Question 1

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 2

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 3

The demand for capital, as an input in production, will decrease if:

Accepted Answer

A) labor and capital are substitutes in production and the supply of labor decreases. 
B) the demand for the final good it produces increases. 
C) capital becomes more productive. 
D) the price of capital decreases. 
E) labor and capital are substitutes in production and the wage rate declines. 
A) labor and capital are substitutes in production and the supply of labor decreases. 
B) the demand for the final good it produces increases. 
C) capital becomes more productive. 
D) the price of capital decreases. 
E) labor and capital are substitutes in production and the wage rate declines.

Question 4

A perfectly competitive employer of an input will maximize profits from the employment of the input by equating:

Accepted Answer

A) the value of the marginal product of the input with the price of the output. 
B) the marginal product of the last unit of the input employed with the input price. 
C) the input price with the price of the product produced. 
D) the marginal-revenue product of the input with the input price. 
E) the marginal product of the last unit of the input employed with the price of the product produced. 
A) the value of the marginal product of the input with the price of the output. 
B) the marginal product of the last unit of the input employed with the input price. 
C) the input price with the price of the product produced. 
D) the marginal-revenue product of the input with the input price. 
E) the marginal product of the last unit of the input employed with the price of the product produced.

Question 5

The following table shows the marginal productivity of different units of labor for producing a product. Table 14.4
  In the table,
MR: Marginal Revenue
MPP: Marginal Physical Product
According to Table 14.4, what is the highest MRP the firm can reach? (MRP = MPP ´ MPP)

Accepted Answer

A) 5 
B) 6 
C) 15 
D) 18 
E) 25 
A) 5 
B) 6 
C) 15 
D) 18 
E) 25

Question 6

Tools and equipments used in production are:

Accepted Answer

A) natural resources. 
B) entrepreneurial resources. 
C) human capital. 
D) capital resources. 
E) labor resources. 
A) natural resources. 
B) entrepreneurial resources. 
C) human capital. 
D) capital resources. 
E) labor resources.

Question 7

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.

Question 8

Scenario 14.1 A worker in Firm A earns an income of $5, 000 per month.He has been offered a job in Firm B where he will be paid a salary of $7, 000 per month.
Refer to Scenario 14.1.If the worker joins Firm B, his economic rent is:

Accepted Answer

A) $5, 000. 
B) $7, 000. 
C) less than $7, 000 but more than $2, 000. 
D) $2, 000. 
E) less than $2, 000. 
A) $5, 000. 
B) $7, 000. 
C) less than $7, 000 but more than $2, 000. 
D) $2, 000. 
E) less than $2, 000.

Question 9

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 14.5
  Note: Marginal revenue product of a resource is the product of MPP and MR.
In Table 14.5, 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 10

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

Accepted Answer

A) True 
 B)False

Question 11

Other things being equal, the marginal revenue product for labor hired by a firm that is a monopolist in the output market:

Accepted Answer

A) is represented by an upward sloping curve. 
B) is equal to the marginal revenue product for labor hired by a perfectly competitive firm. 
C) is less than the marginal revenue product for labor hired by a perfectly competitive firm. 
D) is greater than the marginal revenue product for labor hired by a perfectly competitive firm. 
E) is equal to the value of marginal product of labor. 
A) is represented by an upward sloping curve. 
B) is equal to the marginal revenue product for labor hired by a perfectly competitive firm. 
C) is less than the marginal revenue product for labor hired by a perfectly competitive firm. 
D) is greater than the marginal revenue product for labor hired by a perfectly competitive firm. 
E) is equal to the value of marginal product of labor.

Question 12

If the ratio of marginal revenue product to marginal factor cost for labor is greater than that for capital, then:

Accepted Answer

A) the producer can maximize profit by hiring more units of capital. 
B) the producer suffers losses by hiring more units of labor. 
C) the producer does not alter the resource allocation. 
D) the producer can maximize profit by hiring more units of labor. 
E) the producer will earn above normal profit by hiring less units of labor. 
A) the producer can maximize profit by hiring more units of capital. 
B) the producer suffers losses by hiring more units of labor. 
C) the producer does not alter the resource allocation. 
D) the producer can maximize profit by hiring more units of labor. 
E) the producer will earn above normal profit by hiring less units of labor.

Question 13

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 14

Suppose output of a firm hiring workers in a competitive labor market increases by three units when an additional worker is hired.This firm will hire more laborers if the market price of its product is $4 and the wage rate is $9.[Hint: Marginal revenue product of a resource is equal to the product of marginal product of the resource and the marginal revenue of the firm.]

Accepted Answer

A) True 
 B)False

Question 15

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 14.5
  Note: Marginal revenue product of a resource is the product of MPP and MR.
In Table 14.5, at what wage rate would one worker be hired by a profit-maximizing firm?

Accepted Answer

A) $10 
B) $25 
C) $30 
D) $50 
E) $100 
A) $10 
B) $25 
C) $30 
D) $50 
E) $100

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 24: Resource Markets

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

The demand for capital, as an input in production, will decrease if:

A perfectly competitive employer of an input will maximize profits from the employment of the input by equating:

The following table shows the marginal productivity of different units of labor for producing a product. Table 14.4 In the table, MR: Marginal Revenue MPP: Marginal Physical Product According to Table 14.4, what is the highest MRP the firm can reach? (MRP = MPP ´ MPP)

Tools and equipments used in production are:

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

Scenario 14.1 A worker in Firm A earns an income of $5, 000 per month.He has been offered a job in Firm B where he will be paid a salary of $7, 000 per month. Refer to Scenario 14.1.If the worker joins Firm B, his economic rent is:

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

Other things being equal, the marginal revenue product for labor hired by a firm that is a monopolist in the output market:

If the ratio of marginal revenue product to marginal factor cost for labor is greater than that for capital, then:

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

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

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

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

The more inelastic the supply of a particular resource:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

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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

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The Labor Market

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Economic Growth

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the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

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World Trade Equilibrium

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Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

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Market Failures, Government Failures, and Rent Seeking

Resource Markets

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