Question 1

Most of the total income earned in the U.S. economy is ultimately paid to

Accepted Answer

A)  households in the form of wages and fringe benefits. 
B)  landowners in the form of rent. 
C)  landowners in the form of interest. 
D)  landowners in the form of profit. 
A)  households in the form of wages and fringe benefits. 
B)  landowners in the form of rent. 
C)  landowners in the form of interest. 
D)  landowners in the form of profit. A

Question 2

Average productivity can be measured as total output divided by total units of labor.

Accepted Answer

A) True 
 B)False  True

Question 3

If Firm X is a competitive firm in the market for labor, it has little influence over the wage it pays its employees.

Accepted Answer

A) True 
 B)False  True

Question 4

Suppose that a competitive firm hires labor up to the point at which the value of the marginal product equals the wage and that labor is the only input that varies for the firm. If the firm pays a wage of $700 per week and the marginal product of labor equals 10 units per week, then the marginal cost of producing an additional unit of output is

Accepted Answer

A)  $7. 
B)  $70. 
C)  $700. 
D)  We do not have enough information to answer this question. 
A)  $7. 
B)  $70. 
C)  $700. 
D)  We do not have enough information to answer this question.

Question 5

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. What is the marginal product of the second mechanic?

Accepted Answer

The marginal product

Question 6

Consider the market for university economics professors. Suppose the opportunity cost of going to graduate school to get a Ph.D. in economics decreases 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

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is not possible to determine what will happen to the equilibrium quantity. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is not possible to determine what will happen to the equilibrium quantity.

Question 7

Figure 18-4
The graph below illustrates the market for nurses who work in doctors' offices.  
-Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?

Accepted Answer

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. 
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.

Question 8

Table 18-9
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.
  
-Refer to Table 18-9. What is the marginal product of the fifth unit of labor?

Accepted Answer

A)  30 units 
B)  40 units 
C)  50 units 
D)  250 units 
A)  30 units 
B)  40 units 
C)  50 units 
D)  250 units

Question 9

The rental price of capital is determined by the

Accepted Answer

A)  forces of supply and demand in capital markets. 
B)  amount of equity that is generated in equity markets. 
C)  amount of bond financing used by profit-maximizing firms. 
D)  amount of dividends paid out to stockholders by profit-maximizing firms. 
A)  forces of supply and demand in capital markets. 
B)  amount of equity that is generated in equity markets. 
C)  amount of bond financing used by profit-maximizing firms. 
D)  amount of dividends paid out to stockholders by profit-maximizing firms.

Question 10

Which of the following is an example of a firm's derived demand?

Accepted Answer

A)  The wage that a worker earns is a function of her human capital. 
B)  A firm's demand for college textbook study guide authors is inseparably linked to the supply of college textbooks. 
C)  Factors that increase the demand for labor will increase the equilibrium wage. 
D)  All of the above are correct. 
A)  The wage that a worker earns is a function of her human capital. 
B)  A firm's demand for college textbook study guide authors is inseparably linked to the supply of college textbooks. 
C)  Factors that increase the demand for labor will increase the equilibrium wage. 
D)  All of the above are correct.

Question 11

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.
-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

Accepted Answer

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. 
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.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Table 18-7
  
-Refer to Table 18-7. To maximize its profit, how many workers will the firm hire?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 14

Total income in the United States is comprised of

Accepted Answer

A)  wages only. 
B)  wages and fringe benefits only. 
C)  rents, profits, and interest payments only. 
D)  wages, fringe benefits, rents, profits, and interest payments. 
A)  wages only. 
B)  wages and fringe benefits only. 
C)  rents, profits, and interest payments only. 
D)  wages, fringe benefits, rents, profits, and interest payments.

Question 15

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximizing competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

Accepted Answer

A firm values the contribution of a work

Question 16

How does increased immigration affect the labor market? How would the equilibrium wage and the equilibrium quantity of labor be affected?

Accepted Answer

Increased immigration increase

Question 17

A highly-paid research scientist works 12 hours a day, while a common laborer works only 5 hours a day. Offer a likely explanation, using the concept of opportunity cost.

Accepted Answer

The wage (opportunity cost of

Question 18

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 wage for university economics professors will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is not possible to determine what will happen to the equilibrium wage. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is not possible to determine what will happen to the equilibrium wage.

Question 19

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?

Accepted Answer

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. 
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.

Question 20

When an individual's income goes up, that individual may choose to supply less labor, resulting in a backward­sloping labor supply curve.

Accepted Answer

A) True 
 B)False

Most of the total income earned in the U.S. economy is ultimately paid to

Average productivity can be measured as total output divided by total units of labor.

If Firm X is a competitive firm in the market for labor, it has little influence over the wage it pays its employees.

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. What is the marginal product of the second mechanic?

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?

Table 18-9 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. -Refer to Table 18-9. What is the marginal product of the fifth unit of labor?

The rental price of capital is determined by the

Which of the following is an example of a firm's derived demand?

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

Table 18-7 -Refer to Table 18-7. To maximize its profit, how many workers will the firm hire?

Total income in the United States is comprised of

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximizing competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

How does increased immigration affect the labor market? How would the equilibrium wage and the equilibrium quantity of labor be affected?

A highly-paid research scientist works 12 hours a day, while a common laborer works only 5 hours a day. Offer a likely explanation, using the concept of opportunity cost.

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?

When an individual's income goes up, that individual may choose to supply less labor, resulting in a backwardsloping labor supply curve.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Exam 18: The Markets for the Factors of Production

Most of the total income earned in the U.S. economy is ultimately paid to

Average productivity can be measured as total output divided by total units of labor.

If Firm X is a competitive firm in the market for labor, it has little influence over the wage it pays its employees.

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. What is the marginal product of the second mechanic?

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?

Table 18-9 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. -Refer to Table 18-9. What is the marginal product of the fifth unit of labor?

The rental price of capital is determined by the

Which of the following is an example of a firm's derived demand?

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

Table 18-7 -Refer to Table 18-7. To maximize its profit, how many workers will the firm hire?

Total income in the United States is comprised of

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximizing competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

How does increased immigration affect the labor market? How would the equilibrium wage and the equilibrium quantity of labor be affected?

A highly-paid research scientist works 12 hours a day, while a common laborer works only 5 hours a day. Offer a likely explanation, using the concept of opportunity cost.

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?

When an individual's income goes up, that individual may choose to supply less labor, resulting in a backward­sloping labor supply curve.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

When an individual's income goes up, that individual may choose to supply less labor, resulting in a backwardsloping labor supply curve.