Economics Chapter: Labor and Resources

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Questions and Answers

Which factor is most likely to reduce barriers to imports?

An increase in the minimum wage

Increasing demand for the goods produced by workers

Reducing trade tariffs (correct)

Immigration restrictions

Why do unions advocate for an increase in minimum wages?

To increase demand for labor in their industry (correct)

To help those on minimum wages

To encourage employment among the poor

To decrease the labor supply in their industry

In a perfectly competitive labor market compared to a monopsony, what is the expected wage outcome?

Higher wage and the same number of workers

Lower wage and fewer workers

Lower wage and more workers

Higher wage and more workers (correct)

What characterizes a monopsony market?

A single buyer in the market Signup and view all the answers

What usually initiates a strike or lockout in a bilateral monopoly situation?

Misjudgment of cost impacts by one party Signup and view all the answers

Which option would unions be least likely to support?

Introduction of automation in factories Signup and view all the answers

What is the expected relationship between demand for labor and minimum wage legislation?

Higher minimum wage increases labor demand Signup and view all the answers

What impact does a rise in the value of the marginal product of workers have on employers?

Employers are likely to increase wages Signup and view all the answers

What does the Hotelling Principle suggest about the depletion of natural resources?

The optimal rate of resource depletion aligns with expected price increases. Signup and view all the answers

Which of the following is classified as a nonrenewable natural resource?

Coal Signup and view all the answers

How is the supply of land characterized in the short run?

Relatively inelastic. Signup and view all the answers

What primarily determines the demand for capital in the market?

The value of the marginal product of capital. Signup and view all the answers

Which of the following factors does NOT determine the supply of a nonrenewable natural resource?

Current technological advancements. Signup and view all the answers

What best describes the relationship between the value of the marginal product of land and the demand for land?

Higher marginal product generally leads to greater demand for land. Signup and view all the answers

What does the term 'inelastic supply' refer to in the context of land?

Supply that does not change much with price fluctuations. Signup and view all the answers

Which characteristic is true for nonrenewable resources in economic terms?

Their supply is limited by extraction costs and technology. Signup and view all the answers

What should a profit-maximizing firm do if the value of marginal product of labour is less than the wage rate?

Decrease the quantity of labour it hires Signup and view all the answers

What happens to the value of marginal product of labour when the price of a firm's output decreases?

It decreases the value of marginal product of labour Signup and view all the answers

If the price of apples is $0.50 per kilogram, what is the value of marginal product of the 5th student based on the given production context?

$12.50 an hour Signup and view all the answers

How many apple pickers will Wendy hire if the price of apples is $0.50 per kilogram and the wage rate is $7.50 per hour?

7 Signup and view all the answers

The curve which represents a firm's value of marginal product of labour is the same as which of the following?

Demand curve for labour Signup and view all the answers

What condition would cause the demand curve for labour to shift rightward?

An increase in the price of the firm's output Signup and view all the answers

Which of the following statements about the relationship between wage rate and the quantity of labour hired is correct?

When the value of marginal product exceeds the wage rate, more labour is hired Signup and view all the answers

What is the implication of the value of marginal product of labour being proportional to the output price?

Higher output prices increase the value of marginal product of labour Signup and view all the answers

What should a firm do if the marginal product of labor exceeds the wage rate?

Increase the quantity of labor it hires Signup and view all the answers

How does an increase in the price of a firm's output affect the value of marginal product of labor?

It increases the value of marginal product of labor Signup and view all the answers

What is the likely effect of technological change that raises the value of marginal product of labor?

It shifts the labor demand curve rightward Signup and view all the answers

What happens to the labor demand curve when the price of substitute factors of production decreases?

The labor demand curve shifts leftward Signup and view all the answers

If Mr. Smith's firm has a wage rate of $8.00 and the value of the marginal product for the last worker is $7.00, what should he do to increase profit?

Decrease the number of workers hired Signup and view all the answers

What can be concluded if a firm is currently hiring at a point where the marginal product of labor is less than the wage rate?

The firm should reduce the number of workers hired Signup and view all the answers

What is the impact of an increase in the marginal product of labor on labor hiring decisions?

It encourages firms to hire more labor Signup and view all the answers

What effect might a firm observe if the demand for its output significantly rises?

Shift in the demand curve for labor to the right Signup and view all the answers

What is the profit-maximizing number of workers if the wage rate is $30 and the firm can sell all output for $10 a unit?

8 Signup and view all the answers

If the price of the firm's output decreases, what happens to the value of the marginal product curve?

Shifts to the left Signup and view all the answers

When will Mr. Shaw continue to hire labor?

When the value of marginal product of labor is greater than the wage rate Signup and view all the answers

A profit-maximizing firm will continue to hire labor until which condition is met?

Wage rate equals the last worker's value of marginal product Signup and view all the answers

What condition would cause a shift in a firm's demand curve for labor?

A change in the price of the firm's output Signup and view all the answers

Which of the following does NOT cause a shift in the firm's demand curve for labor?

Change in wage rate Signup and view all the answers

If a firm hires labor in a competitive labor market, what is the expected market behavior regarding labor demand?

It is influenced by the wage set in the market Signup and view all the answers

What happens to the marginal product of labor as more workers are hired in a typical scenario?

It eventually diminishes with increasing employment Signup and view all the answers

What are the four factors of production?

labour, capital, entrepreneurship, and land Signup and view all the answers

Which factor price corresponds to entrepreneurship?

profit Signup and view all the answers

Coal is categorized as which type of resource?

a nonrenewable natural resource Signup and view all the answers

Water from the Mackenzie River serves as an example of what kind of resource?

a natural resource that can be used repeatedly Signup and view all the answers

Natural resources that are consumed and cannot be restored are known as what?

nonrenewable natural resources Signup and view all the answers

Which of the following is an example of a nonrenewable natural resource?

oil Signup and view all the answers

Which of the following factors of production relates to the physical tools and machinery used in production?

capital Signup and view all the answers

Which statement about natural resources is incorrect?

Nonrenewable resources can be used sustainably. Signup and view all the answers

Study Notes

Practice Test Information

Parkin 8e TIF ch18 practice test
Intro Microeconomics (University of Winnipeg)

Factor Markets

Four factors of production: labor, capital, entrepreneurship, and land
Profit is the factor price for entrepreneurship
Coal is a nonrenewable natural resource
Water from the Mackenzie River is a natural resource that can be used repeatedly
Natural resources that are depleted as they are used are called nonrenewable natural resources
Oil is an example of a nonrenewable natural resource
Capital consists of tools, machines, buildings, etc. used to produce goods and services
Labour services are the physical and mental work effort that people supply to produce goods and services
The price of labour services is the wage rate

Demand for a Factor of Production

Firms hire labor to maximize profit
Firms hire labor until the additional benefit of hiring the labor is equal to the additional revenue the labor generates
The value of marginal product of labor is the revenue generated by employing an additional unit of labor
The firm will hire labor until the value of marginal product equals the wage rate
If the price of the firm's output decreases, the demand for a factor of production shifts to the left
If the price of a substitute factor of production increase, the demand for a factor of production shifts to the left
If the price of a substitute factor of production decreases, the demand for a factor of production shifts to the right
If the marginal product of labor increases, the demand for labor increases

Labour Markets

If the supply of labor decreases, the wage rate will increase and firms will decrease the number of workers to the point at which the value of marginal product equals the new wage rate
The reservation wage of labor is the wage rate at which a worker is willing to supply labor to the market
The substitution effect gives a household the incentive to raise its reservation wage

Capital and Natural Resource Markets

If the value of marginal product of capital decreases as more capital is employed, the demand curve for capital is downward sloping
Equilibrium in the market for a nonrenewable natural resource is when the price of the resource is expected to rise at a rate equal to the interest rate
The Hotelling principle states that the price of a nonrenewable natural resource is expected to rise at a rate equal to the interest rate

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Description

This quiz covers key concepts in labor economics and resource management, including union dynamics, monopsony markets, and the impact of minimum wage legislation. Participants will explore the relationship between labor demand and wages, as well as the implications of resource depletion. Test your understanding of these essential economic principles!