Question 1

If the selling price of a bushel of cranberries rises, we would expect the demand for labor in the cranberry industry to
A)increase.
B)decrease.
C)be unchanged.
D)increase by less than the corresponding decrease in supply.

Accepted Answer

An increase in the selling price of a bushel of cranberries indicates an increase in the demand for cranberries, which could lead to an increase in the demand for labor in the cranberry industry as well. With an increased demand for cranberries, cranberry producers will require more labor to meet the higher levels of production.

Question 2

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. In the fresh Pacific salmon product market, Gertrude has some control over the
A)price she charges for her fresh salmon.
B)quantity of fresh salmon that she supplies to the market.
C)competitive environment of the market.
D)supply of labor in the market.

Accepted Answer

Gertrude has control over the quantity of fresh salmon she supplies to the market through her fishing activities. However, she does not have control over market prices or the competitive environment, and her influence over the supply of labor is limited to the crew members she hires for her boats.

Question 3

Harold owns a cranberry bog in which he grows cranberries. Harold's farm is a competitive, profit-maximizing firm. As such, Harold much decide
(i)how many cranberries to sell.
(ii)what price to charge for his cranberries.
(iii)what wages to pay his workers.
(iv)how many workers to hire.
A)(i) only
B)(ii) and (iii) only
C)(i) and (iv) only
D)(i), (ii), (iii), and (iv)

Accepted Answer

In a competitive market, Harold can decide how many cranberries to sell and how many workers to hire, but the market determines the price of cranberries and the wages.

Question 4

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. Labor-market theory assumes that Gertrude's demand for crew members and her supply of fresh Pacific salmon result from her
A)intrinsic desire to hire crew members.
B)primary goal of maximizing profit.
C)altruistic motives to provide fresh salmon to consumers.
D)desire to strike a balance between environmental concerns and maximum profit.

Accepted Answer

Labor-market theory assumes that firms, like Gertrude's, operate in order to maximize profits. Therefore, Gertrude's demand for crew members and supply of fresh Pacific salmon are driven by her desire to make a profit in the competitive market for Pacific salmon. Altruistic motives or environmental concerns may be important to some firms, but they would not be the main drivers of their behavior in a market economy.

Question 5

Which of the following statements is correct?
A)An increase in the supply of other factors, such as capital, will increase the demand for labor.
B)Labor-saving technology will increase the demand for labor.
C)Labor-augmenting technology will decrease the demand for labor.
D)A decrease in the price of output will increase the demand for labor.

Accepted Answer

An increase in the supply of other factors, such as capital, will increase the productivity of labor, which will increase the demand for labor.

Question 6

Figure 18-4
The graph below illustrates the market for nurses who work in doctors' offices. 
-Refer to Figure 18-4. If doctors' offices adopt new labor-augmenting technologies, 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

If doctors' offices adopt new labor-augmenting technologies, it will increase the demand for nurses as the productivity of nurses will increase due to the new technology, leading to an increase in demand from D1 to D2.

Question 7

Which of the following best illustrates the concept of "derived demand?"
A)An increase in the wages of auto workers will lead to an increase in the demand for robots in automobile factories.
B)An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.
C)An automobile producer's 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.

Accepted Answer

The answer of Which of the following best illustrates the...

Question 8

Which of the following would decrease the demand for labor?
(i)a decrease in the output price
(ii)an increase in the output price
(iii)a labor-saving technological advance
(iv)a labor-augmenting technological advance
A)(i) only
B)(i) and (iii) only
C)(ii) only
D)(ii) and (iv) only

Accepted Answer

A decrease in the output price reduces the revenue from selling goods, leading to lower demand for labor. A labor-saving technological advance reduces the need for labor, also decreasing demand.

Question 9

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. If Gertrude is a competitor in both the fresh Pacific salmon market and in the market for crew members, she is called a price
A)taker in the salmon market and a wage setter in the crew market.
B)taker in the crew market and a price setter in the salmon market.
C)taker in both markets.
D)setter in both markets.

Accepted Answer

The answer of Scenario 18-2
Gertrude Kelp owns three boats that...

Question 10

Which of the following would increase the demand for labor?
(i)a decrease in the output price
(ii)an increase in the output price
(iii)a labor-saving technological advance
(iv)a labor-augmenting technological advance
A)(i) only
B)(i) and (iii) only
C)(ii) only
D)(ii) and (iv) only

Accepted Answer

An increase in the output price (ii) makes producing more profitable, increasing demand for labor. A labor-augmenting technological advance (iv) increases productivity, also increasing demand for labor.

Question 11

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. If Gertrude is a price taker in the labor market, she can choose
A)the price at which she will sell the fish she catches.
B)how many crew members she will hire.
C)the wages that she will pay to her crew members.
D)All of the above.

Accepted Answer

The answer of Scenario 18-2
Gertrude Kelp owns three boats that...

Question 12

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. Based on the given information, it is likely that Gertrude's firm has
A)some influence over the wages paid to crew members but no influence over the price of salmon.
B)some influence over the price of salmon but no influence over the wages paid to crew members.
C)some influence over both the price of salmon and the wages paid to crew members.
D)no influence over either the price of salmon or the wages paid to crew members.

Accepted Answer

Since Gertrude's contribution to the entire harvest of salmon is negligible, it is unlikely that her firm would have any influence over the price of salmon. Additionally, since there are thousands of firms like Gertrude's in the market, it is also unlikely that her firm would have any significant influence over the wages paid to crew members. Therefore, the best choice is D, no influence over either the price of salmon or the wages paid to crew members.

Question 13

Figure 18-4
The graph below illustrates the market for nurses who work in doctors' offices. 
-Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals decreases, 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 14

Figure 18-4
The graph below illustrates the market for nurses who work in doctors' offices. 
-Refer to Figure 18-4. If doctors' offices adopt new labor-saving technologies, 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

If doctors' offices adopt new labor-saving technologies, it is likely that they will need fewer nurses to perform tasks that can now be automated. This would lead to a decrease in demand for nurses, shifting the demand curve from D2 to D1.

Question 15

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. If the price of fresh Pacific salmon were to increase significantly, it is most likely that Gertrude would
A)reduce her demand for crew members.
B)sell some of her boats.
C)become a seller in at least one factor market.
D)hire more crew members.

Accepted Answer

If the price of fresh Pacific salmon were to increase significantly, Gertrude would want to take advantage of the opportunity to catch more fish and make a greater profit. This would require her to hire more crew members to help with the increased workload.

Question 16

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. When Gertrude participates in the labor market to hire crew members for her boats, she is most likely considered a
A)demander of labor services.
B)supplier of labor services.
C)demander of capital.
D)supplier of capital.

Accepted Answer

Gertrude is hiring crew members for her boats, which means she is demanding labor services.

Question 17

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 rises, 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

If the price of sports physicals rises, more people may choose not to get a physical or look for alternative options, reducing the demand for sports physicals. However, the increase in price may also indicate a greater need for nurses to conduct these physicals or to handle increased patient flow, thus increasing the demand for nurses in doctors' offices.

Question 18

Scenario 18-2
Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market.
-Refer to Scenario 18-2. If the price of fresh Pacific salmon were to decrease significantly, it is most likely that Gertrude would
A)reduce her demand for crew members.
B)hire more boats.
C)become a seller in at least one factor market.
D)hire more crew members.

Accepted Answer

If the price of fresh Pacific salmon were to decrease significantly, Gertrude's revenue would decrease, and she would need to cut costs. The cost of crew members is a significant expense in this business, and reducing her demand for crew members would be a way for Gertrude to cut costs. Option B is not likely as Gertrude's contribution to the entire harvest of salmon is negligible relative to the size of the market. Option C is not likely as there is no indication in the scenario that Gertrude has any other factor inputs she could sell. Option D is not likely as Gertrude would need to reduce costs if revenue decreases, not increase them.

Question 19

When a competitive firm maximizes profit, it will hire workers up to the point where the
A)marginal product of labor is equal to the product price.
B)marginal product of labor is equal to the wage.
C)value of the marginal product of labor is equal to the product price.
D)value of the marginal product of labor is equal to the wage.

Accepted Answer

When a competitive firm maximizes profit, it will hire workers up to the point where the value of the marginal product of labor is equal to the wage. This is because at this point, the firm is getting the most benefit from the labor being employed without paying more than the value added by that labor.

Question 20

Figure 18-4
The graph below illustrates the market for nurses who work in doctors' offices. 
-Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, 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...

Quiz 18: The Markets for the Factors of Production

If the selling price of a bushel of cranberries rises, we would expect the demand for labor in the cranberry industry to

Harold owns a cranberry bog in which he grows cranberries. Harold's farm is a competitive, profit-maximizing firm. As such, Harold much decide (i) how many cranberries to sell. (ii) what price to charge for his cranberries. (iii) what wages to pay his workers. (iv) how many workers to hire.

Which of the following statements is correct?

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If doctors' offices adopt new labor-augmenting technologies, what happens in the market for nurses?

Which of the following best illustrates the concept of "derived demand?"

Which of the following would decrease the demand for labor? (i) a decrease in the output price (ii) an increase in the output price (iii) a labor-saving technological advance (iv) a labor-augmenting technological advance

Which of the following would increase the demand for labor? (i) a decrease in the output price (ii) an increase in the output price (iii) a labor-saving technological advance (iv) a labor-augmenting technological advance

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals decreases, what happens in the market for nurses?

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If doctors' offices adopt new labor-saving technologies, what happens in the market for nurses?

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 rises, what happens in the market for nurses?

When a competitive firm maximizes profit, it will hire workers up to the point where the

Figure 18-4 The graph below illustrates the market for nurses who work in doctors' offices. -Refer to Figure 18-4. If the supply of medical supplies that nurses use when performing sports physicals increases, what happens in the market for nurses?