Mod 5.1: Introduction to Factor Markets

Which of the following is a factor of production? (SELECT ALL THAT APPLY)

• Land

• Labor

• Money

• Physical Capital

• Technology

Which of the following is true of a factor market but not a product market?

• Firms are the suppliers

• Households are the buyers

• Supply is derived

• Demand is derived

• Prices are established by firms

Factor market demand is called a derived demand because it

• is derived from the demand for the product it produces

• is derived from the market wage received by workers

• is derived from the productivity of workers.

• derives its name from the Latin word factorus

• derives its shape from the price of the factor

The value of the additional output generated by hiring one more unit of labor is known as the:

• marginal product of labor

• marginal revenue of labor

• marginal revenue product of labor

• marginal product curve

• total product of labor

The implicit cost of capital that you own is

• the original purchase price of the capital

• the rental rate

• greater than the rental rate

• greater than the original purchase price of the capital

• zero because you already own it

Which of the following is necessarily true for a firm in a perfectly competitive labor market?

• The marginal revenue product curve for labor is above the demand curve for labor.

• The labor supply curve is horizontal.

• The labor demand curve is horizontal.

• The firm must increase its wage to hire more workers.

• The firm has difficulty finding enough workers due to competition from other firms.