Chapter 18/The Market For the Factors of Production ❖ 21
90. Refer to Figure 18-3. Suppose that the price of the output is $20. What is the value of the marginal product
of the third worker?
a.
$2
b.
$10
c.
$40
d.
$280
91. Refer to Figure 18-3. Suppose that the price of the output is $20. What is the value of the marginal product
of the fourth worker?
a.
$1
b.
$20
c.
$280
d.
$300
Scenario 18-1
Harry owns a snow-removal business. He hires workers to shovel driveways for him during the winter. The
first worker he hires can shovel twelve driveways in one day. When Harry hires two workers, they can shovel
a total of 22 driveways in one day. When Harry hires a third worker, he shovels an additional eight driveways
in one day.
92. Refer to Scenario 18–1. What is the marginal productivity of the second worker?
a.
7
b.
10
c.
12
d.
22
93. Refer to Scenario 18–1. What is the total productivity of three workers?
a.
12
b.
22
c.
30
d.
42
94. Refer to Scenario 18–1. Suppose that Harry pays each worker $80 per day and that he charges each customer
$20 to have his driveway shoveled. What is the value of the marginal product of labor for the second worker?
a.
$200
b.
$240
c.
$800
d.
$960
22 ❖ Chapter 18/The Market For the Factors of Production
95. Refer to Scenario 18–1. Suppose that Harry pays each worker $80 per day and that he charges each customer
$20 to have his driveway shoveled. What is the value of the marginal product of labor for the third worker?
a.
$160
b.
$640
c.
$1,600
d.
$2,400
Table 18-1
Days of Labor
Units of Output
0
0
1
10
2
18
3
25
4
30
5
33
6
34
96. Refer to Table 18–1. What is the marginal product of the second worker?
a.
8
b.
9
c.
10
d.
18
97. Refer to Table 18–1. What is the marginal product of the third worker?
a.
7
b.
8
c.
25
d.
75
98. Refer to Table 18–1. What is the marginal product of the fourth worker?
a.
5
b.
7.5
c.
8
d.
30
99. Refer to Table 18–1. Suppose that the firm pays its workers $45 per day. Each unit of output sells for $10.
How many days of labor should the firm hire?
a.
1
b.
2
c.
3
d.
4
Chapter 18/The Market For the Factors of Production ❖ 23
100. Refer to Table 18–1. Suppose that the firm pays its workers $80 per day. Each unit of output sells for $15.
How many days of labor should the firm hire?
a.
3
b.
4
c.
5
d.
6
101. Refer to Table 18–1. Suppose that the firm pays its workers $50 per day. Each unit of output sells for $20.
How many days of labor should the firm hire?
a.
3
b.
4
c.
5
d.
6
Table 18-2
Quantity of
Number of Calculators
Labor
Per Week
0
0
1
200
2
360
3
480
4
560
5
600
102. Refer to Table 18-2. The following table shows the number of calculators that can be assembled
per week by various numbers of workers. If the price per calculator in a perfectly competitive product market
is $8, how many workers would the firm employ if the weekly wage rate is $800?
a.
1
b.
2
c.
3
d.
4
103. Refer to Table 18-2. The following table shows the number of calculators that can be assembled per week by
various numbers of workers. If the price per calculator in a perfectly competitive product market is $5, how
many workers would the firm employ if the weekly wage rate is $400?
a.
1
b.
2
c.
3
d.
4
24 ❖ Chapter 18/The Market For the Factors of Production
Table 18-3
Number of
Workers (L)
Output of
Firm A
Output of
Firm B
Output of
Firm C
Output of
Firm D
1
100
100
100
100
2
200
300
190
80
3
300
600
270
60
4
400
1,000
340
40
104. Refer to Table 18–3. Which firm’s production function exhibits positive but diminishing mar-
ginal product?
a.
Firm A
b.
Firm B
c.
Firm C
d.
Firm D
105. Refer to Table 18–3. For Firm A, the marginal product of labor is
a.
increasing.
b.
constant.
c.
decreasing.
d.
negative.
106. Refer to Table 18–3. For Firm B, the marginal product of labor is
a.
increasing.
b.
constant.
c.
decreasing.
d.
negative.
107. Refer to Table 18–3. For Firm C, the marginal product of labor is
a.
increasing.
b.
constant.
c.
decreasing.
d.
negative.
108. Refer to Table 18–3. For Firm D, the marginal product of labor is
a.
increasing.
b.
constant.
c.
decreasing.
d.
negative.
Chapter 18/The Market For the Factors of Production ❖ 25
Table 18-4
Labor
Output
Value of Marginal
Product of Labor
Wage
Marginal
Profit
0
0
—
—
—
1
400
$1200
$400
$800
2
700
$ 900
$400
$500
3
950
$ 750
$400
$350
4
1050
$ 300
$400
-$100
109. Refer to Table 18-4. The price of output is
a.
$1.
b.
$2.
c.
$3.
d.
$400.
110. Refer to Table 18-4. How many workers should the firm hire?
a.
1
b.
2
c.
3
d.
4
Table 18-5
Labor
Output
Value of Marginal
Product of Labor
Wage
Marginal
Profit
0
0
—
—
—
1
300
$600
$300
$300
2
500
AA
$300
$100
3
600
$200
$300
BB
4
650
DD
$300
-$200
111. Refer to Table 18-5. What is the value for the cell labeled AA?
a.
$600
b.
$500
c.
$400
d.
$300
112. Refer to Table 18-5. What is the value for the cell labeled BB?
a.
$300
b.
$200
c.
$100
d.
−$100
26 ❖ Chapter 18/The Market For the Factors of Production
113. Refer to Table 18-5. What is the value for the cell labeled CC?
a.
650
b.
600
c.
100
d.
50
114. Refer to Table 18–5. What is the value for the cell labeled DD?
a.
−$100
b.
$300
c.
$100
d.
$50
Table 18-6
Number of
Workers
Output
Marginal Product
of Labor
Value of Marginal
Product of Labor
Wage
Marginal
Profit
0
0
—
—
$500
—
1
100
AA
$1,000
$500
$500
2
BB
80
$ 800
$500
CC
3
DD
60
EE
$500
$100
4
280
FF
$ 400
$500
GG
5
HH
20
II
$500
JJ
115. Refer to Table 18-6. What is the market price of the final good?
a.
$5
b.
$6
c.
$8
d.
$10
116. Refer to Table 18-6. It is apparent from this table that increasing marginal product
a.
occurs only after the first worker is hired.
b.
occurs only after the second worker is hired.
c.
occurs only after the third worker is hired.
d.
never occurs.
117. Refer to Table 18-6. What is the value for the cell labeled BB?
a.
80 units
b.
100 units
c.
180 units
d.
200 units
Chapter 18/The Market For the Factors of Production ❖ 27
118. Refer to Table 18-6. What is the value for the cell labeled FF?
a.
30
b.
40
c.
100
d.
400
119. Refer to Table 18-6. The fact that the marginal product falls as the number of workers increases illustrates a
property called
a.
diminishing marginal product.
b.
utility maximization.
c.
supply and demand.
d.
labor theory.
120. Refer to Table 18-6. The fact that the production function exhibits diminishing marginal productivity implies
that
a.
total production decreases beyond a certain level of output.
b.
labor markets are not always competitive.
c.
the additions to total output get smaller as more workers are hired.
d.
marginal profit is negative.
121. Refer to Table 18-6. What is the value of the cell labeled GG?
a.
$400
b.
$100
c.
$0
d.
−$100
122. Refer to Table 18-6. What is the value of the cell labeled II?
a.
-$100
b.
$100
c.
$200
d.
$300
123. Refer to Table 18-6. What is the value of the cell labeled JJ?
a.
-$300
b.
-$200
c.
-$100
d.
$0
28 ❖ Chapter 18/The Market For the Factors of Production
124. Refer to Table 18-6. To maximize its profit, how many workers will the firm hire?
a.
2
b.
3
c.
4
d.
5
125. Refer to Table 18-6. To maximize its profit, the firm will hire workers as long as the value of the marginal
product of labor equals or exceeds
a.
$100.
b.
$200.
c.
$400.
d.
$500.
Table 18-7
Harold owns a cranberry bog in which he grows cranberries. Harold’s farm is a competitive, profit–
maximizing firm. Harold’s production function is detailed in the table below.
Labor
(# of workers)
Output
(in bushels)
0
0
1
90
2
170
3
220
4
250
5
270
126. Refer to Table 18-7. What is the marginal product of the third worker?
a.
220 bushels
b.
73.33 bushels
c.
50 bushels
d.
30 bushels
127. Refer to Table 18-7. What is the marginal product of the fourth worker?
a.
250 bushels
b.
62.5 bushels
c.
50 bushels
d.
30 bushels
Chapter 18/The Market For the Factors of Production ❖ 29
128. Refer to Table 18-7. If Harold pays his workers $80 per day and sells his cranberries for $5 per bushel, what
is the value of the marginal product of the second worker?
a.
$80
b.
$400
c.
$6,400
d.
$32,000
129. Refer to Table 18-7. If Harold pays his workers $80 per day and sells his cranberries for $5 per bushel, what
is the value of the marginal product of the third worker?
a.
$50
b.
$250
c.
$4,000
d.
$20,000
130. Refer to Table 18-7. If Harold pays his workers $250 per day and sells his cranberries for $5 per bushel,
what is the maximum number of workers that he will hire?
a.
1
b.
2
c.
3
d.
4
Table 18-8
The following table shows the production function for a particular business. The numbers represent the
various labor and output combinations the firm may choose for its output on a daily basis.
Labor
Output
0
0
1
70
2
130
3
180
4
220
5
250
131. Refer to Table 18–8. What is the marginal product of the third unit of labor?
a.
40 units
b.
50 units
c.
60 units
d.
180 units
30 ❖ Chapter 18/The Market For the Factors of Production
132. Refer to Table 18–8. What is the marginal product of the fifth unit of labor?
a.
30 units
b.
40 units
c.
50 units
d.
250 units
133. Refer to Table 18–8. Suppose this firm charges a price of $5 per unit of output and pays workers a wage
equal to $160 per day. What is the value of the marginal product of labor for the second worker?
a.
$300
b.
$650
c.
$9,600
d.
$20,800
134. Refer to Table 18–8. Suppose this firm charges a price of $5 per unit of output and pays workers a wage
equal to $160 per day. What is the value of the marginal product of labor for the fourth worker?
a.
$200
b.
$1,000
c.
$6,400
d.
$32,000
135. Refer to Table 18–8. Suppose this firm charges a price of $5 per unit of output and pays workers a wage
equal to $160 per day. How many workers should this firm hire to maximize its profit?
a.
2 workers
b.
3 workers
c.
4 workers
d.
5 workers
Chapter 18/The Market For the Factors of Production ❖ 31
Table 18-9
Quantity of
Number of Baseballs
Labor
Per Day
0
0
1
100
2
240
3
360
4
440
5
500
136. Refer to Table 18-9. This table describes the number of baseballs a manufacturer can produce per day with
different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment
is the marginal product of labor greatest?
a.
1 worker
b.
2 workers
c.
3 workers
d.
4 workers
137. Refer to Table 18-9. This table describes the number of baseballs a manufacturer can produce per day with
different quantities of labor. Each baseball sells for $5 in a competitive market. What is the total revenue per
day that the firm will earn if it employs five workers?
a.
$500
b.
$300
c.
$2,200
d.
$2,500
138. Refer to Table 18-9. This table describes the number of baseballs a manufacturer can produce per day with
different quantities of labor. Each baseball sells for $5 in a competitive market. What is the marginal revenue
product of the third worker?
a.
120 baseballs.
b.
$300
c.
$400
d.
$600
139. Refer to Table 18-9. This table describes the number of baseballs a manufacturer can produce per day with
different quantities of labor. Each baseball sells for $2.50 in a competitive market. What is the marginal reve-
nue product of the fourth worker?
a.
$200
b.
$300
c.
$400
d.
$500
32 ❖ Chapter 18/The Market For the Factors of Production
140. Refer to Table 18-9. This table describes the number of baseballs a manufacturer can produce per day with
different quantities of labor. Each baseball sells for $5 in a competitive market and the firm pays each unit of
labor a wage equal to $320 per day. How many units of labor should the firm hire to maximize profit?
a.
2 units
b.
3 units
c.
4 units
d.
5 units
141. Refer to Table 18-9. This table describes the number of baseballs a manufacturer can produce per day with
different quantities of labor. Each baseball sells for $2.50 in a competitive market and the firm pays each unit
of labor a wage equal to $225 per day. How many units of labor should the firm hire to maximize profit?
a.
2 units
b.
3 units
c.
4 units
d.
5 units
TOP: Value of the marginal product MSC: Analytical
Table 18–10
Consider the following daily production data for Caroline’s Cookies, Inc. Caroline’s sells cookies for $2.50
each and pays the workers a wage of $325 per day.
Labor
(number of
workers)
Quantity (cookies
per day)
Marginal
Product of
Labor
(cookies
per day)
Value of the
Marginal
Product of
Labor
Wage
(per day)
Marginal
Profit
0
0
$325
1
200
$325
2
380
$325
3
540
$325
4
680
$325
5
800
$325
6
900
$325
142. Refer to Table 18–10. What is the third worker’s marginal product of labor?
a.
120 cookies
b.
140 cookies
c.
160 cookies
d.
180 cookies
143. Refer to Table 18–10. What is the fourth worker’s marginal product of labor?
a.
120 cookies
b.
140 cookies
c.
160 cookies
d.
180 cookies
Chapter 18/The Market For the Factors of Production ❖ 33
144. Refer to Table 18–10. What is the fifth worker’s marginal product of labor?
a.
120 cookies
b.
140 cookies
c.
160 cookies
d.
180 cookies
145. Refer to Table 18–10. What is the sixth worker’s marginal product of labor?
a.
100 cookies
b.
120 cookies
c.
140 cookies
d.
160 cookies
146. Refer to Table 18–10. What is the value of the marginal product of the second worker?
a.
$180
b.
$450
c.
$950
d.
$1,080
147. Refer to Table 18–10. What is the value of the marginal product of the first worker?
a.
$200
b.
$400
c.
$500
d.
$700
148. Refer to Table 18–10. What is the value of the marginal product of the fifth worker?
a.
$120
b.
$300
c.
$2,000
d.
$2,300
149. Refer to Table 18–10. The marginal product of labor begins to diminish with the addition of which worker?
a.
the 1st worker
b.
the 2nd worker
c.
the 3rd worker
d.
the 4th worker
34 ❖ Chapter 18/The Market For the Factors of Production
150. Refer to Table 18–10. What is the marginal profit of the fourth worker?
a.
$25
b.
$117
c.
$350
d.
$1,700
151. Refer to Table 18–10. What is the marginal profit of the sixth worker?
a.
−$12
b.
−$25
c.
−$50
d.
−$75
152. Refer to Table 18–10. Assuming Caroline’s Cookies is a competitive, profit-maximizing firm, how many
workers will the firm hire?
a.
3 workers
b.
4 workers
c.
5 workers
d.
6 workers
153. Refer to Table 18–10. Assume that Caroline’s Cookies is a competitive, profit-maximizing firm. If the market
price of cookies decreases from $2.50 to $2.00, how many workers would the firm then hire?
a.
2 workers
b.
3 workers
c.
4 workers
d.
5 workers
154. Refer to Table 18–10. Suppose that there is a technological advance that allows Caroline’s employees to pro-
duce more cookies than they could before. Because of this change, the firm’s
a.
demand for labor shifts right.
b.
demand for labor shifts left.
c.
supply of labor shifts right.
d.
supply of labor shifts left.
Chapter 18/The Market For the Factors of Production ❖ 35
Figure 18-4
155. Refer to Figure 18-4. The graph above illustrates the market for bakers who make homemade breads and
breakfast pastries. If the price of breakfast pastries falls, what happens in the market for bakers?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
156. Refer to Figure 18-4. The graph above illustrates the market for bakers who make homemade breads and
breakfast pastries. If the price of breakfast pastries rises, what happens in the market for bakers?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
157. Refer to Figure 18-4. The graph above illustrates the market for bakers who make homemade breads and
breakfast pastries. If bakeries adopt new labor-saving technologies, what happens in the market for bakers?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
D1 D2
S1 S2
Quantity
W age
36 ❖ Chapter 18/The Market For the Factors of Production
158. Refer to Figure 18-4. The graph above illustrates the market for bakers who make homemade breads and
breakfast pastries. If bakeries adopt new labor-augmenting technologies, what happens in the market for bak-
ers?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
159. Refer to Figure 18-4. The graph above illustrates the market for bakers who make homemade breads and
breakfast pastries. If the supply of commercial-grade ovens in which the bakers bake their breads and pastries
increases, what happens in the market for bakers?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
160. Refer to Figure 18-4. The graph above illustrates the market for bakers who make homemade breads and
breakfast pastries. If the supply of commercial-grade ovens in which the bakers bake their breads and pastries
decreases, what happens in the market for bakers?
a.
Demand increases from D1 to D2.
b.
Demand decreases from D2 to D1.
c.
Supply increases from S1 to S2.
d.
Supply decreases from S2 to S1.
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.
161. Refer to Scenario 18-2. Based on the given information, it is likely that Gertrude’s firm has
a.
some influence over the wages paid to crew members but no influence over the price of salmon.
b.
some influence over the price of salmon but no influence over the wages paid to crew members.
c.
some influence over both the price of salmon and the wages paid to crew members.
d.
no influence over either the price of salmon or the wages paid to crew members.
162. Refer to Scenario 18-2. When Gertrude participates in the labor market to hire crew members for her boats,
she is most likely considered a
a.
demander of labor services.
b.
supplier of labor services.
c.
demander of capital.
d.
supplier of capital.
Chapter 18/The Market For the Factors of Production ❖ 37
163. Refer to Scenario 18-2. If the price of fresh Pacific salmon were to decrease significantly, it is most likely
that Gertrude would
a.
reduce her demand for crew members.
b.
hire more boats.
c.
become a seller in at least one factor market.
d.
hire more crew members.
164. 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.
165. Refer to Scenario 18-2. In the fresh Pacific salmon product market, Gertrude has some control over the
a.
price she charges for her fresh salmon.
b.
quantity of fresh salmon that she supplies to the market.
c.
competitive environment of the market.
d.
supply of labor in the market.
166. Refer to Scenario 18-2. If Gertrude is a price taker in the labor market, she can choose
a.
the price at which she will sell the fish she catches.
b.
how many crew members she will hire.
c.
the wages that she will pay to her crew members.
d.
All of the above.
167. Refer to Scenario 18-2. Labor-market theory assumes that Gertrude’s demand for crew members and her sup-
ply of fresh Pacific salmon result from her
a.
intrinsic desire to hire crew members.
b.
primary goal of maximizing profit.
c.
altruistic motives to provide fresh salmon to consumers.
d.
desire to strike a balance between environmental concerns and maximum profit.
168. Which of the following statements is correct?
a.
An increase in the supply of other factors, such as capital, will increase the demand for labor.
b.
Labor-saving technology will increase the demand for labor.
c.
Labor-augmenting technology will decrease the demand for labor.
d.
A decrease in the price of output will increase the demand for labor.
38 ❖ Chapter 18/The Market For the Factors of Production
169. Harold owns a cranberry bog in which he grows cranberries. Harold’s farm is a competitive, profit-maximiz-
ing firm. As such, Harold much decide
(i)
how many cranberries to sell.
(ii)
what price to charge for his cranberries.
(iii)
what wages to pay his workers.
(iv)
how many workers to hire.
a.
(i) only
b.
(ii) and (iii) only
c.
(i) and (iv) only
d.
(i), (ii), (iii), and (iv)
170. If the selling price of a bushel of cranberries rises, we would expect the demand for labor in the cranberry in-
dustry to
a.
increase.
b.
decrease.
c.
be unchanged.
d.
increase by less than the corresponding decrease in supply.
171. Which of the following would decrease the demand for labor?
(i)
a decrease in the output price
(ii)
an increase in the output price
(iii)
a labor-saving technological advance
(iv)
a labor-augmenting technological advance
a.
(i) only
b.
(i) and (iii) only
c.
(ii) only
d.
(ii) and (iv) only
172. Which of the following would increase the demand for labor?
(i)
a decrease in the output price
(ii)
an increase in the output price
(iii)
a labor-saving technological advance
(iv)
a labor-augmenting technological advance
a.
(i) only
b.
(i) and (iii) only
c.
(ii) only
d.
(ii) and (iv) only
Chapter 18/The Market For the Factors of Production ❖ 39
173. Which of the following best illustrates the concept of “derived demand?”
a.
An increase in the wages of auto workers will lead to an increase in the demand for robots in
automobile factories.
b.
An automobile producer’s decision to supply more cars will lead to an increase in the demand for
automobile production workers.
c.
An automobile producer’s decision to supply more minivans results from a decrease in the demand
for station wagons.
d.
An increase in the price of gasoline will lead to an increase in the demand for small cars.
174. When a competitive firm maximizes profit, it will hire workers up to the point where the
a.
marginal product of labor is equal to the product price.
b.
marginal product of labor is equal to the wage.
c.
value of the marginal product of labor is equal to the product price.
d.
value of the marginal product of labor is equal to the wage.
175. For a competitive, profit-maximizing firm, the labor demand curve is the same as the
a.
marginal cost curve.
b.
value of marginal product curve.
c.
production function.
d.
profit function.
176. Which of the following is true at the level of output at which a competitive firm maximizes profit?
a.
price = marginal cost
b.
price = wage/value of marginal product of labor
c.
price = marginal product of labor/wage
d.
All of the above are correct.
177. What causes the labor demand curve to shift?
(i)
changes in productivity
(ii)
changes in wages
(iii)
changes in output prices
a.
(i) and (ii)
b.
(ii) and (iii)
c.
(i) and (iii)
d.
All of the above are correct.
40 ❖ Chapter 18/The Market For the Factors of Production
178. If the price of airline tickets falls, what will happen to the demand curve for flight attendants?
a.
It will shift to the right.
b.
It will shift to the left.
c.
The direction of the shift is ambiguous.
d.
It will remain unchanged.
179. If the demand curve for beef shifts to the right, then the value of the marginal product of labor for butchers
will
a.
rise.
b.
fall.
c.
remain unchanged.
d.
rise or fall; either is possible.
180. If the demand curve for computer games shifts to the left, then the value of the marginal product of labor for
computer game authors will
a.
rise.
b.
fall.
c.
remain unchanged.
d.
rise or fall; either is possible.
181. Competitive firms decide how much output to sell by producing output until the price of the good equals
a.
marginal product.
b.
the value of marginal product.
c.
marginal cost.
d.
marginal profit.
182. Competitive firms hire workers until the additional benefit they receive from the last worker hired is equal to
(i)
the additional cost of that worker.
(ii)
the wage paid to that worker.
(iii)
the marginal product of that worker.
a.
(i) only
b.
(iii) only
c.
(i) and (ii) only
d.
(ii) and (iii) only