Question 1

If a particular factor has a specific use its transfer earning is very high.

Accepted Answer

A) True 
 B)False

Question 2

The following figure shows the marginal revenue product of a resource [MRP]: Figure 28.1   In Figure 28.1, if the price of the resource is equal to 0C and the resource market is perfectly competitive, the quantity employed of the resource would be:

Accepted Answer

A) less than L2. 
B) equal to L1. 
C) equal to L2. 
D) equal to L3. 
E) more than L3. 
A) less than L2. 
B) equal to L1. 
C) equal to L2. 
D) equal to L3. 
E) more than L3.

Question 3

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 28.6   In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
According to Figure 28.6, what is the wage and quantity of labor hired by a competitive firm?

Accepted Answer

A) $12 and 75 laborers 
B) $20 and 75 laborers 
C) $15 and 125 laborers 
D) $10 and 250 laborers 
E) $23 and 50 laborers 
A) $12 and 75 laborers 
B) $20 and 75 laborers 
C) $15 and 125 laborers 
D) $10 and 250 laborers 
E) $23 and 50 laborers

Question 4

If the marginal factor cost is greater than the marginal revenue product of a resource, the producer can increase profits by laying off some units of the resource.

Accepted Answer

A) True 
 B)False

Question 5

If the elasticity of supply of a resource is greater than zero but less than infinity, its income will comprise of:

Accepted Answer

A) only economic rent. 
B) only transfer earnings. 
C) salaries and traveling allowances. 
D) both economic rent and transfer earnings. 
E) salaries, traveling allowances, as well as other incentives. 
A) only economic rent. 
B) only transfer earnings. 
C) salaries and traveling allowances. 
D) both economic rent and transfer earnings. 
E) salaries, traveling allowances, as well as other incentives.

Question 6

The marginal-factor cost (MFC)is the:

Accepted Answer

A) value of the additional output that an extra unit of a resource can produce. 
B) additional cost of employing an additional unit of a resource. 
C) additional cost of producing an additional unit of output. 
D) the ratio of the total fixed cost to the total cost of production. 
E) ratio of total cost to the total amount of resources employed. 
A) value of the additional output that an extra unit of a resource can produce. 
B) additional cost of employing an additional unit of a resource. 
C) additional cost of producing an additional unit of output. 
D) the ratio of the total fixed cost to the total cost of production. 
E) ratio of total cost to the total amount of resources employed.

Question 7

The following table shows output per hour produced by the different units of labor. Table 28.1
  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 28.1, 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 8

A perfectly competitive firm hires more resources than a monopolist firm.

Accepted Answer

A) True 
 B)False

Question 9

The following table shows output per hour produced by the different units of labor. Table 28.1
  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 28.1, 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 10

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
According to Table 28.4, how many laborers should be hired if the wage rate is $18? (Marginal revenue product = MPP ´ MR)

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
E) 6 
A) 2 
B) 3 
C) 4 
D) 5 
E) 6

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 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.How many units of the resource will a profit-maximizing firm hire?

Accepted Answer

A) Two labor hours 
B) Between two and three labor hours 
C) Between three and four labor hours 
D) More than four labor hours 
E) Three labor hours 
A) Two labor hours 
B) Between two and three labor hours 
C) Between three and four labor hours 
D) More than four labor hours 
E) Three labor hours

Question 12

The following table shows the marginal revenue of a firm and the marginal physical product of different units of labor in a perfectly competitive labor market. Table 28.5
  Note: Marginal revenue product of a resource is the product of MPP and MR.
In Table 28.5, if the wage rate is $10, how many workers will be employed by a profit-maximizing firm ?

Accepted Answer

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

Question 13

If a firm hires its fourth worker for $5 and its fifth worker for $8, then

Accepted Answer

A) the firm is a monopolist. 
B) the firm must be substituting capital for labor. 
C) the fifth worker must have been less productive than the fourth. 
D) the firm is not maximizing its profit. 
E) the labor market is not perfectly competitive. 
A) the firm is a monopolist. 
B) the firm must be substituting capital for labor. 
C) the fifth worker must have been less productive than the fourth. 
D) the firm is not maximizing its profit. 
E) the labor market is not perfectly competitive.

Question 14

The greater the elasticity of supply of a resource the greater is its economic rent.

Accepted Answer

A) True 
 B)False

Question 15

A market is classified as a monopsony will arise when there is only one seller of the product.

Accepted Answer

A) True 
 B)False

Question 16

Assume that labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units.If the product sells for $6 per unit in a perfectly competitive market, then the MRPof this additional worker is:

Accepted Answer

A) $78 
B) $72 
C) $36 
D) $39 
E) $6 
A) $78 
B) $72 
C) $36 
D) $39 
E) $6

Question 17

If the government sets a minimum wage which is more than the equilibrium wage, the firms tend to demand more labor.

Accepted Answer

A) True 
 B)False

Question 18

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 19

When studying the market for resources, it is important to understand that:

Accepted Answer

A) resources are wanted not for themselves but for what they produce. 
B) demand for resources is generally inelastic in nature. 
C) derived demand does not apply to the resource market. 
D) resource markets do not conform to the laws of supply and demand as other markets do. 
E) supply is much more important than demand in determining the price of a resource. 
A) resources are wanted not for themselves but for what they produce. 
B) demand for resources is generally inelastic in nature. 
C) derived demand does not apply to the resource market. 
D) resource markets do not conform to the laws of supply and demand as other markets do. 
E) supply is much more important than demand in determining the price of a resource.

Question 20

A firm will demand more units of a resource if:

Accepted Answer

A) the resource adds more to revenues than it costs. 
B) the firm experiences diseconomies of scale. 
C) the price of the good that uses the resource declines. 
D) the resource has many substitutes. 
E) the resource has few substitutes. 
A) the resource adds more to revenues than it costs. 
B) the firm experiences diseconomies of scale. 
C) the price of the good that uses the resource declines. 
D) the resource has many substitutes. 
E) the resource has few substitutes.

Exam 49: Resource Markets

If a particular factor has a specific use its transfer earning is very high.

The following figure shows the marginal revenue product of a resource [MRP]: Figure 28.1 In Figure 28.1, if the price of the resource is equal to 0C and the resource market is perfectly competitive, the quantity employed of the resource would be:

If the marginal factor cost is greater than the marginal revenue product of a resource, the producer can increase profits by laying off some units of the resource.

If the elasticity of supply of a resource is greater than zero but less than infinity, its income will comprise of:

The marginal-factor cost (MFC)is the:

The following table shows output per hour produced by the different units of labor. Table 28.1 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 28.1, the marginal-revenue product of the:

A perfectly competitive firm hires more resources than a monopolist firm.

If a firm hires its fourth worker for $5 and its fifth worker for $8, then

The greater the elasticity of supply of a resource the greater is its economic rent.

A market is classified as a monopsony will arise when there is only one seller of the product.

Assume that labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units.If the product sells for $6 per unit in a perfectly competitive market, then the MRPof this additional worker is:

If the government sets a minimum wage which is more than the equilibrium wage, the firms tend to demand more labor.

The more inelastic the supply of a particular resource:

When studying the market for resources, it is important to understand that:

A firm will demand more units of a resource if:

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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