Question

State whether each of the following statements is TRUE or FALSE.

1. If Joe could produce 6 pizzas or 3 photographs per hour, his opportunity cost of a pizza is 2 photographs.

2. Public goods are land, labour, and capital resources provided by households in return for payments from the government.

3. The presence of a fixed input means that the marginal product of labour eventually declines. This concept is known as substitutable inputs.

4. The additional output produced by hiring an additional unit of labour is known as the productivity of labour.

5. The additional revenue that a firm will take in by hiring one additional unit of labour is the marginal revenue product of labour

6. If the marginal product of the second worker employed by a calculator manufacturer is 10 calculators, and the price of a calculator is P10, the second worker's marginal revenue product is P1.

7. A profit-maximizing firm will hire labour as long as the marginal revenue product of labour exceeds the wage.

8. Minimum-wage laws increase the efficiency of labour markets.

9. Employment generally rises when the minimum wage rises.

10. In raising the wage above the equilibrium level, unions will create an excess supply of labour in the market.

Answer 1

The statements on opportunity cost, productivity of labor, marginal revenue product, and profit-maximizing firms are true, while those regarding public goods, diminishing marginal product, effects of minimum-wage laws, and unions' impact on wages are false.

Step-by-step explanation:

Let's evaluate each statement regarding its correctness within the context of economics.

1. True. If Joe could produce 6 pizzas or 3 photographs per hour, then forgoing 3 photographs to make one pizza means forgoing 2 photographs for each pizza, thus the opportunity cost of a pizza is 2 photos.
2. False. Public goods are non-excludable and non-rivalrous goods provided by the government, not resources like land, labor, and capital.
3. False. The presence of a fixed input can lead to a decline in the marginal product of labor; this is known as the Law of Diminishing Marginal Product, not substitutable inputs.
4. True. The additional output produced by hiring an additional unit of labor is indeed known as the productivity of labor.
5. True. The additional revenue generated by employing one more unit of labor is referred to as the marginal revenue product of labor.
6. False. If the marginal product of the second worker is 10 calculators, and the price of a calculator is P10, then the second worker's marginal revenue product is 10 calculators × P10 = P100, not P1.
7. True. A profit-maximizing firm will hire labor until the marginal revenue product of labor equals the wage.
8. False. Minimum-wage laws can cause unemployment if set above the equilibrium wage, thus not necessarily increasing the efficiency of labor markets.
9. False. Employment does not generally rise when the minimum wage rises, it can actually lead to job loss for some low-skilled workers.
10. True. Unions raising the wage above the equilibrium can cause an excess supply of labor, resulting in unemployment.