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Exam 18: The Markets for the Factors of Production

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Question 21

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A profit-maximizing competitive firm will hire workers up to the point at which the wage equals the price of the final good.

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Question 22

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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.

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The wage (opportunity cost of ...

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Question 23

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Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage

Table 18-1 ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Labor } \\\text { (Number of workers) }\end{array} & \begin{array} { c } \text { Output } \\\text { (Units per day) }\end{array} \\\hline 0 & 0 \\\hline 1 & 14 \\\hline 2 & 23 \\\hline 3 & 30 \\\hline 4 & 34 \\\hline 5 & 36 \\\hline 6 & 37 \\\hline\end{array}$ -Refer to Table 18-1. What is the marginal product of the fourth worker?

The marginal product of land depends only on the quantity of land available.

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.

Suppose the supply of capital decreases. As a result, the quantity of capital used in production and the rental price of capital will both fall.

Because a firm's demand for a factor of production is derived from its decision to supply a good in the market, it is called a

Value of marginal product is defined as the additional

If the demand for labor in a particular industry increases, the equilibrium wage in that industry will also increase.

An event that changes the supply of any factor of production can alter the earnings of all the factors.

Suppose the wage earned by pear pickers suddenly rises. Which of the following effects would we most likely observe as a result?

Sunshine's Organic Market sells organic produce. Assume that labor is the only input that varies for the firm. The store manager has determined that if she hires nine workers, the store can sell 230 pounds of produce per day. If she hires 10 workers, the store can sell 290 pounds of produce per day. The store earns $6 for each pound of produce that it sells, and the manager pays each worker $60 per day. Which of the following is correct?

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 35 units per week, then the marginal cost of producing an additional unit of output is

What are the three most important factors of production?

If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will decrease to offset the higher price.

Table 18-1 ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Labor } \\\text { (Number of workers) }\end{array} & \begin{array} { c } \text { Output } \\\text { (Units per day) }\end{array} \\\hline 0 & 0 \\\hline 1 & 14 \\\hline 2 & 23 \\\hline 3 & 30 \\\hline 4 & 34 \\\hline 5 & 36 \\\hline 6 & 37 \\\hline\end{array}$ -Refer to Table 18-1. Suppose that the firm pays its workers $29 per day. Each unit of output sells for $11. How many workers should the firm hire?

The rental price of land is

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

Table 18-7 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. Assume that labor is the only input that varies for the firm. ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Labor } \\\text { (Number of workers) }\end{array} & \begin{array} { c } \text { Marginal Product of Labor } \\\text { (Boxes of envelopes per week) }\end{array} & \begin{array} { c } \text { Wage } \\\text { (Dollars per } \\\text { worker per week) }\end{array} \\\hline 0 & & \\\hline 1 & 133 & 393 \\\hline 2 & 111 & 393 \\\hline 3 & 93 & 393 \\\hline 4 & 83 & 393 \\\hline 5 & 75 & 393 \\\hline\end{array}$ ​ -Refer to Table 18-7. Suppose the firm sells each box of envelopes that it produces for $5. What is the marginal profit of the fourth worker?