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The Markets for the Factors of Production 4619
30. Consider the labor market for short-order cooks. An increase in the wages paid to fast-food
workers will cause
a. both equilibrium wages and equilibrium employment to increase in the market for short-order
cooks.
b. both equilibrium wages and equilibrium employment to decrease in the market for short-order
cooks.
c. equilibrium wages to increase and equilibrium employment to decrease in the market for short-
order cooks.
d. equilibrium wages to decrease and equilibrium employment to increase in the market for short-
order cooks.
Scenario 18-6
Rocchetta Industries manufactures and supplies bottled water in Mexico. As a result of a
contamination of water supplies at many of Mexico's resort communities, the demand for bottled
water has increased.
31. Refer to Scenario 18-6. We would expect that, as a result of the contamination, the value of the
marginal product for Rocchetta Industries’ workers would
a. be offset by a decrease in wages.
b. be unaffected by a rise in demand for bottled water.
c. increase.
d. decrease.
4620 The Markets for the Factors of Production
32. Refer to Scenario 18-6. When the labor market adjusts to its new equilibrium, we would expect
the
a. marginal product of labor to be higher than it was before the increase in demand for bottled
water.
b. value of the marginal product of labor to be higher than it was before the increase in demand
for bottled water.
c. price of bottled water to be lower than it was before the increase in demand for bottled water.
d. wages of Rocchetta workers to be lower than they were before the increase in demand for
bottled water.
Figure 18-8
This figure below shows the labor market for automobile workers. The curve labeled S is the
labor supply curve, and the curves labeled D1 and D2 are the labor demand curves. On the
horizontal axis, L represents the quantity of labor in the market.
The Markets for the Factors of Production 4621
33. Refer to Figure 18-8. What is measured along the vertical axis on the graph?
a. the quantity of automobiles produced
b. the price of automobiles
c. the wage paid to automobile workers
d. time spent by workers producing automobiles
34. Refer to Figure 18-8. Which of the following is a possible explanation of the shift of the labor-
demand curve from D1 to D2?
a. The wage earned by automobile workers increased.
b. The price of automobiles increased.
c. The opportunity cost of leisure, as perceived by automobile workers, decreased.
d. Large segments of the population changed their tastes regarding leisure versus work.
4622 The Markets for the Factors of Production
35. Refer to Figure 18-8. Which of the following events would most likely explain the shift of the
labor-demand curve from D1 to D2?
a. The price of automobiles decreased.
b. A large number of immigrants entered the automobile-worker market.
c. A technological advance increased the marginal product of automobile workers.
d. All of the above are correct.
36. Refer to Figure 18-8. Which of the following events would most likely explain a shift of the
labor-demand curve from D2 back to D1?
a. The price of automobiles decreased.
b. A large number of immigrants entered the automobile-worker market.
c. A technological advance increased the marginal product of automobile workers.
d. The demand for automobiles increased.
The Markets for the Factors of Production 4623
Figure 18-9
37. Refer to Figure 18-9. If the apple pickers start working fewer hours because they are taking
more vacation time, the equilibrium wage will
a. fall below w1 due to a shift in demand.
b. fall below w1 due to a shift in supply.
c. rise above w1 due to a shift in demand.
d. rise above w1 due to a shift in supply.
4624 The Markets for the Factors of Production
38. Refer to Figure 18-9. If the marginal product of labor falls and the price of apples remains
unchanged,
(i) the value of the marginal product of labor will fall.
(ii) the quantity of labor demanded will increase above L1.
(iii) the labor supply curve will remain unchanged.
a. (i) and (ii) only
b. (ii) and (iii) only
c. (i) and (iii) only
d. (i), (ii), and (iii)
39. Refer to Figure 18-9. If the price of apples increases, the
a. demand for apple pickers will shift to the left.
b. demand for apple pickers will shift to the right.
c. supply of apple pickers will shift to the left.
d. supply of apple pickers will shift to the right.
The Markets for the Factors of Production 4625
40. Refer to Figure 18-9. If the price of apples decreases, the
a. demand for apple pickers will shift to the left.
b. demand for apple pickers will shift to the right.
c. supply of apple pickers will shift to the left.
d. supply of apple pickers will shift to the right.
41. Refer to Figure 18-9. If the price of apples increases, the equilibrium wage will
a. increase, and more apple pickers will be hired.
b. decrease, and more apple pickers will be hired.
c. increase, and fewer apple pickers will be hired.
d. decrease, and fewer apple pickers will be hired.
42. Refer to Figure 18-9. If the price of apples decreases, the equilibrium wage will
a. increase, and more apple pickers will be hired.
b. decrease, and more apple pickers will be hired.
c. increase, and fewer apple pickers will be hired.
d. decrease, and fewer apple pickers will be hired.
4626 The Markets for the Factors of Production
Figure 18-10
43. Refer to Figure 18-10. When the relevant labor demand curve is D1 and the labor market is in
equilibrium,
a. the value of the marginal product of labor to firms is less than W1.
b. the opportunity cost of leisure to workers is greater than W1.
c. the wage is W1.
d. All of the above are correct.
The Markets for the Factors of Production 4627
44. Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D1
to D2?
a. technological progress
b. an increase in the price of firms' output
c. an increase in the supply of a relevant factor of production other than labor
d. All of the above are correct.
45. Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D1
to D2?
a. a change in workers' attitudes toward the work-leisure tradeoff
b. decreases in wages in other labor markets
c. an increase in the price of firms' output
d. All of the above are correct.
4628 The Markets for the Factors of Production
46. Refer to Figure 18-10. Assume W1 = $20 and W2 = $22, and the market is always in
equilibrium. A shift of the labor demand curve from D1 to D2 would
a. increase the value of the marginal product of labor by $2.
b. increase the value of the marginal product of labor by less than $2.
c. decrease the value of the marginal product of labor by more than $2.
d. not change the value of the marginal product of labor.
47. Refer to Figure 18-10. If the relevant labor demand curve is D2 and the current wage is W1,
a. there is a surplus of labor.
b. there is a shortage of labor.
c. the quantity of labor supplied exceeds the quantity of labor demanded.
d. workers are failing to take into account the work-leisure tradeoff in deciding what quantity of
labor to supply at alternative wages.
The Markets for the Factors of Production 4629
48. Suppose that the market for labor is initially in equilibrium. An increase in the price of output 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.
49. Suppose that the market for labor is initially in equilibrium. A decrease in the price of output 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.
4630 The Markets for the Factors of Production
50. Suppose that the market for labor is initially in equilibrium. If the firm employs labor-augmenting
technology, the equilibrium wage
a. and the equilibrium quantity of labor will rise.
b. and the equilibrium quantity of labor will fall.
c. will rise, and the equilibrium quantity of labor will fall.
d. will fall, and the equilibrium quantity of labor will rise.
51. Suppose that the market for labor is initially in equilibrium. If the firm employs labor-saving
technology, the equilibrium wage
a. and the equilibrium quantity of labor will rise.
b. and the equilibrium quantity of labor will fall.
c. will rise, and the equilibrium quantity of labor will fall.
d. will fall, and the equilibrium quantity of labor will rise.
The Markets for the Factors of Production 4631
52. 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
a. rise, and the equilibrium quantity of teachers employed will fall.
b. rise, and the equilibrium quantity of teachers employed will rise.
c. fall, and the equilibrium quantity of teachers employed will fall.
d. fall, and the equilibrium quantity of teachers employed will rise.
53. 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
a. increased, and the equilibrium quantity of labor increased.
b. increased, and the equilibrium quantity of labor decreased.
c. decreased, and the equilibrium quantity of labor increased.
d. decreased, and the equilibrium quantity of labor decreased.
4632 The Markets for the Factors of Production
54. 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
a. increased.
b. decreased.
c. did not change.
d. It is not possible to determine the equilibrium wage.
55. 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
a. increased.
b. decreased.
c. did not change.
d. It is not possible to determine the equilibrium quantity.
The Markets for the Factors of Production 4633
56. 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?
a. The equilibrium wage increased.
b. The equilibrium wage decreased.
c. The equilibrium wage did not change.
d. It is not possible to determine what happens to the equilibrium wage.
57. 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?
a. The equilibrium quantity of labor increased.
b. The equilibrium quantity of labor decreased.
c. The equilibrium quantity of labor did not change.
d. It is not possible to determine what happens to the equilibrium quantity of labor.
4634 The Markets for the Factors of Production
58. 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
a. increases, and the equilibrium quantity of labor increases.
b. increases, and the equilibrium quantity of labor decreases.
c. decreases, and the equilibrium quantity of labor increases.
d. decreases, and the equilibrium quantity of labor decreases.
59. 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
a. increase.
b. decrease.
c. not change.
d. It is not possible to determine what happens to the equilibrium wage.
The Markets for the Factors of Production 4635
60. 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
a. increase.
b. decrease.
c. not change.
d. It is not possible to determine what happens to the equilibrium quantity.
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.
61. Refer to Scenario 18-7. As a result of these two events, holding all else constant, the
equilibrium wages of university economics professors will
a. increase.
b. decrease.
c. not change.
d. It is not possible to determine what will happen to the equilibrium wages.
4636 The Markets for the Factors of Production
62. Refer to Scenario 18-7. As a result of these two events, holding all else constant, the equilibrium
quantity of university economics professors will
a. increase.
b. decrease.
c. not change.
d. It is not possible to determine what will happen to the equilibrium quantity.
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.
63. Refer to Scenario 18-8. As a result of these two events, holding all else constant, the
equilibrium wages of university economics professors will
a. increase.
b. decrease.
c. not change.
d. It is not possible to determine what will happen to the equilibrium wage.
The Markets for the Factors of Production 4637
64. Refer to Scenario 18-8. As a result of these two events, holding all else constant, the equilibrium
quantity of university economics professors will
a. increase.
b. decrease.
c. not change.
d. It is not possible to determine what will happen to the equilibrium quantity.
65. When firms are able to increase the amount of physical capital available to workers, the
a. marginal product of labor will decrease.
b. value of the marginal product of labor will decrease.
c. value of the marginal product of labor will increase.
d. final product price will increase.
4638 The Markets for the Factors of Production
66. An increase in the value of the marginal product of labor has the effect of increasing the
a. demand for labor.
b. wage.
c. quantity of labor employed.
d. All of the above are correct.
67. 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
a. increases the marginal product of banana pickers for any given number of banana pickers.
b. increases the value of the marginal product of banana pickers for any given number of banana
pickers.
c. increases the supply of banana pickers.
d. All of the above are correct.
