Question 1

If the wage is below the marginal revenue product, then a profit-maximizing firm will

Accepted Answer

A) employ more workers 
B) employ fewer workers 
C) see an increase in its demand for labor 
D) see an increase in its supply of labor 
E) see a fall in its demand for labor 
A) employ more workers 
B) employ fewer workers 
C) see an increase in its demand for labor 
D) see an increase in its supply of labor 
E) see a fall in its demand for labor

Question 2

A resource's earnings are all economic rent when the resource has no alternative uses.

Accepted Answer

A) True 
 B)False

Question 3

A firm's demand for a resource is a(n)

Accepted Answer

A) final demand 
B) derived demand 
C) secondary demand 
D) induced demand 
E) marginal demand 
A) final demand 
B) derived demand 
C) secondary demand 
D) induced demand 
E) marginal demand

Question 4

For a resource in a perfectly competitive market, marginal revenue product is equal to the price of the resource.

Accepted Answer

A) True 
 B)False

Question 5

The demand for labor is likely to increase when

Accepted Answer

A) the supply of the good it produces falls 
B) the demand for the good it produces rises 
C) the supply of the good it produces rises 
D) the demand for the good it produces falls 
E) the real wage rate rises 
A) the supply of the good it produces falls 
B) the demand for the good it produces rises 
C) the supply of the good it produces rises 
D) the demand for the good it produces falls 
E) the real wage rate rises

Question 6

People supply their resources to the highest-paying alternative, even if working conditions are not equally attractive.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 11-10   How low would the wage rate have to fall before the firm in Exhibit 11-9 would hire nine workers?

Accepted Answer

A) $198 
B) $4 
C) $396 
D) $28 
E) The firm would have to be paid to hire nine workers. 
A) $198 
B) $4 
C) $396 
D) $28 
E) The firm would have to be paid to hire nine workers.

Question 8

Permanent resource price differentials are caused by

Accepted Answer

A) differences in resource quality 
B) differences in the time and training required to perform the job 
C) differences in nonmonetary aspects of the job 
D) a lack of resource mobility 
E) all of the above 
A) differences in resource quality 
B) differences in the time and training required to perform the job 
C) differences in nonmonetary aspects of the job 
D) a lack of resource mobility 
E) all of the above

Question 9

A resource that earns only economic rent

Accepted Answer

A) cannot be employed in any other line of production, so its opportunity cost is zero 
B) is rental payment for a resource that has already been paid for 
C) is impossible because all resources have an opportunity cost associated with their use 
D) is not fixed in quantity 
E) has a perfectly elastic supply curve 
A) cannot be employed in any other line of production, so its opportunity cost is zero 
B) is rental payment for a resource that has already been paid for 
C) is impossible because all resources have an opportunity cost associated with their use 
D) is not fixed in quantity 
E) has a perfectly elastic supply curve

Question 10

In May 2007, Congress and the president passed a law increasing the minimum hourly wage from $5.15 to

Accepted Answer

A) $4.15 
B) $5.25 
C) $7.25 
D) $17.25 
E) $70.25 
A) $4.15 
B) $5.25 
C) $7.25 
D) $17.25 
E) $70.25

Question 11

If the marginal product of labor increases because of a shift of the MP curve, that will likely cause

Accepted Answer

A) an increase in the price of output produced by labor 
B) an increase in labor demand 
C) an increase in labor supply 
D) a fall in the wage paid to labor 
E) a fall in the number of workers employed 
A) an increase in the price of output produced by labor 
B) an increase in labor demand 
C) an increase in labor supply 
D) a fall in the wage paid to labor 
E) a fall in the number of workers employed

Question 12

A firm's marginal resource cost curve is

Accepted Answer

A) horizontal only if the firm is a price taker in the product market 
B) horizontal only if the firm is a price taker in the resource market 
C) vertical only if the firm is a price taker in the product market 
D) vertical only if the firm is a price taker in the resource market 
E) horizontal only if the firm is a price taker in both the product and resource markets 
A) horizontal only if the firm is a price taker in the product market 
B) horizontal only if the firm is a price taker in the resource market 
C) vertical only if the firm is a price taker in the product market 
D) vertical only if the firm is a price taker in the resource market 
E) horizontal only if the firm is a price taker in both the product and resource markets

Question 13

If a firm is maximizing profit and the marginal revenue product of labor is $10 and the marginal revenue product of capital is $30, then

Accepted Answer

A) the marginal resource cost of labor is $3, and the marginal resource cost of capital is $0.33 
B) the marginal resource cost of labor is $0.33, and the marginal resource cost of capital is $3 
C) the marginal resource cost of labor equals the marginal resource cost of capital; both are $300 
D) the marginal resource cost of labor is 1/3 of the marginal resource cost of capital 
E) we have no way of knowing the marginal resource cost of either labor or capital 
A) the marginal resource cost of labor is $3, and the marginal resource cost of capital is $0.33 
B) the marginal resource cost of labor is $0.33, and the marginal resource cost of capital is $3 
C) the marginal resource cost of labor equals the marginal resource cost of capital; both are $300 
D) the marginal resource cost of labor is 1/3 of the marginal resource cost of capital 
E) we have no way of knowing the marginal resource cost of either labor or capital

Question 14

If two resources, such as labor and farm machinery, are complementary,

Accepted Answer

A) one can be used in place of the other 
B) an increase in the price of one will increase the demand for the other 
C) an increase in the price of one will increase the supply of the other 
D) a decrease in the price of one will increase the productivity of the other, which will decrease the demand for that other resource 
E) a decrease in the price of one will increase the demand for the other 
A) one can be used in place of the other 
B) an increase in the price of one will increase the demand for the other 
C) an increase in the price of one will increase the supply of the other 
D) a decrease in the price of one will increase the productivity of the other, which will decrease the demand for that other resource 
E) a decrease in the price of one will increase the demand for the other

Question 15

A firm produces in a perfectly competitive market and hires labor in a perfectly competitive labor market.The firm hires four workers, the marginal product of the fourth worker is 4, and the wage rate is $40.The firm produces 100 units of the product, which sell for a price of $10.This firm is

Accepted Answer

A) maximizing profit when it hires four workers 
B) not maximizing profit and should hire more workers to increase profit 
C) not maximizing profit and should hire fewer workers to increase profit 
D) not maximizing profit when it produces 100 units of the product and should increase production to increase profit 
E) not maximizing profit when it produces 100 units of the product and should decrease production to increase profit 
A) maximizing profit when it hires four workers 
B) not maximizing profit and should hire more workers to increase profit 
C) not maximizing profit and should hire fewer workers to increase profit 
D) not maximizing profit when it produces 100 units of the product and should increase production to increase profit 
E) not maximizing profit when it produces 100 units of the product and should decrease production to increase profit

Question 16

Which of the following can lead to permanent differentials in resource prices?

Accepted Answer

A) an increase in demand for a product produced by the resource 
B) differences in the inherent quality of resources 
C) differences in the time and money involved in developing necessary skills 
D) differences in the nonmonetary rewards of a job 
E) a lack of resource mobility 
A) an increase in demand for a product produced by the resource 
B) differences in the inherent quality of resources 
C) differences in the time and money involved in developing necessary skills 
D) differences in the nonmonetary rewards of a job 
E) a lack of resource mobility

Question 17

Marginal resource cost is defined as the

Accepted Answer

A) total cost of producing a unit 
B) total cost of adding one more unit of a resource, other things constant 
C) cost of adding one more unit of a resource, other things constant 
D) marginal cost divided by the quantity of a resource 
E) price of labor 
A) total cost of producing a unit 
B) total cost of adding one more unit of a resource, other things constant 
C) cost of adding one more unit of a resource, other things constant 
D) marginal cost divided by the quantity of a resource 
E) price of labor

Question 18

Resource owners will supply additional units of a resource as long as

Accepted Answer

A) doing so increases their costs 
B) doing so increases production 
C) the quantity of the resource demanded exceeds the resource price 
D) resource users demand the resource 
E) doing so increases their utility 
A) doing so increases their costs 
B) doing so increases production 
C) the quantity of the resource demanded exceeds the resource price 
D) resource users demand the resource 
E) doing so increases their utility

Question 19

Resource price differentials that do not trigger the reallocation of resources are known as

Accepted Answer

A) temporary differentials 
B) market differentials 
C) conditional differentials 
D) permanent differentials 
E) sustainable differentials 
A) temporary differentials 
B) market differentials 
C) conditional differentials 
D) permanent differentials 
E) sustainable differentials

Question 20

The marginal revenue product curve slopes downward only if the firm is a price searcher in the product market.

Accepted Answer

A) True 
 B)False

Exam 11: Resource Markets

If the wage is below the marginal revenue product, then a profit-maximizing firm will

A resource's earnings are all economic rent when the resource has no alternative uses.

A firm's demand for a resource is a(n)

For a resource in a perfectly competitive market, marginal revenue product is equal to the price of the resource.

The demand for labor is likely to increase when

People supply their resources to the highest-paying alternative, even if working conditions are not equally attractive.

Exhibit 11-10 How low would the wage rate have to fall before the firm in Exhibit 11-9 would hire nine workers?

Permanent resource price differentials are caused by

A resource that earns only economic rent

In May 2007, Congress and the president passed a law increasing the minimum hourly wage from $5.15 to

If the marginal product of labor increases because of a shift of the MP curve, that will likely cause

A firm's marginal resource cost curve is

If a firm is maximizing profit and the marginal revenue product of labor is $10 and the marginal revenue product of capital is $30, then

If two resources, such as labor and farm machinery, are complementary,

A firm produces in a perfectly competitive market and hires labor in a perfectly competitive labor market.The firm hires four workers, the marginal product of the fourth worker is 4, and the wage rate is $40.The firm produces 100 units of the product, which sell for a price of $10.This firm is

Which of the following can lead to permanent differentials in resource prices?

Marginal resource cost is defined as the

Resource owners will supply additional units of a resource as long as

Resource price differentials that do not trigger the reallocation of resources are known as

The marginal revenue product curve slopes downward only if the firm is a price searcher in the product market.

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters