NSS Exploring Economics 2 (3rd Edition) Answers To Exercises Chapter 10 Factors of Production

NSS Exploring Economics 2 (3rd Edition)
Answers to Exercises
Chapter 10 Factors of Production
Questions
p.67
Test yourself 10.1
What is the labour supply in the three cases in Task 10.1? Fill in the table below.
Average working
Number of workers Labour supply
hours per day
Case 1 hours man-hours
p.68
Test yourself 10.2
How do the following events affect the labour supply? Put ‘’ for increase, ‘’ for decrease or
‘–’ for remain unchanged.
Average
Number of
× working = Labour supply
workers
hours
a. The government relaxes
→ & →
immigration controls.
b. Opportunities for further
→ & →
education increase.
c. The government raises the
minimum working age from → & →
15 to 18.
d. Relative to last year, fewer
public holidays fall on → & →
Saturdays this year.
e. The government raises the
transport allowance for → & →
workers.
NSS Exploring Economics 2 (3rd Edition) 1 © Pearson Education Asia Limited 2019
Answers to Exercises (Chapter 10)
p.69
Misconceptions 10.1
Are the following statements correct?
a. The availability of more job vacancies increases the labour supply.
b. An increase in the salaries tax rate reduces the labour supply.
p.73
Test yourself 10.3
The following table shows the amount of input and output of Factory A in 2017 and 2018.
2017 2018
Number of workers 15 10
Total number of working hours 2,000 3,000
Unit of dressed produced per year 84,000 90,000
Was there any change in Factory A’s labour supply and labour productivity from 2017 to
2018? Explain your answer.
p.79
Test yourself 10.4
Due to economic globalisation, it is more common for firms from developed countries to
outsource some production processes to developing countries and to send supervisors to
monitor the production.
a. Explain how the above phenomenon affects labour mobility in developed countries.
b. If these firms offer new kinds of jobs for workers in developing countries, discuss the
effect this would have on labour mobility in developing countries.
p.82
Misconceptions 10.2
a. Workers earn a higher income by a piece rate than by a time rate.
b. The employer can save on the cost of monitoring workers by adopting a piece rate instead
of a time rate.
p.84
Test yourself 10.5
Match the following items. More than one reason can be matched.
Wage payment
Worker Reason(s)
method
a. A postman • • Time rate • • It is costly to measure the
with tips worker’s contribution.
b. A hotel porter • • Time rate • • This can increase the worker’s
incentive to work.
c. An author of an • • Piece rate • • The employer can transfer part of
economics textbook the business risk to the worker.
d. A sewing machine • • Sharing of • • The cost of calculating wages is
operator sales revenue lower.
p.87
Misconceptions 10.3
a. The return for entrepreneurship must be positive.
b. The return for entrepreneurship must be larger than the return for labour.
c. When John is employed by a company as the chief executive officer, he provides the
service of entrepreneurship.
p.91
Test yourself 10.6
Which of the following resources belong to land? Put a ‘’ in the appropriate brackets.
a. A reservoir ( )
b. Wind used for wind power generation ( )
c. Dolphins at Ocean Park ( )
d. Solar energy collected by a solar cell ( )
Misconceptions 10.4
a. Land is a free gift of nature and hence it is a free good.
b. The creation of land involves zero cost and hence the use of land also involves zero cost.
c. Since the supply of land can be increased by natural forces, the supply curve of land is
upward sloping.
Exercises
pp.97-99
Multiple Choice Questions
Choose the best answer.
1.
Which of the following statements about labour are correct?
(1) Labour supply is measured by the number of workers.
(2) Labour supply is measured by the number of working hours.
(3) Labour productivity is measured by the output produced.
(4) Labour productivity is measured by the output per unit of labour.
A. (1) and (3) only
B. (1) and (4) only
C. (2) and (3) only
D. (2) and (4) only
2.
Which of the following will increase a country’s labour supply?
(1) More firms offer overtime work allowances to employees.
(2) The government provides more affordable child care services.
(3) The working population becomes better educated.
(4) Many firms change their wage payment methods from piece rates to time rates.
A. (1) and (2) only
B. (1) and (4) only
C. (2) and (3) only
D. (3) and (4) only
3.
The following table shows the number of tables produced by a factory in 2017 and 2018.
Year 2017 2018
Number of workers employed 50 60
Units of tables produced 100,000 100,000
Number of working hours per worker 1,250 1,000
In 2018, the labour supply _____ and the average labour productivity _____ relative to those
in 2017.
A. decreased … remained unchanged
B. increased … remained unchanged
C. decreased … increased
D. increased … decreased
4.
Which of the following will increase the average productivity of labour?
A. Increasing unemployment benefits
B. Importing workers from other countries
C. Adopting specialisation.
D. Extending working hours
6.
Which of the following types of people have the lowest occupational mobility?
A. Teachers
B. Lawyers
C. Lorry drivers
D. Secretaries
7.
Suppose the government introduces a child care subsidy. This helps low-income families
reduce their cost of child care and encourages mothers to go to work. If they get a job far
away from their home, additional subsidies will be given.
Which of the following would likely occur as a result of the subsidy?
(1) Labour supply would increase.
(2) Labour productivity would increase.
(3) Geographical mobility of labour would increase.
(4) Occupational mobility of labour would increase.
A. (1) and (3) only
B. (1) and (4) only
C. (2) and (3) only
D. (1), (2), (3) and (4)
8.
Newspaper columnists are usually paid by a piece rate instead of a time rate because
A. it can improve the quality of work.
B. it can increase columnists’ income.
C. it can increase columnists’ sense of belonging.
D. it can reduce the cost of monitoring to prevent shirking.
9.
Which of the following is NOT a feature of entrepreneurship?
A. The return is higher than that for labour.
B. The return is uncertain.
C. Some entrepreneurs take part in decision making at their firms.
D. It bears production risks.
10.
Which of the following factors of production of an organic farm belong to capital?
(1) Natural fertilisers made from animal waste
(2) Sunshine
(3) Seeds
(4) Rainwater harvesting system
A. (1) and (3) only
B. (2) and (3) only
C. (2) and (4) only
D. (1), (3) and (4)
11.
Which of the following statements about land is INCORRECT?
A. The supply of land is fixed over time.
B. The supply of land cannot be increased through human effort.
C. Land creation involves zero cost.
D. The use of land usually has a cost.
pp.99-100
Short Questions
1.
a. How will the labour supply be affected if the government raises the legal retirement age?
(2 marks)
b. The occupational mobility of elderly workers would increase as a result of raising the
legal retirement age. Do you agree? Explain your answer. (2 marks)
2.
The Working Holiday Scheme allows young people aged between 18 and 30 to take
short-term employment and/or enrol in short-term courses in a participating country. An
annual quota exists in each participating country.
Suppose the quota for the scheme increases. Discuss the effects of the increase in the quota
on young people in terms of
a. labour mobility, and (3 marks)
b. labour productivity. (3 marks)
3.
June is the owner as well as the hairdresser at a hair salon. She employs Romeo as her
assistant to shampoo customers’ hair and clean the floor.
a. What types of factors of production do June and Romeo provide? Explain. (4 marks)
b. Suppose June allows Romeo to accept tips from customers. Explain ONE advantage of
this arrangement to June and Romeo, respectively. (4 marks)
4.*
Proofreaders employed in a publishing company are responsible for checking any mistakes in
the text, such as grammar, spelling and punctuation. Suppose their payment methods change
as follows:
Method A Method B
Salary: $30 per page Salary: $200 per hour
‘From the viewpoint of the employer, some disadvantages of Method A can be eliminated by
the adoption of Method B.’ Justify the statement with ONE reason. (4 marks)
5.
‘The formation of natural resources does not involve any production cost. Thus, natural
resources are free goods.’ Do you agree? Explain. (6 marks)
p.100
Structured Questions
1.
a. In which type of production is a principal of a subsidised secondary school engaged? To
what factor of production does a principal belong? Explain your answer. (4 marks)
b. Explain why a principal is paid by a time rate instead of a piece rate. (4 marks)
c. At the school, the clerks are more likely to change their jobs than teachers. Explain the
above phenomenon in terms of labour mobility. (3 marks)
2.
The following table shows the input-output relationship of Firm A and Firm B.
Firm A Firm B
Number of full-time workers 0 60
Number of part-time workers 80 0
Number of monthly working
0 300
hours per full-time worker
Number of monthly working
200 0
hours per part-time worker
Total output per month (units) 102,400 108,000
a. Which firm has a larger labour supply? Explain your answer. (3 marks)
b. Calculate the labour productivity of Firm A and Firm B, respectively. (2 marks)
c. Suggest THREE possible reasons for the difference between the labour productivity of
Firm A and Firm B. (3 marks)
d. Suggest ONE advantage and ONE disadvantage to the firms of introducing a
profit-sharing scheme. (4 marks)
Answers
p.67
Test yourself 10.1
Average working
Number of workers Labour supply
hours per day
Case 1 2 8 hours 16 man-hours
p.68
Test yourself 10.2
Average
Number of
× working = Labour supply
workers
hours
a. The government relaxes
→  & – → 
immigration controls.
b. Opportunities for further
→  & – → 
education increase.
c. The government raises the
minimum working age from →  & – → 
15 to 18.
d. Relative to last year, fewer
public holidays fall on → – &  → 
Saturdays this year.
e. The government raises the
transport allowance for →  & – → 
workers.
p.69
Misconceptions 10.1
a. Incorrect. Job vacancies are offered by firms (the demand side). The availability of more
job vacancies reflects an increase in labour demand. There is no change in workers’
willingness to provide labour services (the supply side). The labour supply remains
unchanged.
b. Correct. At the same wage rate, an increase in the salaries tax rate lowers workers’ income
net of tax. Workers will be less willing to provide labour services. Hence, the labour
supply decreases.
p.73
Test yourself 10.3
Labour supply increased because the total number of working hours increased from 2,000
man-hours to 3,000 man-hours.
Labour productivity in 2017 = 84,000 units / 2,000 man-hours = 42 units/man-hour
Labour productivity in 2018 = 90,000 units / 3,000 man-hours = 30 units/man-hour
Hence, labour productivity decreased.
p.79
Test yourself 10.4
a. The geographical mobility of labour in developed countries increases.
This is because workers from developed countries are more likely to be assigned to work
in developing countries to supervise the outsourced production.
b. The occupational mobility of labour in developing countries increases.
This is because workers in developing countries have more occupational choices.
p.82
Misconceptions 10.2
a. Incorrect. Workers paid by a piece rate earn an unstable income but those paid by a time
rate earn a stable income. However, there is no guarantee that workers would earn more
by a piece rate than by a time rate. This depends on many factors, such as their
productivity and industriousness（勤奮）.
b. Incorrect. By adopting a piece rate, the employer incurs a higher cost of monitoring
product quality, since workers have a greater incentive to sacrifice quality for quantity.
p.84
Test yourself 10.5
Wage payment
Worker Reason(s)
method
a. A postman • • Time rate • • It is costly to measure the
with tips worker’s contribution.
b. A hotel porter • • Time rate • • This can increase the worker’s
incentive to work.
c. An author of an • • Piece rate • • The employer can transfer part of
economics textbook the business risk to the worker.
d. A sewing machine • • Sharing of • • The cost of calculating wages is
operator sales revenue lower.
p.87
Misconceptions 10.3
a. Incorrect. The return for entrepreneurship can be negative when the firm suffers losses.
b. Incorrect. The return for entrepreneurship can be negative and smaller than the return for
labour when the firm suffers losses.
c. Incorrect, because he does not bear risks. Instead, he provides labour.
p.91
Test yourself 10.6
a. A reservoir ( )
b. Wind used for wind power generation ()
c. Dolphins at Ocean Park ( )
d. Solar energy collected by a solar cell ( )
Explanation:
a. Human effort is involved, e.g., dams are built and pipes are added.
b. No human effort is involved in the formation of natural wind.
c. Human effort is involved, e.g., dolphins are caught and trained.
d. Human effort is involved, e.g., energy is transformed and stored.
Misconceptions 10.4
a. Incorrect.
Land is a free gift of nature. This means that the creation of land does not involve any
human effort.
However, this does not mean that all wants for land are satisfied. Land can be a scarce
good.
b. Incorrect.
The creation of land involves zero cost.
However, if land is scarce, not all uses of land can be satisfied. Then, the cost of its
present use is forgoing its highest-valued alternative use.
c. Incorrect.
When the supply of land is increased by natural forces, its supply curve shifts rightwards.
Since the quantity of land cannot be increased artificially even when its price increases,
the supply curve of land is vertical, instead of upward sloping.
Exercises
pp.97-99
Multiple Choice Questions
1. D
2. A
Option (1) is correct. The allowances will encourage employees to work longer hours.
Option (2) is correct. This will attract more females with children to join the labour force.
Option (4) is incorrect. The change may weaken workers’ incentive to work and reduce
labour productivity rather than labour supply.
3. C
The labour supply was 62,500h (= 50 × 1,250h) in 2017 and 60,000h (= 60 × 1,000h) in
2018. It decreased.
Average labour productivity was 1.6 (= 100,000 / 62,500) units/h in 2017 and 1.67
(= 100,000 / 60,000) units/h in 2018. It increased.
4. C
Option A is incorrect. An increase in unemployment benefits lowers the cost of
unemployment, increases the number of unemployed persons and extends the duration of
unemployment. Thus, it reduces the labour supply, but has little effect on labour
productivity.
Option B is incorrect. This increases the labour force and thus the labour supply. The
effect on labour productivity depends on the average quality of imported workers.
Option D is incorrect. Labour supply increases. However, labour productivity declines
because workers would normally be tired after working long hours.
6. B
The cost of changing occupations (e.g., income forgone) to a lawyer is generally greater
than the cost to other workers. Compared with other workers, a lawyer is the least willing
to change his occupation.
7. A
Option (1) is correct. A lower cost for child care will encourage more mothers to enter the
labour force.
Option (3) is correct. With the additional subsidies, mothers are more willing to accept
jobs that are far away from their home.
8. D
9. A
10. D
Option (1) is the answer. Human effort is involved to produce fertilisers from animal
waste.
Option (2) is not the answer. Sunshine is a natural resource rather than a man-made
resource.
11. A
The supply of land can be changed by natural forces.
pp.99-100
Short Questions
1.
a. If the government raises the legal retirement age, the number of workers available
increases at the same wage rate. Hence, the labour supply increases. (2 marks)
b. No. (1 mark)
The measure does not affect the willingness and ease with which elderly workers can
change their occupation. Hence, the occupational mobility of elderly workers is not
affected. (1 mark)
2.
a. This increases the geographical mobility of young people because they can more easily
work in other countries. (3 marks)
b. This may increase the labour productivity of young people because more young people
can obtain knowledge and experience during their stay in participating countries.
(3 marks)
3.
a. June is the owner. She employs Romeo, makes production decisions and bears risks. She
provides entrepreneurship. (2 marks)
Both June and Romeo provide services to customers. They provide mental and physical
effort and participate in the production process. Both provide labour. (2 marks)
b. Advantages to June:
● This can lower the cost of monitoring Romeo’s work performance.
● This can raise Romeo’s work incentive
(Any ONE of the above. 2 marks)
Advantage to Romeo:
Romeo may obtain a higher income by providing better services. (2 marks)
4.
By using Method A, workers may sacrifice quality for quantity. With Method B, workers do
not have to hurry. They can pay more attention to quality. Hence, the disadvantage of Method
A can be eliminated. (4 marks)
OR:
Method A requires an exact measure of each worker’s contribution, which can be very costly.
With Method B, workers are paid according to their working hours. There is no need to
measure the exact contribution. Hence, the disadvantage of Method A can be eliminated.
(4 marks)
5.
The first statement is correct. Natural resources are gifts of nature and their formation
involves zero production cost. (3 marks)
However, the second statement is incorrect. We face scarcity. In other words, the quantities
of most natural resources are insufficient to satisfy all human wants. Most natural resources
are not free goods, e.g., mineral and oil deposits. (3 marks)
p.100
Structured Questions
1.
a. The principal engages in tertiary production, (1 mark)
as he provides educational services. (1 mark)
The principal provides labour, (1 mark)
as he is an employee who provides the mental and physical effort required to manage the
school. (1 mark)
b. This is because the contribution of a principal is too costly to measure and his
performance has significant effects on the school. To save on the cost of measuring the
contribution of the principal and prevent the sacrifice of output quality for quantity, a
time rate is used. (4 marks)
c. The clerks have higher occupational mobility. (1 mark)
This is because the income of a clerk is lower than that of a teacher. It is less costly for a
clerk to change occupation than for a teacher to change occupation. (2 marks)
2.
a. Labour supply of Firm A = 80 × 200 = 16,000 man-hours per month (1 mark)
Labour supply of Firm B = 60 × 300 = 18,000 man-hours per month (1 mark)
Hence, Firm B has a larger labour supply than Firm A. (1 mark)
b. Labour productivity of Firm A = 102,400 / 16,000 = 6.4 units per man-hour (1 mark)
Labour productivity of Firm B = 108,000 / 18,000 = 6.0 units per man-hour (1 mark)
c. Possible reasons for Firm A to have higher labour productivity than Firm B:
● Workers at Firm A are healthier.
● Workers at Firm A have a higher educational level or more training.
● Workers at Firm A have higher work incentives (e.g., due to the adoption of an
appropriate wage payment method).
● More advanced machines are used at Firm A.
● The working environment at Firm A is better.
● The management of Firm A is better, such as their practice of division of labour.
(Any THREE of the above or other reasonable answers. 1 mark × 3 = 3 marks)
d. Advantages of introducing a profit-sharing scheme to the firms:
● It can raise workers’ incentive to work as well as their productivity as workers can
earn more if the firm earns a higher profit.
● It reduces the need for supervision against shirking.
● Part of the business risk can be shifted to workers.
Disadvantages of introducing a profit-sharing scheme to the firms:
● The cost of calculating wage payments may be higher to the firms.
● Workers might not want to bear the risk. The firms may have difficulty in recruiting
workers if they do not provide any basic salary.

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Chapter 10 Factors of Production

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