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Exam 18: The Markets for the Factors of Production

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Question 81

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Which of the following statements is correct?

A) The value of the marginal product curve is the labor demand curve for competitive,profit-maximizing firms.
B) A competitive,profit-maximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage.
C) By hiring labor up to the point where the value of the marginal product of labor equals the wage,the firm is producing where price equals marginal cost.
D) All of the above are correct.

E) None of the above
F) A) and B)

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Question 82

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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 marginal productivity of the second worker?

A) 7
B) 10
C) 12
D) 22

E) C) and D)
F) None of the above

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Question 83

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Diminishing marginal product is closely related to

Figure 18-4 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 18-4.Which of the following events would most likely explain a shift of the labor-demand curve from D₂ back to D₁?

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?

Table 18-4 Consider the following daily production data for Wills Golf Balls.Wills sells golf balls for $2.50 cents each and pays the workers a wage of $325 per day. -Refer to Table 18-4.What is the sixth worker's marginal product 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.

Diminishing marginal product occurs when

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 18-4 Consider the following daily production data for Wills Golf Balls.Wills sells golf balls for $2.50 cents each and pays the workers a wage of $325 per day. -Refer to Table 18-4.The marginal product of labor begins to diminish with the addition of which worker?

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

Value of marginal product is defined as the additional

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

If hiring more workers results in each additional worker contributing successively smaller amounts of output,then

An increase in the supply of labor has the effect of decreasing the

Scenario 18-3 Jerry 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 $10 per hour.During the summer,he drives a tour bus around the ski resort,earning $12 per hour. -Refer to Scenario 18-3.During the summer months,what is Jerry's opportunity cost of taking an hour off work to go hiking?

Consider the labor market for computer programmers.Because of the dot.com boom in the late 1990s,a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies.However,when these computer programming students graduated,the dot.com bust took place.The dot.com bust decreased the value of the marginal product of computer programmers.Holding all else equal,what effect did these two circumstances have on the equilibrium wage in the labor market for computer programmers?

Table 18-7 -Refer to Table 18-7.What is the value for the cell labeled BB?

Labor-saving technology causes which of the following?

Suppose that a competitive firm hires labor up to the point at which the value of the marginal product equals the wage.If the firm pays a wage of $700 per week and the marginal product of labor equals 20 units per week,then the marginal cost of producing an additional unit of output is