Question 1

The production function is the

Accepted Answer

A)  increase in the amount of output from an additional unit of labor.
B)  marginal product of an input times the price of output.
C)  relationship between the quantity of inputs and output.
D)  shift in labor demand caused by a change in the price of output.E) B) and C)
F) A) and D)

Question 2

Capital income does not include income paid to households for the use of their capital.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that a college professor is creating an exam in her university office. Which of the following would be an example of a factor of production used by the professor? (i) 
The professor's time
(ii) 
A computer software program into which the professor types the exam questions
(iii) 
The physical space of the professors office where she works when creating the exam
(iv) 
The interest on the professor's home mortgage

Accepted Answer

A)  (i)  only
B)  (i)  and (ii)  only
C)  (i) , (ii) , and (iii)  only
D)  (i) , (ii) , (iii) , and (iv) E) None of the above
F) All of the above

Question 4

A consultant interviews the hiring manager of a small, profit-maximizing firm. The manager explains that the firm used to have 15 employees but decided not to rehire when the most-recently-hired employee left the company, so the firm now has 14 employees. We can infer that

Accepted Answer

A)  for the 15th employee, the wage exceeded the value of the marginal product of labor.
B)  for the 15th employee, the value of the marginal product of labor exceeded the wage.
C)  the firm is too small and should rehire to replace the 15th employee.
D)  the firm is no longer attempting to maximize profits.E) B) and C)
F) A) and B)

Question 5

Fiona's hourly wage increases from $8 to $10. Which of the following describes a consequence of the increase in Fiona's wage?

Accepted Answer

A)  The opportunity cost of Fiona's leisure time has decreased.
B)  Fiona may choose to work fewer hours due to the increase in her wage.
C)  If Fiona's labor supply curve is upward sloping, she will choose to work fewer hours.
D)  Both a and b are correct.E) A) and B)
F) B) and D)

Question 6

Profit maximization by firms ensures that the equilibrium wage always equals the value of the marginal product of capital.

Accepted Answer

A) True 
 B)False

Question 7

A recent flood in the Midwest has destroyed much of the farmland that lies in fertile regions near the rivers. Describe the effect of the flood on the marginal productivity of land, labor, and capital. How would the flood affect the price of inputs? Provide some examples.

Accepted Answer

The flood would increase the marginal pr...

Question 8

The theory of labor supply is based on the trade-off between __________.

Accepted Answer

The answer of The theory of labor supply is based...

Question 9

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

Accepted Answer

A)  increased.
B)  decreased.
C)  did not change.
D)  It is not possible to determine the equilibrium quantity.E) None of the above
F) All of the above

Question 10

Because of diminishing returns, a factor in abundant supply has a

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 11

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?

Accepted Answer

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.E) A) and D)
F) A) and B)

Question 12

Ellen receives a raise at her current part-time job from $8 to $10 per hour. If her labor supply curve is upward sloping, she will work fewer hours after receiving the pay raise.

Accepted Answer

A) True 
 B)False

Question 13

According to the neoclassical theory of distribution, the wages paid to workers depend on the

Accepted Answer

A)  supply of labor.
B)  demand for labor.
C)  marginal productivity of labor.
D)  All of the above are correct.E) B) and D)
F) All of the above

Question 14

If the wage exceeds the value of the marginal product of labor, then hiring another worker

Accepted Answer

A)  decreases the firm's total revenue.
B)  increases the firm's profit.
C)  decreases the firm's total cost.
D)  decreases the firm's profit.E) B) and C)
F) A) and B)

Question 15

Assume the market for candles is competitive. A decrease in the market price of candles

Accepted Answer

A)  decreases the demand for workers who make candles and decreases their equilibrium wage.
B)  decreases the demand for workers who make candles and increases their equilibrium wage.
C)  increases the demand for workers who make candles and decreases their equilibrium wage.
D)  increases the demand for workers who make candles and increases their equilibrium wage..E) A) and B)
F) A) and C)

Question 16

Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium quantity of capital equipment will

Accepted Answer

A)  increase.
B)  decrease.
C)  not change.
D)  It is not possible to determine what will happen to the equilibrium quantity of capital equipment.E) B) and D)
F) B) and C)

Question 17

Owners of land are compensated according to the

Accepted Answer

A)  absolute level of production from the land.
B)  number of laborers the land can support.
C)  purchase price of the land stock.
D)  value of the marginal product of land.E) A) and C)
F) B) and D)

Question 18

Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. Such an invention would be an example of

Accepted Answer

A)  labor-saving technology.
B)  labor-augmenting technology.
C)  revenue technology.
D)  supply-shifting technology.E) C) and D)
F) B) and D)

Question 19

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

Accepted Answer

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.E) B) and C)
F) None of the above

Question 20

A profit-maximizing, competitive firm will always hire an additional worker when the additional worker makes a positive contribution to

Accepted Answer

A)  total revenue.
B)  total profit.
C)  the value of the marginal product of labor.
D)  marginal revenue.E) A) and D)
F) B) and D)

Exam 18: The Markets for the Factors of Production

A consultant interviews the hiring manager of a small, profit-maximizing firm. The manager explains that the firm used to have 15 employees but decided not to rehire when the most-recently-hired employee left the company, so the firm now has 14 employees. We can infer that

Correct Answer
verified

Assume the market for candles is competitive. A decrease in the market price of candles

Correct Answer
verified

Correct Answer
verified

According to the neoclassical theory of distribution, the wages paid to workers depend on the

Correct Answer
verified

Ellen receives a raise at her current part-time job from $8 to $10 per hour. If her labor supply curve is upward sloping, she will work fewer hours after receiving the pay raise.

Correct Answer
verified

The production function is the

Correct Answer
verified

Owners of land are compensated according to the

Correct Answer
verified

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

Correct Answer
verified

Profit maximization by firms ensures that the equilibrium wage always equals the value of the marginal product of capital.

Correct Answer
verified

Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. Such an invention would be an example of

Correct Answer
verified

If the wage exceeds the value of the marginal product of labor, then hiring another worker

Correct Answer
verified

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?

Correct Answer
verified

A profit-maximizing, competitive firm will always hire an additional worker when the additional worker makes a positive contribution to

Correct Answer
verified

Fiona's hourly wage increases from $8 to $10. Which of the following describes a consequence of the increase in Fiona's wage?

Correct Answer
verified

Capital income does not include income paid to households for the use of their capital.

Correct Answer
verified

The theory of labor supply is based on the trade-off between __________.

Correct Answer
verified

Correct Answer
verified

Because of diminishing returns, a factor in abundant supply has a

Correct Answer
verified

Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium quantity of capital equipment will

Correct Answer
verified

A recent flood in the Midwest has destroyed much of the farmland that lies in fertile regions near the rivers. Describe the effect of the flood on the marginal productivity of land, labor, and capital. How would the flood affect the price of inputs? Provide some examples.

Correct Answer
verified
The flood would increase the marginal pr...
View Answer

Exam 18: The Markets for the Factors of Production

A consultant interviews the hiring manager of a small, profit-maximizing firm. The manager explains that the firm used to have 15 employees but decided not to rehire when the most-recently-hired employee left the company, so the firm now has 14 employees. We can infer that

Correct AnswerverifiedShow Answer

Assume the market for candles is competitive. A decrease in the market price of candles

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the neoclassical theory of distribution, the wages paid to workers depend on the

Correct AnswerverifiedShow Answer

Ellen receives a raise at her current part-time job from $8 to $10 per hour. If her labor supply curve is upward sloping, she will work fewer hours after receiving the pay raise.

Correct AnswerverifiedShow Answer

The production function is the

Correct AnswerverifiedShow Answer

Owners of land are compensated according to the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Profit maximization by firms ensures that the equilibrium wage always equals the value of the marginal product of capital.

Correct AnswerverifiedShow Answer

Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. Such an invention would be an example of

Correct AnswerverifiedShow Answer

If the wage exceeds the value of the marginal product of labor, then hiring another worker

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A profit-maximizing, competitive firm will always hire an additional worker when the additional worker makes a positive contribution to

Correct AnswerverifiedShow Answer

Fiona's hourly wage increases from $8 to $10. Which of the following describes a consequence of the increase in Fiona's wage?

Correct AnswerverifiedShow Answer

Capital income does not include income paid to households for the use of their capital.

Correct AnswerverifiedShow Answer

The theory of labor supply is based on the trade-off between __________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because of diminishing returns, a factor in abundant supply has a

Correct AnswerverifiedShow Answer

Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium quantity of capital equipment will

Correct AnswerverifiedShow Answer

A recent flood in the Midwest has destroyed much of the farmland that lies in fertile regions near the rivers. Describe the effect of the flood on the marginal productivity of land, labor, and capital. How would the flood affect the price of inputs? Provide some examples.

Correct AnswerverifiedThe flood would increase the marginal pr...View AnswerShow Answer

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Correct Answer
verified
The flood would increase the marginal pr...
View Answer