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Exam 18: The Markets for the Factors of Production

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Question 201

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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.

E) B) and D)
F) All of the above

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Question 202

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

A) The opportunity cost of Fiona's leisure time has decreased.
B) Fiona may choose to work more hours due to the decrease in her wage.
C) Fiona may choose to work fewer hours due to the decrease in her wage.
D) All of the above are correct.

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

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Question 203

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Economists define capital as the

In the United States, technological advances help explain persistently rising employment in the face of rising wages.

If the output price of a product rises, the demand for capital will increase, raising the rental price of capital.

The labor-supply curve is affected by the trade-off between labor and leisure.

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. -Refer to Scenario 18-7. As a result of these two events, holding all else constant, the equilibrium wages of university economics professors will

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

Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. If the value of the marginal product of the first worker hired is $938, then how many workers does the firm employ?

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?

When a competitive firm hires labor up to the point at which the value of the marginal product of labor equals the wage, it also produces up to the point at which the price of output equals average variable cost.

Suppose that the market for labor is initially in equilibrium. Suppose that workers' tastes change so that they choose to retire at age 70 rather than age 67. Then the equilibrium wage

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?

What happens to the labor supply curves in both countries when Mexican workers leave Mexico and move to the United States?

An event that changes the supply of any factor of production can alter the earnings of all the factors.

Consider the market for university economics professors. Suppose the opportunity cost of going to graduate school to get a Ph.D. in economics increases for many individuals. Suppose it generally takes about five years to get a Ph.D. in economics. Holding all else constant, in five years the equilibrium quantity of university economics professors will

Figure 18-12. The figure shows the relationship between the number of mechanics hired and the number of car repairs performed per day at a car-repair shop. -Refer to Figure 18-12. The relationship depicted on the graph is called a _______ function.

The Black Death in fourteenth-century Europe resulted in

Table 18-1 -Refer to Table 18-1. What is the marginal product of the fourth worker?

If the marginal productivity of the sixth worker hired is less than the marginal productivity of the fifth worker hired, then the addition of the sixth worker causes total output to decline.