Unit 5 AP Econ

A change in demand for a given factor of production will not occur if:

the price of that factor falls.

Wage and marginal resource cost are one and the same if

we're hiring in a perfectly competitive labor market.

Suppose a firm is producing the profit-maximizing level of output and the MP of capital and labor are 10 and 20, respectively. If the wage is $10 and the rental rate for capital is $25, which of the following is true? To minimize costs the firm should

Hire more labor and use less capital.

A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring of both labor and capital?

The price of capital and labor both decrease by 5%.

A minimum wage that leads to job losses can still lead to increased overall worker pay if

demand for labor is relatively inelastic

The demand for a factor of production is a(n):

derived demand

Compared to a firm that faces a perfectly competitive input market, a monopsonist will hire:

fewer and pay a lower input price.

In a competitive industry, suppose the marginal revenue product of the last donut baker hired is $35 and the marginal revenue product of the last bagel maker hire is $15. A bakery must pay donut bakers $40 a day and bagel makers $10 a day. Which of the following should the bakery hire to maximize profits?

fewer donut bakers and more bagel makers

Facing the same market conditions, a monsopsonist

hires fewer people than one hiring in a perf. comp. market pays lower wages than one hiring in a perf. comp. market

An increase in the demand for construction workers may come about because of a(n):

increase in the demand for new housing.

A monopsonist's marginal resource cost curve lies above its supply curve because the firm must:

increase the input price to be able to hire more.

Which would be the best description of the elasticity of supply for land?

perfectly inelastic

The supply curve for land is...

perfectly inelastic (vertical)

For a firm selling in a perfectly competitive product market, marginal revenue product is equal to:

price times marginal product

For a firm selling in perfect competition, for its output, marginal revenue product is equal to:

price times marginal product

A determinant of the demand for a factor of production is the: a. quantity of the factor supplied.

productivity of the factor

Labor with a particular skill level and training is used in only two industries: grape cultivation and cranberry cultivation. Which of the following is likely to cause an increase in the demand for this type of labor?

publication of a report that asserts that drinking two glasses of grape or cranberry juice every day improves digestion and heart health

Which is generally NOT considered to be a negative effect that unions may have in an economy?

reduced skill in the workforce

Suppose all perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are paying their workers $7 per hour. Then suppose the government decides to raise the minimum wage to $8 per hour. Then:

since the value of the marginal product would be less than the wage, firms would lay off some workers.

What is economic rent?

the difference between the minimum price the provider of a resource requires and the price of the resource

The elasticity of demand for factor of production A will be lowest when:

the elasticity of demand for the final good is lowest.

Which of the following would determine the marginal revenue product of an input used in a perfectly competitive output market? I. Dividing the change in total revenue by the change in the input II. Dividing the change in marginal revenue by the change in the output III. Multiplying the marginal product by the marginal revenue of the output IV. Multiplying marginal revenue by the price of the output

I and III only

Assume that firefighters are hired in a monopsonistic labor market. New technology makes firefighting safer. Which of the following is the most likely effect, graphically speaking?

MCL shifts right

Which of the following is NOT true? (PC = firms buying resources in perfect competition)

MP X MR = MRP in a non-competitive product market

MP of the last unit of labor is 100 and of capital is 50; labor costs $30, capital costs $15

Make no changes.

Which of the following will cause an increase in the demand for labor? I. Increase in the price of the output II. Increase in worker productivity III. Increase in wages IV. Increase in the supply of workers

I and II only

Cassie's Car Repair owns a machine for fixing punctured tires. When they use the machine, what is the cost?

The dollar amount equal to what they could rent the machine out for.

A profit-maximizing firm which sells in a perfectly competitive product market will hire:

labor until its wage rate equals its marginal revenue product.

Which of the following incorrectly pairs a job and its category of labor?

plumber:unskilled

A change in which of the following will NOT cause a shift in the demand for a factor of production?

supply of the factor

What is the term for the cost of using land or capital?

the rental rate

What are the common effects of unions on wages and the number of jobs in a company?

wages go up and number of jobs go down

The MRP of a resource in a competitive market decreases as a firm increases the quantity of an input used because of the:

law of diminishing marginal returns.

For a firm that buys its labor as a price taker, marginal resource cost of labor is equal to the:

market price of labor

What type of labor market does this employer face?

monopsony

When a good is sold in a perfectly competitive market, the marginal revenue product of labor used to make that good can be computed by:

multiplying the price of the output by the marginal product of labor.

Mary is considering hiring another worker in an assembly line for stereo speakers. Mary knows the average product of labor is 15 speakers per day. She also believes that the next worker hired will produce an extra 12 speakers per day. A speaker sells for $10 each. Mary should hire another worker:

only if the new worker's daily wage is $120 or less.

Maria operates a persimmon orchard in southeastern Oklahoma. She pays her workers $248 per week to pick and process persimmons, and she sells her persimmons for $6 per bushel. If she adds one more worker and that worker can pick and process 44 bushels per week, what will be the profit for Maria from hiring that worker

$16

The federal minimum wage is _____________ per hour for large employers.

$7.25

So why do we call the payment for land, "rent"?

Because land has already been "produced."

What wage will this profit-maximizing monopsony pay for its labor?

W3

A labor market in which a coal mine is the only firm hiring manual labor in a city would be best described as:

a monopsony

Which of the following would not necessarily shift the demand for a factor of production?

A change in the supply of the factor

Now that Sheila has completed her bachelor's degree, she has decided to pursue her master's degree. Sheila's choice of additional education is called an investment in:

human capital

The wage rate is $20 per hour and the last worker hired by the firm increased output by 100 units. Computers rent for $50 per hour and the last computer rented by the firm increased output by 200 units. If the firm is producing the desired level of output, what should the firm do to minimize costs?

Hire more workers and reduce the number of computers rented because the marginal product per dollar spent is higher for workers.

In a perfectly competitive labor market, which is a result of an effective minimum wage?

Hiring falls/workers are laid off.

Which is definitely true?

If you satisfy the profit maximizing rule, you automatically satisfy the least cost rule

How is the marginal cost of labor curve different for firms hiring in monopsonistic and perfectly competitive labor markets?

In monopsony it is upward sloping, in perfect competition it is perfectly elastic.

A company that manufactures light bulbs uses both capital (C) and labor (L) in its production process. It just got an order to produce 150 light bulbs. If it wants to produce those 150 units in the least cost way possible, it should use capital and labor such that, for the last units hired, what is true?

MP(L)/P(L) = MP(C)/P(C)

A company that manufactures light bulbs uses both capital (C) and labor (L) in its production process. If it wants to maximize its profits, and can choose to produce any quantity of light bulbs it wants, it should use capital and labor such that, for the last units hired, what is true?

MRP(L)/P(L) = MRP(C)/P(C) = 1

A company that manufactures light bulbs uses both capital (C) and labor (L) in its production process. It's trying to maximize its profit, and can produce any number of light bulbs it wants to. Currently, for the last unit of labor used, the MRP(L) is $18 and the P(L) is $6. For the last unit of capital used, the MRP(C) is $5 and the P(C) is $10. In order to become more profitable, which is true?

The firm should use less capital and more labor.

A company that manufactures light bulbs uses both capital (C) and labor (L) in its production process. It's trying to fill an order for 200 light bulbs. To do so, the company has hired some labor and some capital, and has met the order. For the last unit of labor used, the MP(L) is 12 and the P(L) is $6. For the last unit of capital used, the MP(C) is 40 and the P(C) is $10. In order to produce these 200 light bulbs in the least cost way, which is true?

The firm should use more capital and less labor.

Phil's Photo Studio pays its workers $60 per day and it sells photos for $10 per print. Now the market wage rises to $70. What happens to Phil's labor demand?

The quantity demanded of labor decreases but the demand for labor curve does not shift.

What is the meaning of the term "rent" in economics?

The value of land or capital as a factor of production.

When the demand for automobiles is high, the demand for workers who build automobiles is high. This relationship between the market for autos and the market for the labor that builds automobiles is why demand in a factor market is called:

a derived demand

Assume glass is purchased for use in the manufacturing of sunglasses in a perfectly competitive resource market. Plastic, a substitute resource for glass, becomes more affordable. Which of the following is the most likely effect of this in the resource market for glass, graphically speaking?

demand decreases

For a perfectly competitive employer, the value of the marginal product curve is the firm's labor ________ curve. This means the marginal product curve has a ________ slope.

demand; negative

The demand for a productive resource is said to be "derived" because the demand for the factor

depends on the demand for the product it makes.

The demand for factors of production is called a derived demand because it is:

derived from the demand for the outputs that are produced by the factors of production.

The marginal productivity theory of income distribution is that:

each factor is paid the value of the output generated by the last unit employed in the factor market as a whole.

Which of the following is not a factor of production at a college?

electricity

Sarah owns a small flower shop and the industry is perfectly competitive. She is considering whether or not to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units produced is $10 per unit. What should Sarah do?

hire the additional worker because the value of the marginal product exceeds the wage

f government regulations are imposed, such as an action to reduce pollution, and this reduces the productivity of the workers, how will this affect the number of employees hired and their wage rate?

hiring decreases; wages decrease

A factor demand curve will shift to the right because of a(n):

increase in the price of the good the factor produces.

Max employs both labor and capital to produce his trinkets. Currently the last unit of labor employed has a marginal product of 15 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $3 per unit and the price of capital is $10 per unit. If Max is going to find the least-cost combination of labor and capital, he needs to ____ his employment of labor and ____ his employment of capital.

increase; decrease

A decrease in the demand for pastry chefs may come about because of an:

increased concern for fitness.

The payment for capital is called what?

interest

Human capital:

is the improvement in labor created by education and knowledge that is embodied in the workforce

What happens to economic rent if the demand for a resource increases?

it increases

Manufactured resources such as equipment, buildings, and tools are also known as:

physical capital

For a firm selling in a perfectly competitive product market, MRP=

price x MP

Which term refers to the opportunity cost of using capital?

rent

The firm's marginal revenue product curve

slopes downward due to diminishing marginal product

Although horses were once a very important factor of production, the development of automobiles and other machinery reduced the demand for their use. This is an example of:

technological progress shifting the demand for horses to the left.

If the price of plastic, a substitute factor of production for glass, goes up then

the demand for glass will go up.

Marginal resource cost (MRC) is:

the increase in a firm's total cost caused by hiring one additional unit of an input.

Which of the following explains why the marginal revenue product of an input in an imperfectly competitive market decreases as a firm increases the quantity of an input used?

the law of diminishing marginal returns reductions in the price of the final product

When selling in a perfectly competitive product market, which is the basis for wages?

the marginal product of the last worker hired

An increase in the market demand for electricians might occur if:

the market price of electrical repair and installation services increases.