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Exam 17: The Economics of Factor Markets

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Question 31

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A decrease in the demand for fish

A) decreases the value of the marginal product of fishermen, reduces their wage, and reduces employment in the fishing industry.
B) increases the value of the marginal product of fishermen, increases their wage, and increases employment in the fishing industry.
C) decreases the value of the marginal product of fishermen, reduces their wage, and increases employment in the fishing industry.
D) increases the value of the marginal product of fishermen, increases their wage, and decreases employment in the fishing industry.

E) B) and D)
F) B) and C)

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Question 32

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Which of the following is likely to generate a compensating differential?

A) One employee is more attractive than another.
B) One employee is more educated than another.
C) All of these answers generate compensating differentials.
D) One employee works harder than another.
E) One employee is willing to work the nightshift while another is not.

F) A) and E)
G) B) and D)

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Question 33

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Firms are willing to pay more for workers with greater human capital because workers with greater human capital have a greater value of marginal product.

If there is a difference in wages among groups, it is evidence that there is discrimination in the labour market.

Describe the difference between a diminishing marginal product of labour and a negative marginal product of labour. Why would a profit-maximizing firm always choose to operate where the marginal product of labour is decreasing (but not negative)?

A person earns €60 000 in a job. The next best job would pay €50 000 so the economic rent is

Explain the theory that education acts as a signalling device. How does this contrast with the theory of education as an investment in human capital?

The rental price is the price a person pays to use a factor of production for a _________ period of time.

Figure 1 Labour (number of workers) $\begin{array}{cccc} \text { Labour (number of } & \text { Output } & \text { Marginal Product } & \text { Value of MPL } \\ \text { workers) } & \text {per hour } & \text { of Labour (MPL) } \\\hline0 & 0 \\ 1 & 5 \\ 2 & 9 \\ 3 & 12 \\ 4 & 14 \\ 5 & 15\end{array}$ -Refer to Figure 1. If this profit-maximizing firm sells its output in a competitive market for €3 per unit and hires labour in a competitive market for €8/hour, then this firm should hire

The value of the marginal product of labour is the

A factor exhibits diminishing marginal productivity if employing additional units of the factor reduces output.

Which of the following is not part of a worker's human capital?

Explain how a firm values the contribution of workers to its profitability. Would a profit-maximizing competitive firm ever stop increasing employment as long as marginal product is rising? Explain your answer.

Which of the following is not a reason why some workers are paid above the equilibrium wage?

Which of the following professionals is most likely to be able to generate the income of a superstar?

An increase in the supply of capital decreases the value of the marginal product of capital, reduces the rental rate of capital, and decreases the value of the marginal product of labour, which reduces the wage of labour.

According to the human capital view of education, education

Evaluate the following statement: "The gender pay gap provides evidence of widespread, severe, ongoing discrimination by employers and fellow workers."

If there is an increase in the equilibrium wage, there must have been an increase in the value of the marginal product of labour.

A competitive, profit-maximizing firm should hire workers up to the point where the