Question 1

Suppose that a large lake in the middle of Minnesota evaporates,leaving fertile farm land for growing corn.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?

Accepted Answer

A) Both wages and rents would increase. 
B) Both wages and rents would decrease. 
C) Wages would increase, and rents would decrease. 
D) Wages would decrease, and rents would increase.

Question 2

Table 18-4
 
-Refer to Table 18-4.How many workers should the firm hire?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4

Question 3

The distinction between purchase price and rental price applies to which factor(s)of production?

Accepted Answer

A) land only 
B) capital only 
C) land and capital only 
D) land, capital, and labor

Question 4

If Emma's individual labor supply curve is upward sloping,then Emma responds to an increase in

Accepted Answer

A) the wage by working more hours per week. 
B) the opportunity cost of leisure by working fewer hours per week. 
C) the opportunity cost of leisure by taking more hours of leisure per week. 
D) Both a and b are correct.

Question 5

Scenario 18-4
Rocchetta Industries manufactures and supplies bottled water in Mexico. As a result of a contamination of water supplies at many of Mexico's resort communities, the demand for bottled water has increased.
-Refer to Scenario 18-4.We would expect that,as a result of the contamination,the value of the marginal product for Rocchetta Industries' workers would

Accepted Answer

A) be offset by a decrease in wages. 
B) be unaffected by a rise in demand for bottled water. 
C) rise. 
D) fall.

Question 6

For the profit-maximizing competitive firm,the value of marginal product curve is

Accepted Answer

A) always rising. 
B) falling only when marginal product is rising. 
C) the labor supply curve. 
D) the labor demand curve.

Question 7

Consider the market for capital equipment.Suppose the value of the marginal product of capital equipment increases.Holding all else constant,what will happen to the equilibrium rental price of capital equipment?

Accepted Answer

A) The equilibrium rental price of capital equipment increases. 
B) The equilibrium rental price of capital equipment decreases. 
C) The equilibrium rental price of capital equipment does not change. 
D) It is not possible to determine what will happen to the equilibrium rental price of capital equipment.

Question 8

Suppose that in January a profit-maximizing firm has 25 employees.By February,the firm has decreased employment.One can infer that,when 25 employees are hired,the

Accepted Answer

A) firm is losing market share. 
B) firm is minimizing losses. 
C) wage exceeds the value of the marginal product of labor. 
D) value of the marginal product of labor exceeds the wage.

Question 9

Labor supply curves are always upward sloping.

Accepted Answer

A) True 
 B)False

Question 10

Figure 18-2
 
-Refer to Figure 18-2.What happens to the profit earned by apple producers and to the wage earned by apple pickers when the price of apples rises?

Accepted Answer

A) Profit will rise, and the wage will fall. 
B) Profit will fall, and the wage will rise. 
C) Both profit and the wage will rise. 
D) Both profit and the wage will fall.

Question 11

Suppose the government designates certain areas within a community to be "wetlands," making it illegal to build on the land.What happens to land not classified as "wetlands" within the community? (i)	The price of non-wetland land will rise.
(ii)	The marginal product of non-wetland land will fall.
(iii)	The marginal product of non-wetland land will rise.

Accepted Answer

A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (ii) only

Question 12

Scenario 18-2
Jerry has two jobs, one for the winter and one for the summer. In the winter, he workers as a lift attendant at a ski resort where he earns $10 per hour. During the summer, Jerry drives a tour bus around the ski resort, earning $12 per hour.
-Refer to Scenario 18-2.During the winter months,what is Jerry's opportunity cost of taking an hour off work to go skiing?

Accepted Answer

A) $12 
B) between $10 and $12 
C) $10 
D) less than $10

Question 13

Firms pay out a portion of their earnings in the form of interest and dividends,and those payments are a portion of the economy's capital income.

Accepted Answer

A) True 
 B)False

Question 14

Table 18-1
 
-Refer to Table 18-1.This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5 in a competitive market.What is the total revenue per day that the firm will earn if it employs five workers?

Accepted Answer

A) $500. 
B) $300. 
C) $2200. 
D) $2500.

Question 15

Consider the labor market for computer programmers,which is in equilibrium.During the late 1990s,the value of the marginal product of all computer programmers increased dramatically.Holding all else equal,what effect did this process have on the equilibrium quantity in the labor market for computer programmers?

Accepted Answer

A) The equilibrium quantity increased. 
B) The equilibrium quantity decreased. 
C) The equilibrium quantity did not change. 
D) It is not possible to determine the equilibrium quantity.

Question 16

Table 18-2
Consider the following daily production data for Davis Golf Balls, Inc. Davis Golf Balls, Inc. sells golf balls for 50 cents each and pays the workers a wage of $30 a day.
 
-Refer to Table 18-2.Suppose that there is a technological advance that allows Davis Golf Balls,Inc.employees to produce more golf balls than they could before.Because of this change,

Accepted Answer

A) the firm's demand for labor shifts right. 
B) the firm's demand for labor shifts left. 
C) the firm's supply of labor shifts right. 
D) the firm's supply of labor shifts left.

Question 17

What does an upward-sloping labor supply curve mean?

Accepted Answer

A) It means that workers prefer to buy more leisure time when their incomes increase. 
B) It means that workers prefer to supply less labor when wages are high. 
C) It means that an increase in the opportunity cost of leisure leads workers to increase the quantity of labor they supply. 
D) All of the above are correct.

Question 18

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.

Question 19

The opportunity cost of an hour of leisure is

Accepted Answer

A) 60 minutes. 
B) an hour of sleep. 
C) an hour's worth of wear and tear on your TV, exercise equipment, etc. 
D) your hourly wage.

Question 20

Suppose that a toxic waste spill renders half of the land in New Jersey uninhabitable.Assuming that land and labor are complements in the production function,what would happen to the wages earned by workers and rents earned by landowners?

Accepted Answer