Question 1

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 2

The marginal-revenue product (MRP)is the:

Accepted Answer

A) value of the additional output that an extra unit of a resource can produce. 
B) cost of hiring an additional unit of a resource. 
C) extra cost of producing an additional unit of output. 
D) increase in total output when an additional unit of an input is hired. 
E) change in total revenue when an additional unit of a good is sold. 
A) value of the additional output that an extra unit of a resource can produce. 
B) cost of hiring an additional unit of a resource. 
C) extra cost of producing an additional unit of output. 
D) increase in total output when an additional unit of an input is hired. 
E) change in total revenue when an additional unit of a good is sold.

Question 3

The resource market comprises of the households and firms where the firms sell their resources to the households.

Accepted Answer

A) True 
 B)False

Question 4

The resource market is the same as the product market except that, in the resource market:

Accepted Answer

A) the demand curve slopes upward. 
B) the households are the sellers and the firms are the buyers. 
C) there is no substitution effect. 
D) the supply curve is perfectly inelastic. 
E) there is no income effect. 
A) the demand curve slopes upward. 
B) the households are the sellers and the firms are the buyers. 
C) there is no substitution effect. 
D) the supply curve is perfectly inelastic. 
E) there is no income effect.

Question 5

If the resource market is perfectly competitive, the marginal factor cost is equal to the price of the resource.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following goods is likely to have a derived demand?

Accepted Answer

A) Tractor 
B) T-shirt 
C) Italian food 
D) Residential buildings 
E) Cigarettes 
A) Tractor 
B) T-shirt 
C) Italian food 
D) Residential buildings 
E) Cigarettes

Question 7

The following table shows total output produced by different units of capital. Table 28.3
  The marginal revenue product of a resource is the product of the marginal product of the resource and the marginal revenue.
In Table 28.3, how many units of capital will the firm hire if the price per unit of capital is $60?

Accepted Answer

A) 1 unit of capital. 
B) 2 units of capital. 
C) 3 units of capital. 
D) 4 units of capital. 
E) 5 units of capital. 
A) 1 unit of capital. 
B) 2 units of capital. 
C) 3 units of capital. 
D) 4 units of capital. 
E) 5 units of capital.

Question 8

Consider a perfectly competitive firm that can raise its output by 2 units by hiring an additional unit of capital.If the cost of hiring this additional unit of capital is $4 and the market price of the good is $1, the firm will certainly hire this unit of capital.[Hint: MRP = MP ´ MR]

Accepted Answer

A) True 
 B)False

Question 9

In a perfectly competitive labor market, a profit-maximizing firm that is also perfectly competitive in the product market will:

Accepted Answer

A) face a perfectly inelastic supply curve of labor. 
B) pay a wage that is equal to the price of the product. 
C) pay a wage that is equal to the marginal product of labor. 
D) hire more units of labor than would a firm that sells its output in a monopoly market. 
E) pay a wage equal to the marginal-factor cost. 
A) face a perfectly inelastic supply curve of labor. 
B) pay a wage that is equal to the price of the product. 
C) pay a wage that is equal to the marginal product of labor. 
D) hire more units of labor than would a firm that sells its output in a monopoly market. 
E) pay a wage equal to the marginal-factor cost.

Question 10

The following figure represents the equilibrium in the labor markets. Figure 28.4   In the figure,
MFC: Marginal Factor Cost curve
D: Demand or the Marginal Revenue Product curve
S: Supply curve
Refer to Figure 28.4.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 11

If an individual thinks about how he purchase goods and services, he will realize that he allocates his expenditures so that the pleasure he gets out of spending one more dollar is the same no matter what he spends that dollar on.For a firm purchasing resources, this is the same as ensuring that:

Accepted Answer

A) the ratio between marginal revenue product and the marginal factor cost is equal for all the resources used. 
B) the marginal revenue product of the resources are equal. 
C) the marginal factor cost of the resources are equal. 
D) the ratio between marginal revenue product and the marginal factor cost is greater than one for all resources. 
E) the marginal revenue product is greater than the marginal factor cost of all resources. 
A) the ratio between marginal revenue product and the marginal factor cost is equal for all the resources used. 
B) the marginal revenue product of the resources are equal. 
C) the marginal factor cost of the resources are equal. 
D) the ratio between marginal revenue product and the marginal factor cost is greater than one for all resources. 
E) the marginal revenue product is greater than the marginal factor cost of all resources.

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

In the market for resources, Demand and supply:

Accepted Answer

A) do not behave in the same way as demand and supply in product markets. 
B) behave in exactly the same way as demand and supply in product markets. 
C) curves usually don't intersect at equilibrium. 
D) are both controlled by firms. 
E) are both controlled by households 
A) do not behave in the same way as demand and supply in product markets. 
B) behave in exactly the same way as demand and supply in product markets. 
C) curves usually don't intersect at equilibrium. 
D) are both controlled by firms. 
E) are both controlled by households

Question 14

A monopsonist firm faces a negatively sloped marginal factor cost curve.

Accepted Answer

A) True 
 B)False

Question 15

An automobile manufacturer uses land, labor, capital, and entrepreneurial ability to produce cars and trucks.If the price of trucks increases, the automobile manufacturer would not _____.

Accepted Answer

A) pay a lower wage rate to labor 
B) increase truck production 
C) hire more workers 
D) increase capital used in production 
E) increase land used in production 
A) pay a lower wage rate to labor 
B) increase truck production 
C) hire more workers 
D) increase capital used in production 
E) increase land used in production

Question 16

The following table shows the marginal productivity of different units of labor for producing a product. Table 28.4
  In the table,
MR: Marginal Revenue
MPP: Marginal Physical Product
In Table 28.4, if marginal revenue product is equal to the product of MPP and MR, what wage rate would be consistent with a profit-maximizing firm hiring six laborers?

Accepted Answer

A) $6 
B) $10 
C) $12 
D) $18 
E) $24 
A) $6 
B) $10 
C) $12 
D) $18 
E) $24

Question 17

The figure given below represents the marginal revenue product (MRP)and the marginal factor cost (MFC)of a resource in the resource market. Figure 28.3   Consider the resource market shown in Figure 28.3.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 18

The buyers and sellers in a resource market are:

Accepted Answer

A) household and firms respectively. 
B) banks and farmers respectively. 
C) households and land owners respectively. 
D) firms and household respectively. 
E) exporters and importers respectively. 
A) household and firms respectively. 
B) banks and farmers respectively. 
C) households and land owners respectively. 
D) firms and household respectively. 
E) exporters and importers respectively.

Question 19

The demand curve for labor indicates that:

Accepted Answer

A) as the real wage rate increases, employers will hire more workers. 
B) as the nominal wage rate increases, employers will hire more workers. 
C) as the nominal wage rate decreases, the real wage rate increases. 
D) as the real wage rate increases, employers will hire fewer workers. 
E) the real wage rate does not affect firms' hiring decisions. 
A) as the real wage rate increases, employers will hire more workers. 
B) as the nominal wage rate increases, employers will hire more workers. 
C) as the nominal wage rate decreases, the real wage rate increases. 
D) as the real wage rate increases, employers will hire fewer workers. 
E) the real wage rate does not affect firms' hiring decisions.

Question 20

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 28.2
  Marginal revenue product (MRP)of a resource is the product of the marginal product of the resource and the marginal revenue.
Refer to Table 28.2.What is the marginal-factor cost for the third unit of the resource?

Accepted Answer

A) $13.00 
B) $15.00 
C) $17.50 
D) $195.00 
E) $19.50 
A) $13.00 
B) $15.00 
C) $17.50 
D) $195.00 
E) $19.50

Exam 49: Resource Markets

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

The marginal-revenue product (MRP)is the:

The resource market comprises of the households and firms where the firms sell their resources to the households.

The resource market is the same as the product market except that, in the resource market:

If the resource market is perfectly competitive, the marginal factor cost is equal to the price of the resource.

Which of the following goods is likely to have a derived demand?

Consider a perfectly competitive firm that can raise its output by 2 units by hiring an additional unit of capital.If the cost of hiring this additional unit of capital is $4 and the market price of the good is $1, the firm will certainly hire this unit of capital.[Hint: MRP = MP ´ MR]

In a perfectly competitive labor market, a profit-maximizing firm that is also perfectly competitive in the product market will:

If an individual thinks about how he purchase goods and services, he will realize that he allocates his expenditures so that the pleasure he gets out of spending one more dollar is the same no matter what he spends that dollar on.For a firm purchasing resources, this is the same as ensuring that:

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

In the market for resources, Demand and supply:

A monopsonist firm faces a negatively sloped marginal factor cost curve.

An automobile manufacturer uses land, labor, capital, and entrepreneurial ability to produce cars and trucks.If the price of trucks increases, the automobile manufacturer would not _____.

The buyers and sellers in a resource market are:

The demand curve for labor indicates that:

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

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

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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