True/False
Indicate whether the statement is true or
false.
|
|
|
1.
|
Capital is the amount of financial assets that an individual has in the
bank.
|
|
|
2.
|
The value of the marginal product of labour is the marginal product of labour
times the price of the output.
|
|
|
3.
|
For a competitive, profit-maximizing firm, the demand for labour curve is the
value of the marginal product of labour curve, and slopes downwards because of the law of diminishing
marginal productivity.
|
|
|
4.
|
An increase in the demand for labour will cause the labour demand curve to shift
to the left and lower the level of wages.
|
|
|
5.
|
Any event that changes the supply or demand for labour must change the
equilibrium wage and the value of the marginal product by differing amounts, because these can never
be equal.
|
|
|
6.
|
The diminishing marginal product suggests that as the input decreases, the
marginal product of an input decreases.
|
|
|
7.
|
When a competitive firm hires labour up to the point at which the value of the
marginal product equals the wage, it also produces up to the point at which the price equals the
marginal cost.
|
Multiple Choice
Identify the choice that best completes the statement or
answers the question.
|
|
|
1.
|
The demand for a factor of production such as labour is
a. | a derived demand | b. | a vertical function | c. | a horizontal
function | d. | an upward-sloping function |
|
|
|
2.
|
Which of the following can change the equilibrium purchase price of a piece of
land?
a. | a change in the land’s current value of marginal product | b. | a change in the
price of capital | c. | a change in the supply of capital | d. | a change in the marginal product of
capital |
|
|
|
3.
|
The marginal product of labour is defined as
a. | the increase in cost from one more unit of labour | b. | the increase in
output from one more unit of labour | c. | the increase in revenue from one more unit of
labour | d. | the net increase in profit from one more unit of
labour |
|
|
|
4.
|
When a firm employs 50 workers, total output is 720 units per day. When the firm
employs 51 workers, total output is 726 units per day. The marginal product of labour for this output
range is
a. | I unit per day | b. | 306 [726-720) x 51] units per
day | c. | 6 units per day | d. | 726 units per
day |
|
|
|
5.
|
Plainco Corporation sells widgets for $3 each in a market that is perfectly
competitive; increasing the number of Plainco workers from 1000 to 1001 would cause output to rise
from 615 to 625 widgets per day. The value of the marginal product of the 1001st worker is
|
|
|
6.
|
Which of the following contributes to high wages for workers?
a. | high labour demand and low labour supply | b. | low labour demand
and high labour supply | c. | high labour demand and high labour
supply | d. | low labour demand and low labour supply |
|
|
|
7.
|
The demand for labour is called a derived demand because
a. | the demand for labour depends on the amount of capital the firm
uses | b. | the demand for labour depends on the supply of labour | c. | the work effort of
an employee is based on the worker’s wage | d. | the demand for labour is influenced by the
demand for the firm’s output |
|
|
|
8.
|
The value of the marginal product of labour measures
a. | the extra cost of hiring an additional unit of labour | b. | the extra output
produced by an additional unit of labour | c. | the additional value produced by an additional
unit of labour | d. | the change in profits associated with employing an additional unit of
labour |
|
|
|
9.
|
Human capital
a. | is a form of economic rent | b. | is a new term economists have devised for
robotics technology | c. | claims that employers make hiring decisions
solely on the basis of educational credentials | d. | is knowledge and skills acquired through
education and training |
|
|
|
10.
|
Which of the following resources is the primary source of income in the Canadian
economy?
a. | land | b. | labour | c. | capital | d. | enterprise |
|
|
|
11.
|
Which of the following will not cause the labour demand to shift?
a. | A change in price of the output product | b. | A change in
technology | c. | A change in supply of other factors of production | d. | A change in
immigration levels |
|
|
|
12.
|
Which of the following will not cause the labour supply to shift?
a. | A change in other opportunities labourers may have | b. | A change in the
attitudes of the labourers | c. | The number of labourers entering the
market | d. | The price of the good the labourers are producing |
|
|
|
13.
|
Productivity, wages, and standards of living are mostly influenced by all of the
following, except
a. | interest rates | b. | physical capital | c. | human
capital | d. | technological change |
|
Short Answer
|
|
|
1.
|
The following table shows the production function for Little Apple Manufacturing
Company. Suppose the firm can sell each unit of output for $4. Fill in the marginal product and the
value of the marginal product in the table. What is the value of the fourth unit of labour?
Quantity
of
Labour | Output (tonnes)
Quantity per day | Marginal Product
Of
Labour | Value of
the
Marginal Product | 0 |
0 | | | 1 | 40 | | | 2 | 70 | | | 3 | 100 | | | 4 | 120 | | | | | | |
|
|
|
2.
|
What causes the labour demand curve to shift?
|
|
|
3.
|
What causes the supply of labour curve to shift?
|
|
|
4.
|
What causes productivity and wages to vary over time and across
countries?
|
|
|
5.
|
How is capital income distributed to households?
|