Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Foundations of Microeconomics, 5e (Bade/Parkin)
Chapter 18 Markets for Factors of Production
18.1 The Demand for a Factor of Production
1) The four factors of production that produce goods and services are
A) labor, money, machinery, and land.
B) labor, capital, money, and entrepreneurship.
C) labor, capital, land, and entrepreneurship.
D) labor, investment capital, machinery, and land.
E) labor, stocks, money, and bonds.
2) Economists define the four factors of production to be
A) land, labor, labor services, and capital.
B) labor, capital, land, and entrepreneurship.
C) labor, labor services, capital, and capital services.
D) entrepreneurship, land, natural resources, and capital.
E) entrepreneurship, natural resources, labor services, and land.
3) Which of the following is NOT a factor of production?
A) labor
B) capital
C) entrepreneurship
D) bonds
E) land
4) Entrepreneurship differs from the other factors of production because it
A) is not real.
B) is the most important.
C) has only existed since the new economy of the 1990s.
D) is not traded in a factor market.
E) is not paid.
5) As a factor of production, any of the gifts of nature are called
A) land.
B) labor.
C) capital.
D) entrepreneurial ability.
E) physical capital.
6) In the labor market,
A) households demand labor.
B) firms demand labor.
C) firms supply labor.
D) wage are determined only by firms alone.
E) None of the above answers is correct.
7) The demand for a factor of production is called a derived demand because it is derived from
A) the demand for goods and services produced by the factor of production.
B) a table of specific prices and quantities.
C) the ideas of an entrepreneur.
D) a financial market.
E) the supply of the factor of production.
8) Derived demand means that the demand for a factor of production is derived from the
A) supply of that factor of production.
B) price of that factor of production.
C) demand for the goods and services the factor of production is used to produce.
D) costs of production.
E) government, which forces large firms to hire at least some minimum number of different
resources.
9) The demand for a resource is derived from the
A) price of the resource.
B) supply of the resource.
C) supply of substitute resources.
D) demand for the good or service that the resource is used to produce.
E) supply of complement resources.
10) What is meant by derived demand?
A) The demand is derived from income, tastes, etc. of sellers.
B) The demand for a resource is derived from the demand for what it can produce.
C) The demand is derived from the price elasticity of demand.
D) The demand exists because the government mandates production of the good.
E) The demand for a good is derived from the supply of the good.
11) Which of the following factors have a derived demand?
i. labor
ii. capital
iii. raw materials
A) i and ii
B) ii and iii
C) i and iii
D) i, ii, and iii
E) i only
12) Which of the following represents a derived demand? Demand for
A) a taco by Sam when she is hungry.
B) golf balls by Jose who is planning on going golfing with his boss.
C) a grocery clerk by the local Safeway.
D) an automobile by Jack who wants a car to get to school.
E) new clothing by shaniq who is starting a new job.
13) The demand for carpenters needed to build houses represents a
A) direct demand.
B) derived demand.
C) marginal demand/cost for input.
D) supplied demand.
E) directed supply.
14) If the demand for a good increases, the demand for the factors used to produce the good
A) increases.
B) decreases.
C) stays the same.
D) could increase, decrease, or stay the same depending on whether the demand for the good is
elastic, inelastic, or unit elastic.
E) None of the above answers is correct.
15) The value of the marginal product is equal to
A) marginal product × marginal cost.
B) marginal product × product price.
C) marginal revenue × marginal cost.
D) marginal cost × product price.
E) marginal product ÷ product price.
16) The value of the marginal product of labor is calculated by multiplying the ________ by the
________.
A) quantity of labor; wage rate
B) total product; wage rate
C) marginal product of labor; price of the product
D) wage rate; price of the product
E) marginal product of labor; wage rate
17) The value of marginal product is equal to the
A) additional revenue from selling one more unit of the product.
B) change in total revenue from selling one more unit of product.
C) additional cost of hiring one more unit of a factor of production.
D) change in revenue from hiring one more unit of a factor of production.
E) change in total cost when one more unit of the product is produced.
18) If UPS hires another worker, UPS will be able to deliver an additional 20 packages an hour.
The price of each package is $5. The value of this worker's marginal product is equal to
A) $5.
B) $100.
C) $4.
D) 20 packages.
E) $20.
19) The total output of candles in Nick's Wicks candle shop increases from 20 per hour to 30 per
hour as he hires the second worker. The price of each candle is $2. The
A) marginal product of the second worker is 20 candles.
B) marginal product of the second worker is 30 candles.
C) value of marginal product of the second worker is $20.
D) value of marginal product of the second worker is $30.
E) value of marginal product of the second worker is $60.
20) The value of the marginal product of labor
A) always increases as more labor is hired.
B) is constant as long as each worker is paid the same wage rate.
C) declines only if each worker is paid more than the previous worker.
D) at some point declines as more workers are hired.
E) at first decreases and then increases as more workers are hired.
21) As the quantity of land used increases, its value of marginal product
A) decreases and then eventually increases.
B) increases and then eventually decreases.
C) remains constant.
D) might increase, decrease, or remain constant depending if the rent for the land rises, falls, or
does not change.
E) The premise of the question is wrong because land does not have a value of marginal product.
22) Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The
above table shows the marginal product of trainers in Kevin's gym. If Kevin hires one trainer, the
value of the marginal product of this trainer equals
A) 4 clients.
B) $164.
C) $410.
D) $41.
E) None of the above answers is correct.
23) Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The
above table shows the marginal product of trainers in Kevin's gym. If Kevin hires three trainers,
the value of the marginal product of the third trainer equals
A) 2 clients.
B) $82.
C) 9 clients.
D) $369.
E) $123.
24) Kevin owns a personal training gym in Laredo, Texas. He charges $41 per session. The
above table shows the marginal product of trainers in Kevin's gym. If Kevin hires four trainers,
the value of the marginal product of the fourth trainer equals
A) 10 clients.
B) $410.
C) $41.
D) 1 client.
E) $10.25.
25) The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a
nearby college town. Suppose workers are paid $10 per hour and the price per pizza is $10. The
marginal product of the third worker is
A) 5 pizzas per hour.
B) 17 pizzas per hour.
C) $220 per hour.
D) 7 1/3 pizzas per hour.
E) None of the above answers is correct.
26) The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a
nearby college town. Suppose workers are paid $12 per hour and the price per pizza is $10. The
value of marginal product of the fourth worker is ________ per hour
A) $240
B) $220
C) $20
D) $12
E) $24
27) The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a
nearby college town. Suppose workers are paid $12 per hour and the price per pizza is $10. The
value of marginal product of the fifth worker is ________ per hour
A) $240
B) $220
C) $24
D) $10
E) $12
Number of
workers
Marginal
product
(bats per
hour)
1
8
2
7
3
6
4
5
5
4
The table has the marginal products for workers at Bart's Bats, a baseball bat factory.
28) Using the above table, if the price of a bat is $8, then the value of the marginal product of
labor of the fourth worker is
A) $40.
B) $0.625.
C) $1.375.
D) 5 bats.
E) None of the above answers is correct.
29) Using the above table, if the wage rate for a worker in a baseball bat manufacturing plant is
$18 an hour, and the price of a bat is $3, then the firm will hire ________ workers.
A) 1
B) 2
C) 3
D) 4
E) More information is needed to determine how many workers will be hired.
30) Using the above table, if the wage rate for a worker in a baseball bat manufacturing plant is
$12 an hour, and the price of a bat is $3, then the firm will hire ________ workers.
A) 1
B) 2
C) 3
D) 4
E) 5
31) Using the above table, suppose the price of a bat is $3. If the wage rate for a worker in a
baseball bat manufacturing plant is $18 an hour, then the firm will hire ________ workers; if the
wage rate falls to $12 an hour, then the firm will hire ________..
A) 1; 2
B) 2; 4
C) 3; 3
D) 5; 4
E) 3; 5
32) When hiring labor, to maximize profit a firm hires labor
A) until the value of the marginal product equals the wage rate.
B) if the workers are not unionized.
C) regardless of cost, because the firm definitely needs labor.
D) until the value of the marginal product is greater than the wage rate.
E) until the value of the marginal product equals the marginal revenue from hiring the worker.
33) A profit-maximizing firm hires labor up to the point where
A) price of the product equals the value of marginal product.
B) price of the product equals the wage rate.
C) the wage rate multiplied by the quantity of labor equals the marginal product.
D) the wage rate equals the value of marginal product.
E) marginal revenue equals the wage rate.
34) The rule for employing a profit-maximizing amount of labor is to continue to hire additional
workers until the additional worker's value of marginal product is
A) less than the wage rate.
B) equal to the wage rate.
C) greater than 1.
D) less than the price of the product.
E) equal to the price of the product.
35) Suppose the Miami Dolphins are considering adding another backup quarterback to their
roster. If the salary the Dolphins would have to pay equals $500,000 and the value of the
marginal product of the new quarterback equals $800,000, to maximize their profit the Dolphins
should
A) add the new quarterback.
B) add two new quarterbacks.
C) not add the new quarterback.
D) not add the new quarterback and, in fact, get rid of at least one other backup quarterback.
E) Not enough information is given to determine if the Dolphins should hire the quarterback.
36) Suppose Mongo runs a glue factory in Knuckle, North Dakota. Mongo wants to fire his
cousin Beevo for not working very hard at making glue. If firing Beevo would save Mongo
$6.11 per hour in wages and the value of Beevo's marginal product equals $7.29 per hour, to
maximize his profit, Mongo should
A) fire Beevo.
B) keep Beevo employed.
C) add another worker, Teevo, Beevo's sister, whose value of the marginal product would be
$4.83 per hour and whose wage would be $6.11 per hour.
D) increase the wage he pays Beevo to $7.29 per hour.
E) There is not enough information given to determine what Mongo should do.
37) If the value of the marginal product of the 10th worker is $60, then the
A) quantity of labor demanded when the wage rate is $60 will be 10 workers.
B) wage rate of the 10th worker will be $6.
C) firm will not hire the worker if the wage rate is less than $60.
D) marginal cost of the 10th worker will be $6.
E) quantity of labor demanded when the wage rate is $6 will be 10 workers.
38) If a firm finds itself at the point where the value of the marginal product of labor is greater
than its wage rate, then the firm
A) stops hiring more workers but does not fire any because the firm is maximizing its profit.
B) decreases the number of workers it has hired in order to increase its profit.
C) increases the number of workers it hires in order to increase its profit.
D) increases sales to keep its employees busy.
E) changes its employment of workers and maximizes its profit by hiring the number of workers
that makes the difference between the value of the marginal product and the wage rate as large as
possible.
39) If the wage rate exceeds the value of marginal product, a firm
A) is maximizing its profit.
B) can increase its profit by hiring more workers.
C) can increase its profit by firing some workers.
D) can increase its profit by increasing the wage rate and not changing its employment.
E) can increase its profit by increasing the wage rate and increasing its employment.
40) A company finds that the value of marginal product for the current level of employment is
$53 and the wage rate is $45. Which of the following is correct?
A) The firm is employing the profit-maximizing quantity of labor.
B) Too much labor is currently employed and the firm will lay off some workers.
C) Too few workers are currently employed and the firm will hire more workers.
D) The firm should shut down and produce nothing.
E) More information about the price of the product is needed to determine if the firm is hiring the
profit-maximizing amount of labor.
41) A company finds that the value of marginal product for the current level of employment is
$53 and the wage rate is $53. Which of the following is correct?
A) The firm is employing the profit-maximizing quantity of labor.
B) Too much labor is currently employed and the firm will lay off some workers.
C) Too few workers are currently employed and the firm will hire more workers.
D) The firm should shut down and produce nothing.
E) More information about the price of the product is needed to determine if the firm is hiring the
profit-maximizing amount of labor.
42) A company finds that the value of marginal product for the current level of employment is
$53 and the wage rate is $75. Which of the following is correct?
A) The firm is employing the profit-maximizing quantity of labor.
B) Too much labor is currently employed and the firm will lay off some workers.
C) Too few workers are currently employed and the firm will hire more workers.
D) The firm should shut down and produce nothing.
E) More information about the price of the product is needed to determine if the firm is hiring the
profit-maximizing amount of labor.
43) The demand curve for labor is the same as the firm's
A) marginal revenue curve.
B) marginal cost curve.
C) value of marginal product of labor curve.
D) wage rate curve.
E) supply of output curve.
44) A firm's demand for labor curve is also
A) its value of marginal product of labor curve.
B) the demand curve for the good it produces.
C) the supply of labor curve.
D) its marginal cost curve.
E) the supply curve for the good it produces.
45) The demand curve for a factor of production is
A) the same as the factor's supply curve.
B) upward sloping.
C) the same as the factor's value of marginal product curve.
D) vertical.
E) None of the above answers is correct.
46) If we compare the value of marginal product of labor curve and the demand for labor curve
we see that
A) they are the same thing.
B) the value of marginal product curve is twice as steep.
C) the demand for labor curve has no relationship to the value of marginal product curve.
D) the demand for labor curve is twice as steep but they share the same axes.
E) the demand for labor curve lies above the value of marginal product curve.
47) Which of the following statements about a firm's demand for labor curve and its value of
marginal product of labor curve is true?
A) The value of marginal product curve slopes upward and the demand for labor curve slopes
downward.
B) The demand for labor curve shows the amount of labor firms will hire based on the wage rate
while the value of marginal product curve shows the amount of output supplied based on the
wage rate.
C) The value of marginal product curve is steeper than the demand for labor curve.
D) The demand for labor curve is the same as the value of marginal product curve.
E) The value of marginal product curve lies above the demand for labor curve.
48) The demand for labor curve slopes downward because
A) it takes more workers to produce more output.
B) the value of marginal product of labor diminishes as the quantity of labor employed increases.
C) at lower wages, people are not willing to work as many hours.
D) wages are fixed.
E) the supply of labor curve is upward sloping.
49) For a firm selling its product in a perfectly competitive market, the demand curve for a factor
of production is downward sloping because
A) of the diminishing marginal product of the factor.
B) to sell more output the firm must lower the price of its product.
C) firms must hire more factors of production if they want to increase their output.
D) a factor's marginal product increases when the price of the factor increases.
E) None of the above answers is correct.
50) A firm's demand for labor curve shifts when there is a change in
i. the supply of labor.
ii. population
iii. the equilibrium wage rate.
A) i only
B) ii only
C) i and iii
D) i and ii
E) ii and iii
51) If the marginal product of labor increases, the firm's demand for labor curve
A) does not shift and there is no movement along it.
B) shifts leftward.
C) shifts rightward.
D) does not shift but there is a movement along it.
E) might shift leftward or rightward depending on whether the demand for the firm's product is
elastic or inelastic.
52) In part, the demand for labor depends on the
A) supply of labor.
B) number of workers available.
C) price of the firm's output.
D) worker's income.
E) wage rate at which the labor supply curve starts to bend backwards.
53) If the price of the firm's output increases, the demand for labor curve
A) shifts rightward.
B) shifts leftward.
C) remains constant.
D) could shift rightward, leftward, or remain constant.
E) might shift leftward or rightward depending on whether the demand for the firm's product is
elastic or inelastic.
54) If the price of a firm's product falls, the firm's demand for labor curve
A) does not shift and there is no movement along it.
B) shifts leftward.
C) shifts rightward.
D) does not shift but there is a movement along it.
E) might shift leftward or rightward depending on whether the demand for the firm's product is
elastic or inelastic.
55) If a firm uses new technology that increases its demand for labor, the firm's demand for labor
curve
A) shifts leftward.
B) shifts rightward only if the demand for labor is elastic.
C) shifts rightward no matter if the demand for labor is elastic or inelastic.
D) does not shift but there is a movement along it.
E) shifts rightward only if the demand for labor is inelastic.
56) If the wage rate increases, a firm's demand for labor curve
A) does not shift and there is no movement along it.
B) shifts leftward.
C) shifts rightward only if the elasticity of demand for labor is elastic.
D) does not shift but there is a movement along it.
E) shifts rightward only if the elasticity of demand for labor is inelastic.
