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Exam 18: The Markets for the Factors of Production

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Question 101

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Suppose an influenza pandemic were to significantly decrease the population of a country. We would predict a decrease in the marginal product of land in that country.

A) True
B) False

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Question 102

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Figure 18-5 -Refer to Figure 18-5. Assume W₁ = $15 and W₂ = $11, and the market is always in equilibrium. A shift of the labor supply curve from S₂ to S₁ would

A) decrease the value of the marginal product of labor by $4.
B) increase the value of the marginal product of labor by $4.
C) increase the value of the marginal product of labor by more than $4.
D) not change the value of the marginal product of labor.

E) A) and D)
F) B) and C)

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Question 103

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Describe the process by which the market for capital and the market for land reach equilibrium. As part of your description, elaborate on the role of the stock of the resource versus the flow of services from the resource.

Suppose that a rare virus infects and kills a significant percentage of the population. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners?

Table 18-5 ​ ​ ​ ​ -Refer to Table 18-5. What is the value for the cell labeled AA?

Using the theory of wage determination, explain why wages in developing countries, where levels of capital are small, are typically quite low.

Figure 18-1 -Refer to Figure 18-1. Suppose the firm sells its output for $14 per unit, and it pays each of its workers $143 per day. How many workers will the firm hire to maximize its profit?

Labor supply curves are always upward sloping.

Why do we say that the demand for labor is a derived demand?

Omega Custom Cabinets produces and sells custom bathroom vanities. Assume that labor is the only input that varies for the firm. The firm has determined that if it hires 10 workers, it can produce and sell 20 vanities per week. If it hires 11 workers, it can produce and sell 22 vanities per week. It sells each vanity for $800, and it pays each of its workers $1,000 per week. Which of the following is correct?

A decrease in population can be expected to

The marginal product of labor is defined as the change in

The labor supply curve reflects how workers' decisions about the labor-leisure tradeoff respond to changes in the opportunity cost of leisure.

If the demand for labor decreases and the supply of labor is unchanged, then the opportunity cost of leisure will decrease.

Suppose that the wage paid to workers who de-tassel corn rises. What happens in the market for workers who weed soybean fields, given that workers who de-tassel corn can easily work weeding soybean fields?

Capital owners are compensated according to the value of the marginal product of that capital.

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

The value of the marginal product of capital can be calculated as the marginal product of capital multiplied by the cost of the capital input.

The opportunity cost of leisure is impossible to measure because we cannot measure leisure time in dollars.

If men's preferences for work change such that more men want to be stay-at-home fathers, the wages paid to men who remain in the workplace would rise, all else equal.