Question 1

Value of marginal product is defined as the additional

Accepted Answer

A)  output a firm would receive after hiring one more factor of production.
B)  cost of hiring one more factor of production.
C)  revenue earned from selling one more unit of product.
D)  revenue earned from hiring one more factor of production.E) None of the above
F) A) and C)

Question 2

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

Accepted Answer

A)  labor-saving technology.
B)  labor-augmenting technology.
C)  Luddite technology.
D)  supply-shifting technology.E) None of the above
F) C) and D)

Question 3

Labor-saving technological advances decrease the marginal productivity of labor.

Accepted Answer

A) True 
 B)False

Question 4

Labor-saving technological advances increase the marginal productivity of labor.

Accepted Answer

A) True 
 B)False

Question 5

Describe the difference between the purchase price of capital and the rental price of capital.If you know the value of marginal product from the flow of capital services,how would you determine the market price for the capital stock?

Accepted Answer

The purchase price of capital is a refle...

Question 6

The rental price of land is

Accepted Answer

A)  the price paid for ownership of the land.
B)  the price paid for the flow of services from land over a specified time period.
C)  always more than the purchase price.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 7

The figure represents the value of marginal product for a firm that sells its product in a competitive market.
Figure 18-1
 
-Refer to Figure 18-1.The shape of the curve suggests the presence of

Accepted Answer

A)  an inverted production function.
B)  diminishing total product.
C)  increasing marginal product.
D)  diminishing marginal product.E) C) and D)
F) A) and B)

Question 8

A change in the supply of one factor of production

Accepted Answer

A)  will not change either the marginal productivities or the prices of other factors.
B)  will not change the prices of other factors, but it may change their marginal productivities.
C)  will not change the marginal productivities of other factors, but it may change their prices.
D)  changes the marginal productivities and the prices of other factors.E) B) and C)
F) A) and B)

Question 9

Labor-augmenting technology causes which of the following? (i) 	The marginal productivity of labor increases.
(ii) 	The marginal productivity of labor decreases.
(iii) 	Labor demand shifts to the right.
(iv) 	Labor demand shifts to the left.

Accepted Answer

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

Question 10

If the price of airline tickets falls,what will happen to the demand curve for flight attendants?

Accepted Answer

A)  It will shift to the right.
B)  It will shift to the left.
C)  The direction of the shift is ambiguous.
D)  It will remain unchanged.E) B) and C)
F) A) and B)

Question 11

For a computer software firm,capital could be thought of as (i) 	the firm's computer programmers.
(ii) 	the wages the firm pays to its computer programmers.
(iii) 	computer equipment.

Accepted Answer

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

Question 12

The equilibrium rental income paid to landowners at any point in time equals the

Accepted Answer

A)  purchase price of land.
B)  value of the marginal product of land.
C)  marginal product of land.
D)  wage paid to laborers.E) B) and C)
F) A) and B)

Question 13

Capital is paid according to the value of its marginal product

Accepted Answer

A)  only if earnings from capital are paid to households in the form of dividends.
B)  only if earnings from capital are kept within firms as retained earnings.
C)  regardless of whether earnings from capital are paid to households in the form of dividends or whether those earnings are kept within firms as retained earnings.
D)  None of the above are correct; capital is a factor of production for which earnings are unrelated to the value of marginal product.E) A) and B)
F) All of the above

Question 14

Table 18-3
 
-Refer to Table 18-3.To maximize its profit,the firm will hire workers as long as the value of the marginal product of labor equals or exceeds

Accepted Answer

A)  $100.
B)  $200.
C)  $400.
D)  $500.E) B) and D)
F) C) and D)

Question 15

Suppose medical research provides evidence that eating bananas provides far greater health benefits than was previously thought.The resulting increase in the demand for bananas

Accepted Answer

A)  increases the marginal product of banana pickers for any given number of banana pickers.
B)  increases the value of the marginal product of banana pickers for any given number of banana pickers.
C)  increases the supply of banana pickers.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 16

Along the horizontal axis of the production function we typically measure

Accepted Answer

A)  revenue.
B)  the marginal product of the input.
C)  the quantity of input.
D)  the quantity of output.E) A) and B)
F) A) and C)

Question 17

A competitive firm will hire workers up to the point at which the value of the marginal product of labor equals the

Accepted Answer

A)  average total cost.
B)  average variable cost.
C)  wage.
D)  price per unit of output.E) A) and B)
F) A) and D)

Question 18

When a firm decides to retain its earnings instead of paying dividends,the stockholders necessarily suffer.

Accepted Answer

A) True 
 B)False

Question 19

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.If the firm is maximizing the marginal product of labor,what is the firm's marginal revenue product?

Accepted Answer

A)  140 baseballs.
B)  $300.
C)  $400.
D)  $700.E) C) and D)
F) B) and C)

Question 20

The purchase price of capital is

Accepted Answer

A)  the value of the capital to the firm.
B)  always less than the rental price.
C)  the price received from the flow of some capital services.
D)  the price a person pays to own that factor of production indefinitely.E) A) and D)
F) C) and D)

Exam 18: The Markets for the Factors of Production

Labor-augmenting technology causes which of the following? (i) The marginal productivity of labor increases. (ii) The marginal productivity of labor decreases. (iii) Labor demand shifts to the right. (iv) Labor demand shifts to the left.

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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.If the firm is maximizing the marginal product of labor,what is the firm's marginal revenue product?

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Labor-saving technological advances increase the marginal productivity of labor.

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The rental price of land is

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Labor-saving technological advances decrease the marginal productivity of labor.

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A change in the supply of one factor of production

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Capital is paid according to the value of its marginal product

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The figure represents the value of marginal product for a firm that sells its product in a competitive market. Figure 18-1 -Refer to Figure 18-1.The shape of the curve suggests the presence of

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If the price of airline tickets falls,what will happen to the demand curve for flight attendants?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Value of marginal product is defined as the additional

Correct AnswerverifiedShow Answer

The equilibrium rental income paid to landowners at any point in time equals the

Correct AnswerverifiedShow Answer

Along the horizontal axis of the production function we typically measure

Correct AnswerverifiedShow Answer

Suppose medical research provides evidence that eating bananas provides far greater health benefits than was previously thought.The resulting increase in the demand for bananas

Correct AnswerverifiedShow Answer

The purchase price of capital is

Correct AnswerverifiedShow Answer

A competitive firm will hire workers up to the point at which the value of the marginal product of labor equals the

Correct AnswerverifiedShow Answer

Describe the difference between the purchase price of capital and the rental price of capital.If you know the value of marginal product from the flow of capital services,how would you determine the market price for the capital stock?

Correct AnswerverifiedThe purchase price of capital is a refle...View AnswerShow Answer

Table 18-3 -Refer to Table 18-3.To maximize its profit,the firm will hire workers as long as the value of the marginal product of labor equals or exceeds

Correct AnswerverifiedShow Answer

For a computer software firm,capital could be thought of as (i) the firm's computer programmers. (ii) the wages the firm pays to its computer programmers. (iii) computer equipment.

Correct AnswerverifiedShow Answer

When a firm decides to retain its earnings instead of paying dividends,the stockholders necessarily suffer.

Correct AnswerverifiedShow Answer

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The purchase price of capital is a refle...
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