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A profit-maximizing, competitive firm for which the marginal product of labor is diminishing also experiences


A) a perfectly inelastic supply of labor.
B) a perfectly elastic supply of labor.
C) a downward-sloping demand for labor.
D) an upward-sloping demand for labor.

E) B) and C)
F) A) and D)

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The rental price of capital is


A) determined outside the realm of factor markets.
B) the price paid to use capital for a limited time period.
C) the price paid for ownership of the capital.
D) always more than the purchase price.

E) A) and C)
F) B) and D)

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Table 18-7 Table 18-7 -Refer to Table 18-7. What is the value for the cell labeled BB? A) 80 units B) 100 units C) 180 units D) 200 units -Refer to Table 18-7. What is the value for the cell labeled BB?


A) 80 units
B) 100 units
C) 180 units
D) 200 units

E) A) and B)
F) None of the above

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Labor markets are different from most other markets because labor demand is


A) unresponsive to changes in wages.
B) unresponsive to changes in the final prices of the products produced by the labor.
C) a derived demand.
D) very responsive to labor supply.

E) B) and D)
F) C) and D)

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Figure 18-5 The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily. Figure 18-5 The figure shows a particular profit­maximizing, competitive firm's value­of­marginal­product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily. -Refer to Figure 18-5. The firm would choose to hire three workers if A) the market wage for a day's work is $220. B) the market wage for a day's work is $260. C) the output price is $220. D) the output price is $260. -Refer to Figure 18-5. The firm would choose to hire three workers if


A) the market wage for a day's work is $220.
B) the market wage for a day's work is $260.
C) the output price is $220.
D) the output price is $260.

E) A) and D)
F) A) and B)

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Figure 18-2 The figure below shows the production function for a particular firm. Figure 18-2 The figure below shows the production function for a particular firm. -Refer to Figure 18-2. Suppose the firm pays a wage equal to $160 per unit of labor and sells its output at $10 per unit. How many units of labor should the firm hire to maximize profit? A) 2 units B) 3 units C) 4 units D) 5 units -Refer to Figure 18-2. Suppose the firm pays a wage equal to $160 per unit of labor and sells its output at $10 per unit. How many units of labor should the firm hire to maximize profit?


A) 2 units
B) 3 units
C) 4 units
D) 5 units

E) A) and B)
F) A) and C)

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Who has a greater opportunity cost of leisure - a president of a major corporation or a babysitter?

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The opportunity cost...

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Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. Let Q represent the number of boxes of envelopes produced per week. Which of the following points is not a point on this firm's production function? A) (L = 2, Q = 240) . B) (L = 3, Q = 332) . C) (L = 4, Q = 408) . D) (L = 5, Q = 494) . -Refer to Table 18-12. Let Q represent the number of boxes of envelopes produced per week. Which of the following points is not a point on this firm's production function?


A) (L = 2, Q = 240) .
B) (L = 3, Q = 332) .
C) (L = 4, Q = 408) .
D) (L = 5, Q = 494) .

E) C) and D)
F) A) and B)

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Assume all capital is owned by firms, rather than by households. Under this assumption, capital is paid according to the value of its marginal product


A) only if this income is transmitted to households in the form of interest.
B) only if this income is transmitted to households in the form of dividends.
C) only if this income is transmitted to households in the form of interest or dividends.
D) regardless of whether this income is transmitted to households in the form of interest or dividends or whether it is kept within firms as retained earnings.

E) None of the above
F) A) and D)

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Table 18-2 Table 18-2 -Refer to Table 18-2. The table shows the number of bracelets that can be assembled per week by various numbers of workers. If the price per bracelet in a perfectly competitive product market is $2.50, how many workers would the firm employ if the weekly wage rate is $375? A) 2 B) 3 C) 4 D) 5 -Refer to Table 18-2. The table shows the number of bracelets that can be assembled per week by various numbers of workers. If the price per bracelet in a perfectly competitive product market is $2.50, how many workers would the firm employ if the weekly wage rate is $375?


A) 2
B) 3
C) 4
D) 5

E) A) and D)
F) A) and C)

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Consider the market for medical doctors. Suppose the opportunity cost of going to medical school increases for many individuals. Suppose it generally takes about ten years to become a practicing doctor. Holding all else constant, in ten years the equilibrium quantity of doctors will


A) increase.
B) decrease.
C) not change.
D) It is not possible to determine what will happen to the equilibrium quantity.

E) A) and B)
F) None of the above

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For a competitive, profit-maximizing firm, the demand curve for labor will shift in response to a change in the


A) wage rate.
B) quantity of labor demanded.
C) price of the product that the firm sells.
D) an increase in the supply of labor.

E) B) and D)
F) None of the above

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The equilibrium purchase price of an acre of land depends upon the current value of the marginal product of land and upon the __________.

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value of the margina...

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Figure 18-3 Figure 18-3 -Refer to Figure 18-3. Suppose that the price of the output is $20. What is the value of the marginal product of the fourth worker? A) $1 B) $20 C) $280 D) $300 -Refer to Figure 18-3. Suppose that the price of the output is $20. What is the value of the marginal product of the fourth worker?


A) $1
B) $20
C) $280
D) $300

E) A) and B)
F) A) and C)

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Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. Each August many high school and college students visit a doctor's office to have a sports physical. If the price of sports physicals falls, what happens in the market for nurses? A) Demand increases from D1 to D2. B) Demand decreases from D2 to D1. C) Supply increases from S1 to S2. D) Supply decreases from S2 to S1. -Refer to Figure 18-4. Each August many high school and college students visit a doctor's office to have a sports physical. If the price of sports physicals falls, what happens in the market for nurses?


A) Demand increases from D1 to D2.
B) Demand decreases from D2 to D1.
C) Supply increases from S1 to S2.
D) Supply decreases from S2 to S1.

E) A) and D)
F) All of the above

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Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $6. What is the marginal profit of the fourth worker? A) $-132 B) $-96 C) $132 D) $504 -Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $6. What is the marginal profit of the fourth worker?


A) $-132
B) $-96
C) $132
D) $504

E) A) and B)
F) All of the above

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If the marginal productivity of the sixth worker hired is less than the marginal productivity of the fifth worker hired, then the addition of the sixth worker causes total output to decline.

A) True
B) False

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Which of the following events would bring about a change in the value of the marginal product of labor?


A) technological progress that alters the amount a worker can produce
B) a change in the marginal product of labor
C) a change in the price of the product that the firm sells
D) All of the above are correct.

E) B) and C)
F) A) and D)

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A profit-maximizing, competitive firm will always hire an additional worker when the additional worker makes a positive contribution to


A) total revenue.
B) total profit.
C) the value of the marginal product of labor.
D) marginal revenue.

E) C) and D)
F) A) and B)

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A decrease in population can be expected to


A) increase the marginal product of land.
B) decrease the supply of land.
C) decrease the rents on land.
D) increase the demand for land.

E) B) and D)
F) C) and D)

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