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Exam 18: The Markets for the Factors of Production

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Question 101

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Scenario 18-2 Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market. -Refer to Scenario 18-2. If Gertrude is a competitor in both the fresh Pacific salmon market and in the market for crew members, she is called a price

A) taker in the salmon market and a wage setter in the crew market.
B) taker in the crew market and a price setter in the salmon market.
C) taker in both markets.
D) setter in both markets.

E) A) and B)
F) A) and C)

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Question 102

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

A) and the equilibrium quantity of labor to rise.
B) and the equilibrium quantity of labor to fall.
C) to rise and the equilibrium quantity of labor to fall.
D) to fall and the equilibrium quantity of labor to rise.

E) A) and D)
F) A) and C)

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Question 103

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An upward-sloping labor-supply curve implies that an increase in the wage induces

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the fourth worker's marginal product of labor?

Figure 18-1. The figure shows the relationship between the number of mechanics hired and the number of car repairs performed per day at a car-repair shop. -Refer to Figure 18-1. The production process depicted on the graph exhibits _______ marginal product of labor.

Economic theory predicts a close relationship between productivity and real wages. Does history confirm this relationship?

"The firm hires the factor up to the point where the value of the factor's marginal product is equal to the factor's price." This statement applies to which factor of production?

An upward-sloping labor-supply curve implies that an increase in the wage induces

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the price of the final good multiplied by the marginal product of the last worker hired.

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)?

If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will decrease to offset the higher price.

Miguel receives a pay raise at his part-time job from $7.50 to $9 per hour. He used to work 10 hours per week, but now he decides to work 12 hours per week. For this price range, his labor supply curve is

Total income in the United States is comprised of

Figure 18-1 On the graph, L represents the quantity of labor and Q represents the quantity of output per week. -Refer to Figure 18-1. Suppose the firm hires each unit of labor for $700 per week, and each unit of output sells for $9. How many workers will the firm hire to maximize its profit?

The equilibrium rental income paid to landowners at any point in time equals the

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

Suppose that a competitive firm hires labor up to the point at which the value of the marginal product equals the wage and that labor is the only input that varies for the firm. If the firm pays a wage of $700 per week and the marginal product of labor equals 10 units per week, then the marginal cost of producing an additional unit of output is

When a competitive firm produces output up to the point at which the price is equal to marginal cost, it also hires labor up to the point at which the wage is equal to the

Define monopsony.

Figure 18-6 -Refer to Figure 18-6. The graph above illustrates the market for bakers who make homemade breads and breakfast pastries. If the bakery profession becomes more attractive to young women and men because of a new reality television show, what happens in the market for bakers?