Question 1

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.
 
-Refer to Table 18-10.Assuming Caroline's Cookies is a competitive,profit-maximizing firm,how many workers will the firm hire?

Accepted Answer

A)  3 workers 
B)  4 workers 
C)  5 workers 
D)  6 workers

Question 2

Of the total income earned in the U.S.economy,approximately

Accepted Answer

A)  25 percent is earned by workers, and 75 percent is earned by landowners. 
B)  50 percent is earned by workers, 25 percent is earned by landowners, and 25 percent is earned by owners of capital. 
C)  75 percent is earned by workers, and 25 percent is earned by owners of land and capital. 
D)  90 percent is earned by workers, and 10 percent is earned by owners of land and capital.

Question 3

Figure 18-3
 
-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?

Accepted Answer

A)  $1 
B)  $20 
C)  $280 
D)  $300

Question 4

A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the marginal product of labor.

Accepted Answer

A) True 
 B)False

Question 5

Figure 18-2
The figure below shows the production function for a particular firm.
 
-Refer to Figure 18-2.Suppose the firm pays a wage equal to $160 per unit of labor and sells its output at $10 per unit.What is the value of the marginal product of labor for the fourth worker?

Accepted Answer

A)  10 units 
B)  $100 
C)  $1,000 
D)  $1,600

Question 6

When deciding whether to hire an additional worker,firms need only consider how the additional worker would affect

Accepted Answer

A)  costs. 
B)  revenues. 
C)  output. 
D)  profit.

Question 7

Figure 18-8
This figure below shows the labor market for automobile workers. The curve labeled S is the labor supply curve, and the curves labeled D₁ and D₂ are the labor demand curves. On the horizontal axis, L represents the quantity of labor in the market.
 
-Refer to Figure 18-8.Which of the following events would most likely explain a shift of the labor-demand curve from D₂ back to D₁?

Accepted Answer

A)  The price of automobiles decreased. 
B)  A large number of immigrants entered the automobile-worker market. 
C)  A technological advance increased the marginal product of automobile workers. 
D)  The demand for automobiles increased.

Question 8

Suppose that the market for labor is initially in equilibrium.If the firm employs labor-augmenting technology,the equilibrium wage

Accepted Answer

A)  and the equilibrium quantity of labor will rise. 
B)  and the equilibrium quantity of labor will fall. 
C)  will rise, and the equilibrium quantity of labor will fall. 
D)  will fall, and the equilibrium quantity of labor will rise.

Question 9

Suppose that a violent earthquake causes the uninhabited Hawaiian island of Mokuauia (also called Goat Island)to fall into the Pacific Ocean.No people are killed or injured,and since the island is undeveloped,no buildings are destroyed.The island was a source of tourist income for Hawaiian landowners.Which of the following statements correctly describes the rents earned by the people who own land on the surrounding islands?

Accepted Answer

A)  As the supply of vacation land decreases, the marginal productivity of the remaining land will decrease; thus rents will decrease. 
B)  As the supply of vacation land decreases, the marginal productivity of the remaining land will increase; thus, rents will decrease. 
C)  As the supply of vacation land decreases, the marginal productivity of the remaining land will increase; thus, rents will increase. 
D)  There would be no change in the rents earned by the other landowners because the effects of supply and demand would exactly cancel each other out.

Question 10

Figure 18-8
This figure below shows the labor market for automobile workers. The curve labeled S is the labor supply curve, and the curves labeled D₁ and D₂ are the labor demand curves. On the horizontal axis, L represents the quantity of labor in the market.
 
-Refer to Figure 18-8.What is measured along the vertical axis on the graph?

Accepted Answer

A)  the quantity of automobiles produced 
B)  the price of automobiles 
C)  the wage paid to automobile workers 
D)  time spent by workers producing automobiles

Question 11

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the

Accepted Answer

A)  wage. 
B)  marginal cost of the output. 
C)  change in total profit. 
D)  market price of the output.

Question 12

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.
 
-Refer to Table 18-10.What is the sixth worker's marginal product of labor?

Accepted Answer

A)  100 cookies 
B)  120 cookies 
C)  140 cookies 
D)  160 cookies

Question 13

The inputs used to produce goods and services are called

Accepted Answer

A)  Luddite factors. 
B)  marginal products. 
C)  labor demands. 
D)  factors of production.

Question 14

Your best friend receives a pay raise at her part-time job from $8 to $10 per hour.She used to work 16 hours per week,but now she decides to work 20 hours per week.For this price range,her labor supply curve is

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  upward sloping. 
D)  backward sloping.

Question 15

The labor supply curve shifts when

Accepted Answer

A)  employers need to hire more people. 
B)  employers develop new technology. 
C)  workers change the number of hours that they want to work at any given wage. 
D)  workers become more productive.

Question 16

Rosie's Flower Shop sells floral arrangements for $20 each.If Rosie hires 10 workers,she can sell 600 arrangements per week.If she hires 11 workers,she can sell 650 arrangements per week.Rosie pays each of her workers $400 per week.Which of the following is correct?

Accepted Answer

A)  For the 11th worker, the marginal profit is $1,000. 
B)  For the 11th worker, the marginal revenue product is $1,000. 
C)  The firm is maximizing its profit. 
D)  If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers.

Question 17

Which of the following events could decrease the demand for labor?

Accepted Answer

A)  An increase in the number of migrant workers 
B)  An increase in the marginal productivity of workers 
C)  A decrease in demand for the final product produced by labor 
D)  A decrease in the supply of labor

Question 18

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

Accepted Answer

A)  landowners in the form of rent. 
B)  owners of capital in the form of interest. 
C)  households in the form of wages and fringe benefits. 
D)  households in the form of welfare, disability, and Social Security payments.

Question 19

Which of the following is not correct?

Accepted Answer

A)  Earnings from capital may be paid to households in the form of dividends. 
B)  Earnings from capital may be retained by firms to purchase additional capital. 
C)  Firms may not pay out all of their earnings to households. 
D)  Firms earn the highest profits when the owners of capital receive a value above the marginal product.

Question 20

Scenario 18-3
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $11 per hour. During the summer, he drives a tour bus around the ski resort, earning $13 per hour.
-Refer to Scenario 18-3.Assume that Sam has an upward-sloping labor supply curve.If the opportunity cost of Sam's leisure time increases,he will respond by working

Accepted Answer

A)  more hours. 
B)  fewer hours. 
C)  an equal number of hours. 
D)  a number of hours that cannot be determined from the information. The labor demand curve is needed to make this determination.

Exam 18: The Market For the Factors of Production.

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. -Refer to Table 18-10.Assuming Caroline's Cookies is a competitive,profit-maximizing firm,how many workers will the firm hire?