Question 1

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 2

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 3

Earnings of a resource is termed as economic rent if:

Accepted Answer

A) it has a perfectly elastic demand. 
B) it has a perfectly elastic supply. 
C) it has a perfectly inelastic supply. 
D) it has a perfectly inelastic demand. 
E) it has no demand. 
A) it has a perfectly elastic demand. 
B) it has a perfectly elastic supply. 
C) it has a perfectly inelastic supply. 
D) it has a perfectly inelastic demand. 
E) it has no demand.

Question 4

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 5

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 6

Transfer earning is the minimum amount that has to be paid to a factor to allocate it in its next best alternative use.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Which of the following statements brings out the relationship between the value of marginal product (VMP)and the marginal revenue product (MRP)?

Accepted Answer

A) They are the same for a firm selling in a perfectly competitive market structure. 
B) They are the same for a firm purchasing inputs in a perfectly competitive market structure. 
C) VMP is greater than MRP when a firm is perfectly competitive in the product market. 
D) VMP is less than MRP when a firm is perfectly competitive in the product market. 
E) They are same when a firm is a monopolist. 
A) They are the same for a firm selling in a perfectly competitive market structure. 
B) They are the same for a firm purchasing inputs in a perfectly competitive market structure. 
C) VMP is greater than MRP when a firm is perfectly competitive in the product market. 
D) VMP is less than MRP when a firm is perfectly competitive in the product market. 
E) They are same when a firm is a monopolist.

Question 9

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 10

If a person is earning $80, 000 per year as a dentist and could earn at most $45, 000 per year doing something else, his transfer earnings are ____, whereas his economic rent is ____.

Accepted Answer

A) $45, 000, $35, 000 
B) $80, 000, $45, 000 
C) $45, 000, $80, 000 
D) $80, 000, $35, 000 
E) $35, 000, $45, 000 
A) $45, 000, $35, 000 
B) $80, 000, $45, 000 
C) $45, 000, $80, 000 
D) $80, 000, $35, 000 
E) $35, 000, $45, 000

Question 11

The profit-maximizing number of workers for a monopsony to employ is derived at the point where the marginal-revenue product of labor is equal to the marginal-factor cost of labor.

Accepted Answer

A) True 
 B)False

Question 12

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 14.6   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 14.6, if the government imposes a minimum wage of $15, what quantity of labor will a competitive firm and a monopsonist, respectively, hire?

Accepted Answer

A) 50 and 25 
B) 50 and 75 
C) 75 and 125 
D) 125 and 250 
E) 50 and 125 
A) 50 and 25 
B) 50 and 75 
C) 75 and 125 
D) 125 and 250 
E) 50 and 125

Question 13

Transfer earnings of a factor is equal to its:

Accepted Answer

A) economic rent. 
B) explicit cost. 
C) actual earnings. 
D) overhead cost. 
E) opportunity cost. 
A) economic rent. 
B) explicit cost. 
C) actual earnings. 
D) overhead cost. 
E) opportunity cost.

Question 14

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 monopsonist will pay the wage rate _____ and hire _____ units of labor.

Accepted Answer

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

Question 15

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 14.6   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
Refer to Figure 14.6.Calculate the quantity of labor hired by a monopsonist.

Accepted Answer

A) 125 laborers 
B) 75 laborers 
C) 25 laborers 
D) 250 laborers 
E) 50 laborers 
A) 125 laborers 
B) 75 laborers 
C) 25 laborers 
D) 250 laborers 
E) 50 laborers

Question 16

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 17

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 18

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 19

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-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

Question 20

The figure given below represents equilibrium in the labor market. Figure 14.5   In the figure,
VMP: Value of marginal product curve
MRP: Marginal revenue product curve
MFC: Marginal factor cost
S: Supply curve of labor
According to Figure 14.5, what is the equilibrium level of employment?

Accepted Answer

A) 0 units 
B) L1 units. 
C) L2 units. 
D) L3 units. 
E) L4 units. 
A) 0 units 
B) L1 units. 
C) L2 units. 
D) L3 units. 
E) L4 units.

Exam 24: Resource Markets

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:

Earnings of a resource is termed as economic rent if:

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.

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.

Transfer earning is the minimum amount that has to be paid to a factor to allocate it in its next best alternative use.

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

Which of the following statements brings out the relationship between the value of marginal product (VMP)and the marginal revenue product (MRP)?

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

If a person is earning $80, 000 per year as a dentist and could earn at most $45, 000 per year doing something else, his transfer earnings are ____, whereas his economic rent is ____.

The profit-maximizing number of workers for a monopsony to employ is derived at the point where the marginal-revenue product of labor is equal to the marginal-factor cost of labor.

Transfer earnings of a factor is equal to its:

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 monopsonist will pay the wage rate _____ and hire _____ units of labor.

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

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:

In the market for resources, Demand and supply:

The figure given below represents equilibrium in the labor market. Figure 14.5 In the figure, VMP: Value of marginal product curve MRP: Marginal revenue product curve MFC: Marginal factor cost S: Supply curve of labor According to Figure 14.5, what is the equilibrium level of employment?

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

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

Resource Markets

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

If a person is earning $80, 000 per year as a dentist and could earn at most $45, 000 per year doing something else, his transfer earnings are , whereas his economic rent is .

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 monopsonist will pay the wage rate _ and hire _ units of labor.