Exam 18: The Markets for the Factors of Production

Omega Custom Cabinets produces and sells custom bathroom vanities. Assume that labor is the only input that varies for the firm. The firm has determined that if it hires 10 workers, it can produce and sell 20 vanities per week. If it hires 11 workers, it can produce and sell 22 vanities per week. It sells each vanity for $800, and it pays each of its workers $1,000 per week. Which of the following is correct?

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.

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. -Refer to Scenario 18-1. What is the total productivity of three workers?

Increases in productivity are not responsible for increased standards of living in the United States.

Diminishing marginal product occurs when

Figure 18-6 -Refer to Figure 18-6. The graph above illustrates the market for bakers who make homemade breads and breakfast pastries. If the bakery profession becomes less attractive to young women and men because of news reports documenting health risks, what happens in the market for bakers?

When a competitive firm maximizes profit, it will hire workers up to the point where the

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?

The owners of capital resources are compensated according to the

Figure 18-1. 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 18-1. Suppose the shop pays each of its mechanics $210 per day. Over what interval of prices (that is, charges per car repair, P) would the shop maximize its profit by hiring exactly 3 mechanics? (Determine and such that .)

If hiring more workers results in each additional worker contributing successively smaller amounts of output, then which of the following is present?

Table 18-8 Harold and Maude own a dance studio where they and their employees teach ballroom dancing. Their company is a competitive, profit-maximizing firm. Harold and Maude's production function is detailed in the table below. -Refer to Table 18-8. What is the marginal product of the fourth worker?

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 pretzel-stand owner in Chicago hires workers to make hot pretzels and sell them to customers. If the firm is competitive in both the market for pretzels and in the market for pretzel-makers, then it has

Table 18-2 -Refer to Table 18-2. The table shows the number of bracelets that can be assembled per week by various numbers of workers. If the price per bracelet in a perfectly competitive product market is $8, how many workers would the firm employ if the weekly wage rate is $800?

Jen's wage decreased, and she responded by enjoying more hours of leisure per day. Is Jen's behavior consistent with an upward-sloping labor-supply curve?

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

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. -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?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-B. Assuming MadeFromScratch is a competitive, profit-maximizing firm, how many workers will the firm hire?

Changes in supply and demand in the labor market will cause changes in wages.