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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


A) increase.
B) decrease.
C) not change.
D) It is not possible to determine what will happen to the equilibrium rental price of capital equipment.

E) B) and D)
F) All of the above

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Scenario 18-6 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 18-6.When the labor market adjusts to its new equilibrium,we would expect the


A) marginal product of labor to be higher than it was before the increase in demand for bottled water.
B) value of the marginal product of labor to be higher than it was before the increase in demand for bottled water.
C) price of bottled water to be lower than it was before the increase in demand for bottled water.
D) wages of Rocchetta workers to be lower than they were before the increase in demand for bottled water.

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

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


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

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

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Figure 18-5 The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily. Figure 18-5 The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily. -Refer to Figure 18-5.The value-of-marginal-product curve that is drawn could be relabeled as the firm's A) production function. B) total revenue curve. C) labor supply curve. D) labor demand curve. -Refer to Figure 18-5.The value-of-marginal-product curve that is drawn could be relabeled as the firm's


A) production function.
B) total revenue curve.
C) labor supply curve.
D) labor demand curve.

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

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

A) True
B) False

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In the 1980s,the dangerous Ebola virus entered the United States through contaminated monkeys that were imported for use in medical experiments.Suppose this virus had not been contained but had spread to the general population.Assume that the virus is lethal in half of the people who are exposed to it.Describe the resulting effect on labor productivity.

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There are two possible direct effects: O...

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Table 18-7 Harold owns a cranberry bog in which he grows cranberries. Harold's farm is a competitive, profit-maximizing firm. Harold's production function is detailed in the table below. Table 18-7 Harold owns a cranberry bog in which he grows cranberries. Harold's farm is a competitive, profit-maximizing firm. Harold's production function is detailed in the table below. -Refer to Table 18-7.If Harold pays his workers $80 per day and sells his cranberries for $5 per bushel,what is the value of the marginal product of the third worker? A) $50 B) $250 C) $4,000 D) $20,000 -Refer to Table 18-7.If Harold pays his workers $80 per day and sells his cranberries for $5 per bushel,what is the value of the marginal product of the third worker?


A) $50
B) $250
C) $4,000
D) $20,000

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

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For maximum profit,a firm hires labor up to the point at which the wage equals (i) the value of the marginal product of labor. (ii) the marginal cost of an additional unit of output. (iii) output price multiplied by the marginal product of labor.


A) (i) and (ii)
B) (i) and (iii)
C) (ii) and (iii)
D) All of the above are correct.

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

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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


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

E) All of the above
F) B) and D)

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Table 18-5 Table 18-5 -Refer to Table 18-5.What is the value for the cell labeled AA? A) $600 B) $500 C) $400 D) $300 -Refer to Table 18-5.What is the value for the cell labeled AA?


A) $600
B) $500
C) $400
D) $300

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

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Figure 18-2 The figure below shows the production function for a particular firm. 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.How many units of labor should the firm hire to maximize profit? A) 2 units B) 3 units C) 4 units D) 5 units -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.How many units of labor should the firm hire to maximize profit?


A) 2 units
B) 3 units
C) 4 units
D) 5 units

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

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Diminishing marginal product is closely related to


A) diminishing total cost.
B) diminishing marginal cost.
C) increasing price.
D) increasing marginal cost.

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

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Scenario 18-5 Suppose that workers from northern Minnesota, North Dakota, and Montana decide to emigrate to southern Canada. -Refer to Scenario 18-5.In the labor market in the northern United States,the equilibrium wage


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.

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

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Which of the following is an example of a firm's derived demand?


A) The wage that a worker earns is a function of her human capital.
B) A firm's demand for college textbook study guide authors is inseparably linked to the supply of college textbooks.
C) Factors that increase the demand for labor will increase the equilibrium wage.
D) All of the above are correct.

E) B) and C)
F) All of the above

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Consider the labor market for computer programmers.During the late 1990s,the value of the marginal product of all computer programmers increased dramatically.Holding all else equal,the equilibrium wage in the labor market for computer programmers


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

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

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Which of the following would decrease the demand for labor? (i) a decrease in the output price (ii) an increase in the output price (iii) a labor-saving technological advance (iv) a labor-augmenting technological advance


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

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

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


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

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

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Table 18-3 Table 18-3 -Refer to Table 18-3.For Firm B,the marginal product of labor is A) increasing. B) constant. C) decreasing. D) negative. -Refer to Table 18-3.For Firm B,the marginal product of labor is


A) increasing.
B) constant.
C) decreasing.
D) negative.

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

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Which of the following is true at the level of output at which a competitive firm maximizes profit?


A) price = marginal cost
B) price = wage/value of marginal product of labor
C) price = marginal product of labor/wage
D) All of the above are correct.

E) A) and C)
F) All of the above

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Because of diminishing returns,a factor in relatively low supply has a


A) low marginal product and a low rental price.
B) low marginal product and a high rental price.
C) high marginal product and a low rental price.
D) high marginal product and a high rental price.

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

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