Question 1

If a dollar spent on capital yields less marginal revenue product than labor,the profit of the firm is reduced if it hires less capital than labor.

Accepted Answer

A) True 
 B)False

Question 2

The following figure represents the equilibrium in the labor markets. Figure 14.4   In the figure,
MFC: Marginal Factor Cost curve
D: Demand or the Marginal Revenue Product curve
S: Supply curve
Refer to Figure 14.4.If the government imposes a minimum wage of W2,how many units of labor will a monopsonist hire?

Accepted Answer

A) Q2 
B) Between Q2 and Q3 
C) Q1 
D) Q3 
E) Between Q1 and Q2 
A) Q2 
B) Between Q2 and Q3 
C) Q1 
D) Q3 
E) Between Q1 and Q2

Question 3

Why is the value of marginal product equal to the marginal revenue product under perfect competition in the product market?

Accepted Answer

A) Because price is equal to average revenue 
B) Because price is equal to average cost 
C) Because marginal revenue is equal to marginal cost. 
D) Because price is equal to marginal revenue 
E) Because average revenue is equal to average cost 
A) Because price is equal to average revenue 
B) Because price is equal to average cost 
C) Because marginal revenue is equal to marginal cost. 
D) Because price is equal to marginal revenue 
E) Because average revenue is equal to average cost

Question 4

The producer can raise the level of profit by hiring more units of a resource if:

Accepted Answer

A) the marginal revenue product of the resource is equal to the marginal factor cost. 
B) the marginal factor cost becomes negative. 
C) the marginal revenue product of the resource is greater than the marginal factor cost. 
D) the marginal revenue product falls to zero. 
E) the marginal revenue product of the resource is less than the marginal factor cost. 
A) the marginal revenue product of the resource is equal to the marginal factor cost. 
B) the marginal factor cost becomes negative. 
C) the marginal revenue product of the resource is greater than the marginal factor cost. 
D) the marginal revenue product falls to zero. 
E) the marginal revenue product of the resource is less than the marginal factor cost.

Question 5

Economic rent is the sum of actual earning and transfer earning.

Accepted Answer

A) True 
 B)False

Question 6

The following figure represents the equilibrium in the labor markets. Figure 14.4   In the figure,
MFC: Marginal Factor Cost curve
D: Demand or the Marginal Revenue Product curve
S: Supply curve
Refer to Figure 14.4.A competitive labor market will pay the wage rate _____ and hire _____ units of labor.

Accepted Answer

A) W1; Q1 
B) W1; Q2 
C) W2; Q2 
D) W1; Q3 
E) W3; Q1 
A) W1; Q1 
B) W1; Q2 
C) W2; Q2 
D) W1; Q3 
E) W3; Q1

Question 7

The figure given below represents the marginal revenue product (MRP) and the marginal factor cost (MFC) of a resource in the resource market. Figure 14.3   Consider the resource market shown in Figure 14.3.Given that the resource market is perfectly competitive,how many units of the resource will be purchased when the market is in equilibrium?

Accepted Answer

A) Less than 10 units 
B) 10 units 
C) Between 10 and 15 units 
D) 15 units 
E) More than 15 units 
A) Less than 10 units 
B) 10 units 
C) Between 10 and 15 units 
D) 15 units 
E) More than 15 units

Question 8

If a resource can be put to a single use and has no alternative uses then:

Accepted Answer

A) economic rents are zero. 
B) transfer earnings are maximized. 
C) total earnings are zero. 
D) all earnings are economic rents. 
E) all earnings are transfer earnings. 
A) economic rents are zero. 
B) transfer earnings are maximized. 
C) total earnings are zero. 
D) all earnings are economic rents. 
E) all earnings are transfer earnings.

Question 9

The figure given below shows the marginal revenue product (MRP) of accountants in a firm. Figure 14.2   MRP = MP ´ MR
According to Figure 14.2,the:

Accepted Answer

A) value of the resource to the firm declines after the second unit of the resource is used. 
B) marginal-physical product diminishes at every resource level if we consider the product market to be competitive. 
C) law of diminishing marginal product does not apply in this case. 
D) optimal number of units of the resource to be used is 2. 
E) optimal number of units of the resource to be used is 7. 
A) value of the resource to the firm declines after the second unit of the resource is used. 
B) marginal-physical product diminishes at every resource level if we consider the product market to be competitive. 
C) law of diminishing marginal product does not apply in this case. 
D) optimal number of units of the resource to be used is 2. 
E) optimal number of units of the resource to be used is 7.

Question 10

The following table shows total output produced by different units of capital. Table 14.3
  The marginal revenue product of a resource is the product of the marginal product of the resource and the marginal revenue.
In Table 14.3,if there exists perfect competition in the capital market and the price per unit of capital is ten times the price of the product,the marginal factor cost at the profit maximizing level of employment is:

Accepted Answer

A) $60. 
B) $50. 
C) $40 
D) $30 
E) $20 
A) $60. 
B) $50. 
C) $40 
D) $30 
E) $20

Question 11

The following table shows the total output produced by different units of a resource.Assume that the resource and output markets are both perfectly competitive.The equilibrium price of the resource is $15.00,and the equilibrium price of the product is $0.50. Table 14.2
  Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue.
Refer to Table 14.2.What is the marginal-revenue product of the third unit of the resource?

Accepted Answer

A) $6.50 
B) $13.00 
C) $17.50 
D) $70.00 
E) $20.00 
A) $6.50 
B) $13.00 
C) $17.50 
D) $70.00 
E) $20.00

Question 12

If a resource has perfectly elastic supply curve then its income is termed as:

Accepted Answer

A) economic rent. 
B) rental rate of capital. 
C) rental income. 
D) annuity. 
E) transfer earnings. 
A) economic rent. 
B) rental rate of capital. 
C) rental income. 
D) annuity. 
E) transfer earnings.

Question 13

If resource A and resource B are substitutes of each other and the price of resource A increases,then:

Accepted Answer

A) the price elasticity of demand for resource B will increase. 
B) the demand for resource A will increase. 
C) the demand for resource B will increase. 
D) the price elasticity of demand for resource B will decrease. 
E) the demand for resource B will decrease. 
A) the price elasticity of demand for resource B will increase. 
B) the demand for resource A will increase. 
C) the demand for resource B will increase. 
D) the price elasticity of demand for resource B will decrease. 
E) the demand for resource B will decrease.

Question 14

The value of the marginal product of a resource is equal to:

Accepted Answer

A) the marginal revenue of the firm,if the product market is perfectly competitive. 
B) the market price of the product divided by the price of the resource. 
C) the market price of the product divided by the marginal product of the resource. 
D) the marginal revenue product of the resource,if the product market is perfectly competitive. 
E) the marginal product of the resource divided by the price of the resource. 
A) the marginal revenue of the firm,if the product market is perfectly competitive. 
B) the market price of the product divided by the price of the resource. 
C) the market price of the product divided by the marginal product of the resource. 
D) the marginal revenue product of the resource,if the product market is perfectly competitive. 
E) the marginal product of the resource divided by the price of the resource.

Question 15

The price of a resource declines when:

Accepted Answer

A) both the demand for and the supply of the resource declines in the same proportion. 
B) demand remaining constant,supply of the resource declines. 
C) supply remaining constant,the demand for the resource declines. 
D) both the demand for and the supply of the resource increases in the same proportion. 
E) both the demand for and the supply of the resource declines,but supply falls by a greater proportion than demand. 
A) both the demand for and the supply of the resource declines in the same proportion. 
B) demand remaining constant,supply of the resource declines. 
C) supply remaining constant,the demand for the resource declines. 
D) both the demand for and the supply of the resource increases in the same proportion. 
E) both the demand for and the supply of the resource declines,but supply falls by a greater proportion than demand.

Question 16

The following table shows output per hour produced by the different units of labor. Table 14.1
  The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue.
According to Table 14.1,if the wage rate is $6 per hour,how many workers should this firm hire?

Accepted Answer

A) 3 
B) 2 
C) 4 
D) 5 
E) 1 
A) 3 
B) 2 
C) 4 
D) 5 
E) 1

Question 17

The more inelastic the supply of a particular resource:

Accepted Answer

A) the higher are its transfer earnings. 
B) the higher is its economic rent. 
C) the higher are its total earnings. 
D) the higher is the elasticity of demand for the resource. 
E) the lower is the elasticity of demand for the resource. 
A) the higher are its transfer earnings. 
B) the higher is its economic rent. 
C) the higher are its total earnings. 
D) the higher is the elasticity of demand for the resource. 
E) the lower is the elasticity of demand for the resource.

Question 18

The following figure shows the marginal revenue product of a resource [MRP]: Figure 14.1   Assume that the resource market shown in Figure 14.1 is perfectly competitive.The MRP curve for the resource is negatively sloped because:

Accepted Answer

A) the firm can sell more units of a good only at lower prices. 
B) the marginal physical product curve for the resource is negatively sloped. 
C) the resource gives increasing returns as more of the resource is employed. 
D) the firm hires more units of the resource at a higher price. 
E) average productivity of the resource increases as more units of the resource are used. 
A) the firm can sell more units of a good only at lower prices. 
B) the marginal physical product curve for the resource is negatively sloped. 
C) the resource gives increasing returns as more of the resource is employed. 
D) the firm hires more units of the resource at a higher price. 
E) average productivity of the resource increases as more units of the resource are used.

Question 19

The following table shows output per hour produced by the different units of labor. Table 14.1
  The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue.
According to Table 14.1,the marginal-revenue product of the:

Accepted Answer

A) fourth worker is $8. 
B) fifth worker is $3. 
C) first worker is $3. 
D) third worker is $5. 
E) second worker is $12. 
A) fourth worker is $8. 
B) fifth worker is $3. 
C) first worker is $3. 
D) third worker is $5. 
E) second worker is $12.

Question 20

If the market price of the product that employs labor in production increases:

Accepted Answer

A) the marginal product of labor increases. 
B) the demand curve for labor shifts to the left. 
C) the price of labor decreases. 
D) the marginal revenue product of labor increases. 
E) the supply curve of labor shifts to the left. 
A) the marginal product of labor increases. 
B) the demand curve for labor shifts to the left. 
C) the price of labor decreases. 
D) the marginal revenue product of labor increases. 
E) the supply curve of labor shifts to the left.

If a dollar spent on capital yields less marginal revenue product than labor,the profit of the firm is reduced if it hires less capital than labor.

Why is the value of marginal product equal to the marginal revenue product under perfect competition in the product market?

The producer can raise the level of profit by hiring more units of a resource if:

Economic rent is the sum of actual earning and transfer earning.

The following figure represents the equilibrium in the labor markets. Figure 14.4 In the figure, MFC: Marginal Factor Cost curve D: Demand or the Marginal Revenue Product curve S: Supply curve Refer to Figure 14.4.A competitive labor market will pay the wage rate _ and hire _ units of labor.

If a resource can be put to a single use and has no alternative uses then:

The figure given below shows the marginal revenue product (MRP) of accountants in a firm. Figure 14.2 MRP = MP ´ MR According to Figure 14.2,the:

If a resource has perfectly elastic supply curve then its income is termed as:

If resource A and resource B are substitutes of each other and the price of resource A increases,then:

The value of the marginal product of a resource is equal to:

The price of a resource declines when:

The more inelastic the supply of a particular resource:

The following figure shows the marginal revenue product of a resource [MRP]: Figure 14.1 Assume that the resource market shown in Figure 14.1 is perfectly competitive.The MRP curve for the resource is negatively sloped because:

The following table shows output per hour produced by the different units of labor. Table 14.1 The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue. According to Table 14.1,the marginal-revenue product of the:

If the market price of the product that employs labor in production increases:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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Exam 14: Resource Markets

If a dollar spent on capital yields less marginal revenue product than labor,the profit of the firm is reduced if it hires less capital than labor.

Why is the value of marginal product equal to the marginal revenue product under perfect competition in the product market?

The producer can raise the level of profit by hiring more units of a resource if:

Economic rent is the sum of actual earning and transfer earning.

If a resource can be put to a single use and has no alternative uses then:

The figure given below shows the marginal revenue product (MRP) of accountants in a firm. Figure 14.2 MRP = MP ´ MR According to Figure 14.2,the:

If a resource has perfectly elastic supply curve then its income is termed as:

If resource A and resource B are substitutes of each other and the price of resource A increases,then:

The value of the marginal product of a resource is equal to:

The price of a resource declines when:

The more inelastic the supply of a particular resource:

The following figure shows the marginal revenue product of a resource [MRP]: Figure 14.1 Assume that the resource market shown in Figure 14.1 is perfectly competitive.The MRP curve for the resource is negatively sloped because:

The following table shows output per hour produced by the different units of labor. Table 14.1 The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue. According to Table 14.1,the marginal-revenue product of the:

If the market price of the product that employs labor in production increases:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters