Question 1

Which of the following best describes the value of marginal product (VMP) for labor?

Accepted Answer

The market price of the good multiplied by the marginal product of labor.

Question 2

A bakery can sell loaves of bread for $3 each. The marginal product of the 4th worker is 10 loaves. What is the value of marginal product for the 4th worker?

Accepted Answer

$30

Question 3

In a competitive labor market, a firm will hire workers up to the point where:

Accepted Answer

$$VMP = Wage Rate$$

Question 4

Which of the following would NOT increase the demand for labor in a bakery?

Accepted Answer

A decrease in the price of capital, leading to more machines replacing workers.

Question 5

If the wage rate rises above a worker’s reservation wage, what is the most likely effect?

Accepted Answer

The worker will supply more labor.

Question 6

Suppose a firm faces a wage rate of $$15 and the value of marginal product for the next worker is 12. $$What should the firm do to maximize profit?

Accepted Answer

Fire one worker.

Question 7

Which of the following is NOT a factor of production traded in a market?

Accepted Answer

Entrepreneurship

Question 8

A labor union can increase wages for its members by:

Accepted Answer

Both decreasing the supply of union labor and increasing the demand for the final product.

Question 9

In a monopsony labor market, compared to a competitive market, the wage rate and number of workers hired are:

Accepted Answer

Lower wage, fewer workers hired.

Question 10

Which equation correctly represents the value of marginal product of labor?

Accepted Answer

$$VMP_L = P 	imes MPL$$

Question 11

If a new technology increases the marginal product of labor, what happens to the demand for labor?

Accepted Answer

It increases.

Question 12

Which of the following is an example of a residual claimant in a non-profit hospital?

Accepted Answer

Doctors and hospital personnel

Question 13

The market supply curve for labor in a particular job market is:

Accepted Answer

The horizontal sum of individual supply curves.

Question 14

Which of the following best explains why land rental rates are typically fixed in the short run?

Accepted Answer

Land supply is fixed in the short run.

Question 15

A firm is considering whether to rent or buy capital. What is the implicit rental rate if the firm buys capital?

Accepted Answer

The sum of depreciation and interest costs.

Question 16

Which of the following is true about the demand for a factor of production?

Accepted Answer

It is a derived demand, based on the demand for the final good.

Question 17

If the price of a firm's output doubles, what happens to the value of marginal product for each worker?

Accepted Answer

It doubles.

Question 18

Which of the following is NOT a way unions try to increase wages for their members?

Accepted Answer

Decreasing demand for the final product.

Question 19

In the context of factor markets, what does the term 'derived demand' mean?

Accepted Answer

Demand for a factor is based on the demand for the goods it helps produce.

Question 20

Which of the following would most likely cause the labor supply curve to bend backward at high wage rates?

Accepted Answer

The income effect dominates the substitution effect.

Markets for Factors of Production: Microeconomics Chapter 18 Study Notes

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