 7

Competitive firms hire workers until the additional benefit they receive from the last worker hired is equal to (i) the additional cost of that worker.
(ii) the wage paid to that worker.
(iii) the marginal product of that worker.

Accepted Answer

The answer of Competitive firms hire workers until the additional...

Question 8

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

Accepted Answer

The demand for labor is ultimately derived from the demand for the product or service that the firm sells. Therefore, any change in the price of the product that the firm sells will directly affect the demand for labor. A change in the wage rate (A) or quantity of labor demanded (B) will merely result in a movement along the labor demand curve, rather than a shift of the curve itself. An increase in the supply of labor (D) would more likely shift the supply curve for labor, rather than the demand curve.

Question 9

Figure 18-5
The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (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

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

Question 10

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 decreases the marginal productivity of labor, which means that fewer workers are needed to produce the same amount of output. This leads to a leftward shift in labor demand as firms demand less labor.

Question 11

A pretzel-stand owner in Chicago hires workers to make hot pretzels and sell them to customers. If the firm is competitive in both the market for pretzels and in the market for pretzel-makers, then it has

Accepted Answer

If the firm is competitive in both the market for pretzels and for pretzel-makers, it is a price-taker in both markets. In the market for pretzels, the firm cannot control the price because it must accept the market price set by supply and demand. Similarly, in the market for pretzel-makers, the firm must pay the prevailing wage to attract workers because workers have many other options for employment. Therefore, the firm has no control over either the price of pretzels or the wage it pays to its workers.

Question 12

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

Accepted Answer

The value-of-marginal-product (VMP) curve shows the additional revenue a firm receives from hiring one more worker. Therefore, it represents the firm's labor demand curve.

Question 13

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

An increase in the marginal product of labor for all workers would increase the profitability of the firm, leading to increased output and an increase in demand for labor. This would shift the labor demand curve to the right, resulting in a higher equilibrium wage and quantity of labor hired.

Question 14

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 the firm is a demander of labor, its objective is to maximize profit, just like when it is a supplier of goods or services.

Question 15

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, resulting in an increase in the marginal productivity of labor. This leads to an increase in the demand for labor, causing labor demand to shift to the right. Therefore, (i) and (iii) are true. The marginal productivity of labor does not decrease as a result of labor-augmenting technology, so (ii) is false. Similarly, labor-augmenting technology does not lead to a decrease in labor demand, so (iv) is also false.

Question 16

Which of the following events could decrease the demand for labor?

Accepted Answer

A decrease in demand for the final product produced by labor would decrease the demand for labor as there would be less need for workers to produce the product. An increase in the number of migrant workers (A) and a decrease in the supply of labor (D) could potentially increase the competition for jobs but could also increase demand for labor if more workers were needed. An increase in the marginal productivity of workers (B) would increase the demand for labor.

Question 17

John owns a number of hot dog stands in New York City. He hires workers to sell hot dogs at his stands. Which of the following events will lead to a decrease in John's demand for hot dog vendors?

Accepted Answer

The answer of John owns a number of hot dog...

Question 18

Competitive firms decide how much output to sell by producing output until the price of the good equals

Accepted Answer

Competitive firms decide how much output to sell by producing output until the price of the good equals marginal cost. This is because at the point where price equals marginal cost, the firm is maximizing its profit. If price were greater than marginal cost, the firm could increase its profit by producing more. Conversely, if price were less than marginal cost, the firm would decrease its profit by producing more. Therefore, choice C is the correct answer.

Question 19

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

A new invention that increases the marginal productivity of labor will shift the labor demand curve to the right, indicating that firms are willing to hire more workers at any given wage rate. This type of invention is called labor-augmenting technology, as it enhances (augments) the capabilities of labor. Labor-saving technology, on the other hand, reduces the amount of labor needed to produce a given level of output, shifting the labor demand curve to the left. Revenue technology and supply-shifting technology are not commonly used terms in economics, and do not accurately describe this situation.

Question 20

Dan owns one of the many bakeries in New York City. Which of the following events will lead to an increase in Dan's demand for the services of bakers? (i) The price of muffins increases. (Muffins are Dan's specialty.)
(ii) Dan adds three new ovens to the kitchen area to help the bakers work faster.
(iii) Local bakers form a union to protect themselves from low wages.

Accepted Answer

(i) The price increase of muffins will lead to an increase in demand for the services of bakers, as Dan's sales may increase and therefore he may need more bakers to keep up with the higher demand.

(ii) Adding three new ovens will help the bakers work faster, but it does not necessarily increase Dan's demand for their services.

(iii) The formation of a union may lead to an increase in wages for bakers, but it does not directly increase Dan's demand for their services.

Quiz 18: The Markets for the Factors of Production

If the demand curve for wedding cakes shifts to the right, then the value of the marginal product of labor for bakers will

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.

If the demand curve for economics textbooks shifts to the left, then the value of the marginal product of labor for economics textbook authors will

Which of the following events could increase the demand for labor?

Competitive firms hire workers until the additional benefit they receive from the last worker hired is equal to (i) the additional cost of that worker. (ii) the wage paid to that worker. (iii) the marginal product of that worker.

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

Figure 18-5 The figure shows a particular profitmaximizing, competitive firm's valueofmarginalproduct (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

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

A pretzel-stand owner in Chicago hires workers to make hot pretzels and sell them to customers. If the firm is competitive in both the market for pretzels and in the market for pretzel-makers, then it has

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?

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

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.

Which of the following events could decrease the demand for labor?

John owns a number of hot dog stands in New York City. He hires workers to sell hot dogs at his stands. Which of the following events will lead to a decrease in John's demand for hot dog vendors?

Competitive firms decide how much output to sell by producing output until the price of the good equals

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

Quiz 18: The Markets for the Factors of Production

If the demand curve for wedding cakes shifts to the right, then the value of the marginal product of labor for bakers will

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.

If the demand curve for economics textbooks shifts to the left, then the value of the marginal product of labor for economics textbook authors will

Which of the following events could increase the demand for labor?

Competitive firms hire workers until the additional benefit they receive from the last worker hired is equal to (i) the additional cost of that worker. (ii) the wage paid to that worker. (iii) the marginal product of that worker.

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

Figure 18-5 The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (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

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

A pretzel-stand owner in Chicago hires workers to make hot pretzels and sell them to customers. If the firm is competitive in both the market for pretzels and in the market for pretzel-makers, then it has

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?

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

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.

Which of the following events could decrease the demand for labor?

John owns a number of hot dog stands in New York City. He hires workers to sell hot dogs at his stands. Which of the following events will lead to a decrease in John's demand for hot dog vendors?

Competitive firms decide how much output to sell by producing output until the price of the good equals

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

Figure 18-5 The figure shows a particular profitmaximizing, competitive firm's valueofmarginalproduct (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