# Unit 5 Factor Markets

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The value of the marginal product is equal to

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## Description and Tags

### 40 Terms

1

The value of the marginal product is equal to

marginal product times the price per unit of output

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2

Maria operates a persimmon orchard in southeastern Oklahoma. She pays her workers \$248 per week to pick and process persimmons, and she sells her persimmons for \$6 per bushel. If she adds one more worker and that worker can pick and process 44 bushels per week, what will be the profit for Maria from hiring that worker?

\$16

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3

Barry's Brewpub is considering hiring more brewmasters (they already employ several). A pint of brew sells for \$3. The current market wage of a brewmaster is \$150 per day. Barry's Brewpub will hire another brewmaster only if they believe the new brewmaster will:

raise total production to 50 or more pints per day.

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4

The individual producer's labor demand curve is the…

Value of the marginal product of labor curve(VMPL/MRP)

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5

Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is \$130 and the price per unit of corn is \$10. The table shows Laura's production function. Suppose Laura is currently employing two workers. If she adds the third worker, her profits will…

increase by \$80

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6

Workers and Corn Output) Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is \$125 and the price per unit of corn is \$10. The table shows Laura's production function. To maximize profits Laura should employ ________ workers.

four

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7

The Value of the Marginal Product Curve) In the figure, the VMPL curve will shift to the right if

a technological advance makes labor more productive

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8

If the extra output that is produced by hiring one more unit of labor adds more to ________ than to ________, the firm will increase its profit by increasing the use of labor.

total revenue; total cost

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9

Value of the Marginal Product of Labor and Demand) If the product price is \$2 per unit, the value of the marginal product for the fifth unit of labor is

\$40

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10

If the product price is \$2 per unit and the market wage rate is \$20 per unit of labor, the profit-maximizing quantity of labor is ________ units.

six

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11

A factor demand curve will shift because of

a change in the price of the good the factor produces

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12

An increase in the demand for construction workers may come about because of an

increase in the demand for new housing

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13

If marginal product is ________, value of marginal product must be ________

falling; falling

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14

A firm's demand curve for labor is

its VMPL curve

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15

If W < VMPL…

the firm should hire more labor

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16

If the wage rate rises, firms will find that

they move upward and to the left along the labor demand curve

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17

Derived demand for a factor means

the demand for factors depends on the demand for the outputs the factor can produce.

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18

The firm's value of marginal product curve slopes downward because of

Diminishing Marginal Return, DMR

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19

A new law is passed, requiring people to have an associate’s degree in order to work as a waiter. We would expect

wages for waiters to rise and typical restaurants to hire fewer waiters.

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20

The market supply curve for labor slopes upward because

more workers are willing to work in the market at higher wages.

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21

The behavior of a monopolist differs from that of a competitive industry in that

the monopolist restricts output and hires less labor.

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22

The supply of labor to the individual firm in a competitive labor market is

perfectly elastic at the market wage rate.

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23

What would NOT shift an industry’s supply of labor curve?

The wage rate in the particular industry falls.

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24

If a firm hires labor in a competitive labor market and the market wage is \$10, the marginal resource cost of labor is

\$10

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25

The marginal physical product(MPP) of labor is the

change in output that results from hiring another worker

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26

In terms of labor supply, the substitution effect of a higher wage causes

an increase in the quantity of labor supplied.

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27

In monopsony, the marginal resource cost of a worker is

equal to the worker’s wage plus the increase in the wages of the other workers.

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28

A monopsony exists when

a single firm is the only buyer of a particular resource.

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29

According to efficiency wages theory

firms sometimes pay a wage higher than the market wage in order to attract higher quality workers and reduce turnover costs.

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30

It becomes widely known that conditions improve for workers in textile factories, with more frequent breaks and more comfortable work spaces. All other things being equal, this will likely lead to

a decrease in the wages for textile workers

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31

A firm should hire another worker as long as

MRP>MRC

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32

If higher wages begin to be paid to fast food workers we would expect

The supply of retail workers to fall

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33

A Monopsony will hire additional workers until

MRP = MRC

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34

If a 5th worker is hired, hat production rises from 15 hats to 22 hats. Hat price is \$10....

The 5th worker should be hired if wage is \$60.

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35

The productivity of workers in an industry rises. In that industry we would expect

wages to rise and more workers to be hired.

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36

As wage rises, the substitution effect makes you want to work ______

more, and the income effect makes you want to work less

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37

If a monopolist hires 2 workers, Q=10 and P=\$5. If they hire 3 workers, Q=15 and P=\$4. The 3rd worker's MRP is

\$10

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38

Which of the following would result in lower wages for waiters?

Better working conditions for waiters

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39

Why is MRC greater than wage for the Monopsonist?

Because they must raise the wage of all workers to hire additional workers

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40

If the price of the product workers produce rises _________, but if wage rises __________.

The demand for workers rises; the quantity demanded of workers falls

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