Chapter 16 Factors of Production
The _____, the largest such union organization in the United States, is a confederation of unions that represents 13 million workers, ranging from pilots and bricklayers to actors and police officers.
AFL-CIO
The Factors of Production:
Land, Labor, and Capital
Suppose your friend wants to become a doctor. Which of the following is not an example of some of the human capital required to achieve this goal?
Obtain a stethoscope and other medical equipment
The value of the marginal product, which is ________, decreases for each additional worker because the ______ decreases for each additional worker.
[MPL x Pproduct]; MPL
efficiency wage
a wage that is deliberately set above the market rate to increase worker productivity
In deciding whether the opportunity cost of not being able to work another job outweighs the benefits, the worker will have to consider not only the wages each other job offers, but also
any other perks of each job.
A minimum wage might not be the cause of unemployment if the minimum wage is________the equilibrium level.
below
The main ____ for workers when supplying labor to firms is the income they can earn.
benefit
Someone who owns physical capital is a
capitalist
For a _____ firm, the price of the output is always going to be the same.
competitive
the determinants of labor supply include
culture, population, and other opportunities
Changes that increase the opportunity cost of work or decrease the number of workers
decrease the labor supply, shifting the curve to the left.
Any event that decreases the value of the marginal product will _______ demand, shifting the labor demand curve ______
decrease; left
Changes that increase the opportunity cost of work or decrease the number of workers will ______ the labor supply, shifting the supply curve ______
decrease; left
When the marginal product of labor decreases, labor demand
decreases
The value of the marginal product is identical to the firm's ____ curve for labor.
demand
The income effect occurs when workers respond to higher incomes by
demanding more leisure
The demand for labor is_____from the demand for goods and services.
derived
The demand for factors of production is referred to as
derived demand
Sometimes ownership of physical capital is_______, as in ownership of a factory; often it is_________as in ownership of stocks.
direct; indirect
If the minimum wage is below the equilibrium level, the effect might transfer surplus from
employer to worker
A competitive firm should keep hiring as long as the value of the marginal product is greater than or
equal to the marginal cost of the worker (the worker's wage)
How much income people get from labor compared to land and capital is the Multiple choice question.
factor distribution of income
Economists refer to the pattern of income that people derive from different factors of production as the
factors of distribution
Because of the opportunity cost of working, if workers get paid more per hour, they tend to work _____ hours.
fewer
An effective minimum wage is an example of a price______in which the quantity______decreases and the quantity_______increases compared to equilibrium levels.
floor; demanded; supplied
The question of how much labor a firm will hire comes down to whether added workers are
generate more revenue than it would cost to hire them
In taking college courses, you are acquiring
human capital
If product demand_____it will_______the product price, increasing the value of the_________product, shifting labor________curve to the right.
increase; raise; marginal; demand
Any event that increases the value of the marginal product will _____ demand, shifting the labor demand curve _____
increase; right
Changes that decrease the opportunity cost or work or increase the number of workers will _______ the labor supply, shifting the supply curve to the _______
increase; right
Labor
is the time employees spend working
labor demand is determined by the value of the marginal product of
labor
The cost of supplying labor is the forgone opportunity of forgone
leisure
Since the firm is a price-taker in a competitive market, the firm cannot control the going price of inputs or the going wage of workers, so maximizing profit is focused on
making the right choice on the quantity to produce
Capital:
manufactured goods that are used to produce new goods
A change in the supply of other factors can change the______product of labor.
marginal
The increase in output that is generated by an additional unit of input is called
marginal product
A reduction in the_____product of labor would shift the entire_______curve to the left
marginal; demand
To raise wages or improve non-wage benefits and capture some surplus for workers, unions must have, at a minimum, a_________or near________on labor in a particular market.
monopoly; monopoly
Normally, when higher wages are offered, people will want to work_______, and the quantity of labor supplied will increase.
more
So long as the benefit of another hour of work exceeds the opportunity cost of work
more labor should be supplied.
An analysis that implies that the existing factor distribution of income is, or is not, fair in a broader sense is a
normative analysis
A higher wage means more income but also increases the_______cost of working.
opportunity
In deciding whether the ____ cost of not being able to work another job outweighs the benefits, the worker will have to consider not only the wages each other job offers, but also any other perks of each job.
opportunity
This is because:
otherwise, workers will move between markets
The purchase price is what a producer pays to
permanent ownership of a factor of production
When people talk about investing money, they mean that they have lent their money to someone who will use it to buy______capital
physical
A firm in a competitive market maximizes____ by producing the quantity at which the revenue it earns from the last unit is equal to the cost of producing that unit.
profit
The area above the supply curve but below the equilibrium rental price is economic
rent
The ______ price is what a producer pays to use a factor of production for a certain period or task; the _______ price is what a producer pays to gain permanent ownership of a factor of production.
rental; purchase
A firm in a competitive market maximizes profits by producing the quantity at which
revenue it earns from the last unit is equal to the cost of producing that unit.
Any event that increases the value of the marginal product shifts the labor demand curve to the
right
Changes in non-price determinants cause a______ in the supply and demand curves for labor.
shift
Any event that decreases the value of the marginal product
shifts the labor demand curve to the left.
Wages in interconnected markets are likely to be
similar
Individuals who work are the _____ of labor; firms that produce goods using those workers are the _______ of labor.
suppliers; buyers
The number of workers and the opportunity cost of providing their labor determine labor
supply
many shifts in the labor demand curve can be traced to 3 determinants
supply of other factors technology output prices
the _____and _____ curves for _____ can shift right or left with changes in non-price determinants
supply; demand; labor
marginal product of labor:
the change in quantity of a good produced due to hiring one additional worker
The income effect describes
the decrease in labor supply due to the greater demand for leisure caused by a higher income
Maximizing profit in a competitive market is focused on making the right choice about the quantity to produce because
the firm is a price-taker and cannot control the price of inputs.
economic rent:
the gains that workers and owners of capital receive from supplying their labor or machinery in factor markets
The price effect describes
the increase in labor supply in response to the higher wage that can be earned for each hour of work
marginal product
the increase in output that is generated by an additional unit of input
value of marginal product
the increase in revenue generated by the last unit of an input; calculated as the output generated by an input (marginal product) times the unit price of the output
factors of production:
the ingredients that go into making a good or service
at any given wage, labor supply is determined by
the number of workers and the opportunity cost of providing their labor
Land:
the place where employees work
At equilibrium in the labor market:
the quantity of labor supplied is equal to the quantity of labor demanded
for a competitive firm, the price of the output is always going to be
the same
human capital
the set of skills, knowledge, experience, and talent that determine the productivity of workers
Labor markets are most likely to be interconnected when:
the skills required in each market are similar.
In some cases when the labor market is inefficient, a minimum wage appears to cause a small amount of________In others, it seems to change who is
unemployment; employed
In general, labor supply curves are usually This is true because usually:
upward sloping the price effect exceeds the income effect.
When the marginal product of labor is multiplied by the market price of the product, the result is the
value of the marginal product
The firm's demand curve for labor is identical to the
value of the marginal product curve.