Chapter 18

Chapter 18 The Markets For the Factors of Production
TRUE/FALSE 1. 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. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: -arginal product of la+or -S*: Interpretive ". In "..%, the total income of all /.S. residents was approximately 01". +illion. ANS: !I : 1 #$ : 1%&. NA': Analytic ()*: (a+or markets '),: Income -S*: Interpretive 1. In order to calculate the value of the marginal product of la+or, a manager must know the marginal product of la+or and the wage rate of the worker. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: 2alue of the marginal product -S*: Interpretive 3. (et L represent the 4uantity of la+or and let Q represent the 4uantity of output. Suppose a certain production function includes the points 5L 6 7, Q 6 "78, 5L 6 %, Q 6 198, and 5L 6 :, Q 6 398. ;ased on these three points, this production function exhi+its diminishing marginal product. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: 'he study of economics, and definitions of economics '),: !iminishing marginal product -S*: Applicative 9. <hen a competitive firm hires la+or up to the point at which the value of the marginal product of la+or e4uals the wage, it also produces up to the point at which the price of output e4uals average varia+le cost. ANS: !I : 1 #$ : 1%&1 NA': Analytic ()*: 'he study of economics, and definitions of economics '),: *ompetitive firms = ,rofit maximi>ation -S*: Applicative ?. 'he demand for computer programmers is insepara+ly tied to the supply of computer software. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: Interpretive 7. If irm @ is a competitive firm in the market for la+or, it has little influence over the wage it pays its employees. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: Interpretive %. 'he idea that rational employers think at the margin is central to understanding how many units of la+or they choose to employ. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: Interpretive :. or competitive firms, the curve that represents the value of marginal product of la+or is the same as the demand for la+or curve. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand = 2alue of the marginal product -S*: Interpretive
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1..
*hapter 1%A'he -arkets or the actors of ,roduction
'he value of the marginal product of la+or can +e calculated as the price of the final good minus the marginal product of la+or. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: 2alue of the marginal product -S*: Analytical 11. 'o compute the value of the marginal product of capital, you should multiply the market price of the good +y the marginal product of capital. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: 2alue of the marginal product -S*: Analytical 1". A profit&maximi>ing competitive firm will hire workers up to the point at which the wage e4uals the price of the final good. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand = 2alue of the marginal product -S*: Analytical 11. A profit&maximi>ing competitive firm will hire workers up to the point at which the wage e4uals the marginal product of la+or. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand = -arginal product of la+or -S*: Analytical 13. 'echnological advances can cause the la+or demand curve to shift. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: -S*: Applicative 19.
(a+or demand
In the /nited States, technological advances help explain persistently rising employment in the face of rising wages. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: Applicative 1?. 'he term (uddite refers to BtekkiesC or people who are the first to adopt new technological advances. ANS: !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: !efinitional 17. (a+or&saving technological advances increase the marginal productivity of la+or. ANS: !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: !efinitional 1%. (a+or&saving technological advances decrease the marginal productivity of la+or. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: !efinitional 1:. (a+or&augmenting technological advances increase the marginal productivity of la+or. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: !efinitional ".. (a+or&augmenting technological advances decrease the marginal productivity of la+or. ANS: !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: !efinitional

"1. An increase in a productDs price will shift the la+or demand curve for that product to the left. ANS: !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: !efinitional "". 'he 4uantity availa+le of one factor of production can affect the marginal product of other factors. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: -arginal product of la+or = actor markets -S*: Applicative "1. In a competitive market for la+or, the e4uili+rium wage always e4uals the value of the marginal product. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: 2alue of the marginal product -S*: Applicative "3.
1:7
rom 1:?. to "..., inflation&adEusted wages increased +y 111 percent in the /.S. As a result, firms reduced the amount of la+or they employed +y nearly ". percent. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or demand -S*: Interpretive "9. 'he la+or&supply curve is affected +y the trade&off +etween la+or and leisure. ANS: ' !I : " #$ : 1%&" NA': Analytic ()*: (a+or markets '),: (a+or supply -S*: Interpretive "?. 'he opportunity cost of leisure is impossi+le to measure, since we canFt measure leisure time in dollars. ANS: !I : " #$ : 1%&" NA': Analytic ()*: (a+or markets '),: (a+or supply -S*: Interpretive "7. 'he la+or supply curve reflects how workersF decisions a+out the la+or&leisure tradeoff respond to changes in the opportunity cost of leisure. ANS: ' !I : " #$ : 1%&" NA': Analytic ()*: (a+or markets '),: (a+or supply -S*: Interpretive "%. (a+or supply curves are always upward sloping. ANS: !I : " #$ : NA': Analytic ()*: (a+or markets -S*: Interpretive ":. 1%&" '),: (a+or supply
<hen an individualDs income goes up, that individual may choose to supply less la+or, resulting in a +ackward&sloping la+or supply curve. ANS: ' !I : " #$ : 1%&" NA': Analytic ()*: (a+or markets '),: (a+or supply -S*: Interpretive 1.. 'he supply of la+or in any one market depends on the opportunities availa+le in other markets. ANS: ' !I : " #$ : 1%&" NA': Analytic ()*: (a+or markets '),: (a+or supply -S*: Applicative 11. -ovements of workers from country to country can cause shifts in the la+or supply curves for +oth countries. ANS: ' !I : " #$ : 1%&" NA': Analytic ()*: (a+or markets '),: (a+or supply -S*: Applicative
1:%
1".
If the demand for la+or in a particular industry increases, the e4uili+rium wage in that industry will also increase. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or&market e4uili+rium -S*: Analytical 11. If the demand for la+or decreases and the supply of la+or is unchanged, then the opportunity cost of leisure will decrease. ANS: ' !I : " #$ : 1%&1 NA': Analytic ()*: /nderstanding and applying economic models '),: )pportunity cost = <ages -S*: Interpretive 13. ,rofit maximi>ation +y firms ensures that the e4uili+rium wage always e4uals the value of the marginal product of capital. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: /nderstanding and applying economic models '),: -arginal product = <ages -S*: Interpretive 19. As the num+er of concrete workers in the /nited States falls, the wage paid to the remaining concrete workers will necessarily fall as well. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or&market e4uili+rium -S*: Applicative 1?. )il field workersF wages are directly tied to the world price of oil. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: -S*: Applicative
(a+or&market e4uili+rium
17. *hanges in supply and demand in the la+or market will cause changes in wages. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or&market e4uili+rium -S*: !efinitional 1%. In general, less productive workers are paid less than more productive workers. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: (a+or&market e4uili+rium -S*: Applicative 1:. Increases in productivity are not responsi+le for increased standards of living in the /nited States. ANS: !I : " #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: actor markets -S*: Applicative 3.. Average productivity can +e measured as total output divided +y total units of la+or. ANS: ' !I : 1 #$ : 1%&1 NA': Analytic ()*: (a+or markets '),: actor markets -S*: !efinitional 31. 'he rental price of capital is the price a person pays to own the capital indefinitely. ANS: !I : " #$ : 1%&3 NA': Analytic ()*: /nderstanding and applying economic models '),: *apital market -S*: Interpretive 3". 'he marginal product of land depends on the 4uantity of land that is availa+le. ANS: ' !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: (and markets -S*: Interpretive

31. ANS: NA': -S*: or a snow&removal +usiness, the capital stock would include inputs such as snow +lowers and shovels. ' !I : 1 #$ : 1%&3 Analytic ()*: (a+or markets '),: *apital !efinitional
1::
33. 'he demand curve for each factor of production e4uals the value of the marginal product of that factor. ANS: ' !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: actor markets -S*: Interpretive 39. *apital income does not include income paid to households for the use of their capital. ANS: !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: *apital income -S*: !efinitional 3?. irms pay out a portion of their earnings in the form of interest and dividends, and those payments are a portion of the economyFs capital income. ANS: ' !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: *apital income -S*: !efinitional 37. <hen a firm decides to retain its earnings instead of paying dividends, the stockholders necessarily suffer. ANS: !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: *apital -S*: Interpretive 3%. *apital owners are compensated according to the value of the marginal product of that capital. ANS: ' !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: *apital -S*: Interpretive 3:. A change in the supply of any one factor alters the earnings of all the other factors. ANS: ' !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: actor markets -S*: Interpretive 9.. If the output price of a product rises, the demand for capital will increase, raising the rental price of capital. ANS: ' !I : 1 #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: *apital -S*: Applicative 91. Suppose the supply of capital decreases. As a result, the 4uantity of capital used in production and the rental price of capital will +oth fall. ANS: !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: *apital -S*: Analytical 9". Suppose an influen>a pandemic were to significantly decrease the population of a country. <e would predict a decrease in the marginal product of land in that country. ANS: ' !I : " #$ : 1%&3 NA': Analytic ()*: (a+or markets '),: (and markets -S*: Analytical
"..
1.

!escri+e the difference +etween a diminishing marginal product of la+or and a negative marginal product of la+or. <hy would a profit&maximi>ing firm always choose to operate where the marginal product of la+or is decreasing 5+ut not negative8G
SH RT A!S"ER
ANS: !iminishing marginal product of la+or means that the last worker hired contri+utes less to the total output of the firm than the worker who was hired Eust previous to her. Negative marginal product of la+or suggests that the last person hired actually causes total output of the firm to decline. 'he firm evaluates the +enefit of hiring 5added revenue8 versus the added cost of hiring 5wage8. In competitive markets, the cost and +enefit converge only when marginal product declines. If the marginal product of la+or is negative, hiring an additional worker would actually decrease revenue. A profit&maximi>ing firm would never choose to operate where marginal product is rising +ecause hiring an additional worker would increase the BvalueC a worker contri+utes to the firm, while costs remain constant. 'hus, the firm will choose to operate where marginal product of la+or is decreasing. !I : '),: ". " #$ : 1%&1 !iminishing marginal product -S*: Analytical
$xplain how a firm values the contri+ution of workers to its profita+ility. <ould a profit&maximi>ing competitive firm ever stop increasing employment as long as marginal product is risingG $xplain your answer.
ANS: A firm values the contri+ution of a worker +y evaluating the workerFs individual contri+ution to firm revenue. 'his is done +y multiplying the workerDs marginal product +y the output price received for his production. A profit& maximi>ing firm would never choose to operate where marginal product is rising +ecause hiring an additional worker would increase the HvalueH a worker contri+utes to the firm and cost would remain constant. As such, value and cost diverge as long a marginal product is increasing, and it is always more profita+le to continue to hire more workers. !I : " -S*: Analytical 1. #$ : 1%&1 '),: -arginal product of la+or
In the 1:%.s, the dangerous $+ola virus entered the /nited States through contaminated monkeys that were imported for use in medical experiments. Suppose this virus had not +een contained +ut had spread to the general population. Assume that the virus is lethal in half of the people who are exposed to it. !escri+e the resulting effect on la+or productivity.
ANS: 'here are two possi+le direct effects: )ne effect would +e that people would +e a+sent from work if they caught the virus 5+ut did not die8 and so marginal productivity would +e higher for the remaining workers. 'he other effect is that people who caught the virus would die, the la+or supply would decrease, and the remaining workers would have a higher marginal product of la+or. <hile the marginal productivity of the remaining workers increases, total output would still fall. !I : " -S*: Analytical 3. #$ : 1%&1 '),: -arginal product of la+or
/sing the theory of wage determination, explain why wages in developing countries. where levels of capital are small, are typically 4uite low.
ANS: <ages are determined +y the value of workers to firms. In many developing countries, the level of capital is 4uite small, and so worker productivity is 4uite low. <orkers are not a+le to contri+ute as much value to a firm as their counterparts in countries that have more capital to complement their la+or efforts. Since marginal productivity is low, wages are low. !I : " -S*: Analytical #$ : 1%&1 '),: *apital

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A recent flood in the -idwest has destroyed much of the farmland that lies in fertile regions near the rivers. !escri+e the effect of the flood on the marginal productivity of land, la+or, and capital. Iow would the flood affect the price of inputsG ,rovide some examples.
ANS: 'he flood would increase the marginal product of unflooded land, lower the marginal product of la+or, and lower the marginal product of capital. As such, the price of unflooded land should rise, and the prices of +oth la+or and capital should fall. !I : " -S*: Analytical ?. #$ : 1%&1 '),: (and markets
!escri+e the process +y which the market for capital and the market for land reach e4uili+rium. As part of your description, ela+orate on the role of the stock of the resource versus the flow of services from the resource.
ANS: $4uili+riums in the markets for land and capital are governed +y the value of marginal product for these factors relative to their supply. )ne difference +etween these markets and the market for la+or is that in land and capital markets there is +oth a rental value 5flow8 and purchase price 5stock8. 'he difference +etween the rental value and purchase price is reconciled +y noting that in efficient markets, the purchase price should reflect the value of the stream of services provided +y the land or capital 5or the sum of rental values appropriately discounted8. !I : '),: 7. 1 #$ : 1%&3 *apital markets = (and markets -S*: Analytical
!escri+e the difference +etween the purchase price of capital and the rental price of capital. If you know the value of marginal product from the flow of capital services, how would you determine the market price for the capital stockG
ANS: 'he purchase price of capital is a reflection of the flow of value in using that capital to produce goods and services over its life span. 'he rental price of capital is the period&specific contri+ution of capital to production of goods and services. 'he discounted present value of rental prices over the life of the capital e4uipment should +e e4ual to its purchase price. !I : 1 -S*: Analytical #$ : 1%&3 '),: *apital
Sec## $ The Markets for the Factors of Production

MULT%PLE CH %CE 1. In "..%, the total income of all /.S. residents was a+out a. 01" +illion. +. 013 +illion. c. 01" trillion. d. 013 trillion. !I : 1 #$ : ()*: (a+or markets 1%&. '),: actor markets
ANS: ! NA': Analytic -S*: !efinitional ".
*apital, la+or, and land a. have derived demands. +. are factors of production. c. are inputs used in the production of goods and services. d. All of the a+ove are correct. !I : 1 #$ : ()*: (a+or markets 1%&. '),: actors of production
ANS: ! NA': Analytic -S*: !efinitional
"."
1.

-ost of the total income earned in the /.S. economy is ultimately paid to a. households in the form of wages and fringe +enefits. +. landowners in the form of rent. c. landowners in the form of interest. d. landowners in the form of profit. !I : " #$ : ()*: (a+or markets 1%&. '),: actor markets
ANS: A NA': Analytic -S*: !efinitional 3.
Since workers in the /.S. economy receive most of the total income earned, which of the following factors of production is considered to +e the most importantG a. ,rofit +. <ages c. Interest d. (a+or !I : 1 #$ : ()*: (a+or markets 1%&. '),: actor markets
ANS: ! NA': Analytic -S*: !efinitional 9.
Iow much of the income in the /nited States is earned +y workers in the form of wages and fringe +enefitsG a. a+out "9 percent +. a+out 9. percent c. a+out 79 percent d. a+out %7 percent !I : 1 #$ : ()*: (a+or markets 1%&. '),: actor markets
ANS: * NA': Analytic -S*: !efinitional
Sec#1 $ The Markets for the Factors of Production $ The &e'and for La(or
MULT%PLE CH %CE 1. 'he production function is the a. increase in the amount of output from an additional unit of la+or. +. marginal product of an input times the price of output. c. relationship +etween the 4uantity of inputs and output. d. shift in la+or demand caused +y a change in the price of output. 1 #$ : '),: 1%&1 NA': Analytic ,roduction function
ANS: * !I : ()*: (a+or markets -S*: !efinitional Table 18-1 !u'(er of "orkers )L* 1 " 1 3 ".
utput of Fir' A 1.. ".. 1.. 3..
utput of Fir' + 1.. 1.. ?.. 1,...
utput of Fir' C 1.. 1:. "7. 13.
utput of Fir' & 1.. %. ?. 3.
Refer to Ta(,e 18$1- <hich firmDs production function exhi+its diminishing marginal productG a. irm A +. irm ; c. irm * d. irm ! " #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
ANS: * !I : ()*: (a+or markets -S*: Analytical

Scenario 18-1
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Iarry owns a snow&removal +usiness. Ie hires workers to shovel driveways for him during the winter. 'he first worker he hires can shovel twelve driveways in one day. <hen Iarry hires two workers, they can shovel a total of "" driveways in one day. <hen Iarry hires a third worker, he shovels an additional eight driveways in one day. 1. Refer to Scenario 18$1- <hat is the marginal productivity of the second workerG a. 7 +. 1. c. 1" d. "" " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: ; !I : ()*: (a+or markets -S*: Analytical 3.
Refer to Scenario 18$1- <hat is the total productivity of three workersG a. 1" +. "" c. 1. d. 3" " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: * !I : ()*: (a+or markets -S*: Analytical 9.
Refer to Scenario 18$1- Suppose that Iarry pays each worker 0%. per day and that he charges each customer 0". to have his driveway shoveled. <hat is the value of the marginal product of la+or for the second workerG a. 0".. +. 0"3. c. 0%.. d. 0:?. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: A !I : ()*: (a+or markets -S*: Analytical ?.
Refer to Scenario 18$1- Suppose that Iarry pays each worker 0%. per day and that he charges each customer 0". to have his driveway shoveled. <hat is the value of the marginal product of la+or for the third workerG a. 01?. +. 0?3. c. 01,?.. d. 0",3.. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: A !I : ()*: (a+or markets -S*: Analytical Table 18-2
'he following ta+le shows the production function for a particular +usiness. 'he num+ers represent the various la+or and output com+inations the firm may choose for its output on a daily +asis. La(or . 1 " 1 3 9 utput . 7. 11. 1%. "". "9.
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7.

Refer to Ta(,e 18$.- <hat is the marginal product of the third unit of la+orG a. 3. units +. 9. units c. ?. units d. 1%. units 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: ; !I : ()*: (a+or markets -S*: Analytical %.
Refer to Ta(,e 18$.- <hat is the marginal product of the fifth unit of la+orG a. 1. units +. 3. units c. 9. units d. "9. units 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: A !I : ()*: (a+or markets -S*: Analytical :.
Refer to Ta(,e 18$.- Suppose this firm charges a price of 09 per unit of output and pays workers a wage e4ual to 01?. per day. <hat is the value of the marginal product of la+or for the second workerG a. 01.. +. 0?9. c. 0:,?.. d. 0".,%.. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: A !I : ()*: (a+or markets -S*: Analytical 1..
Refer to Ta(,e 18$.- Suppose this firm charges a price of 09 per unit of output and pays workers a wage e4ual to 01?. per day. <hat is the value of the marginal product of la+or for the fourth workerG a. 0".. +. 01,... c. 0?,3.. d. 01",... " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: A !I : ()*: (a+or markets -S*: Analytical 11.
Refer to Ta(,e 18$.- Suppose this firm charges a price of 09 per unit of output and pays workers a wage e4ual to 01?. per day. Iow many workers should this firm hire to maximi>e its profitG a. " workers +. 1 workers c. 3 workers d. 9 workers NA': Analytic -S*: Analytical
ANS: * !I : " #$ : 1%&1 ()*: (a+or markets '),: 2alue of the marginal product = ,rofit maximi>ation 1". 'he value of the marginal product of la+or a. increases when the price of output decreases. +. is the firmDs demand for la+or. c. e4uals the marginal product of la+or divided +y the wage rate. d. All of the a+ove are correct. " #$ : '),:
ANS: ; !I : ()*: (a+or markets -S*: Analytical
1%&1 NA': Analytic 2alue of the marginal product

11. <hich of the following statements is correctG a. An increase in the supply of other factors, such as capital, will increase the demand for la+or. +. (a+or&saving technology will increase the demand for la+or. c. (a+or&augmenting technology will decrease the demand for la+or. d. A decrease in the price of output will increase the demand for la+or. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
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ANS: A !I : ()*: (a+or markets -S*: Interpretive 13.
Suppose that a competitive firm hires la+or up to the point at which the value of the marginal product e4uals the wage. If the firm pays a wage of 07.. per week and the marginal product of la+or e4uals ". units per week, then the marginal cost of producing an additional unit of output is a. 019 +. 07. c. 07.. d. <e do not have enough information to answer this 4uestion. 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: A !I : ()*: (a+or markets -S*: Analytical 19.
Suppose that a competitive firm hires la+or up to the point at which the value of the marginal product e4uals the wage. If the firm pays a wage of 07.. per week and the marginal product of la+or e4uals 1.. units per week, then the marginal cost of producing an additional unit of output is a. 07 +. 07. c. 07.. d. <e do not have enough information to answer this 4uestion. 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: A !I : ()*: (a+or markets -S*: Analytical
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Fi/ure 18$1- )n the graph, L represents the 4uantity of la+or and Q represents the 4uantity of output per week.
Q
3". 1:. 139 "%9
"1.
1".
1
1?.
"
Refer to Fi/ure 18$1- 'he figure illustrates the a. demand for la+or. +. supply of la+or. c. production function. d. wage function. NA': Analytic '),: ,roduction function
ANS: * !I : 1 #$ : 1%&1 ()*: 'he study of economics, and definitions of economics -S*: !efinitional 17.
Refer to Fi/ure 18$1- 'he marginal product of the second worker is a. :. units of output. +. 1.9 units of output. c. "1. units of output. d. 11. units of output. NA': Analytic '),: -arginal product of la+or
ANS: A !I : " #$ : 1%&1 ()*: 'he study of economics, and definitions of economics -S*: Applicative 1%.
Refer to Fi/ure 18$1- 'he marginal product of the fourth worker is a. ?. units of output. +. 79 units of output. c. "%9 units of output. d. 139 units of output. NA': Analytic '),: -arginal product of la+or
ANS: A !I : " #$ : 1%&1 ()*: 'he study of economics, and definitions of economics -S*: Applicative 1:.
Refer to Fi/ure 18$1- Suppose the firm hires each unit of la+or for 0?.. per week, and each unit of output sells for 0:. <hat is the value of the marginal product of the third workerG a. 093. +. 0?.. c. 0?79 d. 0%1.

ANS: * !I : ()*: (a+or markets -S*: Applicative ".. " #$ : '),: 1%&1 NA': Analytic -arginal revenue product
".7
Refer to Fi/ure 18$1- Suppose the firm sells its output for 01" per unit, and it pays each of its workers 07.. per week. 'he value of the marginal product of the fifth worker is a. 093. +. 07.. c. 07". d. 01,.%. " #$ : '),: 1%&1 NA': Analytic -arginal revenue product
ANS: A !I : ()*: (a+or markets -S*: Applicative "1.
Refer to Fi/ure 18$1- Suppose the firm hires each unit of la+or for 07.. per week, and each unit of output sells for 0:. Iow many workers will the firm hire to maximi>e its profitG a. " +. 1 c. 3 d. 9 " #$ : '),: 1%&1 NA': Analytic -arginal revenue product = ,rofit maximi>ation
ANS: A !I : ()*: (a+or markets -S*: Applicative "".
Refer to Fi/ure 18$1- Suppose the firm sells its output for 01" per unit, and it pays each of its workers 07.. per week. Iow many workers will the firm hire to maximi>e its profitG a. " +. 1 c. 3 d. 9 " #$ : '),: 1%&1 NA': Analytic -arginal revenue product = ,rofit maximi>ation
ANS: * !I : ()*: (a+or markets -S*: Applicative "1.
Refer to Fi/ure 18$1- Suppose the firm sells its output for 019 per unit, and it pays each of its workers 079. per week. <hen output increases from "1. units to "%9 units, a. the marginal cost is 01. per unit of output. +. the marginal revenue is 09 per unit of output. c. the value of the marginal product of la+or is 03,"79 d. the firmDs profit decreases. A !I : 1 #$ : 1%&1 (a+or markets -arginal cost = -arginal revenue = -arginal revenue product Applicative NA': Analytic
ANS: ()*: '),: -S*: "3.
Refer to Fi/ure 18$1- Suppose the firm sells its output for 01. per unit, and it pays each of its workers 03.. per week. <hen the num+er of workers increases from 3 to 9, a. the marginal revenue is 039. per unit of output and the marginal cost is 03.. per unit of output. +. the value of the marginal product of la+or is 01,:.. and the marginal cost per unit of output is 03... c. the value of the marginal product of la+or is 039. and the marginal cost per unit of output is a+out 0%.%:. d. the firmDs profit increases. * !I : 1 #$ : 1%&1 (a+or markets -arginal revenue = -arginal cost = -arginal revenue product Applicative NA': Analytic
ANS: ()*: '),: -S*:
".%
"9.

Refer to Fi/ure 18$1- Suppose the firm sells its output for 0"9 per unit, and it pays each of its workers 01,... per week. Also, the firmDs non&la+or costs are fixed and they amount to 0",.... 'he firm maximi>es profit +y hiring a. " workers. +. 1 workers. c. 3 workers. d. 9 workers. " #$ : '),: 1%&1 NA': Analytic ,rofit maximi>ation
ANS: ! !I : ()*: (a+or markets -S*: Applicative "?.
Refer to Fi/ure 18$1- Suppose the firm sells its output for 0". per unit, and it pays each of its workers 01,"9. per week. 'he firm maximi>es profit +y hiring a. 1 workers. +. 3 workers. c. 9 workers. d. ? workers. " #$ : '),: 1%&1 NA': Analytic ,rofit maximi>ation
ANS: A !I : ()*: (a+or markets -S*: Analytical "7.
Refer to Fi/ure 18$1. 'he shape of the curve suggests the presence of a. an inverted production function. +. diminishing total product. c. increasing marginal product. d. diminishing marginal product. " #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
ANS: ! !I : ()*: (a+or markets -S*: Analytical
Fi/ure 18$.- 'he figure shows a particular firmDs value&of&marginal&product 5VMP8 curve. )n the hori>ontal axis, L represents the num+er of workers. 'he time frame is daily.
3.. VMP 1?. 1". "%. "3. ".. 1?. 1". %. 3. 1

"%.
VMP " 1 3 9 ? 7 L
Refer to Fi/ure 18$.- 'he value&of&marginal&product curve that is drawn could +e rela+eled as the firmDs a. production function. +. total revenue curve. c. la+or supply curve. d. la+or demand curve. 1 #$ : '),: 1%&1 NA': Analytic -arginal revenue product = (a+or demand
ANS: ! !I : ()*: (a+or markets -S*: Interpretive

":. Refer to Fi/ure 18$.- 'he firm would choose to hire three workers if a. the market wage for a dayDs work is 0"".. +. the market wage for a dayDs work is 0"?.. c. the output price is 0"".. d. the output price is 0"?.. " #$ : '),: 1%&1 NA': Analytic (a+or demand
".:
ANS: A !I : ()*: (a+or markets -S*: Applicative 1..
Refer to Fi/ure 18$.- Suppose the marginal product of the fifth unit of la+or is 1. units of output per day. 'he figure implies that the a. price of output is 03. +. price of output is 0?. c. price of output is 0%. d. daily wage is 01".. " #$ : '),: 1%&1 NA': Analytic -arginal revenue product
ANS: A !I : ()*: (a+or markets -S*: Applicative
11. Refer to Fi/ure 18$.- Suppose one point on the firmDs production function is 5L 6 1, Q 6 1%.8, where L 6 num+er of workers and Q 6 4uantity of output. If the firm sells its output for 09 per unit, then a. a second point on the firmDs production function is 5L 6 3, Q 6 "1?8. +. the firmDs production function exhi+its the property of diminishing marginal product of la+or. c. the firm will maximi>e profit +y hiring four workers if it pays workers 01?. per day. d. All of the a+ove are correct. ANS: ! !I : ()*: (a+or markets -S*: Applicative 1 #$ : '),: 1%&1 NA': Analytic -arginal revenue product = ,rofit maximi>ation
1". Refer to Fi/ure 18$.- Assume the following: J 'wo points on the firmDs production function are 5L 6 ", Q 6 1%.8 and 5L 6 1, Q 6 ""%8, where L 6 num+er of workers and Q 6 4uantity of output. J 'he firm pays its workers 01". per day. J 'he firmDs non&la+or costs are fixed and they amount to 0"9. per day. <e can conclude that a. the firm sells its output for 01" per unit. +. if the firm is currently employing " workers per day, then profit could +e increased +y 03% per day if a third worker is hired. c. the marginal cost per unit of output is 0".9. when output is increased from 1%. units per day to ""% units per day. d. the firmDs maximum profit occurs when it hires 1 workers per day. ANS: ()*: '),: -S*: 11. * !I : 1 #$ : 1%&1 NA': Analytic (a+or markets -arginal cost = -arginal revenue product = ,rofit maximi>ation Analytical
'he factors of production are +est defined as the a. output produced from raw materials. +. inputs used to produce goods and services. c. wages paid to the workforce. d. goods and services sold in the market. 1 #$ : '),: 1%&1 NA': Analytic actor markets
ANS: ; !I : ()*: (a+or markets -S*: !efinitional
"1.
13.

$conomists refer to the inputs that firms use to produce goods and services as a. derived factors. +. derived resources. c. factors of production. d. instruments of revenue. 1 #$ : '),: 1%&1 NA': Analytic actors of production
ANS: * !I : ()*: (a+or markets -S*: !efinitional 19.
;ecause a firmFs demand for a factor of production is derived from its decision to supply a good in the market, it is called a a. differentiated demand. +. secondary demand. c. derived demand. d. hy+rid demand&supply. 1 #$ : '),: 1%&1 NA': Analytic actor markets
ANS: * !I : ()*: (a+or markets -S*: !efinitional 1?.
'he term Hfactor marketH applies to the market for a. la+or. +. capital. c. land. d. All of the a+ove are correct. 1 #$ : '),: 1%&1 NA': Analytic actor markets
ANS: ! !I : ()*: (a+or markets -S*: !efinitional 17.
actor markets are different from product markets in an important way +ecause a. e4uili+rium is the exception, and not the rule, in factor markets. +. the demand for a factor of production is a derived demand. c. the demand for a factor of production is likely to +e upward sloping, in violation of the law of demand. d. All of the a+ove are correct. " #$ : '),: 1%&1 NA': Analytic actor markets
ANS: ; !I : ()*: (a+or markets -S*: Interpretive 1%.
actor&market analysis could not +e complete without some characteri>ation of a. product&market demand. +. the marginal productivities of the different factors. c. market prices for final goods and services. d. All of the a+ove are correct. " #$ : '),: 1%&1 NA': Analytic actor markets
ANS: ! !I : ()*: (a+or markets -S*: Interpretive 1:.
'he +asic tools of supply and demand apply to a. markets for goods and services and to markets for la+or services. +. markets for goods and services +ut not to markets for la+or services. c. markets for goods and services +ut not to markets for factors of production. d. all markets except those in which demand is derived demand. " #$ : '),: 1%&1 NA': Analytic actors of production
ANS: A !I : ()*: (a+or markets -S*: Interpretive

3.. (a+or markets are different from most other markets +ecause la+or demand is a. represented +y a vertical line on a supply&demand diagram. +. represented +y an upward&sloping line on a supply&demand diagram. c. such an elusive concept. d. a derived demand. 1 #$ : '),: 1%&1 NA': Analytic actors of production
"11
ANS: ! !I : ()*: (a+or markets -S*: Interpretive 31.
<hich of the following +est illustrates the concept of Hderived demandGH a. An increase in the wages of auto workers will lead to an increase in the demand for ro+ots in automo+ile factories. +. An automo+ile producerFs decision to supply more cars will lead to an increase in the demand for automo+ile production workers. c. An automo+ile producerFs decision to supply more minivans results from a decrease in the demand for station wagons. d. An increase in the price of gasoline will lead to an increase in the demand for small cars. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Interpretive 3".
<hen a firm maximi>es profit, a. it will hire workers up to the point where the marginal product of la+or is e4ual to the product price. +. it will hire workers up to the point where the marginal product of la+or is e4ual to the wage. c. it will hire workers up to the point where the value of the marginal product of la+or is e4ual to the product price. d. it will hire workers up to the point where the value of the marginal product of la+or is e4ual to the wage. " #$ : '),: 1%&1 NA': Analytic (a+or demand
or a competitive, profit&maximi>ing firm, the la+or demand curve is the same as the a. marginal cost curve. +. value of marginal product curve. c. production function. d. profit function. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Analytical 33.
<hich of the following is true at the level of output at which a competitive firm maximi>es profitG a. ,rice 6 marginal cost +. ,rice 6 <ageA2alue of marginal product of la+or c. ,rice 6 -arginal product of la+orAwage d. All of the a+ove are correct. " #$ : '),: 1%&1 NA': Analytic (a+or demand
39. <hat causes the la+or demand curve to shiftG 5i8 changes in productivity 5ii8 changes in wages 5iii8 changes in output prices a. +. c. d. 5i8 and 5ii8 5ii8 and 5iii8 5i8 and 5iii8 All of the a+ove are correct.
"1"

" #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Applicative 3?.
If the price of airline tickets falls, what will happen to the demand curve for flight attendantsG a. It will shift to the right. +. It will shift to the left. c. 'he direction of the shift is am+iguous. d. It will remain unchanged. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Applicative 37.
If the demand curve for +eef shifts to the right, then the value of the marginal product of la+or for +utchers will a. rise. +. fall. c. remain unchanged. d. rise or fallK either is possi+le. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: A !I : ()*: (a+or markets -S*: Applicative 3%.
If the demand curve for computer games shifts to the left, then the value of the marginal product of la+or for computer game authors will a. rise. +. fall. c. remain unchanged. d. rise or fallK either is possi+le. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Applicative 3:.
*ompetitive firms decide how much output to sell +y producing output until the price of the good e4uals a. marginal product. +. the value of marginal product. c. marginal cost. d. marginal profit. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Applicative
9.. *ompetitive firms hire workers until the additional +enefit they receive from the last worker hired is e4ual to 5i8 the additional cost of that worker. 5ii8 the wage paid to that worker. 5iii8 the marginal product of that worker. a. +. c. d. 5i8 only 5iii8 only 5i8 and 5ii8 5ii8 and 5iii8 " #$ : '),: 1%&1 NA': Analytic (a+or demand

91.
"11
!an owns one of the many +akeries in New Lork *ity. <hich of the following events will lead to an increase in !anFs demand for the services of +akersG 5i8 'he price of muffins increases. 5-uffins are !anFs specialty.8 5ii8 !an adds three new ovens to the kitchen area to help the +akers work faster. 5iii8 (ocal +akers form a union to protect themselves from low wages. a. +. c. d. 5i8 and 5ii8 5ii8 and 5iii8 5i8 and 5iii8 All of the a+ove are correct. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: A !I : ()*: (a+or markets -S*: Applicative 9".
Mohn owns a num+er of hot dog stands in New Lork *ity. Ie hires workers to sell hot dogs at his stands. <hich of the following events will lead to a decrease in MohnFs demand for hot dog vendorsG a. Iollywood glamori>ation of a new movie a+out a hot dog vendor leads hundreds of high&school students in New Lork *ity to apply for a Eo+ at MohnFs. +. 'he price of hot dogs falls. c. 'he local hot dog vendors form a union increasing hot dog vendor wages. d. 'he demand curve for hot dogs shifts to the right. " #$ : '),: 1%&1 NA': Analytic (a+or demand
A sandwich shop hires workers to make sandwiches and sell them to customers. If the firm is competitive in +oth the market for sandwiches and in the market for sandwich&makers, then it has a. some control over +oth the price of sandwiches and the wage it pays to its workers. +. no control over the price of sandwiches +ut some control over the wage it pays to its workers. c. some control over the price of sandwiches +ut no control over the wage it pays to its workers. d. no control over either the price of sandwiches or the wage it pays to its workers. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ! !I : ()*: (a+or markets -S*: Applicative 93.
<hich of the following events could increase the demand for la+orG a. A decrease in output price +. A decrease in the amount of capital availa+le for workers to use c. An increase in the marginal productivity of workers d. A decrease in the wage paid to workers " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Applicative 99.
<hich of the following events could decrease the demand for la+orG a. An increase in the num+er of migrant workers +. An increase in the marginal productivity of workers c. A decrease in demand for the final product produced +y la+or d. A decrease in the supply of la+or " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Applicative 9?.
<hen we focus on the firm as a supplier of a good or a service, we assume that the firm is a profit maximi>er. <hen we focus on the firm as a demander of la+or, we assume that the firmFs o+Eective is to a. minimi>e wages. +. minimi>e varia+le costs. c. maximi>e the num+er of workers hired. d. maximi>e profit.
"13

1 #$ : '),: 1%&1 NA': Analytic (a+or demand
Suppose that a new invention increases the marginal productivity of la+or, shifting la+or demand to the right. Such an invention would +e an example of a. la+or&saving technology. +. la+or&augmenting technology. c. (uddite technology. d. supply&shifting technology. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: !efinitional 9%.
Suppose that a new invention decreases the marginal productivity of la+or, shifting la+or demand to the left. Such an invention would +e an example of a. la+or&saving technology. +. la+or&augmenting technology. c. (uddite technology. d. supply&shifting technology. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: A !I : ()*: (a+or markets -S*: !efinitional
9:. (a+or&saving technology causes which of the followingG 5i8 'he marginal productivity of la+or increases. 5ii8 'he marginal productivity of la+or decreases. 5iii8 (a+or demand shifts to the right. 5iv8 (a+or demand shifts to the left. a. +. c. d. 5i8 only 5ii8 only 5i8 and 5iii8 5ii8 and 5iv8 " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ! !I : ()*: (a+or markets -S*: Interpretive
?.. (a+or&augmenting technology causes which of the followingG 5i8 'he marginal productivity of la+or increases. 5ii8 'he marginal productivity of la+or decreases. 5iii8 (a+or demand shifts to the right. 5iv8 (a+or demand shifts to the left. a. +. c. d. 5i8 only 5ii8 only 5i8 and 5iii8 5ii8 and 5iv8 " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Interpretive ?1.
'he term (uddite is used to descri+e a. a person who readily adopts the latest technological advances. +. a person who is opposed to a reduction in the num+er of immigrants that are allowed into the country each year. c. a person who opposes technological advance. d. any mythical historical figure.

ANS: * !I : ()*: (a+or markets -S*: !efinitional ?". 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
"19
A (uddite would +e expected to oppose a. working more than eight hours per day. +. technological advance. c. national policies that limit immigration into the country. d. the use of economic models to demonstrate market e4uili+rium. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Interpretive ?1.
Along the vertical axis of the production function we typically measure a. revenue. +. the marginal product of the input. c. the 4uantity of input. d. the 4uantity of output. 1 #$ : '),: 1%&1 NA': Analytic ,roduction function
ANS: ! !I : ()*: (a+or markets -S*: !efinitional ?3.
Along the hori>ontal axis of the production function we typically measure a. revenue. +. the marginal product of the input. c. the 4uantity of input. d. the 4uantity of output. 1 #$ : '),: 1%&1 NA': Analytic ,roduction function
ANS: * !I : ()*: (a+or markets -S*: !efinitional ?9.
A competitive firm sells its output for 01. per unit. 'he marginal product of the 1.th worker is ". units of output per dayK the marginal product of the 11th worker is 1? units of output per day. 'he firm pays its workers a wage of 019. per day. a. or the 11th worker, the value of the marginal product of la+or is 01".. +. or the 11th worker, the value of the marginal product of la+or is 03%.. c. or the 11th worker, the value of the marginal product of la+or is 0?... d. or the 11th worker, the value of the marginal product of la+or is 0",3... " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Analytical ??.
A competitive firm sells its output for 0"9 per unit. 'he marginal product of the 1.th worker is 1. units of output per dayK the marginal product of the 11th worker is % units of output per day. 'he firm pays its workers a wage of 01?. per day. a. or the 1.th worker, the value of the marginal product of la+or is 09.. +. or the 1.th worker, the value of the marginal product of la+or is 0"9.. c. or the 1.th worker, the value of the marginal product of la+or is 01... d. or the 1.th worker, the value of the marginal product of la+or is 01,9... " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Analytical
"1?
?7.

,rairie *a+inets produces and sells custom kitchen ca+inets. 'he firm has determined that if it hires 1. workers, it can produce 1. sets of ca+inets per day. If it hires 11 workers, it can produce 1" sets of ca+inets per day. It sells each set of ca+inets for 0",..., and it pays each of its workers 0".. per day. <hich of the following is correctG a. or the 11th worker, the value of the marginal product of la+or is 03... +. or the 11th worker, the value of the marginal product of la+or is 03,.... c. 'he firm should not hire the 11th worker since hiring this worker reduces profit. d. In order to Eustify hiring the 11th worker the firm will need to raise the price of a set of ca+inets. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Analytical ?%.
or a competitive, profit&maximi>ing firm, the demand curve for la+or will shift in response to a change in the a. wage rate. +. 4uantity of la+or demanded. c. price of the product that the firm sells. d. an increase in the supply of la+or. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Applicative ?:.
)mega *ustom *a+inets produces and sells custom +athroom vanities. 'he firm has determined that if it hires 1. workers, it can produce ". vanities per week. If it hires 11 workers, it can produce "" vanities per week. It sells each vanity for 0%.., and it pays each of its workers 01,... per week. <hich of the following is correctG a. or the 11th worker, the marginal profit is 0?... +. or the 11th worker, the marginal revenue product is 0",.... c. 'he firm is maximi>ing its profit. d. If the firm is employing 11 workers, then its profit would increase if it cut +ack to 1. workers. 1 #$ : '),: 1%&1 NA': Analytic ,roduction function
ANS: A !I : ()*: (a+or markets -S*: Analytical 7..
Suppose a la+or&augmenting technology were developed for a product that increased the marginal product of la+or for all workers. <hich of the following would happen in the la+or market for this productG a. !emand would decrease. +. !emand would increase. c. Supply would decrease. d. Supply would increase. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Applicative Scenario 18-2
Nertrude Oelp owns three +oats that participate in commercial fishing for fresh ,acific salmon off the coast of Alaska. As part of her +usiness she hires a captain and several crew mem+ers for each +oat. In the market for fresh ,acific salmon, there are thousands of firms like NertrudeFs. <hile Nertrude usually catches a significant num+er of fish each year, her contri+ution to the entire harvest of salmon is negligi+le relative to the si>e of the market. 71. Refer to Scenario 18$.. ;ased on the given information, it is likely that NertrudeFs firm has a. some influence over the wages paid to crew mem+ers +ut no influence over the price of salmon. +. some influence over the price of salmon +ut no influence over the wages paid to crew mem+ers. c. some influence over +oth the price of salmon and the wages paid to crew mem+ers. d. no influence over either the price of salmon or the wages paid to crew mem+ers. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ! !I : ()*: (a+or markets -S*: Applicative

7".
"17
Refer to Scenario 18$.. <hen Nertrude participates in the la+or market to hire crew mem+ers for her +oats, she is most likely considered a a. demander of la+or services. +. supplier of la+or services. c. demander of capital. d. supplier of capital. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: A !I : ()*: (a+or markets -S*: Applicative 71.
Refer to Scenario 18$.. If the price of fresh ,acific salmon were to decrease significantly, it is most likely that Nertrude would a. reduce her demand for crew mem+ers. +. hire more +oats. c. +ecome a seller in at least one factor market. d. hire more crew mem+ers. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: A !I : ()*: (a+or markets -S*: Applicative 73.
Refer to Scenario 18$.. If Nertrude is a competitor in +oth the fresh ,acific salmon market and in the market for crew mem+ers, she is called a price a. taker in the salmon market and a wage setter in the crew market. +. taker in the crew market and a price setter in the salmon market. c. taker in +oth markets. d. setter in +oth markets. " #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: * !I : ()*: (a+or markets -S*: Applicative 79.
Refer to Scenario 18$.. In the fresh ,acific salmon product market, Nertrude has some control over a. the price she charges for her fresh salmon. +. the 4uantity of fresh salmon that she supplies to the market. c. the competitive environment of the market. d. the supply of la+or in the market. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Applicative 7?.
Refer to Scenario 18$.. If Nertrude is a price taker in the la+or market, she can choose a. the price at which she will sell the fish she catches. +. how many crew mem+ers she will hire. c. the wages that she will pay to her crew mem+ers. d. All of the a+ove. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
Refer to Scenario 18$.. (a+or&market theory assumes that NertrudeFs demand for crew mem+ers and her supply of fresh ,acific salmon result from her a. intrinsic desire to hire crew mem+ers. +. primary goal of maximi>ing profit. c. altruistic motives to provide fresh salmon to consumers. d. desire to strike a +alance +etween environmental concerns and maximum profit. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand
ANS: ; !I : ()*: (a+or markets -S*: Applicative
"1%
7%.

'he following ta+le shows the num+er of calculators that can +e assem+led per week +y various num+ers of workers. If the price per calculator in a perfectly competitive product market is 0%, how many workers would the firm employ if the weekly wage rate is 0%..G 0uantit1 of La(or . 1 " 1 3 9 a. +. c. d. 1 " 1 3 * !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic !u'(er of Ca,cu,ators Per "eek . ".. 1?. 3%. 9?. ?..
ANS: ()*: '),: -S*: 7:.
;ill is trying to convince the owner of a pi>>a shop to hire him. Ie argues that he could help the shop sell an additional five pi>>as per day at the market price of 0% each. If the facts are not in dispute, +ut the owner does not hire him, then a. the wage rate must +e less than 03. per day. +. hiring ;ill would involve a negative marginal product. c. the wage rate must +e more than 03. per day. d. the wage rate must +e less than 0% per day. * !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
ANS: ()*: '),: -S*: %..
Suppose that eight workers can manufacture 7. radios per day and that nine workers can manufacture :. radios per day. If radios can +e sold for 01. each, the value of marginal product of the ninth worker is a. ". radios. +. :. radios. c. 0"... d. 0:... " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: * !I : ()*: (a+or markets -S*: Analytical %1.
2alue of marginal product is defined as the additional a. output a firm would receive after hiring one more factor of production. +. cost of hiring one more factor of production. c. revenue earned from selling one more unit of product. d. revenue earned from hiring one more factor of production. 1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: ! !I : ()*: (a+or markets -S*: !efinitional %".
'he marginal product of la+or is defined as the change in a. output per additional unit of revenue. +. output per additional unit of la+or. c. revenue per additional unit of la+or. d. revenue per additional unit of output.

ANS: ; !I : ()*: (a+or markets -S*: !efinitional %1. 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
"1:
'he marginal product of la+or is a. the increase in the amount of output from an additional unit of la+or. +. the total amount of output divided +y the total units of la+or. c. total revenue minus total cost. d. also called the marginal profit. 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: A !I : ()*: (a+or markets -S*: !efinitional Table 18-3
0uantit1 of La(or . 1 " 1 3 9 %3.
!u'(er of +ase(a,,s Per &a1 . 1.. "3. 1?. 33. 9..
Refer to Ta(,e 18$2. 'his ta+le descri+es the num+er of +ase+alls a manufacturer can produce per day with different 4uantities of la+or. $ach +ase+all sells for 09 in a competitive market. or which level of employment is the marginal product of la+or greatestG a. 1 worker +. " workers c. 1 workers d. 3 workers 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: ; !I : ()*: (a+or markets -S*: Analytical %9.
Refer to Ta(,e 18$2. 'his ta+le descri+es the num+er of +ase+alls a manufacturer can produce per day with different 4uantities of la+or. $ach +ase+all sells for 09 in a competitive market. <hat is the total revenue per day that the firm will earn if it employs five workersG a. 09... +. 01... c. 0","... d. 0",9... ! !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
ANS: ()*: '),: -S*: %?.
Refer to Ta(,e 18$2. 'his ta+le descri+es the num+er of +ase+alls a manufacturer can produce per day with different 4uantities of la+or. $ach +ase+all sells for 09 in a competitive market. <hat is the marginal revenue product of the third workerG a. 1". +ase+alls. +. 01.. c. 03.. d. 0?.. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: ! !I : ()*: (a+or markets -S*: Analytical
"".
%7.

Refer to Ta(,e 18$2. 'his ta+le descri+es the num+er of +ase+alls a manufacturer can produce per day with different 4uantities of la+or. $ach +ase+all sells for 0".9. in a competitive market. <hat is the marginal revenue product of the fourth workerG a. 0".. +. 01.. c. 03.. d. 09.. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: A !I : ()*: (a+or markets -S*: Analytical %%.
Refer to Ta(,e 18$2. 'his ta+le descri+es the num+er of +ase+alls a manufacturer can produce per day with different 4uantities of la+or. $ach +ase+all sells for 09 in a competitive market and the firm pays each unit of la+or a wage e4ual to 01". per day. Iow many units of la+or should the firm hire to maximi>e profitG a. " units +. 1 units c. 3 units d. 9 units " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: * !I : ()*: (a+or markets -S*: Analytical %:.
Refer to Ta(,e 18$2. 'his ta+le descri+es the num+er of +ase+alls a manufacturer can produce per day with different 4uantities of la+or. $ach +ase+all sells for 0".9. in a competitive market and the firm pays each unit of la+or a wage e4ual to 0""9 per day. Iow many units of la+or should the firm hire to maximi>e profitG a. " units +. 1 units c. 3 units d. 9 units " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: ; !I : ()*: (a+or markets -S*: Analytical :..
<hen la+or is the only input a firm uses, the marginal cost of a unit of output can +e defined as a. the marginal revenue multiplied +y the wage. +. the marginal product of la+or multiplied +y the wage. c. the wage divided +y the marginal product of la+or. d. the marginal product of la+or divided +y the wage. 1 #$ : '),: 1%&1 NA': Analytic (a+or demand

Table 18-4 *onsider the following daily production data for <ills Nolf ;alls. <ills sells golf +alls for 0".9. cents each and pays the workers a wage of 01"9 per day.
""1
Mar/ina, La(or )nu'(er Product of of 3orkers* 0uantit1 )/o,f La(or )/o,f (a,,s (a,,s per da1* per da1* . . 1 ".. " 1%. 1 93. 3 ?%. 9 %.. ? :.. :1.
4a,ue of the Mar/ina, Product of La(or
"a/e )per da1*
Mar/ina, Profit
Refer to Ta(,e 18$5. <hat is the third workerFs marginal product of la+orG a. 1". golf +alls +. 13. golf +alls c. 1?. golf +alls d. 1%. golf +alls " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: * !I : ()*: (a+or markets -S*: Analytical :".
Refer to Ta(,e 18$5. <hat is the fourth workerFs marginal product of la+orG a. 1". golf +alls +. 13. golf +alls c. 1?. golf +alls d. 1%. golf +alls " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: ; !I : ()*: (a+or markets -S*: Analytical :1.
Refer to Ta(,e 18$5. <hat is the sixth workerFs marginal product of la+orG a. 1.. golf +alls +. 1". golf +alls c. 13. golf +alls d. 1?. golf +alls " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
ANS: A !I : ()*: (a+or markets -S*: Analytical :3.
Refer to Ta(,e 18$5. <hat is the value of the marginal product of the second workerG a. 01%. +. 039. c. 0:9. d. 01,.%. 1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: ; !I : ()*: (a+or markets -S*: Analytical :9.
Refer to Ta(,e 18$5. <hat is the value of the marginal product of the fifth workerG a. 01". +. 01.. c. 0",... d. 0",1..
"""

1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: ; !I : ()*: (a+or markets -S*: Analytical :?.
Refer to Ta(,e 18$5. <hat is the value of the marginal product of the first workerG a. 0".. +. 03.. c. 09.. d. 07.. 1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: * !I : ()*: (a+or markets -S*: Analytical :7.
Refer to Ta(,e 18$5. 'he marginal product of la+or +egins to diminish with the addition of which workerG a. the 1st worker +. the "nd worker c. the 1rd worker d. the 3th worker 1 #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
ANS: ; !I : ()*: (a+or markets -S*: Analytical :%.
Refer to Ta(,e 18$5. <hat is the marginal profit of the fourth workerG a. 0"9 +. 0117 c. 019. d. 01,7.. A !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
ANS: ()*: '),: -S*: ::.
Refer to Ta(,e 18$5. <hat is the marginal profit of the sixth workerG a. 01" +. 0"9 c. 09. d. 079 ! !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
ANS: ()*: '),: -S*:
1... Refer to Ta(,e 18$5. Assuming <ills is a competitive, profit&maximi>ing firm, how many workers will the firm hireG a. 1 workers +. 3 workers c. 9 workers d. ? workers ANS: ()*: '),: -S*: ; !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
1.1. Refer to Ta(,e 18$5. Assume that <ills is a competitive, profit&maximi>ing firm. If the market price of golf +alls decreases from 0".9. to 0"..., how many workers would the firm then hireG a. " workers +. 1 workers c. 3 workers d. 9 workers

ANS: ()*: '),: -S*: A !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
""1
1.". Refer to Ta(,e 18$5. Suppose that there is a technological advance that allows <ills employees to produce more golf +alls than they could +efore. ;ecause of this change, a. the firmDs demand for la+or shifts right. +. the firmDs demand for la+or shifts left. c. the firmDs supply of la+or shifts right. d. the firmDs supply of la+or shifts left. ANS: A !I : ()*: (a+or markets -S*: Analytical 1.1. 5i8 5ii8 5iii8 " #$ : '),: 1%&1 NA': Analytic (a+or demand
or maximum profit, a firm hires la+or up to the point at which the wage e4uals the value of the marginal product of la+or. the marginal cost of an additional unit of output. output price multiplied +y the marginal product of la+or. a. +. c. d. 5i8 and 5ii8 5i8 and 5iii8 5ii8 and 5iii8 All of the a+ove are correct. " #$ : '),: 1%&1 NA': Analytic (a+or demand = 2alue of the marginal product
ANS: ; !I : ()*: (a+or markets -S*: Analytical Table 18-5 !u'(er of "orkers . 1 " 1 3 9
utput . 1..
Mar/ina, Product of La(or
4a,ue of Mar/ina, Product of La(or 01,... 0 %.. 0 3..
"a/e 09.. 09.. 09.. 09.. 09..
Mar/ina, Profit 09.. 01..
%. ?. "%. ".
1.3. Refer to Ta(,e 18$6. <hat is the market price of the final goodG a. 09 +. 0? c. 0% d. 01. ANS: ()*: '),: -S*: ! !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
1.9. Refer to Ta(,e 18$6. It is apparent from this ta+le that increasing marginal product a. occurs only after the first worker is hired. +. occurs only after the second worker is hired. c. occurs only after the third worker is hired. d. never occurs. ANS: ! !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
""3
1.?. Refer to Ta(,e 18$6. If the firm hires two workers, the two workers together produce a. %. units. +. 1.. units. c. 1%. units. d. ".. units. ANS: ()*: '),: -S*: * !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
1.7. Refer to Ta(,e 18$6. <hat is the marginal product of the fourth workerG a. 1. +. 3. c. 1.. d. 3.. ANS: ; !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
1.%. Refer to Ta(,e 18$6. 'he fact that the marginal product falls as the num+er of workers increases illustrates a property called a. diminishing marginal product. +. utility maximi>ation. c. supply and demand. d. la+or theory. ANS: A !I : ()*: (a+or markets -S*: !efinitional 1 #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
1.:. Refer to Ta(,e 18$6. 'he fact that the production function exhi+its diminishing marginal productivity implies that a. total production decreases +eyond a certain level of output. +. la+or markets are not always competitive. c. the additions to total output get smaller as more workers are hired. d. marginal profit is negative. ANS: * !I : ()*: (a+or markets -S*: !efinitional 1 #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
11.. Refer to Ta(,e 18$6. <hat is the marginal profit of the fourth workerG a. 03.. +. 01.. c. 0. d. 01.. ANS: ()*: '),: -S*: ! !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
111. Refer to Ta(,e 18$6. <hat is the fourth workerFs marginal revenue productG a. 01.. +. 03. c. 03.. d. 09.. ANS: ()*: '),: -S*: * !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic

11". Refer to Ta(,e 18$6. 'o maximi>e its profit, how many workers will the firm hireG a. " +. 1 c. 3 d. 9 ANS: ()*: '),: -S*: ; !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
""9
111. Refer to Ta(,e 18$6. 'o maximi>e its profit, the firm will hire workers as long as the value of the marginal product of la+or e4uals or exceeds a. 01... +. 0"... c. 03... d. 09... ANS: ! !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
113. <hich of the following statements is correctG a. 'he value of the marginal product curve is the la+or demand curve for competitive, profit& maximi>ing firms. +. A competitive, profit&maximi>ing firm hires workers up to the point where the value of the marginal product of la+or e4uals the wage. c. ;y hiring la+or up to the point where the value of the marginal product of la+or e4uals the wage, the firm is producing where price e4uals marginal cost. d. All of the a+ove are correct. ANS: ()*: '),: -S*: ! !I : " #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Interpretive NA': Analytic
119. !ave is the owner of !aveFs ,i>>a ,alace. !ave is a profit&maximi>ing owner whose firm operates in a competitive market. An additional worker costs !ave 0".. and has a marginal productivity of 3. pi>>as. Assuming no other varia+le costs, what is the marginal cost of a pi>>aG a. 0".. +. 0% c. 09 d. 'here is insufficient information availa+le to answer this 4uestion. ANS: ()*: '),: -S*: * !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
11?. Sally runs a hair styling salon. Sally is a profit&maximi>ing owner whose firm operates in a competitive market. 'he marginal cost of a haircut is 07. <hat is the maximum wage that Sally will pay her stylistsG a. less than 07 per haircut +. 07 per haircut c. more than 07 haircut d. 'here is insufficient information to answer this 4uestion. ANS: ()*: '),: -S*: ! !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
""?
117. !ianeFs Auto <orld installs tires on automo+iles, light trucks, and sport utility vehicles. She is a profit& maximi>ing +usiness owner whose firm operates in a competitive market. 'he marginal cost of installing a tire is 01.. 'he marginal productivity of the last worker that !iane hired was " tires per hour. <hat is the maximum hourly wage that !iane was willing to pay the last worker hiredG a. 09 +. 01. c. 0". d. 'here is insufficient information to answer this 4uestion. ANS: ()*: '),: -S*: * !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
Table 18-6 Mar/ina, Product of La(or &&& 3.. 1.. "9. 1.. 4a,ue of Mar/ina, Product of La(or &&& 01".. 0 :.. 0 79. 0 1.. Mar/ina, Profit &&& 0%.. 09.. 019. &01..
La(or . 1 " 1 3
utput . 3.. 7.. :9. 1.9.
"a/e &&& 03.. 03.. 03.. 03..
11%. Refer to Ta(,e 18$7- 'he price of output is a. 01. +. 0". c. 01. d. 03... ANS: * !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
11:. Refer to Ta(,e 18$7- Iow many workers should the firm hireG a. 1 +. " c. 1 d. 3 ANS: ()*: '),: -S*: * !I : " #$ : 1%&1 (a+or markets 2alue of the marginal product = -arginal product of la+or Analytical NA': Analytic
Table 18-7 Mar/ina, Product of La(or &&& 1.. ".. 1.. ** 4a,ue of Mar/ina, Product of La(or &&& 0?.. AA 0".. !! Mar/ina, Profit &&& 01.. 01.. ;; &0"..
La(or . 1 " 1 3
utput . 1.. 9.. ?.. ?9.
"a/e &&& 01.. 01.. 01.. 01..
1".. Refer to Ta(,e 18$8- <hat is the value for the cell la+eled AAG a. 0?.. +. 09.. c. 03.. d. 01..

ANS: * !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
""7
1"1. Refer to Ta(,e 18$8- <hat is the value for the cell la+eled ;;G a. 01.. +. 0".. c. 01.. d. 01.. ANS: ! !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
1"". Refer to Ta(,e 18$8- <hat is the value for the cell la+eled **G a. ?9. +. ?.. c. 1.. d. 9. ANS: ! !I : ()*: (a+or markets -S*: Analytical 1 #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
1"1. Refer to Ta(,e 18$8- <hat is the value for the cell la+eled !!G a. 01.. +. 01.. c. 01.. d. 09. ANS: * !I : ()*: (a+or markets -S*: Analytical Table 18-8 &a1s of La(or . 1 " 1 3 9 ? Units of utput . 1. 1% "9 1. 11 13 1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
1"3. Refer to Ta(,e 18$8- <hat is the marginal product of the third workerG a. 7 +. % c. "9 d. 79 ANS: A !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
1"9. Refer to Ta(,e 18$8- Suppose that the firm pays its workers 039 per day. $ach unit of output sells for 01.. Iow many days of la+or should the firm hireG a. 1 +. " c. 1 d. 3
""%
ANS: ()*: '),: -S*:

! !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
1"?. Refer to Ta(,e 18$8- Suppose that the firm pays its workers 0%. per day. $ach unit of output sells for 019. Iow many days of la+or should the firm hireG a. 1 +. 3 c. 9 d. ? ANS: ()*: '),: -S*: A !I : 1 #$ : 1%&1 (a+or markets -arginal product of la+or = 2alue of the marginal product Analytical NA': Analytic
1"7. If hiring more workers results in each additional worker contri+uting successively smaller amounts of output, then a. diminishing profita+ility is present. +. diminishing marginal cost is present. c. diminishing marginal product is present. d. diminishing total product is present. ANS: * !I : ()*: (a+or markets -S*: !efinitional 1 #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
1"%. !iminishing marginal product affects the shape of the production function in what wayG a. 'he slope of the production function decreases as the 4uantity of input increases. +. 'he production function +ecomes steeper as the 4uantity of input increases. c. 'he production function slopes downward. d. 'he production function is hori>ontal +eyond a certain 4uantity of input. ANS: A !I : " #$ : 1%&1 ()*: (a+or markets '),: !iminishing marginal product = ,roduction function 1":. !iminishing marginal product is closely related to a. diminishing total cost. +. diminishing marginal cost. c. increasing price. d. increasing marginal cost. ANS: ! !I : ()*: (a+or markets -S*: Interpretive " #$ : '),: 1%&1 NA': Analytic !iminishing marginal product NA': Analytic -S*: Applicative
11.. !iminishing marginal product occurs when a. the marginal product of an input increases as the 4uantity of the input increases. +. the marginal product of an input decreases as the 4uantity of the input increases. c. total output increases as the 4uantity of an input increases. d. total output decreases as the 4uantity of an input increases. ANS: ; !I : ()*: (a+or markets -S*: !efinitional 1 #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
111. !iminishing marginal product occurs when a. the increases to total output are declining. +. marginal product is decreasing. c. total output is decreasing. d. ;oth a and + are correct.

ANS: ! !I : ()*: (a+or markets -S*: Interpretive " #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
"":
11". <hen a production function exhi+its a diminishing, +ut positive, marginal product of la+or, a. output increases, +ut at an increasing rate, as more workers are employed. +. output increases, +ut at a decreasing rate, as more workers are employed. c. output declines as more workers are employed. d. the effects on marginal product are am+iguous. ANS: ; !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
111. If a firm experiences diminishing marginal productivity of la+or, the marginal product a. increases as total product increases. +. decreases as total product increases. c. increases as total product decreases. d. decreases as total product decreases. ANS: ; !I : ()*: (a+or markets -S*: !efinitional 1 #$ : '),: 1%&1 NA': Analytic !iminishing marginal product
113. A profit&maximi>ing, competitive firm for which the marginal product of la+or is diminishing also experiences a. a perfectly inelastic supply of la+or. +. a perfectly elastic supply of la+or. c. a downward&sloping demand for la+or. d. an upward&sloping demand for la+or. ANS: * !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic !iminishing marginal product = (a+or demand
119. 'ypically, as a firm hires additional workers, the marginal product of la+or a. decreases and the value of the marginal product of la+or decreases. +. stays constant and the value of the marginal product of la+or decreases. c. decreases and the value of the marginal product of la+or stays constant. d. decreases and the value of the marginal product of la+or increases. ANS: ()*: '),: -S*: A !I : " #$ : 1%&1 (a+or markets !iminishing marginal product = 2alue of the marginal product Applicative NA': Analytic
11?. <hen deciding whether to hire an additional worker, firms look at how the additional worker would affect a. costs only. +. revenue only. c. output only. d. profit. ANS: ! !I : ()*: (a+or markets -S*: Interpretive " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
117. 'he value of the marginal product of any input is e4ual to the marginal product of that input multiplied +y the a. wage. +. marginal cost of the output. c. change in total profit. d. market price of the output. ANS: ! !I : ()*: (a+or markets -S*: !efinitional " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
"1.
11%. 'he value of the marginal product of la+or is e4ual to the change in a. marginal cost caused +y the addition of the last worker. +. total cost caused +y the addition of the last worker. c. total revenue caused +y the addition of the last worker. d. total profit caused +y the addition of the last worker. ANS: * !I : ()*: (a+or markets -S*: !efinitional " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
11:. <hen a firm experiences diminishing marginal product, what is the shape of the curve that represents the value of the marginal product of la+orG a. /&shaped +. flat c. downward sloping d. upward sloping ANS: * !I : ()*: (a+or markets -S*: Interpretive " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
13.. 'o maximi>e profit, a competitive firm hires workers up to the point of intersection of the a. marginal product curve and the wage line. +. value of marginal product curve and the wage line. c. value of marginal product curve and the marginal revenue curve. d. total revenue curve and the wage line. ANS: ; !I : ()*: (a+or markets -S*: Interpretive " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
131. 'he negative slope of the value of marginal product curve is most easily explained +y a. tight la+or markets. +. a surplus of workers. c. diminishing marginal product. d. diminishing marginal cost. ANS: * !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
13". If the value of the marginal product of la+or exceeds the wage, then hiring another worker increases the firmFs a. profit. +. total cost. c. total revenue. d. All of the a+ove are correct. ANS: ! !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
131. If the value of the marginal product of la+or exceeds the wage, then the firm could a. increase profit +y hiring additional la+or. +. increase profit +y reducing the amount of la+or hired. c. increase revenue +y lowering output. d. reduce total cost +y hiring additional workers. ANS: A !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product

133. If the value of the marginal product of la+or is less than the wage, then the firm could a. increase profit +y hiring additional la+or. +. increase profit +y reducing the amount of la+or hired. c. increase revenue +y lowering output. d. reduce total cost +y hiring additional workers. ANS: ; !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
"11
139. If the wage exceeds the value of the marginal product of la+or, then hiring another worker a. decreases the firmFs total revenue. +. increases the firmFs profit. c. decreases the firmFs total cost. d. decreases the firmDs profit. ANS: ! !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
13?. A competitive, profit&maximi>ing firm hires workers up to the point where the a. marginal product e4uals >ero. +. marginal revenue product e4uals >ero. c. marginal product e4uals the wage. d. value of the marginal product e4uals the wage. ANS: ! !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic (a+or demand
137. A workerFs contri+ution to a firmFs revenue is measured directly +y the workerFs a. marginal product. +. value of marginal product. c. marginal product multiplied +y the workerDs wage. d. value of marginal product multiplied +y the output price. ANS: ; !I : ()*: (a+or markets -S*: Interpretive " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
13%. <e o+serve a profit&maximi>ing firm hiring its 91st employee. It is possi+le to infer that, when 9. employees are hired, the a. wage exceeds the value of the marginal product of la+or. +. value of the marginal product of la+or exceeds the wage. c. marginal product of la+or is increasing. d. firm is attempting to increase its market share. ANS: ; !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
13:. A profit&maximi>ing, competitive firm will always hire an additional worker when the additional worker makes a positive contri+ution to a. total revenue. +. total profit. c. the value of the marginal product of la+or. d. marginal revenue. ANS: ; !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
"1"
19.. Suppose that in Manuary a profit&maximi>ing firm has "9 employees. ;y e+ruary, the firm has decreased employment. )ne can infer that, when "9 employees are hired, the a. firm is losing market share. +. firm is minimi>ing losses. c. wage exceeds the value of the marginal product of la+or. d. value of the marginal product of la+or exceeds the wage. ANS: * !I : ()*: (a+or markets -S*: Analytical " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
191. A competitive firm will hire workers up to the point at which the value of the marginal product of la+or e4uals the a. average total cost. +. average varia+le cost. c. wage. d. price per unit of output. ANS: * !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
19". *ompetitive firms that maximi>e profit will hire workers until the value of the marginal product of la+or a. e4uals the wage. +. e4uals the price of the final good. c. +egins to fall. d. +egins to rise. ANS: A !I : ()*: (a+or markets -S*: Analytical 191. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
or a profit&maximi>ing competitive firm, the value of marginal product curve is a. always rising. +. falling only when marginal product is rising. c. the la+or supply curve. d. the la+or demand curve. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
ANS: ! !I : ()*: (a+or markets -S*: Interpretive 193. 5i8 5ii8 5iii8
or a competitive firm experiencing diminishing marginal productivity, the value of the marginal product increases when the price of output decreases. changes when marginal product changes. diminishes as the num+er of workers rises. a. +. c. d. 5i8 and 5ii8 5i8 and 5iii8 5ii8 and 5iii8 All of the a+ove are correct. " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
199. 'he value of the marginal product of la+or is calculated +y multiplying the a. price of output +y the 4uantity of la+or. +. price of output +y the marginal product of la+or. c. wage +y the 4uantity of la+or. d. wage +y the marginal product of la+or. ANS: ; !I : ()*: (a+or markets -S*: !efinitional 1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
"11
19?. <hen a firm hires la+or up to the point where the wage is e4ual to the value of the marginal product of la+or, it is a. minimi>ing la+or costs. +. guaranteeing that la+or costs do not exceed fixed costs. c. maximi>ing the num+er of workers it can hire and still experience a positive profit. d. maximi>ing profit. ANS: ! !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
197. <hich of the following events would +ring a+out a change in the value of the marginal product of la+orG a. 'echnological progress +. A change in the marginal product of la+or c. A change in the price of the product that the firm sells d. All of the a+ove are correct. ANS: ! !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
19%. 'he value of the marginal product is a. total revenue minus total cost. +. the change in total output divided +y the change in an input. c. the marginal product of an input times the price of the output. d. total output divided +y total inputs. ANS: * !I : ()*: (a+or markets -S*: !efinitional Figure 18-3 'he figure +elow shows the production function for a particular firm. 1 #$ : '),: 1%&1 NA': Analytic 2alue of the marginal product
Q
1.9 1.. :.
7.
3.
"
19:. Refer to Fi/ure 18$2- 'he marginal product of the third worker is a. ". units. +. 1. units. c. 3. units. d. 7. units.
"13

" #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
1?.. Refer to Fi/ure 18$2- Suppose the firm pays a wage e4ual to 01?. per unit of la+or and sells its output at 01. per unit. <hat is the value of the marginal product of la+or for the fourth workerG a. 1. units +. 01.. c. 01,... d. 01,?.. ANS: ; !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
1?1. Refer to Fi/ure 18$2- Suppose the firm pays a wage e4ual to 01?. per unit of la+or and sells its output at 01. per unit. Iow many units of la+or should the firm hire to maximi>e profitG a. " units +. 1 units c. 3 units d. 9 units ANS: ; !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
1?". Refer to Fi/ure 18$2- Suppose the firm pays a wage e4ual to 01". per unit of la+or and sells its output at 019 per unit. Iow many units of la+or should the firm hire to maximi>e profitG a. " units +. 1 units c. 3 units d. 9 units ANS: A !I : ()*: (a+or markets -S*: Applicative " #$ : '),: 1%&1 NA': Analytic -arginal product of la+or
Sec#. $ The Markets for the Factors of Production $ The Supp,1 of La(or
MULT%PLE CH %CE 1. Lour +est friend receives a pay raise at her part&time Eo+ from 0% to 01. per hour. She used to work ". hours per week, +ut now she decides to work 1? hours per week in order to spend more time studying economics. or this price range, her la+or supply curve is a. vertical. +. hori>ontal. c. upward sloping. d. +ackward sloping. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ! NA': Analytic -S*: Analytical ".
Lour +est friend receives a pay raise at her part&time Eo+ from 0% to 01. per hour. She used to work 1? hours per week, +ut now she decides to work ". hours per week. or this price range, her la+or supply curve is a. vertical. +. hori>ontal. c. upward sloping. d. +ackward sloping. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Analytical

1. <hich of the following would shift a market la+or supply curve to the rightG a. an increase in the price of output +. an increase in immigration c. a la+or&saving technological change d. a decrease in the wage rate !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
"19
ANS: ; NA': Analytic -S*: Applicative 3.
<hich of the following would shift a market la+or supply curve to the leftG a. an increase in the wage paid to workers in a competing market +. la+or&augmenting technology c. a change in worker tastes so that workers want to retire later d. a decrease in the supply of other factors such as capital !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: A NA': Analytic -S*: Applicative 9.
or a worker, the opportunity cost of an hour of leisure a. rises +y 09 when his or her wage rises +y 09 per hour. +. falls +y 09 when his or her wage rises +y 09 per hour. c. is the same for a corporate chief executive officer as it is for a gar+age&collection worker. d. is determined +y factors that are unrelated to his or her hourly wage.
ANS: A !I : " #$ : 1%&" NA': Analytic ()*: 'he study of economics, and definitions of economics '),: )pportunity cost = <ages -S*: Interpretive ?. Immigration is an important a. explanation for the failure of firms to operate on their la+or&demand curves. +. explanation for the failure of firms to operate on their output&supply curves. c. source of shifts in la+or demand. d. source of shifts in la+or supply. !I : 1 #$ : 1%&" ()*: /nderstanding and applying economic models -S*: Interpretive
ANS: ! NA': Analytic '),: (a+or supply Scenario 18-3
Merry has two Eo+s, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns 01. per hour. !uring the summer, he drives a tour +us around the ski resort, earning 01" per hour. 7. Refer to Scenario 18$2. !uring the winter months, what is MerryFs opportunity cost of taking an hour off work to go skiingG a. 01" +. +etween 01. and 01" c. 01. d. less than 01. !I : 1 #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Interpretive %.
Refer to Scenario 18$2. !uring the summer months, what is MerryFs opportunity cost of taking an hour off work to go hikingG a. 01" +. +etween 01. and 01" c. 01. d. less than 01.
"1?

!I : 1 #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: A NA': Analytic -S*: Interpretive :.
Refer to Scenario 18$2. Assume that Merry has an upward&sloping la+or supply curve. If the opportunity cost of MerryFs leisure time increases, he will respond +y working a. more hours. +. fewer hours. c. an e4ual num+er of hours. d. a num+er of hours that cannot +e determined from the information. 'he la+or demand curve is needed to make this determination. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: A NA': Analytic -S*: Interpretive 1..
Refer to Scenario 18$2. If Merry takes fewer hours of leisure in the summer than in the winter, we can assume that his la+or supply curve a. is hori>ontal. +. is vertical. c. slopes upward. d. slopes downward. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Interpretive 11.
<hich of the following events would shift the la+or supply curveG a. *hanges in the num+er of women willing to work +. Immigration of workers c. *hanging attitudes towards work d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ! NA': Analytic -S*: Applicative 1".
'he la+or supply curve shifts when a. employers need to hire more people. +. employers develop new technology. c. workers change the num+er of hours that they want to work at any given wage. d. workers +ecome more productive. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Applicative 11.
'he la+or supply curve is fundamentally a representation of the trade&off people face +etween which of the followingG a. <ork and wage +. <ork and leisure c. <age and productivity d. 'echnology and wage !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ; NA': Analytic -S*: Interpretive 13.
<hat does an upward&sloping la+or supply curve meanG a. It means that workers prefer to +uy more leisure time when their incomes increase. +. It means that workers prefer to supply less la+or when wages are high. c. It means that an increase in the opportunity cost of leisure leads workers to increase the 4uantity of la+or they supply. d. All of the a+ove are correct.

ANS: * NA': Analytic -S*: Interpretive 19. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
"17
If workers respond to an increase in the opportunity cost of leisure +y taking less leisure, then their la+or supply curve is a. hori>ontal. +. vertical. c. downward sloping. d. upward sloping. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ! NA': Analytic -S*: Interpretive 1?.
If workers respond to an increase in the opportunity cost of leisure +y taking more leisure, then their la+or supply curve is a. upward sloping. +. +ackward sloping. c. hori>ontal. d. vertical. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
<hat happens to la+or supply in the pear&picking market when the wage paid to apple pickers increasesG a. 'he la+or supply will stay unchanged until the wages paid to pear pickers change. +. 'he la+or supply will decrease. c. 'he la+or supply will increase. d. 'he la+or supply may fall or rise, depending on the price of pears. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ; NA': Analytic -S*: Applicative 1%.
<hat happens to the la+or supply curves in +oth countries when -exican workers leave -exico and move to the /nited StatesG a. (a+or supply decreases in -exico and decreases in the /nited States. +. (a+or supply increases in the /nited States and increases in -exico. c. (a+or supply increases in the /nited States and decreases in -exico. d. (a+or supply increases in -exico and decreases in /nited States. !I : 1 #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Applicative 1:.
A household mem+erFs decision a+out how much la+or to supply is most closely linked to a. the supply of factors of production other than la+or. +. technological change. c. the tradeoff +etween leisure and work. d. immigration trends. !I : 1 #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Interpretive "..
Among the people who are characteri>ed +elow, who has the highest opportunity cost of leisureG a. an attorney who earns 0".. per hour and who plays golf during her leisure time +. a medical doctor who earns 0"1. per hour and who sleeps during his leisure time c. a retail clerk who earns 019 per hour and who watches '2 during her leisure time d. a waiter who earns 01" per hour and who reads poetry during his leisure time
"1%

!I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ; NA': Analytic -S*: Applicative "1.
'he la+or supply curve reflects how a. workersF decisions a+out the la+or&leisure tradeoff respond to a change in the wage. +. workersF decisions a+out the opportunity cost of la+or respond to a change in the 4uantity of la+or supplied. c. firmsF decisions a+out the la+or&leisure tradeoff respond to the 4uantity of la+or demanded. d. firmsF decisions a+out how the 4uantity of la+or they hire respond to changes in their opportunities to earn profits. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: A NA': Analytic -S*: Interpretive "".
If $mmaFs individual la+or supply curve is upward sloping, then $mma responds to an increase in a. the wage +y working more hours per week. +. the opportunity cost of leisure +y working fewer hours per week. c. the opportunity cost of leisure +y taking more hours of leisure per week. d. ;oth a and + are correct. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: A NA': Analytic -S*: Applicative "1.
<hich of the following statements is correctG An individual workerFs la+or supply curve a. can never +e +ackward sloping. +. slopes +ackward if that person responds to a higher wage +y taking fewer hours of leisure per week. c. slopes +ackward if that person responds to a higher opportunity cost of leisure +y working fewer hours per week. d. slopes upward if that person works the same num+er of hours per week, regardless of the opportunity cost of leisure. !I : 1 #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Applicative "3.
Immigration of workers into the /nited States is often an important source of a. increases in the demand for la+or in the /nited States. +. decreases in the demand for la+or in the /nited States. c. increases in the supply of la+or in the /nited States. d. decreases in the supply of la+or in the /nited States. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: * NA': Analytic -S*: Applicative "9.
<hich of the following events would lead to an increase in the supply of la+orG a. 'he price of a firmFs product increases. +. A country experiences an increase in immigrant la+or. c. 'he development of a new la+or&augmenting technology. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&" '),: (a+or supply
ANS: ; NA': Analytic -S*: Applicative "?.
<hat happens to the la+or supply curve for academic economists when the wages paid to government economists increaseG a. 'he la+or supply curve for academic economists shifts to the left. +. 'he la+or supply curve for academic economists shifts to the right. c. 'he la+or supply curve for academic economists will +ecome +ackward&sloping. d. 'he la+or supply curve for academic economists will not change.

ANS: A NA': Analytic -S*: Applicative "7. !I : 1 #$ : ()*: (a+or markets 1%&" '),: (a+or supply
"1:
redFs hourly wage increases from 0% to 01.. <hich of the following descri+es a conse4uence of the increase in redFs wageG a. 'he opportunity cost of redFs leisure time has decreased. +. red may choose to work fewer hours due to the increase in his wage. c. If redDs la+or supply curve is upward sloping, red will choose to work fewer hours. d. ;oth a and + are correct. !I : " #$ : ()*: (a+or markets 1%&" '),: Income effect
ANS: ; NA': Analytic -S*: Analytical
Sec#2 $ The Markets for the Factors of Production $ E9ui,i(riu' in the La(or Market
MULT%PLE CH %CE 1. Suppose that the market for la+or is initially in e4uili+rium. An increase in the price of output will cause a. the e4uili+rium wage and the 4uantity of la+or to +oth rise. +. the e4uili+rium wage and the 4uantity of la+or to +oth fall. c. the e4uili+rium wage to rise and the 4uantity of la+or to fall. d. the e4uili+rium wage to fall and the 4uantity of la+or to rise. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Interpretive ".
Suppose that the market for la+or is initially in e4uili+rium. A decrease in the price of output will cause a. the e4uili+rium wage and the 4uantity of la+or to +oth rise. +. the e4uili+rium wage and the 4uantity of la+or to +oth fall. c. the e4uili+rium wage to rise and the 4uantity of la+or to fall. d. the e4uili+rium wage to fall and the 4uantity of la+or to rise. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
Suppose that the market for la+or is initially in e4uili+rium. If the firm employs la+or&augmenting technology, a. the e4uili+rium wage and the 4uantity of la+or will +oth rise. +. the e4uili+rium wage and the 4uantity of la+or will +oth fall. c. the e4uili+rium wage will rise and the 4uantity of la+or will fall. d. the e4uili+rium wage will fall and the 4uantity of la+or will rise. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Interpretive 3.
Suppose that the market for la+or is initially in e4uili+rium. If the firm employs la+or&saving technology, a. the e4uili+rium wage and the 4uantity of la+or will +oth rise. +. the e4uili+rium wage and the 4uantity of la+or will +oth fall. c. the e4uili+rium wage will rise and the 4uantity of la+or will fall. d. the e4uili+rium wage will fall and the 4uantity of la+or will rise. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ; NA': Analytic -S*: Interpretive
"3.
9.

Suppose that the market for la+or is initially in e4uili+rium. An increase in immigration will cause a. the e4uili+rium wage and the 4uantity of la+or to +oth rise. +. the e4uili+rium wage and the 4uantity of la+or to +oth fall. c. the e4uili+rium wage to rise and the 4uantity of la+or to fall. d. the e4uili+rium wage to fall and the 4uantity of la+or to rise. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Interpretive ?.
Suppose that the market for la+or is initially in e4uili+rium. Suppose that workersD tastes change so that they choose to retire at age 99 rather than age ?7. 'hen a. the e4uili+rium wage and the 4uantity of la+or will +oth rise. +. the e4uili+rium wage and the 4uantity of la+or will +oth fall. c. the e4uili+rium wage will rise and the 4uantity of la+or will fall. d. the e4uili+rium wage will fall and the 4uantity of la+or will rise. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Interpretive Figure 18-4
'his figure +elow shows the la+or market for automo+ile workers. 'he curve la+eled S is the la+or supply curve, and the curves la+eled D1 and D" are the la+or demand curves. )n the hori>ontal axis, L represents the 4uantity of la+or in the market.
!" !1 .
7. Refer to Fi/ure 18$5- <hat is measured along the vertical axis on the graphG a. 'he 4uantity of automo+iles produced +. 'he price of automo+iles c. 'he wage paid to automo+ile workers d. 'ime spent +y workers producing automo+iles !I : 1 #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Interpretive %.
Refer to Fi/ure 18$5- <hich of the following is a possi+le explanation of the shift of the la+or&demand curve from D1 to D"G a. 'he wage earned +y automo+ile workers increased. +. 'he price of automo+iles increased. c. 'he opportunity cost of leisure, as perceived +y automo+ile workers, decreased. d. (arge segments of the population changed their tastes regarding leisure versus work. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ; NA': Analytic -S*: Interpretive

:.
"31
Refer to Fi/ure 18$5- <hich of the following events would most likely explain the shift of the la+or&demand curve from D1 to D"G a. 'he price of automo+iles decreased. +. A large num+er of immigrants entered the automo+ile&worker market. c. A technological advance increased the marginal product of automo+ile workers. d. All of the a+ove events are e4ually&likely explanations. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Interpretive 1..
Refer to Fi/ure 18$5- <hich of the following events would most likely explain a shift of the la+or&demand curve from D" +ack to D1G a. 'he price of automo+iles decreased. +. A large num+er of immigrants entered the automo+ile&worker market. c. A technological advance increased the marginal product of automo+ile workers. d. An increase in the demand for automo+iles. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
A significant slowdown in the growth of productivity persisted in the /.S. economy +etween a. 1:9: and 1:71. +. 1:71 and 1::9. c. 1:71 and the present. d. 1::9 and the present. !I : " #$ : 1%&1 ()*: ,roductivity and growth'),: ,roductivity
ANS: ; NA': Analytic -S*: Interpretive 1".
<hich of the following statements is correctG a. Neither economic theory nor evidence from the /.S. economy suggests that there is a close link +etween productivity and real wages. +. $conomic theory suggests that there is a close link +etween productivity and real wages, +ut evidence from the /.S. economy fails to confirm that link. c. $vidence from the /.S. economy suggests a close link +etween productivity and real wages, +ut economic theory provides no +asis for such a link. d. ;oth economic theory and evidence from the /.S. economy suggest that there is a close link +etween productivity and real wages. !I : " #$ : 1%&1 ()*: ,roductivity and growth'),: ,roductivity = <ages
ANS: ! NA': Analytic -S*: Interpretive 11.
Suppose that technological progress increases the productivity of teachers. <hich of the following accurately descri+es the la+or market for teachers after the technological changeG a. <ages will rise and 4uantity of teachers employed will fall. +. <ages will rise and the 4uantity of teachers employed will rise. c. <ages will fall and the 4uantity of teachers employed will fall. d. <ages will fall and the 4uantity of teachers employed will rise. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
<hich of the following correctly descri+es a representative la+or marketG a. 'he wage adEusts to +alance the supply and demand for la+or. +. 'he wage e4uals the value of the marginal product of la+or. c. An increase in the supply of la+or increases the e4uili+rium wage. d. ;oth a and + are correct.
"3"

!I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Analytical 19.
*onsider the la+or market for computer programmers. !uring the late 1::.s, the value of the marginal product of all computer programmers increased dramatically. Iolding all else e4ual, what effect did this process have on the la+or market for computer programmersG a. 'he e4uili+rium wage increased and the e4uili+rium 4uantity of la+or increased. +. 'he e4uili+rium wage increased and the e4uili+rium 4uantity of la+or decreased. c. 'he e4uili+rium wage decreased and the e4uili+rium 4uantity of la+or increased. d. 'he e4uili+rium wage decreased and the e4uili+rium 4uantity of la+or decreased. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Applicative 1?.
*onsider the la+or market for computer programmers. !uring the late 1::.s, the value of the marginal product of all computer programmers increased dramatically. Iolding all else e4ual, what effect did this process have on the e4uili+rium wage in the la+or market for computer programmersG a. 'he e4uili+rium wage increased. +. 'he e4uili+rium wage decreased. c. 'he e4uili+rium wage did not change. d. It is not possi+le to determine the e4uili+rium wage. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
*onsider the la+or market for computer programmers. !uring the late 1::.s, the value of the marginal product of all computer programmers increased dramatically. Iolding all else e4ual, what effect did this process have on the e4uili+rium 4uantity in the la+or market for computer programmersG a. 'he e4uili+rium 4uantity increased. +. 'he e4uili+rium 4uantity decreased. c. 'he e4uili+rium 4uantity did not change. d. It is not possi+le to determine the e4uili+rium 4uantity. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Applicative 1%.
*onsider the la+or market for computer programmers. ;ecause of the dot.com +oom in the late 1::.s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. Iowever, when these computer programming students graduated, the dot.com +ust took place. 'he dot.com +ust decreased the value of the marginal product of computer programmers. Iolding all else e4ual, what effect did these two circumstances have on the e4uili+rium wage in the la+or market for computer programmersG a. 'he e4uili+rium wage increased. +. 'he e4uili+rium wage decreased. c. 'he e4uili+rium wage did not change. d. It is not possi+le to determine what happens to the e4uili+rium wage. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&" = 1%&1 '),: (a+or&market e4uili+rium
ANS: ; NA': Analytic -S*: Analytical 1:.
*onsider the la+or market for computer programmers. ;ecause of the dot.com +oom in the late 1::.s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. Iowever, when these computer programming students graduated the dot.com +ust took place. 'he dot.com +ust decreased the value of the marginal product of computer programmers. Iolding all else e4ual what effect did these two circumstances have on the e4uili+rium 4uantity in the la+or market for computer programmersG a. 'he e4uili+rium 4uantity of la+or increased. +. 'he e4uili+rium 4uantity of la+or decreased. c. 'he e4uili+rium 4uantity of la+or did not change. d. It is not possi+le to determine what happens to the e4uili+rium 4uantity of la+or.

ANS: ! NA': Analytic -S*: Analytical ".. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&" = 1%&1 '),: (a+or&market e4uili+rium
"31
*onsider the la+or market for heath care workers. ;ecause of the aging population in the /nited States, the output price for health care services has increased. Iolding all else e4ual, what effect does this have on the la+or market for health care employeesG a. 'he e4uili+rium wage increases and the e4uili+rium 4uantity of la+or increases. +. 'he e4uili+rium wage increases and the e4uili+rium 4uantity of la+or decreases. c. 'he e4uili+rium wage decreases and the e4uili+rium 4uantity of la+or increases. d. 'he e4uili+rium wage decreases and the e4uili+rium 4uantity of la+or decreases. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
*onsider the la+or market for heath care workers. ;ecause of the aging population in the /nited States, the output price for health care services has increased. Iolding all else e4ual, what effect does this have on the e4uili+rium wage of health care employeesG a. 'he e4uili+rium wage increases. +. 'he e4uili+rium wage decreases. c. 'he e4uili+rium wage does not change. d. It is not possi+le to determine what happens to the e4uili+rium wage. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Applicative "".
*onsider the la+or market for heath care workers. ;ecause of the aging population in the /nited States, the output price for health care services has increased. Iolding all else e4ual, what effect does this have on the e4uili+rium 4uantity of health care employeesG a. 'he e4uili+rium 4uantity increases. +. 'he e4uili+rium 4uantity decreases. c. 'he e4uili+rium 4uantity does not change. d. It is not possi+le to determine what happens to the e4uili+rium 4uantity. !I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 '),: (a+or&market e4uili+rium
*onsider the market for university economics professors. Suppose the opportunity cost of going to graduate school to get a ,h.!. in economics decreases for many individuals. Since it generally takes a+out five years to get a ,h.!. in economics, holding all else constant, what will happen to the e4uili+rium wage for university economics professors in five yearsG a. 'he e4uili+rium wage will increase. +. 'he e4uili+rium wage will decrease. c. 'he e4uili+rium wage will not change. d. It is not possi+le to determine what will happen to the e4uili+rium wage. !I : " #$ : ()*: (a+or markets 1%&" = 1%&1 '),: (a+or&market e4uili+rium
ANS: ; NA': Analytic -S*: Applicative "3.
*onsider the market for university economics professors. Suppose the opportunity cost of going to graduate school to get a ,h.!. in economics decreases for many individuals. Since it generally takes a+out five years to get a ,h.!. in economics, holding all else constant, what will likely happen to the e4uili+rium 4uantity of university economics professors in five yearsG a. 'he e4uili+rium 4uantity will increase. +. 'he e4uili+rium 4uantity will decrease. c. 'he e4uili+rium 4uantity will not change. d. It is not possi+le to determine what will happen to the e4uili+rium 4uantity.
"33

!I : " #$ : ()*: (a+or markets 1%&" = 1%&1 '),: (a+or&market e4uili+rium
Suppose the following events occur in the market for university economics professors.
$vent 1: A recession in the /.S. economy lowers the opportunity cost of going to graduate school in economics to +ecome a university economics professor. $vent ": An increasing num+er of students in /.S. primary and secondary schools increases the num+er of students entering college, increasing the output price of university economics professorsD services. As a result of these two events, holding all else constant, what will likely happen to the e4uili+rium 4uantity of university economics professorsG a. 'he e4uili+rium 4uantity will increase. +. 'he e4uili+rium 4uantity will decrease. c. 'he e4uili+rium 4uantity will not change. d. It is not possi+le to determine what will happen to the e4uili+rium 4uantity. ANS: A NA': Analytic -S*: Analytical "?. !I : 1 #$ : ()*: (a+or markets 1%&1 = 1%&" = 1%&1 '),: (a+or&market e4uili+rium
Suppose the following events occur in the market for university economics professors.
$vent 1: A recession in the /.S. economy lowers the opportunity cost of going to graduate school in economics to +ecome a university economics professor. $vent ": An increasing num+er of students in /.S. primary and secondary schools increases the num+er of students entering college, increasing the output price of university economics professorsD services. As a result of these two events, holding all else constant, what will likely happen to the e4uili+rium wage of university economics professorsG a. 'he e4uili+rium wage will increase. +. 'he e4uili+rium wage will decrease. c. 'he e4uili+rium wage will not change. d. It is not possi+le to determine what will happen to the e4uili+rium wage. ANS: ! NA': Analytic -S*: Analytical "7. !I : 1 #$ : ()*: (a+or markets 1%&1 = 1%&" = 1%&1 '),: (a+or&market e4uili+rium
<hen la+or supply increases, a. the marginal productivity of workers always increases. +. profit&maximi>ing firms reduce employment. c. wages increase as long as la+or supply is upward sloping. d. wages decrease as long as la+or demand is downward sloping. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Applicative Scenario 18-4
In 1::7, Al+ania experienced a civil war. 'he civil unrest sent thousands of refugees across the Adriatic Sea to Italy where they sought relief from the fighting. "%. Refer to Scenario 18$5. 'he Al+anian civil war pro+a+ly affected Italian la+or markets in the following way: a. 'otal employment in Italy decreased. +. <ages in Italy increased. c. 'he marginal product of la+or in Italy decreased. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Applicative

":. Refer to Scenario 18$5. 'he Italian government started to patrol the Adriatic Sea and had a policy of returning all refugees to Al+ania. 'his policy would contri+ute to a. an increase in the supply of la+or in Italy. +. an increase in the demand la+or in Italy. c. a decrease in the demand for la+or in Italy. d. preventing an increase in the supply of la+or in Italy. !I : 1 #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
"39
ANS: ! NA': Analytic -S*: Applicative 1..
Refer to Scenario 18$5. <hen a la+or market experiences a surplus of la+or, there is downward pressure on a. the supply of la+or. +. final product price. c. wages. d. the demand for la+or. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Applicative Scenario 18-5
#occhetta Industries manufactures and supplies +ottled water in -exico. As a result of a contamination of water supplies at many of -exicoFs resort communities, the demand for +ottled water has increased. 11. Refer to Scenario 18$6. <e would expect that, as a result of the contamination, the value of the marginal product for #occhetta IndustriesD workers would a. +e offset +y a decrease in wages. +. +e unaffected +y a rise in demand for +ottled water. c. rise. d. fall. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Analytical 1".
Refer to Scenario 18$6. <hen the la+or market adEusts to its new e4uili+rium, we would expect the a. marginal product of la+or to +e higher than it was +efore the increase in demand for +ottled water. +. value of the marginal product of la+or to +e higher than it was +efore the increase in demand for +ottled water. c. price of +ottled water to +e lower than it was +efore the increase in demand for +ottled water. d. wages of #occhetta workers to +e lower than they were +efore the increase in demand for +ottled water. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ; NA': Analytic -S*: Analytical 11.
<hen firms are a+le to increase the amount of physical capital availa+le to workers, the a. marginal product of la+or will decrease. +. value of the marginal product of la+or will decrease. c. value of the marginal product of la+or will increase. d. final product price will increase. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Analytical
"3?
Figure 18-5
13.
Refer to Fi/ure 18$6. If the apple pickers start working fewer hours 5+y taking more vacation time8, the e4uili+rium wage will a. fall +elow w1 due to a shift in demand. +. fall +elow w1 due to a shift in supply. c. rise a+ove w1 due to a shift in demand. d. rise a+ove w1 due to a shift in supply. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Analytical
19. Refer to Fi/ure 18$6. If the marginal product of la+or falls and the price of apples remains unchanged, 5i8 the value of the marginal product of la+or will fall. 5ii8 the 4uantity of la+or demanded will increase a+ove (1. 5iii8 the la+or supply curve will remain unchanged. a. +. c. d. 5i8 and 5ii8 5ii8 and 5iii8 5i8 and 5iii8 All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Analytical 1?.
Refer to Fi/ure 18$6. If the price of apples increases, the a. demand for apple pickers will shift to the left. +. demand for apple pickers will shift to the right. c. supply of apple pickers will shift to the left. d. supply of apple pickers will shift to the right. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
Refer to Fi/ure 18$6. If the price of apples decreases, the a. demand for apple pickers will shift to the left. +. demand for apple pickers will shift to the right. c. supply of apple pickers will shift to the left. d. supply of apple pickers will shift to the right. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Analytical

1%. Refer to Fi/ure 18$6. If the price of apples increases, the wage will a. increase and more apple pickers will +e hired. +. decrease and more apple pickers will +e hired. c. increase and fewer apple pickers will +e hired. d. decrease and fewer apple pickers will +e hired. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
"37
ANS: A NA': Analytic -S*: Analytical 1:.
Refer to Fi/ure 18$6. If the price of apples decreases, the wage will a. increase and more apple pickers will +e hired. +. decrease and more apple pickers will +e hired. c. increase and fewer apple pickers will +e hired. d. decrease and fewer apple pickers will +e hired. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Analytical Figure 18-6
3..
Refer to Fi/ure 18$7. <hen the relevant la+or demand curve is !1 and the la+or market is in e4uili+rium, a. the value of the marginal product of la+or to firms is less than <1. +. the opportunity cost of leisure to workers is greater than <1. c. the wage is <1. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Analytical 31.
Refer to Fi/ure 18$7. 'he shift of the la+or demand curve from !1 to !" could possi+ly +e explained +y a. technological progress. +. an increase in the price of firmsF output. c. an increase in the supply of a relevant factor of production other than la+or. d. All of the a+ove are correct. !I : 1 #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Analytical 3".
Refer to Fi/ure 18$7. 'he shift of the la+or demand curve from !1 to !" could possi+ly +e explained +y a. a change in workersF attitudes toward the work&leisure tradeoff. +. decreases in wages in other la+or markets. c. an increase in the price of firmsF output. d. All of the a+ove are correct.
"3%

Refer to Fi/ure 18$7. Assume <1 6 0". and <" 6 0"" and the market is always in e4uili+rium. 'hen the shift of the la+or demand curve from !1 to !" a. increases the value of the marginal product of la+or +y 0". +. increases the value of the marginal product of la+or +y less than 0". c. decreases the value of the marginal product of la+or +y more than 0". d. does not change the value of the marginal product of la+or. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: A NA': Analytic -S*: Analytical 33.
Refer to Fi/ure 18$7. If the relevant la+or demand curve is !" and the current wage is <1, a. there is a surplus of la+or. +. there is a shortage of la+or. c. the 4uantity of la+or supplied exceeds the 4uantity of la+or demanded. d. workers are failing to take into account the work&leisure tradeoff in deciding what 4uantity of la+or to supply at alternative wages. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
An increase in the value of the marginal product of la+or has the effect of increasing the a. demand for la+or. +. wage. c. 4uantity of la+or employed. d. All of the a+ove are correct. !I : 1 #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Applicative 3?.
An increase in the supply of la+or has the effect of decreasing the a. wage. +. marginal product of la+or. c. value of the marginal product of la+or. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ! NA': Analytic -S*: Applicative 37.
Suppose medical research provides evidence that eating +ananas provides far greater health +enefits than was previously thought. 'he resulting increase in the demand for +ananas a. increases the marginal product of +anana pickers for any given num+er of +anana pickers. +. increases the value of the marginal product of +anana pickers for any given num+er of +anana pickers. c. increases the supply of +anana pickers. d. All of the a+ove are correct. !I : 1 #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: ; NA': Analytic -S*: Analytical 3%.
;oth theory and history point to a close relationship +etween increases in a. la+or demand and increases in la+or supply. +. la+or demand and decreases in real wages. c. the productivity of la+or and increases in real wages. d. interest rates and decreases in real wages.

ANS: * NA': Analytic -S*: Interpretive 3:. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
"3:
Suppose that workers immigrate to -innesota from *anada. <hich of the following correctly descri+es what would happen in the market for la+or in -innesotaG a. 'he e4uili+rium wage would increase, and the 4uantity of la+or would increase. <ith more workers, the added output from an extra worker is larger. +. 'he e4uili+rium wage would decrease, and the 4uantity of la+or would decrease.. <ith fewer workers, the added output from an extra worker is smaller. c. 'he e4uili+rium wage would decrease, and the 4uantity of la+or would increase. <ith more workers, the added output from an extra worker is smaller. d. 'he e4uili+rium wage would decrease, and the 4uantity of la+or would increase. <ith more workers, the added output from an extra worker is larger. !I : 1 #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Applicative Figure 18-7
9..
Refer to Fi/ure 18$8. <hen the relevant la+or supply curve is S1 and the la+or market is in e4uili+rium, a. the wage is <1. +. the opportunity cost of leisure to workers is <1. c. the value of the marginal product of la+or to firms is <1. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
Refer to Fi/ure 18$8. 'he shift of the la+or supply curve from S1 to S" could possi+ly +e explained +y a. technological progress. +. a decrease in the price of the firmDs output. c. a change in workersF attitudes toward the work&leisure tradeoff. d. an increase in the price of the firmDs output. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
Refer to Fi/ure 18$8. 'he shift of the la+or supply curve from S1 to S" could possi+ly +e explained +y a. a change in workersF attitudes toward the work&leisure tradeoff. +. decreases in wages in other la+or markets. c. immigration of workers into the region or country. d. All of the a+ove are correct.
"9.

Refer to Fi/ure 18$8. Assume <1 6 0". and <" 6 01% and the market is always in e4uili+rium. 'hen the shift of the la+or supply curve from S1 to S" a. increases the value of the marginal product of la+or +y 0". +. decreases the value of the marginal product of la+or +y 0". c. decreases the value of the marginal product of la+or +y more than 0". d. does not change the value of the marginal product of la+or. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
Refer to Fi/ure 18$8. If the relevant la+or supply curve is S" and the current wage is <1, a. there is a surplus of la+or. +. the 4uantity of la+or demanded exceeds the 4uantity of la+or supplied. c. an increase in the minimum wage could +e employed to restore e4uili+rium in the market. d. firms will need to raise the wage to restore e4uili+rium. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
Sec#5 $ The Markets for the Factors of Production $ The Production$Land and Capita,
MULT%PLE CH %CE 1.
ther Factors of
$conomists define capital as the a. accumulation of goods produced in the past that are +eing used in the present to produce new goods and services. +. the goods and services that are most affected +y changes in technology. c. factors of production that can +e rented +y firms. d. factors of production that can +e purchased +y firms. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: A NA': Analytic -S*: !efinitional ".
<hich of the following statements is correctG a. 'he market for capital is unlike the market for la+or +ecause the rental price of capital is unaffected +y the marginal product of capital, whereas the price of la+or is affected +y the marginal product of la+or. +. 'he market for capital is unlike the market for la+or +ecause the purchase price of capital is unaffected +y the marginal product of capital, whereas the price of la+or is affected +y the marginal product of la+or. c. 'he market for capital is like the market for la+or +ecause the rental price of capital is affected +y the marginal product of capital, and the price of la+or is affected +y the marginal product of la+or. d. ;oth a and + are correct. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital markets
ANS: * NA': Analytic -S*: Interpretive

1.
"91
Suppose that a violent earth4uake causes the uninha+ited Iawaiian island of -okuauia 5also called Noat Island8 to fall into the ,acific )cean. No people are killed or inEured, and since the island is undeveloped, no +uildings are destroyed. 'he island was a source of tourist income for Iawaiian landowners. <hich of the following statements correctly descri+es the rents earned +y the people who own land on the surrounding islandsG a. As the supply of vacation land decreases, the marginal productivity of the remaining land will decreaseK thus rents will decrease. +. As the supply of vacation land decreases, the marginal productivity of the remaining land will increaseK thus, rents will decrease. c. As the supply of vacation land decreases, the marginal productivity of the remaining land will increaseK thus, rents will increase. d. 'here would +e no change in the rents earned +y the other landowners +ecause the effects of supply and demand would exactly cancel each other out. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: (and markets
Suppose that a college physics experiment goes horri+ly wrong and releases an electronic pulse that renders all electronic e4uipment in the city of San rancisco, *alifornia permanently useless. No people are hurt, and no +uildings are damaged. <hich of the following statements correctly descri+es the wages earned +y *alifornia workers after the accidentG a. 'he marginal productivities of workers will increase and wages will increase. +. 'he marginal productivities of workers will decrease and wages will decrease. c. 'he marginal productivities of workers will increase and wages will decrease. d. 'he marginal productivities of workers will decrease and wages will increase. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital markets
Suppose that a large tornado destroys the fleet of fire trucks for the city of )maha, Ne+raska. <hat happens to the earnings of firefighters in )mahaG a. 'he reduction in the supply of fire trucks reduces the marginal productivities of )maha firefighters, which causes the e4uili+rium wage to fall. +. 'he reduction in the supply of fire trucks increases the marginal productivities of )maha firefighters, which causes the e4uili+rium wage to fall. c. 'he reduction in the supply of fire trucks reduces the marginal productivities of )maha firefighters, which causes the e4uili+rium wage to rise. d. 'he reduction in the supply of fire trucks increases the marginal productivities of )maha firefighters, which causes the e4uili+rium wage to rise. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital markets
ANS: A NA': Analytic -S*: Interpretive ?.
'he demand curve for capital a. is vertical. +. is hori>ontal. c. is derived from householdsD decisions concerning saving and spending. d. reflects the marginal productivity of capital.
ANS: ! !I : " #$ : 1%&3 NA': Analytic ()*: /nderstanding and applying economic models '),: *apital market -S*: Interpretive 7. *onsider the market for land. Suppose the value of the marginal product of land decreases. Iolding all else constant, what will happen to the e4uili+rium rental price for landG a. 'he e4uili+rium rental rate increases. +. 'he e4uili+rium rental rate decreases. c. 'he e4uili+rium rental rate does not change. d. It is not possi+le to determine what will happen to the e4uili+rium rental rate.
"9"

!I : " #$ : ()*: (a+or markets 1%&1 = 1%&1 = 1%&3 '),: actor markets
ANS: ; NA': Analytic -S*: Analytical %.
<hen economists refer to a firmFs capital, they are likely to +e using the term to descri+e the a. markets for final goods and services. +. stock of e4uipment and +uildings used in production. c. amount of +ank financing used +y the firm. d. amount of financing provided +y the e4uity markets. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: ; NA': Analytic -S*: !efinitional :.
'he accumulation of machinery and +uildings used in the production of new goods and services is referred to as a. production factors. +. output factors. c. capital. d. e4uity. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: * NA': Analytic -S*: !efinitional 1..
If one were to consider a university as a +usiness, the computers in the computer la+s would +e regarded +y economists as a. technology flows. +. mechani>ation flows. c. part of the universityFs stock of capital. d. a flow of services from the universityFs stock of capital. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital
'he purchase price of capital is a. the value of the capital to the firm. +. always less than the rental price. c. the price received from the flow of some capital services. d. the price a person pays to own that factor of production indefinitely. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: ! NA': Analytic -S*: !efinitional 1".
'he owners of capital resources are compensated according to the a. purchase price of the capital stock. +. marginal product of capital. c. value of the marginal product of capital. d. a+solute level of production of final goods and services. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital
'he marginal product of any factor of production depends on a. the 4uantity of the factor used. +. the price of the final good. c. the demand for the final good. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: A NA': Analytic -S*: Applicative

13. ;ecause of diminishing returns, a factor in a+undant supply has a. a high marginal product and a high rental price. +. a high marginal product and a low rental price. c. a low marginal product and a high rental price. d. a low marginal product and a low rental price. !I : " #$ : ()*: (a+or markets 1%&3 '),: actor markets
"91
;ecause of diminishing returns, a factor in scarce supply has a. a low marginal product and a low rental price. +. a low marginal product and a high rental price. c. a high marginal product and a low rental price. d. a high marginal product and a high rental price. !I : " #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: ! NA': Analytic -S*: Analytical 1?.
A change in the supply of one factor of production a. will not change either the marginal productivities or the prices of other factors. +. will not change the prices of other factors, +ut it may change their marginal productivities. c. will not change the marginal productivities of other factors, +ut it may change their prices. d. changes the marginal productivities and the prices of other factors. !I : " #$ : ()*: (a+or markets 1%&3 '),: actor markets
'he e4uili+rium rental income paid to the owners of capital at any point in time e4uals the a. marginal product of capital. +. value of the marginal product of capital. c. percentage of profits paid out to stockholders in the form of dividends. d. e4uili+rium purchase price of capital. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital markets
ANS: ; NA': Analytic -S*: Applicative 1%.
In economics, the term capital is used to refer to a. money. +. stocks and +onds. c. e4uipment and structures used in production. d. All of the a+ove are correct. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: * NA': Analytic -S*: !efinitional 1:.
'he distinction +etween purchase price and rental price applies to which factor5s8 of productionG a. (and only +. *apital only c. (and and capital only d. (and, capital, and la+or !I : " #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: * NA': Analytic -S*: Interpretive
"93
"..

<hich term +elow refers to Hthe accumulation of goods produced in the past that are +eing used in the present to produce new goods and servicesGH a. Inventories +. ,roducts c. actors of production d. *apital !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: ! NA': Analytic -S*: !efinitional "1.
H'he firm hires the factor up to the point where the value of the factorFs marginal product is e4ual to the factorFs price.H 'his statement applies to which factor of productionG a. (a+or +. (and c. *apital d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: ! NA': Analytic -S*: Applicative "".
*apital is paid according to the value of its marginal product a. only if earnings from capital are paid to households in the form of dividends. +. only if earnings from capital are kept within firms as retained earnings. c. regardless of whether earnings from capital are paid to households in the form of dividends or whether those earnings are kept within firms as retained earnings. d. None of the a+ove are correctK capital is a factor of production for which earnings are unrelated to the value of marginal product. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: * NA': Analytic -S*: Analytical "1.
<hich of the following +est descri+es the economyFs stock of e4uipment and structuresG a. *apital +. Aggregate demand c. (ong&term inventory d. Aggregate stock !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: A NA': Analytic -S*: !efinitional "3. 5i8 5ii8 5iii8
or a computer software firm, capital could +e thought of as 'he firmFs computer programmers. 'he wages the firm pays to its computer programmers. *omputer e4uipment. a. +. c. d. 5i8 only 5ii8 only 5iii8 only 5i8 and 5iii8 !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
ANS: * NA': Analytic -S*: !efinitional "9. 5i8 5ii8 5iii8
or a retail gasoline station, which of the following would 4ualify as capitalG 'he gas tanks and pumps 'he service attendantsF time 'he plot of land on which the station sits

a. +. c. d. 5i8 only 5iii8 only 5i8 and 5iii8 5ii8 and 5iii8 !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital
"99
ANS: A NA': Analytic -S*: !efinitional "?.
'he ;lack !eath in fourteenth&century $urope resulted in a. a lower marginal product of land. +. a lower marginal product of la+or of surviving workers. c. economic hardship for surviving peasants. d. economic prosperity for surviving landowners. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: A NA': Analytic -S*: Analytical "7.
'he ;lack !eath in fourteenth&century $urope resulted in a. a lower marginal product of la+or of surviving workers. +. a higher marginal product of la+or of surviving workers. c. economic hardship for surviving peasants. d. economic prosperity for surviving landowners. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: ; NA': Analytic -S*: Analytical "%.
'he ;lack !eath in fourteenth&century $urope resulted in a. a lower marginal product of la+or of surviving workers. +. a higher marginal product of land. c. economic hardship for surviving peasants. d. economic hardship for surviving landowners. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: ! NA': Analytic -S*: Analytical ":.
Suppose that the wage paid to workers who detassel corn rises. <hat happens in the market for workers who weed soy+ean fields, given that workers who detassel corn can easily work weeding soy+ean fieldsG a. 'he demand curve for soy+ean workers increases. +. 'he demand curve for soy+ean workers decreases. c. 'he supply curve for soy+ean workers increases. d. 'he supply curve for soy+ean workers decreases. !I : " #$ : ()*: (a+or markets 1%&" = 1%&3 '),: (a+or supply
ANS: ! NA': Analytic -S*: Applicative 1..
<hich of the following accurately descri+es how earnings from capital eventually get paid to householdsG a. Iouseholds can own a stock of capital and rent it to firms. +. Iouseholds lend money to firms, who then pay interest to the households. c. Iouseholds that own stock in firms receive dividends. d. All of the a+ove are correct. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital income
ANS: ! NA': Analytic -S*: !efinitional
"9?
11.

#ent, interest, and profit are all forms of income paid to the owners of a. aggregate stock. +. aggregate demand. c. firms and not&for&profit organi>ations. d. land and capital. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: actor markets
ANS: ! NA': Analytic -S*: !efinitional 1".
'he rental price of capital is a. determined outside the realm of factor markets. +. 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. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital income
'he rental price of capital is determined +y a. the forces of supply and demand in capital markets. +. the amount of e4uity that is generated in e4uity markets. c. the amount of +ond financing used +y profit&maximi>ing firms. d. the amount of dividends paid out to stockholders +y profit&maximi>ing firms. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital income
<ho receives income from capital in the /nited StatesG a. ;ank depositors +. ;ondholders c. Stockholders d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital income
<hich of the following 4ualify as part of our economyFs capital incomeG a. <ages paid to workers +. Interest paid to the owners of corporate +onds c. Salaries paid to chief executive officers of corporations d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&3 '),: *apital income
ANS: ; NA': Analytic -S*: Interpretive 1?.
*onsider the market for capital e4uipment. Suppose the value of the marginal product of capital e4uipment increases. Iolding all else constant, what will happen to the e4uili+rium rental price of capital e4uipmentG a. 'he e4uili+rium rental price of capital e4uipment increases. +. 'he e4uili+rium rental price of capital e4uipment decreases. c. 'he e4uili+rium rental price of capital e4uipment does not change. d. It is not possi+le to determine what will happen to the e4uili+rium rental price of capital e4uipment. !I : 1 #$ : ()*: (a+or markets 1%&1 = 1%&1 = 1%&3 '),: *apital markets

17. *onsider the market for capital e4uipment. Suppose the price of firmsD output increases. Iolding all else constant, what will happen to the e4uili+rium rental price of capital e4uipmentG a. 'he e4uili+rium rental price of capital e4uipment increases. +. 'he e4uili+rium rental price of capital e4uipment decreases. c. 'he e4uili+rium rental price of capital e4uipment does not change. d. It is not possi+le to determine what will happen to the e4uili+rium rental price of capital e4uipment. !I : 1 #$ : ()*: (a+or markets 1%&1 = 1%&1 = 1%&3 '),: *apital markets
"97
ANS: A NA': Analytic -S*: Analytical 1%.
*onsider the market for capital e4uipment. Suppose the value of the marginal product of capital e4uipment increases. Iolding all else constant, what will happen to the e4uili+rium 4uantity of capital e4uipmentG a. 'he e4uili+rium 4uantity of capital e4uipment increases. +. 'he e4uili+rium 4uantity of capital e4uipment decreases. c. 'he e4uili+rium 4uantity of capital e4uipment does not change. d. It is not possi+le to determine what will happen to the e4uili+rium 4uantity of capital e4uipment. !I : 1 #$ : ()*: (a+or markets 1%&1 = 1%&1 = 1%&3 '),: *apital markets
ANS: A NA': Analytic -S*: Analytical 1:.
*onsider the market for capital e4uipment. Suppose the market price of firmsD output decreases. Iolding all else constant, what will happen to the e4uili+rium 4uantity of capital e4uipmentG a. 'he e4uili+rium 4uantity of capital e4uipment increases. +. 'he e4uili+rium 4uantity of capital e4uipment decreases. c. 'he e4uili+rium 4uantity of capital e4uipment does not change. d. It is not possi+le to determine what will happen to the e4uili+rium 4uantity of capital e4uipment. !I : 1 #$ : ()*: (a+or markets 1%&1 = 1%&1 = 1%&3 '),: *apital markets
ANS: ; NA': Analytic -S*: Analytical 3..
As a result of a fire, a small +usiness owner loses some of her computers and other e4uipment. If the property of diminishing returns applies to all factors of production, she should expect to see a. an increase in the marginal productivity of her remaining capital and an increase in the marginal productivity of her la+or. +. an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her la+or. c. a decrease in the marginal productivity of her remaining capital and an increase in the marginal productivity of her la+or. d. a decrease in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her la+or. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: *apital markets
'he rental price of land is a. the price paid for ownership of the land. +. the price paid for the flow of services from land over a specified time period. c. always more than the purchase price. d. All of the a+ove are correct. !I : " #$ : ()*: (a+or markets 1%&3 '),: (and markets
ANS: ; NA': Analytic -S*: Interpretive 3".
)wners of land are compensated according to the a. a+solute level of production from the land. +. num+er of la+orers the land can support. c. purchase price of the land stock. d. value of the marginal product of land.
"9%

!I : " #$ : ()*: (a+or markets 1%&3 '),: (and markets
Suppose the government designates certain areas within a community to +e Hwetlands,H making it illegal to +uild on the land. <hat happens to land not classified as HwetlandsH within the communityG 5i8 'he price of non&wetland land will rise. 5ii8 'he marginal product of non&wetland land will fall. 5iii8 'he marginal product of non&wetland land will rise. a. +. c. d. 5i8 and 5ii8 5ii8 and 5iii8 5i8 and 5iii8 5ii8 only !I : " #$ : ()*: (a+or markets 1%&3 '),: (and markets
As a result of severe flooding, a farmer loses half of his productive farmland. Ie should expect to see the marginal productivity of his remaining land a. increase. +. remain unchanged. c. decrease, +ut remain positive. d. decrease and +ecome negative. !I : " #$ : ()*: (a+or markets 1%&3 '),: (and markets
As a result of severe flooding, a farmer loses half of his productive farmland. If the property of diminishing returns applies to all factors of production, he should expect to see a. an increase in the marginal productivity of his remaining land and an increase in the marginal productivity of his la+or. +. an increase in the marginal productivity of his remaining land and a decrease in the marginal productivity of his la+or. c. a decrease in the marginal productivity of his remaining land and an increase in the marginal productivity of his la+or. d. a decrease in the marginal productivity of his remaining land and a decrease in the marginal productivity of his la+or. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: (and markets
ANS: ; NA': Analytic -S*: Analytical 3?.
'he e4uili+rium rental income paid to landowners at any point in time e4uals the a. purchase price of land. +. value of the marginal product of land. c. marginal product of land. d. wage paid to la+orers. !I : " #$ : ()*: (a+or markets 1%&3 '),: (and markets
'he current value of the marginal product of land influences a. the demand for land. +. the e4uili+rium rental price of land. c. the e4uili+rium purchase price of land. d. all of the a+ove. !I : " #$ : ()*: (a+or markets 1%&3 '),: (and markets
ANS: ! NA': Analytic -S*: Applicative

3%.
"9:
Suppose that a rare virus infects and kills a significant percentage of the population. Assuming that land and la+or are complements in a farming production function, what would happen to the wages earned +y workers and the rents earned +y landownersG a. ;oth wages and rents would increase. +. ;oth wages and rents would decrease. c. <ages would increase, and rents would decrease. d. <ages would decrease, and rents would increase. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: (and markets
ANS: * NA': Analytic -S*: Analytical 3:.
Suppose that due to flooding in (ouisiana, 1..,... farmers relocate from (ouisiana to 'exas. Assuming that land and la+or are complements in a farming production function, what would happen to the wages earned +y workers and the rents earned +y landowners in 'exasG a. ;oth wages and rents would increase. +. ;oth wages and rents would decrease. c. <ages would increase, and rents would decrease. d. <ages would decrease, and rents would increase. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: (and markets
ANS: ! NA': Analytic -S*: Analytical 9..
Suppose that a toxic waste spill renders half of the land in New Mersey uninha+ita+le. Assuming that land and la+or are complements in the production function, what would happen to the wages earned +y workers and rents earned +y landownersG a. ;oth wages and rents would increase. +. ;oth wages and rents would decrease. c. <ages would increase, and rents would decrease. d. <ages would decrease, and rents would increase. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: (and markets
Suppose that a large lake in the middle of -innesota evaporates, leaving more fertile farm land for growing corn availa+le. Assuming that land and la+or are complements in a farming production function, what would happen to the wages earned +y workers and rents earned +y landownersG a. ;oth wages and rents would increase. +. ;oth wages and rents would decrease. c. <ages would increase, and rents would decrease. d. <ages would decrease, and rents would increase. !I : 1 #$ : ()*: (a+or markets 1%&3 '),: (and markets
A decrease in population can +e expected to a. increase the marginal product of land. +. decrease the supply of land. c. decrease the rents on land. d. increase the demand for land. !I : " #$ : ()*: (a+or markets 1%&1 '),: (a+or&market e4uili+rium
ANS: * NA': Analytic -S*: Applicative 91.
An increase in population can +e expected to a. increase the marginal product of land. +. decrease the supply of land. c. decrease the rents on land. d. decrease the demand for land.
"?.

ANS: A NA': Analytic -S*: Applicative
Sec#6 $ The Markets for the Factors of Production $ Conc,usion

MULT%PLE CH %CE 1. According to the neoclassical theory of distri+ution, the wages paid to workers a. reflect the market prices of the goods those workers produce. +. reflect the degree of market power held +y the firms that pay those wages. c. fail to reflect those workersD opportunity costs of leisure. d. are unrelated to the forces of supply and demand.
ANS: A !I : " #$ : 1%&9 NA': Analytic ()*: /nderstanding and applying economic models '),: Neoclassical theory of distri+ution -S*: Interpretive

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Chapter 18 The Markets For the Factors of Production

*hapter 1%A'he -arkets or the actors of ,roduction

*hapter 1%A'he -arkets or the actors of ,roduction

*hapter 1%A'he -arkets or the actors of ,roduction

*hapter 1%A'he -arkets or the actors of ,roduction

*hapter 1%A'he -arkets or the actors of ,roduction

*hapter 1%A'he -arkets or the actors of ,roduction

Sec## $ The Markets for the Factors of Production

ANS: ! NA': Analytic -S*: !efinitional ".

ANS: ! NA': Analytic -S*: !efinitional

*hapter 1%A'he -arkets or the actors of ,roduction

ANS: A NA': Analytic -S*: !efinitional 3.

ANS: ! NA': Analytic -S*: !efinitional 9.

ANS: * NA': Analytic -S*: !efinitional

utput of Fir' A 1.. ".. 1.. 3..

utput of Fir' + 1.. 1.. ?.. 1,...

utput of Fir' C 1.. 1:. "7. 13.

utput of Fir' & 1.. %. ?. 3.

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ANS: A !I : ()*: (a+or markets -S*: Analytical Table 18-2

*hapter 1%A'he -arkets or the actors of ,roduction

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1%&1 NA': Analytic 2alue of the marginal product

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ANS: A !I : ()*: (a+or markets -S*: Interpretive 13.

ANS: A !I : ()*: (a+or markets -S*: Analytical 19.

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*hapter 1%A'he -arkets or the actors of ,roduction

*hapter 1%A'he -arkets or the actors of ,roduction

ANS: A !I : ()*: (a+or markets -S*: Applicative "1.

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3.. VMP 1?. 1". "%. "3. ".. 1?. 1". %. 3. 1

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*hapter 1%A'he -arkets or the actors of ,roduction

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ANS: ! !I : ()*: (a+or markets -S*: Interpretive 31.

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ANS: * !I : (): (a+or markets -S: Analytical

ANS: ; !I : (): (a+or markets -S: Analytical 3.

ANS: * !I : (): (a+or markets -S: Analytical 9.

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ANS: A !I : (): (a+or markets -S: Analytical Table 18-2

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ANS: A !I : (): (a+or markets -S: Interpretive 13.

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