Micro Unit 5

Factor market demand is called derived demand because it

• derives its name from the Latin word factorus

• is derived from the market wages received by workers

• is derived from the productivity of workers

• is derived from the product market

• derives its shape from the price of the factor

Which of the following curves represents an individual firm's demand curve for labor?

• marginal revenue

• marginal product of labor

• marginal revenue product of labor

• average product of labor

• marginal factor cost

Which of the following is necessarily true if you work more when your wage rate increases?

• the income effect is large

• the substitution effect is small

• the income effect dominates the substitution effect

• the substitution effect dominates the income effect

• the income effect equals the substitution effect

The implicit cost of capital that you own is

• the rental rate

• greater than the rental rate

• the original purchase price of the capital

• greater than the original purchase price of the capital

• zero because you already own it

A very steep supply curve for land indicates that

• the supply of land is elastic

• the quantity of land supplied is very responsive to price changes

• it is very costly to increase the quantity of land supplied

• an increase in the demand for land would have a relatively small effect on the price of land

• a decrease in the demand for land would have a relatively large effect on the quantity of land supplied

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

• the labor supply curve is horizontal

• the labor demand curve is horizontal

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

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

• the firm must increase its wage to hire more workers

The entire payment for land that is in fixed supply constitutes

• a tax

• a subsidy

• a deadweight loss

• economic rent

• price discrimination

When a land tax is used to distribute the economic rent from land that is in fixed supply, the resulting deadweight loss is

• equal to the size of the tax

• equal to the price paid for the land

• larger than the size of the tax but smaller than the price paid for the land

• negative

• zero

As a result of an increase in the supply of land, the demand curve for land

• shifts to the right

• shifts to the left

• shifts upward

• shifts downward

• does not shift

Which of the following will shift a factor's demand curve to the right?

• a technological advance that replaces that factor

• a decrease in demand for the good being produced

• a decrease in that factor's marginal product

• an increase in the price of that factor

• an increase in the price of the good being produced