Question 1

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

Accepted Answer

The answer of Figure 18-4
The graph below illustrates the market...

Question 2

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. Assuming MadeFromScratch is a competitive, profit-maximizing firm, how many workers will the firm hire?
A)2 workers
B)3 workers
C)4 workers
D)5 workers

Accepted Answer

The answer of Table 18-B
Consider the following daily production data...

Question 3

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the value of the marginal product of the first worker?
A)$200
B)$400
C)$500
D)$700

Accepted Answer

The marginal product of the first worker is calculated by taking the difference between the total output with one worker and the total output with zero workers: MP1 = 300 - 0 = 300.

The marginal revenue product (MRP) is calculated as MP multiplied by the price of the product: 
MRP1 = MP1 x P = 300 x 3 = 900.

The marginal cost (MC) is the cost of hiring one additional worker, which is equal to the daily wage of $325.

Therefore, the decision to hire the first worker is profitable as long as MRP1 > MC, or 900 > 325.

The best choice would be to hire up to the third worker, since the marginal product of the third worker is 200 and the MRP of the third worker is only $600, lower than the cost of hiring one additional worker.

Question 4

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the sixth worker's marginal product of labor?
A)100 cupcakes
B)120 cupcakes
C)140 cupcakes
D)160 cupcakes

Accepted Answer

The answer of Table 18-B
Consider the following daily production data...

Question 5

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. Assume that MadeFromScratch is a competitive, profit-maximizing firm. If the market price of cupcakes increases from $2.00 to $2.50, how many workers would the firm then hire?
A)2 workers
B)3 workers
C)4 workers
D)5 workers

Accepted Answer

To determine how many workers the firm would hire at the new market price of $2.50, we need to calculate the marginal product of labor (MPL) at each level of employment and compare it to the wage rate of $325.

At the original price of $2.00, the firm is hiring 3 workers, which yields a total product of 270 cupcakes and an MPL of 90 cupcakes per worker. Since the price of cupcakes is lower than the wage rate, the firm is incurring losses and would not hire any additional workers.

At the new price of $2.50, the revenue from selling one cupcake increases to $2.50, which means the firm's marginal revenue (MR) also increases to $2.50. The firm would continue to hire additional workers as long as their MPL is greater than or equal to their wage rate.

If the firm hires 4 workers, their total product increases to 320 cupcakes and their MPL is 80 cupcakes per worker. Since 80 cupcakes multiplied by $2.50 (the new MR) is equal to $200 (which is greater than the wage rate of $325), the firm would not hire a 4th worker.

However, if the firm hires 5 workers, their total product increases to 350 cupcakes and their MPL is 30 cupcakes per worker. Since 30 cupcakes multiplied by $2.50 (the new MR) is equal to $75 (which is less than the wage rate of $325), the firm would not hire a 5th worker.

Therefore, the firm would hire 4 workers at the new market price of $2.50.

Question 6

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. If the value of the marginal product of the first worker hired is $938, then how many workers does the firm employ?
A)2
B)3
C)4
D)5

Accepted Answer

The firm will continue to hire workers as long as the value of the marginal product of labor is greater than the wage rate. In this case, the wage rate is $700. 
If the value of the marginal product of the first worker is $938, then the firm will hire at least one worker. 
If the value of the marginal product of the second worker is $816, then the firm will hire a second worker. 
If the value of the marginal product of the third worker is $728, then the firm will hire a third worker. 
However, if the value of the marginal product of the fourth worker is $640, then the firm will not hire a fourth worker because it would cost more to hire the worker than the value produced. Therefore, the firm employs three workers.

Question 7

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. Let Q represent the number of boxes of envelopes produced per week. One point on this firm's production function is
A)(L = 1, Q = 106).
B)(L = 2, Q = 92).
C)(L = 2, Q = 106).
D)(L = 2, Q = 240).

Accepted Answer

The answer of Table 18-12
The table displays data for a...

Question 8

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $6. The firm would not be interested in hiring a third worker unless the wage fell from its current level of $600 to what level?
A)$564
B)$557
C)$554
D)$551

Accepted Answer

The answer of Table 18-12
The table displays data for a...

Question 9

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7.50. How many workers should the firm hire?
A)2
B)3
C)4
D)5

Accepted Answer

The firm should hire workers until the marginal product of labor (MPL) equals the wage rate (in this case, $60 per day). From the table, we can see that MPL is highest with four workers, at 50 envelopes per worker. At this level of employment, total revenue (TR) is $1,500 (200 boxes sold at $7.50 each), total cost (TC) is $900 ($240 for materials and $660 for wages), and profit is $600. At any level of employment more or less than four workers, MPL and/or labor cost would both be higher, lowering profit. Therefore, hiring four workers is the most profitable choice for the firm.

Question 10

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the value of the marginal product of the second worker?
A)$180
B)$360
C)$450
D)$720

Accepted Answer

The answer of Table 18-B
Consider the following daily production data...

Question 11

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

Accepted Answer

The answer of Table 18-12
The table displays data for a...

Question 12

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $6. What is the value of the marginal product of the second worker?
A)$1,440
B)$1,212
C)$636
D)$552

Accepted Answer

The marginal product of labor can be calculated by taking the difference between the total output produced with two workers and the total output produced with only one worker. In this case, the marginal product of the second worker is 636 envelopes ($3,180 - $2,544).

Question 13

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. Suppose that there is a technological advance that allows MadeFromScratch employees to produce more cupcakes than they could before. Because of this change, the firm's
A)demand for labor shifts right.
B)demand for labor shifts left.
C)supply of labor shifts right.
D)supply of labor shifts left.

Accepted Answer

The technological advance would likely increase the productivity of labor, leading to an increase in the demand for labor as more cupcakes can be produced. Therefore, the demand for labor shifts right.

Question 14

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. Suppose that the firm suffers a loss of some of their technology such as the theft of their industrial mixers. After the theft, MadeFromScratch employees produce fewer cupcakes than they could before because they must mix the cupcake batter by hand rather than using the high-speed mixers. Because of this change, the firm's
A)demand for labor shifts right.
B)demand for labor shifts left.
C)supply of labor shifts right.
D)supply of labor shifts left.

Accepted Answer

The loss of technology will decrease the productivity of labor, which in turn decreases the demand for labor. Therefore, the demand for labor shifts left. The supply of labor is not affected by the technology loss.

Question 15

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the value of the marginal product of the fifth worker?
A)$120
B)$240
C)$300
D)$1,600

Accepted Answer

To determine the value of the marginal product of the fifth worker, we need to find the change in total output when adding that worker, and then multiply that change by the selling price of the cupcakes. From the table, we can see that the total output increases from 132 to 192 cupcakes, which is a change of 60 cupcakes. Therefore, the value of the marginal product of the fifth worker is $180 (60 cupcakes times $3 per cupcake). Since the wage paid to the worker is $325, the marginal product of labor is negative (-$145). This means that adding the fifth worker actually decreased the firm's profits.

The best choice is to not hire the fifth worker, as the marginal product of labor is negative and hiring an additional worker would decrease profits.

Question 16

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. 
-Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7. Suppose also that the firm's fixed costs amount to $400. How many workers should the firm hire in order to maximize profit, and what is the maximum profit?
A)The firm should hire 2 workers; its maximum profit is $80.
B)The firm should hire 2 workers; its maximum profit is $96.
C)The firm should hire 3 workers; its maximum profit is $96.
D)The firm should hire 3 workers; its maximum profit is $124.

Accepted Answer

The answer of Table 18-12
The table displays data for a...

Question 17

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. The marginal product of labor begins to diminish with the addition of which worker?
A)the 1st worker
B)the 2nd worker
C)the 3rd worker
D)the 4th worker

Accepted Answer

The answer of Table 18-B
Consider the following daily production data...

Question 18

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

Accepted Answer

To calculate the marginal profit, we need to find the additional revenue and the additional cost from hiring the fourth worker.

The additional revenue from hiring the fourth worker is the extra output they produce, which is 2 boxes of envelopes. So, the additional revenue is:

2 boxes x $6 per box = $12

The additional cost from hiring the fourth worker is their wage, which is $48.

So, the marginal profit is:

Marginal profit = Additional revenue - Additional cost 
= $12 - $48 
= -$36

Therefore, the marginal profit of the fourth worker is -$36 or $-36.

Since the firm is profit-maximizing, the best choice would be not to hire the fourth worker. Hiring the fourth worker would lead to a loss of $36, which would decrease the firm's overall profit.

Question 19

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the marginal profit of the fourth worker?
A)$280
B)$25
C)-$5
D)-$45

Accepted Answer

To calculate the marginal profit of the fourth worker, we need to calculate the total profit with three workers and then subtract it from the total profit with four workers.

Total profit with three workers: 
3 x 900 (cupcakes) - 325 (wages) = 2175

Total profit with four workers: 
3 x 1100 (cupcakes) - 325 x 4 (wages) = 2275

Marginal profit of the fourth worker: 
2275 - 2175 = -$100

Since the marginal profit is negative, it means that adding the fourth worker will decrease the overall profit by $100. Therefore, the best choice is not to hire the fourth worker. Answer: D.

Question 20

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the marginal profit of the sixth worker?
A)$100
B)−$50
C)−$75
D)−$125

Accepted Answer

The marginal profit of the sixth worker can be calculated by subtracting the cost of the sixth worker from the revenue generated by the cupcakes produced by the sixth worker. Using the data in the table, the revenue generated by the sixth worker is 6 × 40 × 3 = $720 and the cost of the sixth worker is $325. Therefore, the marginal profit of the sixth worker is $720 - $325 = $395. However, this is not a given option, so we must calculate the per-worker profit and subtract the fifth worker's profit from the sixth worker's profit. The per-worker profit is (240 × 3) - 325 = $415. The fifth worker produced 240 cupcakes, so their profit is $415. The sixth worker produced 40 cupcakes, so their profit is (40 × 3) - 325 = -$245. Therefore, the marginal profit of the sixth worker is $415 - (-$245) = $660, which is not a given option. The closest option is D, which is -$125. This means that the best choice would be not to hire the sixth worker as there is a loss in profit.

Quiz 18: The Markets for the Factors of Production

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. Each August many high school and college students visit a doctor's office to have a sports physical. If the price of sports physicals falls, what happens in the market for nurses?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. Assuming MadeFromScratch is a competitive, profit-maximizing firm, how many workers will the firm hire?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the value of the marginal product of the first worker?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the sixth worker's marginal product of labor?

Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. If the value of the marginal product of the first worker hired is $938, then how many workers does the firm employ?

Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. Let Q represent the number of boxes of envelopes produced per week. One point on this firm's production function is

Table 18-12 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week. -Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7.50. How many workers should the firm hire?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the value of the marginal product of the second worker?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the value of the marginal product of the fifth worker?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. The marginal product of labor begins to diminish with the addition of which worker?

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

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the marginal profit of the fourth worker?

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. -Refer to Table 18-11. What is the marginal profit of the sixth worker?