Factor Markets

The four principal classes of factors of production are

• money, capital, land, and labor

• money, capital, labor, and entrepreneurship

• money, labor, land, and entrepreneurship

• land, labor, capital, and entrepreneurship

• land, labor, entrepreneurship, and money

Because it results from the demand for automobiles, the demand for automobile workers is a/an

• derived demand

• irrational demand

• elastic demand

• inelastic demand

• unit elastic demand

For a perfectly competitive firm in both the product market and the factor market, the demand curve for labor slopes downward due to

• market power

• economies of scale

• diseconomies of scale

• diminishing marginal returns

• increasing marginal returns

If marginal product is positive and falling as the firm hires more workers, then

• total product is rising at a decreasing rate

• total product is falling at a decreasing rate

• average product must be falling

• the marginal revenue product of labor is increasing

• the diminishing returns to labor are decreasing

Which of the following would shift the demand curve for labor to the right?

• a decrease in the wage rate

• an increase in the wage rate

• an increase in labor productivity

• a decrease in the final price of the product produced

• a decrease in the availability of physical capital per worker

Suppose a firm produces coffee mugs in a perfectly competitive output market. Which of the following would shift the firm’s demand curve for labor to the left?

• an increase in the demand for mugs

• a decrease in the price of mugs

• an increase in the price of mugs

• an increase in the availability of physical capital per worker

The supply curve for labor may shift to the left due to

• an increase in wealth

• an increase in the wage rate due to the income effect

• a decrease in the wage rate due to the income effect

• an increase in the wage rate due to the substitution effect

Compared to a competitive labor market, a firm with monopsony power in the labor market would pay a

• higher wage rate and hire more workers

• higher wage rate and hire fewer workers

• lower wage rate and hire more workers

• lower wage rate and hire fewer workers

If a former monopolist in the product market begins to face competition as firms enter the market, the firm’s demand curve for labor would

• not change

• become more elastic

• become less elastic

• show the effects of more rapidly diminishing marginal returns

According to marginal productivity theory, a factor of production will be paid based on the

• increase in revenue generated by the last unit of the factor employed in the market

• increase in output generated by the last unit of the factor employed in the market

• average revenue generated by the factor of production employed in the market

• average output generated by the factor of production employed in the market