Question 1

An increase in the value of the marginal product of labor has the effect of increasing the

Accepted Answer

An increase in the value of the marginal product of labor (i.e. the additional output produced by hiring one more unit of labor) means that each worker is now producing more and adding more value to the firm, which in turn makes it more profitable to hire additional workers. This means that firms are willing to increase the quantity of labor they employ (i.e. hire more workers) which increases the demand for labor. As the demand for labor increases, competition among firms for workers drives up the wage. Therefore, all of the above choices are correct.

Question 2

Consider the labor market for heath care workers. Because of the aging population in the United States, the output price for health care services has increased. Holding all else equal, in the labor market for health care employees the equilibrium wage

Accepted Answer

An increase in the price of output in the healthcare sector will lead to an increase in the demand for healthcare workers, as firms will want to hire more workers to produce more healthcare services to meet the increased demand. This will shift the demand curve to the right, leading to a new equilibrium with a higher wage and a higher quantity of labor. Therefore, the equilibrium wage increases, and the equilibrium quantity of labor increases.

Question 3

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-augmenting technology, the equilibrium wage

Accepted Answer

Labor-augmenting technology increases the productivity of labor, thus increasing the demand for labor. As a result, the equilibrium wage will rise as firms compete for a limited supply of labor. Additionally, the higher productivity of labor means that firms can afford to hire more workers at the higher wage rate, leading to an increase in the equilibrium quantity of labor.

Question 4

Suppose that the market for labor is initially in equilibrium. An increase in the price of output will cause the equilibrium wage

Accepted Answer

An increase in the price of output will result in an increase in demand for labor as firms will want to increase production, leading to an increase in the equilibrium wage and quantity of labor. This is because the demand curve shifts to the right, increasing both equilibrium wage and quantity of labor.

Question 5

Scenario 18-8
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to graduate school in economics to become a university economics professor.
Event 2: A decreasing number of students in U.S. primary and secondary schools decreases the number of students entering college, decreasing the output price of university economics professors' services.
-Refer to Scenario 18-8. As a result of these two events, holding all else constant, the equilibrium wages of university economics professors will

Accepted Answer

Event 1 will increase the supply of economics professors, as more individuals will see the profession as relatively more attractive than other opportunities during the recession. Event 2 will decrease the demand for economics professors, as there are fewer students entering college and therefore fewer students taking economics courses, leading to a decrease in the quantity demanded of economics professors. The intersection of the increased supply and decreased demand will result in a decrease in the equilibrium wage of university economics professors.

Question 6

Consider the labor market for heath care workers. Because of the aging population in the United States, the output price for health care services has increased. Holding all else equal, the equilibrium quantity of health care employees would

Accepted Answer

The increase in output price for health care services will increase the demand for health care workers, leading to an increase in the equilibrium quantity of health care employees.

Question 7

Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage

Accepted Answer

A decrease in the price of output means that firms are earning less revenue, which will lead to a decrease in the demand for labor. This will cause a decrease in the equilibrium wage and a decrease in the equilibrium quantity of labor.

Question 8

Scenario 18-7
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to graduate school in economics to become a university economics professor.
Event 2: An increasing number of students in U.S. primary and secondary schools increases the number of students entering college, increasing the output price of university economics professors' services.
-Refer to Scenario 18-7. As a result of these two events, holding all else constant, the equilibrium wages of university economics professors will

Accepted Answer

The answer of Scenario 18-7
Suppose the following events occur in...

Question 9

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

Accepted Answer

When firms increase the amount of physical capital available, this generally leads to an increase in the productivity of labor due to the complementarity of capital and labor. This, in turn, increases the value of the marginal product of labor, as each additional unit of labor can produce more output in conjunction with the increased capital. Therefore, the answer is C: the value of the marginal product of labor will increase.

Question 10

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage

Accepted Answer

When the value of the marginal product of computer programmers increases, it means that their output (programs) is more valuable to society. This leads to an increase in the demand for computer programmers, causing the demand curve to shift to the right. As a result, the equilibrium wage (the wage that balances the supply and demand of computer programmers) increases, since firms are willing to pay more for the now more valuable work. Furthermore, since the demand for computer programmers has increased, the equilibrium quantity of labor (the number of people employed as computer programmers) also increases as more workers are attracted to the higher wages.

Question 11

Consider the labor market for heath care workers. Because of the aging population in the United States, the output price for health care services has increased. Holding all else equal, the equilibrium wage of health care employees would

Accepted Answer

An increase in output price for health care services will increase the demand for health care workers, as more resources will be allocated towards the health care industry. As a result, the equilibrium wage for health care employees would increase.

Question 12

Suppose that technological progress increases the productivity of teachers. Which of the following accurately describes the labor market for teachers after the technological change? Equilibrium wages will

Accepted Answer

If technological progress increases the productivity of teachers, it means that teachers will be able to produce more output in less time with the same resources. This leads to a decrease in the cost of producing education, and thus an increase in the demand for teachers as education becomes more affordable. As a result, the equilibrium wage for teachers will rise as the demand for their services increases, and the equilibrium quantity of teachers employed will also rise because it is now more profitable to hire them.

Question 13

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium wage in the labor market for computer programmers

Accepted Answer

When the value of the marginal product of all computer programmers increases, this means that their contribution to the production process is more valuable. As a result, firms are willing to pay a higher wage to attract and retain these workers. This leads to an increase in the equilibrium wage in the labor market for computer programmers.

Question 14

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium quantity in the labor market for computer programmers

Accepted Answer

When the value of the marginal product of computer programmers increased, the demand for them also increased. Therefore, the equilibrium quantity in the labor market for computer programmers would have increased as well, as employers would want to hire more programmers to meet the increased demand.

Question 15

Suppose medical research provides evidence that eating bananas provides far greater health benefits than was previously thought. The resulting increase in the demand for bananas

Accepted Answer

If the demand for bananas increases due to medical research suggesting greater health benefits, the value of the marginal product of banana pickers will increase. This is because the demand for bananas will lead to an increase in the price of bananas, which will in turn increase the value of the marginal product of banana pickers. The marginal product of banana pickers may or may not increase depending on whether the supply of banana pickers also increases in response to the demand increase, but this is not directly related to the question of the value of their marginal product. Therefore, option B is the correct answer.

Question 16

Consider the labor market for computer programmers. Because of the dot.com boom in the late 1990s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. However, when these computer programming students graduated the dot.com bust took place. The dot.com bust decreased the value of the marginal product of computer programmers. Holding all else equal what effect did these two circumstances have on the equilibrium quantity in the labor market for computer programmers?

Accepted Answer

The answer of Consider the labor market for computer programmers....

Question 17

Consider the labor market for computer programmers. Because of the dot.com boom in the late 1990s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. However, when these computer programming students graduated, the dot.com bust took place. The dot.com bust decreased the value of the marginal product of computer programmers. Holding all else equal, what effect did these two circumstances have on the equilibrium wage in the labor market for computer programmers?

Accepted Answer

The increase in the supply of computer programmers after the dot.com boom, followed by the decrease in the value of their marginal product due to the dot.com bust, led to a decrease in the equilibrium wage in the labor market for computer programmers. This is because there were more programmers available relative to the demand for their services, leading to a decrease in the wage that firms were willing to pay.

Question 18

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-saving technology, the equilibrium wage

Accepted Answer

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

Question 19

Scenario 18-8
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to graduate school in economics to become a university economics professor.
Event 2: A decreasing number of students in U.S. primary and secondary schools decreases the number of students entering college, decreasing the output price of university economics professors' services.
-Refer to Scenario 18-8. As a result of these two events, holding all else constant, the equilibrium quantity of university economics professors will

Accepted Answer

The answer of Scenario 18-8
Suppose the following events occur in...

Question 20

Scenario 18-7
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to graduate school in economics to become a university economics professor.
Event 2: An increasing number of students in U.S. primary and secondary schools increases the number of students entering college, increasing the output price of university economics professors' services.
-Refer to Scenario 18-7. As a result of these two events, holding all else constant, the equilibrium quantity of university economics professors will

Accepted Answer

Both events would increase the demand for university economics professors, leading to an increase in equilibrium quantity. The lower opportunity cost of going to graduate school in economics would increase the supply of potential professors, but this would be outweighed by the increased demand caused by the growing number of students entering college.

Quiz 18: The Markets for the Factors of Production