The Markets for the Factors of Production 4711
19. Refer to Figure 18-12. If the shop charges $120 per repair, then what is the value of the
marginal product of the third mechanic?
20. Refer to Figure 18-12. If the shop charges $150 per repair and pays each of its mechanics a
wage of $700 per day, then what is the marginal profit of the second mechanic?
21. Refer to Figure 18-12. If the shop charges $120 per repair and pays each of its mechanics a
wage of $400 per day, then what is the marginal profit of the third mechanic?
4712 The Markets for the Factors of Production
22. Refer to Figure 18-12. Suppose the shop charges $125 per repair. Over what interval of wages,
W, would the shop maximize its profit by hiring exactly 4 mechanics? (Determine W1 and W2
such that W1 < W < W2.)
23. Refer to Figure 18-12. Suppose the shop pays each of its mechanics $210 per day. Over what
interval of prices (that is, charges per car repair, P) would the shop maximize its profit by hiring
exactly 3 mechanics? (Determine P1 and P2 such that P1 < P < P2.)
The Markets for the Factors of Production 4713
24. How does technological advance affect the demand for labor?
25. Jen’s wage decreased, and she responded by enjoying more hours of leisure per day. Is Jen’s
behavior consistent with an upward-sloping labor-supply curve?
26. Willie’s wage increased, and he responded by enjoying more hours of leisure per day. Is Willie’s
behavior consistent with an upward-sloping labor-supply curve?
4714 The Markets for the Factors of Production
27. Over the last 60 or so years, the percentage of women with paid jobs has increased significantly.
Is this increase in female employment associated with an increase in the demand for labor, or is it
associated with an increase in the supply of labor?
28. The theory of labor supply is based on the trade-off between .
29. Bill is a laborer. What is the relationship between Bill’s wage and his opportunity cost of an hour
of leisure?
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30. Does an upward-sloping labor-supply curve mean that people respond to a decrease in the wage
by enjoying more leisure or less leisure?
31. Who has a greater opportunity cost of leisure — a president of a major corporation or a
babysitter?
32. A highly-paid research scientist works 12 hours a day, while a common laborer works only 5
hours a day. Offer a likely explanation, using the concept of opportunity cost.
4716 The Markets for the Factors of Production
33. Over time, carpenters become aware of more attractive employment opportunities outside of
carpentry. Does this development affect the demand for carpenters, or does it affect the supply of
carpenters?
34. Does the movement of workers from other countries to the U.S. affect the demand for labor in
the U.S., or does it affect the supply of labor in the U.S.?
35. Rob was the last worker hired by a firm that is competitive in the labor market. The labor market
always is in equilibrium. Rob’s wage is $30 per hour. When Rob was hired, the firm’s output
increased by 4 units per hour as a result. For what price does the firm sell its output?
The Markets for the Factors of Production 4717
36. Angie was the last worker hired by a firm that is competitive in the labor market. The labor
market always is in equilibrium. The firm sells its output for $24 per unit. When Angie was hired,
the firm’s output increased by 2 units per hour as a result. What is Angie’s hourly wage?
37. How does increased immigration affect the labor market? How would the equilibrium wage and
the equilibrium quantity of labor be affected?
38. Suppose the prices of agricultural products such as corn and soybeans increase. What is the
effect of these price increases on the marginal product of the 1,000th farm worker? What is the
effect on the value of the marginal product of the 1,000th farm worker?
4718 The Markets for the Factors of Production
39. Define monopsony.
40. If a particular labor market were to convert from a competitive market to a monopsony, what
effect would we expect on the number of workers hired? What effect would we expect on the
wage paid to workers?
41. Over time, there have been technological advances in the production of radios. At the same time,
it has become less popular to listen to radio. Taking these two events into account, what would be
the likely effect on the wages of workers who manufacture radios?
The Markets for the Factors of Production 4719
42. Suppose a shift of the labor-demand curve results in an increase of $5 in the equilibrium wage.
How does this shift affect the value of the marginal product of labor?
43. Suppose a shift of the demand curve for strawberry pickers causes the equilibrium wage of
strawberry pickers to increase by $2. The price of strawberries is $3 per pound before and after
the shift. Does the shift increase the marginal product of the last picker hired, or does it decrease
it? What is the amount of the increase or decrease?
44. Christine works for a firm that makes tires for cars. How is Christine’s wage affected if the price
of tires decreases?
4720 The Markets for the Factors of Production
45. Christine works for a firm that makes tires for cars. How is Christine’s wage affected if the
demand for cars increases?
46. Economic theory predicts a close relationship between productivity and real wages. Does history
confirm this relationship?
47. The U.S. economy experienced a significant slowdown in productivity growth that lasted from
about 1973 to about __________.
The Markets for the Factors of Production 4721
48. Suppose XYZ Corporation is currently renting 300 units of capital at a rental price of $500 units
per unit. The value of the marginal product of the 300th unit of capital is $400. How can the
corporation increase its profit?
49. The equilibrium purchase price of an acre of land depends upon the current value of the marginal
product of land and upon the __________.
50. When you receive interest on your bank account, that income is part of the economy’s
income.