Factor Markets: Understanding the Demand and Supply of Productive Resources

Question 1

Which element is NOT a primary factor of production?

Accepted Answer

The latest technological advancements

Answer

Human effort (labor)

Answer

Machines and equipment (capital)

Answer

Natural resources (land)

Question 2

The need for workers ultimately stems from the demand for:

Accepted Answer

Goods and services

Answer

Time off work

Answer

Access to natural resources

Answer

Financial compensation

Question 3

The equilibrium wage is determined by the intersection of:

Accepted Answer

Labor demand and supply

Answer

Capital demand and supply

Answer

Land demand and supply

Answer

Capital demand and labor supply

Question 4

A profit-maximizing company will hire workers until:

Accepted Answer

The additional revenue generated by each worker (MRPL) equals the additional cost of hiring them (MCL)

Answer

MRPL is greater than MCL

Answer

MRPL is less than MCL

Answer

Total revenue equals total costs

Question 5

The elasticity of demand for labor is calculated as:

Accepted Answer

Percentage change in quantity demanded divided by percentage change in wage rate

Answer

Percentage change in wage rate divided by percentage change in quantity demanded

Answer

Ratio of wage rate to quantity demanded

Answer

Ratio of quantity demanded to wage rate

Question 6

In the construction industry, how do skill requirements, unionization, and globalization affect wages and the labor market's supply and demand?

Accepted Answer

Skill requirements increase wages, unionization can raise wages further, and globalization can lower wages for low-skilled workers.

Answer

Skill requirements increase wages, while unionization lowers wages by reducing competition.

Answer

Globalization increases the labor supply, leading to lower wages, and unionization has no effect on wages in a globalized market.

Answer

Globalization has no effect on wages, unionization always lowers wages, and skill requirements have no effect on labor supply.

Question 7

The demand for labor is primarily driven by:

Accepted Answer

Business demand for goods and services

Answer

Government regulations

Answer

Technological advancements

Answer

Union membership

Question 8

In a competitive labor market, the equilibrium wage:

Accepted Answer

Is determined by the intersection of supply and demand

Answer

Is fixed by government regulations

Answer

Is negotiated by labor unions

Answer

Fluctuates randomly

Question 9

A minimum wage set above the equilibrium wage tends to:

Accepted Answer

Increase unemployment

Answer

Increase labor force participation

Answer

Reduce employer profits

Answer

Improve worker safety

Question 10

Landowners receive income in the form of:

Accepted Answer

Rent

Answer

Wages

Answer

Interest

Answer

Dividends

Question 11

The marginal revenue product of a factor of production:

Accepted Answer

Measures the change in revenue from using one additional unit of that factor

Answer

Is always equal to the factor's marginal cost

Answer

Determines the demand for the factor

Answer

Is irrelevant in perfectly competitive markets

Question 12

How do technological advancements impact the demand for labor, and what are the implications for wage determination?

Accepted Answer

Technological advancements can shift the demand curve for labor, potentially leading to either higher or lower wages depending on the specific industry and skills required.

Answer

Technological advancements always increase labor demand, leading to higher wages.

Answer

Technological advancements only affect low-skilled labor, leaving wages for high-skilled labor unaffected.

Answer

Technological advancements have no impact on labor demand or wage determination.

Question 13

How should ethical considerations influence decisions in factor markets, specifically regarding fair wages, labor exploitation, and corporate social responsibility?

Accepted Answer

Ethical considerations should guide decision-making in factor markets, balancing economic efficiency with fairness and social responsibility.

Answer

Ethical concerns are irrelevant in factor markets, which prioritize economic outcomes.

Answer

Businesses have no ethical obligations beyond maximizing shareholder value.

Answer

Ethical considerations in factor markets are subjective and vary widely, making objective analysis impossible.

Question 14

What is the term for the payment for the use of land resources?

Accepted Answer

Rent

Answer

Wages

Answer

Interest

Answer

Profit

Question 15

Which of the following is NOT a factor that influences the demand for land?

Accepted Answer

Interest rates

Answer

Population growth

Answer

Technological changes

Answer

Price of substitute resources

Question 16

In a competitive labor market, the equilibrium wage rate is determined by:

Accepted Answer

The wage rate that equates the quantity of labor supplied to the quantity of labor demanded

Answer

The minimum wage rate set by the government

Answer

The highest wage rate that employers are willing to pay

Answer

The lowest wage rate that workers are willing to accept

Question 17

What is the primary role of interest rates in the capital market?

Accepted Answer

To encourage saving and investment

Answer

To discourage saving and investment

Answer

To have no effect on saving and investment

Answer

To increase saving and decrease investment

Question 18

What is the main function of factor markets?

Accepted Answer

To efficiently allocate productive resources

Answer

To maximize profits for businesses

Answer

To provide consumers with desired goods and services

Answer

To regulate the economy

Question 19

Which of the following is NOT a traditional factor of production?

Accepted Answer

Equipment

Answer

Labor

Answer

Capital

Answer

Land

Question 20

The demand for labor ultimately stems from the demand for:

Accepted Answer

Goods and services

Answer

Capital

Answer

Land

Answer

Other labor

Question 21

Which of the following could lead to an expansion in the supply of capital?

Accepted Answer

Technological advancements

Answer

A decrease in investment

Answer

An increase in interest rates

Answer

A natural disaster

Question 22

Rent is specifically paid for the use of:

Accepted Answer

Land

Answer

Labor

Answer

Capital

Answer

Entrepreneurship

Question 23

Which of the following is NOT a determinant of wages?

Accepted Answer

Age

Answer

Skill level

Answer

Unionization

Answer

Government regulations

Question 24

Market equilibrium occurs when:

Accepted Answer

Supply equals demand

Answer

Supply exceeds demand

Answer

Demand exceeds supply

Answer

There is a shortage or surplus

Question 25

A surplus in the labor market implies that:

Accepted Answer

The quantity supplied exceeds the quantity demanded

Answer

The quantity demanded exceeds the quantity supplied

Answer

The market is in equilibrium

Answer

There is a shortage of workers

Question 26

Which of the following policies would be most likely to reduce unemployment?

Accepted Answer

Expansionary fiscal policy

Answer

Contractionary monetary policy

Answer

Increasing interest rates

Answer

Reducing government spending

Question 27

In order to maximize profit, a firm must produce at the output level where:

Accepted Answer

Marginal cost equals marginal revenue

Answer

Total cost equals total revenue

Answer

Average cost is minimized

Answer

Demand is highest

Question 28

Which of the following is NOT a characteristic of a perfectly competitive factor market?

Accepted Answer

Government intervention

Answer

Factor mobility

Answer

Factor homogeneity

Answer

Perfect competition

Question 29

How do trade unions affect wages in factor markets?

Accepted Answer

Negotiate higher wages with employers

Answer

Reduce labor supply

Answer

Increase labor demand

Question 30

In a competitive labor market, how do supply and demand forces determine the equilibrium wage rate?

Accepted Answer

The equilibrium wage is established when the quantity of labor supplied equals the quantity of labor demanded.

Answer

The government sets the equilibrium wage.

Answer

The equilibrium wage is the lowest wage employers are willing to pay.

Answer

The equilibrium wage is the highest wage workers are willing to accept.

Question 31

Which of the following is NOT considered a factor of production used in economic activities?

Accepted Answer

Ideas

Answer

Land

Answer

Capital

Answer

Labor

Question 32

In a competitive labor market, the wage rate is primarily determined by:

Accepted Answer

The equilibrium point where labor supply and demand intersect

Answer

Government regulations

Answer

Company policies

Question 33

The economic rent of land primarily depends on:

Accepted Answer

Its scarcity and productivity

Answer

Government subsidies

Answer

Landlord's preferences

Answer

Its location and zoning

Question 34

Which of the following is a characteristic of a perfectly competitive factor market?

Accepted Answer

Numerous independent buyers and sellers

Answer

Government regulations

Answer

Product differentiation

Answer

Barriers to entry

Question 35

The supply of labor is influenced by:

Accepted Answer

Wage rates, benefits, and societal attitudes towards work

Answer

Only wages

Answer

Only non-wage benefits

Answer

Only societal attitudes

Question 36

Which of the following is considered a form of human capital?

Accepted Answer

Education

Answer

Natural resources

Answer

Technology

Answer

Money

Question 37

In a labor market, the equilibrium wage occurs when:

Accepted Answer

The quantity of labor demanded equals the quantity of labor supplied

Answer

Government sets the wage

Answer

Demand exceeds supply

Answer

Supply exceeds demand

Question 38

Which of the following would likely cause a decrease in the equilibrium price of capital?

Accepted Answer

Innovations that reduce the need for capital equipment

Answer

Increase in demand for capital

Answer

Government subsidies for capital investment

Question 39

The opportunity cost associated with entrepreneurial ability is:

Accepted Answer

Profit

Answer

Rent

Answer

Interest

Answer

Wages

Question 40

Which characteristic defines a perfect labor market?

Accepted Answer

Unrestricted entry and exit for workers and firms

Answer

Fixed wages despite market changes

Answer

No influence of unions on wages

Answer

Constant equilibrium in the labor market

Question 41

Which of the following is NOT considered a factor of production?

Accepted Answer

Knowledge

Answer

Land

Answer

Capital

Answer

Labor

Question 42

The demand for labor is primarily derived from the demand for:

Accepted Answer

Output

Answer

Firms

Answer

Inputs

Answer

Consumers

Question 43

The equilibrium price in a factor market is established at the point of:

Accepted Answer

Intersection of supply and demand

Answer

Value of marginal product

Answer

Government intervention

Answer

Cost of production

Question 44

A key characteristic of a perfectly competitive labor market is:

Accepted Answer

Numerous buyers and sellers

Answer

Price-setting firms

Answer

Differentiated products

Answer

High barriers to entry

Question 45

According to the marginal productivity theory of distribution, the income of a factor of production is determined by its:

Accepted Answer

Marginal product's value

Answer

Supply and demand

Answer

Government-set rate

Question 46

The elasticity of demand for labor measures the:

Accepted Answer

Percentage change in quantity demanded relative to percentage change in wage rate

Answer

Percentage change in quantity demanded relative to percentage change in price

Answer

Percentage change in wage rate relative to percentage change in quantity demanded

Question 47

Equilibrium interest rate is achieved when:

Accepted Answer

Supply of loanable funds equals demand for loanable funds

Answer

Quantity of goods and services demanded equals quantity supplied

Answer

Supply of money equals demand for money

Question 48

Which of the following is NOT a productive resource (factor of production)?

Accepted Answer

Money

Answer

Capital

Answer

Labor

Question 49

The primary driver of labor demand is:

Accepted Answer

The productivity of labor

Answer

The price level of goods

Answer

Government policies

Answer

The availability of physical capital

Question 50

The equilibrium wage rate is established at the point where:

Accepted Answer

Labor demand equals labor supply

Answer

Large corporations negotiate with smaller businesses

Answer

Unions and employers reach an agreement

Answer

The government sets a minimum wage

Question 51

Economic rent refers to:

Accepted Answer

Payments made for units of a factor of production that exceed their normal supply price

Answer

Payments made for labor services

Answer

Payments made for capital investments

Question 52

Which of the following is a potential consequence of a negative externality in the factor market?

Accepted Answer

Underallocation of resources to that factor

Answer

No impact on resource allocation

Answer

Increased efficiency in the use of that factor

Answer

Overallocation of resources to that factor

Question 53

Generally, the elasticity of demand for land is considered to be:

Accepted Answer

Low

Answer

Perfectly elastic

Answer

Perfectly inelastic

Answer

Highly elastic