Econ 18

An increase in the demand for apples will cause all but which of the following?

a decrease in the number of apple pickers employed

What will a decrease in the supply of fishermen do to the market for capital employed in the fishing industry?

decrease the demand for fishing boats and decrease rental rates on fishing boats

A decrease in the demand for fish

decreases the value of the marginal product of fishermen, reduces their wage, and reduces employment in the fishing industry.

An increase in the supply of labour

decreases the value of the marginal product of labour and decreases the wage.

For a competitive, profit-maximizing firm, the value-of-the-marginal-product curve for capital is the firm's

demand curve for capital

When capital is owned by the firm as opposed to being directly owned by households, capital income may take any of the following forms except

increase in stocks of good

An increase in the demand for a firm's output

increases the prosperity of both the firm and the factors hired by the firm.

An increase in the price of automobiles shifts the demand for autoworkers to the

right and increases the wage.

An individual firm's demand for a factor of production

slopes downward due to the factor's diminishing marginal product.

If both input and output markets are competitive and firms are profit maximizing, then in equilibrium each factor of production earns

the value of its marginal product.

A competitive, profit-maximizing firm should hire workers up to the point where

the value of the marginal product of labour equals the wage.

If this profit-maximizing firm sells its output in a competitive market for €3 per unit and hires labour in a competitive market for €8/hour, then this firm should hire

three workers

An increase in the demand for pencils will likely improve the fortunes of both the pencil factory and the workers in the pencil factory.

true

An increase in the demand for textbooks will increase the value of the marginal product of textbook writers.

true

For a competitive profit-maximizing firm, the demand curve for a factor is the value of the marginal product curve for that factor.

true

If there is an increase in the equilibrium wage, there must have been an increase in the value of the marginal product of labour.

true

In equilibrium, when a competitive firm hires labour up to the point at which the value of the marginal product of labour equals the wage, it also produces up to the point at which the price equals marginal cost.

true

The demand for a factor is considered to be a derived demand because it is derived from the firm's decision to supply output in another market.

true

The demand for labour is downward sloping because the production function exhibits diminishing marginal productivity of labour.

true

The value of the marginal product of land is the marginal product of land multiplied by the price of the output produced on the land.

true

Which of the following is not true with regard to workers who have a high value of marginal product? These workers

usually have little capital with which to work.

Suppose that a war is fought with biological weapons. The weapons destroy people but not capital. What is likely to happen to equilibrium wages and rental rates after the war when compared to their values before the war?

wages rise and rental rates fall

What is the marginal product of labour as the firm moves from using three workers to using four workers?

2

If the price of output is €4 per unit, what is the value of the marginal product of labour as the firm moves from using four workers to using five workers?

4

A decrease in the supply of farm tractors will cause all but which of the following?

an increase in the wage of farm workers

A decrease in the supply of labour reduces the value of the marginal product of labour, decreases the wage, and decreases employment.

false

A factor exhibits diminishing marginal productivity if employing additional units of the factor reduces output.

false

An increase in the supply of capital decreases the value of the marginal product of capital, reduces the rental rate of capital, and decreases the value of the marginal product of labour, which reduces the wage of labour.

false

An increase in the supply of capital will increase the marginal product of capital and the rental rate of capital.

false

If capital is owned by firms as opposed to being owned directly by households, then capital income will be in the form of shares, bonds, and retained interest.

false

The factors of production are labour, land, and money.

false

The only way for the value of the marginal product of a factor to rise is for the price of the output produced by the factor to rise.

false

If a factor exhibits diminishing marginal product, hiring additional units of the factor will

generate smaller amounts of output

The most important factors of production are

land, labor, and capital

The value of the marginal product of labour is

the price of the output times the marginal product of labour.