Question 1

The MRP curve for labor

Accepted Answer

A)  intersects the firm's labor demand curve from above. 
B)  is the firm's labor demand curve. 
C)  lies below the firm's labor demand curve. 
D)  lies above the firm's labor demand curve. 
A)  intersects the firm's labor demand curve from above. 
B)  is the firm's labor demand curve. 
C)  lies below the firm's labor demand curve. 
D)  lies above the firm's labor demand curve.

Question 2

Those who advocate the marginal productivity theory of income distribution argue that

Accepted Answer

A)  government policy should be used to redistribute income based on need. 
B)  family income should be based on a family's demand for products. 
C)  resource markets will set incomes based on workers' contributions to the output of scarce goods and services. 
D)  monopoly and monopsony power do not affect resource payments of the overall distribution of income. 
A)  government policy should be used to redistribute income based on need. 
B)  family income should be based on a family's demand for products. 
C)  resource markets will set incomes based on workers' contributions to the output of scarce goods and services. 
D)  monopoly and monopsony power do not affect resource payments of the overall distribution of income.

Question 3

An example of derived demand in the auto industry is the demand for

Accepted Answer

A)  new automobiles. 
B)  used automobiles. 
C)  auto workers. 
D)  drivers' insurance. 
A)  new automobiles. 
B)  used automobiles. 
C)  auto workers. 
D)  drivers' insurance.

Question 4

If a firm pays labor $5 and receives an MPL of 10, while paying capital $100 and receiving an MPC of 100, to lower production costs it should hire more labor and less capital.

Accepted Answer

A) True 
 B)False

Question 5

The MRP curve is the resource demand curve for

Accepted Answer

A)  neither the purely competitive nor the imperfectly competitive seller. 
B)  the imperfectly competitive seller but not the purely competitive seller. 
C)  the purely competitive seller but not the imperfectly competitive seller. 
D)  both the purely competitive and imperfectly competitive seller. 
A)  neither the purely competitive nor the imperfectly competitive seller. 
B)  the imperfectly competitive seller but not the purely competitive seller. 
C)  the purely competitive seller but not the imperfectly competitive seller. 
D)  both the purely competitive and imperfectly competitive seller.

Question 6

Under pure competition, the market price of an output is $3. The output schedule of a firm using input X is listed in the table. If the price of input X is $12, how many units of input X will the firm employ to maximize profits? $\begin{array} { | c | c | } 
\hline \text { Units of X } & \begin{array} { c } 
\text { Mrringl } \
\text { Product }
\end{array} \
\hline 1 & 10.0 \
\hline 2 & 9.9 \
\hline 3 & 8.8 \
\hline 4 & 7.7 \
\hline 5 & 6.6 \
\hline 6 & 5.5 \
\hline 7 & 4.4 \
\hline 8 & 3.3 \
\hline 9 & 2.2 \
\hline
\end{array}$

Accepted Answer

A)  4 
B)  5 
C)  7 
D)  9 
A)  4 
B)  5 
C)  7 
D)  9

Question 7

The demand curve for labor would shift leftward as the result of

Accepted Answer

A)  an increase in the price of the product labor is producing. 
B)  a decrease in the productivity of labor. 
C)  an increase in the price of labor. 
D)  a decrease in the price of capital, provided the output effect exceeds the substitution effect. 
A)  an increase in the price of the product labor is producing. 
B)  a decrease in the productivity of labor. 
C)  an increase in the price of labor. 
D)  a decrease in the price of capital, provided the output effect exceeds the substitution effect.

Question 8

If the marginal revenue product (MRP) of labor is less than the wage rate,

Accepted Answer

A)  the firm is making profits. 
B)  the firm is incurring losses. 
C)  more labor should be employed. 
D)  less labor should be employed. 
A)  the firm is making profits. 
B)  the firm is incurring losses. 
C)  more labor should be employed. 
D)  less labor should be employed.

Question 9

Other things being equal, if a once-competitive firm attains a high degree of monopoly power in its product market, then its resource demand will

Accepted Answer

A)  become perfectly inelastic. 
B)  remain perfectly elastic. 
C)  become more elastic. 
D)  become more inelastic. 
A)  become perfectly inelastic. 
B)  remain perfectly elastic. 
C)  become more elastic. 
D)  become more inelastic.

Question 10

272. cost-minimizing firm using two inputs, x and y, will employ inputs so that

Accepted Answer

A)  $\mathrm { MP } _ { x } = \mathrm { MP } _ { y }$ 
B)  $P _ { x } / \mathrm { MP } _ { y } = P _ { y } / \mathrm { MP } _ { x }$ 
C)  $\mathrm { MP } _ { x } / P _ { x } = \mathrm { MP } _ { y } / P _ { y }$ 
D)  $P _ { x } = P _ { y } .$ 
A)  $\mathrm { MP } _ { x } = \mathrm { MP } _ { y }$ 
B)  $P _ { x } / \mathrm { MP } _ { y } = P _ { y } / \mathrm { MP } _ { x }$ 
C)  $\mathrm { MP } _ { x } / P _ { x } = \mathrm { MP } _ { y } / P _ { y }$ 
D)  $P _ { x } = P _ { y } .$

Question 11

Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity."

Accepted Answer

A) True 
 B)False

Question 12

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MP of the second barber is

Accepted Answer

A)  $240. 
B)  $108. 
C)  18 haircuts. 
D)  42 haircuts. 
A)  $240. 
B)  $108. 
C)  18 haircuts. 
D)  42 haircuts.

Question 13

Employers will hire more units of a resource if the

Accepted Answer

A)  price of the resource increases. 
B)  productivity of the resource increases. 
C)  price of the good being produced declines. 
D)  price of a complementary resource rises. 
A)  price of the resource increases. 
B)  productivity of the resource increases. 
C)  price of the good being produced declines. 
D)  price of a complementary resource rises.

Question 14

The elasticity of resource demand measures the

Accepted Answer

A)  responsiveness of workers to changes in wage rates. 
B)  responsiveness of producers to changes in resource prices. 
C)  ratio of marginal revenue product to resource price. 
D)  sensitivity of marginal revenue product to changes in product price. 
A)  responsiveness of workers to changes in wage rates. 
B)  responsiveness of producers to changes in resource prices. 
C)  ratio of marginal revenue product to resource price. 
D)  sensitivity of marginal revenue product to changes in product price.

Question 15

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. $\begin{array} {| c | c | c | c|} 
\text { Units of Labor } & \text { Total Product } & \begin{array} { c } 
\text { Marginal } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} \
\hline 0 & 0 & & \
\hline 1 & 14 & 14 & \$ 42 \
\hline 2 & & 10 & \
\hline 3 & 30 & & 90 \
\hline 4 & 35 & & \
\hline 5 & 39 & & 117 \
\hline 6 & & & 126 \
\hline 7 & 44 & 2 & 132 \
\hline
\end{array}$ If the wage rate is $11, how many workers will Manfred hire to maximize profits?

Accepted Answer

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

Question 16

In the marginal productivity theory of income distribution, when all markets are purely competitive, the payment for each unit of a resource is equal to its

Accepted Answer

A)  total product. 
B)  marginal product. 
C)  marginal revenue product. 
D)  total revenue product. 
A)  total product. 
B)  marginal product. 
C)  marginal revenue product. 
D)  total revenue product.

Question 17

Resource pricing is important because

Accepted Answer

A)  resource prices are a major determinant of money incomes. 
B)  resource prices allocate scarce resources among alternative uses. 
C)  resource prices, along with resource productivity, are important to firms in minimizing their costs. 
D)  of all of these reasons. 
A)  resource prices are a major determinant of money incomes. 
B)  resource prices allocate scarce resources among alternative uses. 
C)  resource prices, along with resource productivity, are important to firms in minimizing their costs. 
D)  of all of these reasons.

Question 18

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal revenue product of the second worker is

Accepted Answer

A)  $24. 
B)  $8. 
C)  $15. 
D)  $9. 
A)  $24. 
B)  $8. 
C)  $15. 
D)  $9.

Question 19

A firm is producing 100 pencils per week. The production process requires labor and capital as inputs. Labor costs $6 per labor hour, and capital costs $12 per machine hour. Currently, the marginal product of labor is 18 pencils and the marginal product of capital is 36 pencils. To minimize the cost of producing this level of output, the firm should use

Accepted Answer

A)  more capital and less labor. 
B)  more labor and less capital. 
C)  less labor and less capital. 
D)  the current amounts of labor and capital. 
A)  more capital and less labor. 
B)  more labor and less capital. 
C)  less labor and less capital. 
D)  the current amounts of labor and capital.

Question 20

The demand for a resource depends on its productivity and the market value of the product it is producing.

Accepted Answer

A) True 
 B)False

Exam 16: The Demand for Resources

The MRP curve for labor

Those who advocate the marginal productivity theory of income distribution argue that

An example of derived demand in the auto industry is the demand for

If a firm pays labor $5 and receives an MPL of 10, while paying capital $100 and receiving an MPC of 100, to lower production costs it should hire more labor and less capital.

The MRP curve is the resource demand curve for

The demand curve for labor would shift leftward as the result of

If the marginal revenue product (MRP) of labor is less than the wage rate,

Other things being equal, if a once-competitive firm attains a high degree of monopoly power in its product market, then its resource demand will

272. cost-minimizing firm using two inputs, x and y, will employ inputs so that

Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity."

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MP of the second barber is

Employers will hire more units of a resource if the

The elasticity of resource demand measures the

In the marginal productivity theory of income distribution, when all markets are purely competitive, the payment for each unit of a resource is equal to its

Resource pricing is important because

The demand for a resource depends on its productivity and the market value of the product it is producing.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

If a firm pays labor $5 and receives an MP_Lof 10, while paying capital $100 and receiving an MP_Cof 100, to lower production costs it should hire more labor and less capital.