37. Consider the market for land. Suppose the value of the marginal product of land decreases. Holding all else constant,
the equilibrium rental price for land will
a.
increase.
b.
decrease.
c.
not change.
d.
It is not possible to determine what will happen to the equilibrium rental rate.
38. The marginal product of any factor of production depends on
a.
the quantity of the factor used.
b.
the price of the final good.
c.
the demand for the final good.
d.
All of the above are correct.
39. Rent, interest, and profit are all forms of income paid to the owners of
a.
b.
c.
d.
40. Because of diminishing returns, a factor in abundant supply has a
a.
high marginal product and a high rental price.
b.
high marginal product and a low rental price.
c.
low marginal product and a high rental price.
d.
low marginal product and a low rental price.
41. Because of diminishing returns, a factor in relatively low supply has a
a.
low marginal product and a low rental price.
b.
low marginal product and a high rental price.
c.
high marginal product and a low rental price.
d.
high marginal product and a high rental price.
42. A change in the supply of one factor of production
a.
will not change either the marginal productivities or the prices of other factors.
b.
will not change the prices of other factors, but it may change their marginal productivities.
c.
will not change the marginal productivities of other factors, but it may change their prices.
d.
changes the marginal productivities and the prices of other factors.
43. The distinction between purchase price and rental price applies to which factor(s) of production?
a.
land only
b.
capital only
c.
land and capital only
d.
land, capital, and labor
44. “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?
a.
labor only
b.
land only
c.
capital only
d.
land, labor, and capital
45. As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of
diminishing returns applies to all factors of production, she should expect to see
a.
an increase in the marginal productivity of her remaining capital and an increase in the marginal productivity
of her labor.
b.
an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of
her labor.
c.
a decrease in the marginal productivity of her remaining capital and an increase in the marginal productivity of
her labor.
d.
a decrease in the marginal productivity of her remaining capital and a decrease in the marginal productivity of
her labor.
46. Suppose that an industrial accident at a factory destroys a significant number of high-speed blenders that bartenders
use to mix frozen drinks. What will happen in the labor market for bartenders?
a.
Both wages and employment will increase.
b.
Both wages and employment will decrease.
c.
Wages will increase, and employment will decrease.
d.
Wages will decrease, and employment will increase.
47. Which of the following statements is correct?
a.
The market for capital is unlike the market for labor because the rental price of capital is unaffected by the
marginal product of capital, whereas the price of labor is affected by the marginal product of labor.
b.
The market for capital is unlike the market for labor because the purchase price of capital is unaffected by the
marginal product of capital, whereas the price of labor is affected by the marginal product of labor.
c.
The market for capital is like the market for labor because the rental price of capital is affected by the marginal
product of capital, and the price of labor is affected by the marginal product of labor.
d.
Both a and b are correct.
48. Suppose that a college physics experiment goes horribly wrong and releases an electronic pulse that renders all
electronic equipment in the cities of Columbus, Cleveland and Cincinnati, Ohio permanently useless. No people are hurt,
and no buildings are damaged. After the accident, the wages earned by Ohio workers will
a.
increase because the marginal productivities of Ohio workers will increase.
b.
decrease because the marginal productivities of Ohio workers will decrease.
c.
decrease because the marginal productivities of Ohio workers will increase.
d.
increase because the marginal productivities of Ohio workers will decrease.
49. Suppose that a large tornado destroys the fleet of fire trucks for the city of Omaha, Nebraska. What happens to the
earnings of firefighters in Omaha?
a.
The reduction in the supply of fire trucks reduces the marginal productivities of Omaha firefighters, which
causes the equilibrium wage to fall.
b.
The reduction in the supply of fire trucks increases the marginal productivities of Omaha firefighters, which
causes the equilibrium wage to fall.
c.
The reduction in the supply of fire trucks reduces the marginal productivities of Omaha firefighters, which
causes the equilibrium wage to rise.
d.
The reduction in the supply of fire trucks increases the marginal productivities of Omaha firefighters, which
causes the equilibrium wage to rise.
50. Suppose that a large rogue wave destroys the (thankfully unoccupied) fleet of swordfish fishing boats docked in the
Gloucester, Massachusetts harbor. What happens to the earnings of fishermen and women in Gloucester?
a.
The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and
women, which causes the equilibrium wage to fall.
b.
The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and
women, which causes the equilibrium wage to fall.
c.
The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and
women, which causes the equilibrium wage to rise.
d.
The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and
women, which causes the equilibrium wage to rise.
51. Suppose that the labor market for life guards is initially in equilibrium. Then the marginal productivity of life guards
increases. What happens to the equilibrium wage and quantity of life guards?
a.
Both the equilibrium wage and quantity increase.
b.
Both the equilibrium wage and quantity decrease.
c.
The equilibrium wage increases, and the equilibrium quantity decreases.
d.
The equilibrium wage decreases, and the equilibrium quantity increases.
52. Suppose that the labor market for life guards is initially in equilibrium. Then swimming pool owners adopt a new
labor-saving technology that uses computers to monitor the locations of swimmers in the pool. What happens to the
equilibrium wage and quantity of life guards?
a.
Both the equilibrium wage and quantity increase.
b.
Both the equilibrium wage and quantity decrease.
c.
The equilibrium wage increases, and the equilibrium quantity decreases.
d.
The equilibrium wage decreases, and the equilibrium quantity increases.
53. Suppose that the labor market for life guards is initially in equilibrium. Then a new television series debuts which
glamorizes the social opportunities for life guards. What happens to the equilibrium wage and quantity of life guards?
a.
Both the equilibrium wage and quantity increase.
b.
Both the equilibrium wage and quantity decrease.
c.
The equilibrium wage increases, and the equilibrium quantity decreases.
d.
The equilibrium wage decreases, and the equilibrium quantity increases.
54. Suppose that the labor market for life guards is initially in equilibrium. Whistles are an important safety tool that life
guards use as a part of their jobs. A fire destroys the largest factory that produces whistles. What happens to the
equilibrium wage and quantity of life guards?
a.
Both the equilibrium wage and quantity increase.
b.
Both the equilibrium wage and quantity decrease.
c.
The equilibrium wage increases, and the equilibrium quantity decreases.
d.
The equilibrium wage decreases, and the equilibrium quantity increases.
55. Suppose that the labor market for life guards is initially in equilibrium. Whistles are an important safety tool that life
guards use as a part of their jobs. A fire destroys the largest factory that produces whistles. In the market for life guards
the equilibrium wage
a.
increases because the marginal productivity of life guards increases.
b.
decreases because the marginal productivity of life guards decreases.
c.
increases because the supply of life guards increases.
d.
decreases because the supply of life guards decreases.
56. Suppose that the labor market for high school chemistry teachers is initially in equilibrium. Chemistry teachers use
laboratory chemicals as an important part of their jobs. New environmental regulations ban the use of many chemicals,
which means that fewer laboratory chemicals are available for high school chemistry teachers to use in their jobs. What
happens to the equilibrium wage and quantity of high school chemistry teachers?
a.
Both the equilibrium wage and quantity increase.
b.
Both the equilibrium wage and quantity decrease.
c.
The equilibrium wage increases, and the equilibrium quantity decreases.
d.
The equilibrium wage decreases, and the equilibrium quantity increases.
57. Suppose that the labor market for high school chemistry teachers is initially in equilibrium. Chemistry teachers use
laboratory chemicals as an important part of their jobs. New environmental regulations ban the use of many chemicals,
which means that fewer laboratory chemicals are available for high school chemistry teachers to use in their jobs. In the
market for high school chemistry teachers, the equilibrium wage
a.
increases because the marginal productivity of high school chemistry teachers increases.
b.
decreases because the marginal productivity of high school chemistry teachers decreases.
c.
increases because the supply of high school chemistry teachers increases.
d.
decreases because the supply of high school chemistry teachers decreases.
58. A decrease in population can be expected to
a.
increase the marginal product of land.
b.
decrease the supply of land.
c.
decrease the rents on land.
d.
increase the demand for land.
59. An increase in population can be expected to
a.
increase the marginal product of land.
b.
decrease the supply of land.
c.
decrease the rents on land.
d.
decrease the demand for land.
60. Suppose that a rare virus infects and kills a significant percentage of the population. Assuming that land and labor are
complements in a farming production function, what would happen to the wages earned by workers and the rents earned
by landowners?
a.
Both wages and rents would increase.
b.
Both wages and rents would decrease.
c.
Wages would increase, and rents would decrease.
d.
Wages would decrease, and rents would increase.
61. Suppose that due to a severe drought in Texas, 100,000 farmers relocate from Texas to Louisiana. Assuming that land
and labor are complements in a farming production function, what would happen to the wages earned by workers and the
rents earned by landowners in Louisiana?
a.
Both wages and rents would increase.
b.
Both wages and rents would decrease.
c.
Wages would increase, and rents would decrease.
d.
Wages would decrease, and rents would increase.
62. Suppose that a toxic waste spill renders half of the land in New Jersey uninhabitable. Assuming that land and labor are
complements in the production function, what would happen to the wages earned by workers and rents earned by
landowners?
a.
Both wages and rents would increase.
b.
Both wages and rents would decrease.
c.
Wages would increase, and rents would decrease.
d.
Wages would decrease, and rents would increase.
63. Suppose that a large lake in the middle of Minnesota evaporates, leaving more fertile farm land for growing corn
available. Assuming that land and labor are complements in a farming production function, what would happen to the
wages earned by workers and rents earned by landowners?
a.
Both wages and rents would increase.
b.
Both wages and rents would decrease.
c.
Wages would increase, and rents would decrease.
d.
Wages would decrease, and rents would increase.
64. The effect of the Black Death in 14th-century Europe was to
a.
decrease wages.
b.
increase land rents.
c.
reduce income inequality between peasants and the landed classes.
d.
Both a) and b) are correct.
65. The Black Death in fourteenth-century Europe resulted in
a.
a lower marginal product of land.
b.
a lower marginal product of labor of surviving workers.
c.
economic hardship for surviving peasants.
d.
economic prosperity for surviving landowners.
66. The Black Death in fourteenth-century Europe resulted in
a.
a lower marginal product of labor of surviving workers.
b.
a higher marginal product of labor of surviving workers.
c.
economic hardship for surviving peasants.
d.
economic prosperity for surviving landowners.
67. The Black Death in fourteenth-century Europe resulted in
a.
a lower marginal product of labor of surviving workers.
b.
a higher marginal product of land.
c.
economic hardship for surviving peasants.
d.
economic hardship for surviving landowners.
68. A change in the supply of one factor of production
a.
can alter the earnings of all of the other factors.
b.
alters the earnings of capital and labor but not land.
c.
will not change the marginal productivities of other factors but may change their prices.
d.
alters the earnings of that factor only.