Question 1

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
SS1U1B11S1U1B0: Supply curve of automobiles prior to regulation
SS1U1B12S1U1B0: Supply curve of automobiles after regulation
FG: Clean up cost per unit
-Tools and equipments used in production are:

Accepted Answer

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

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 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.

Question 3

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.
-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 4

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
 
-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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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. 
-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.

Question 7

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
 
-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.

Question 8

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
SS1U1B11S1U1B0: Supply curve of automobiles prior to regulation
SS1U1B12S1U1B0: Supply curve of automobiles after regulation
FG: Clean up cost per unit
-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.

Question 9

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
 
-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.

Question 10

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, what is the wage paid by a monopsonist?

Accepted Answer

A) $10 
B) $23 
C) $20 
D) $12 
E) $15

Question 11

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2
MRP = MP X MR
 
-A firm under any market structure maximizes profits at a point where:

Accepted Answer

A) marginal revenue product is greater than marginal factor cost. 
B) marginal revenue product is equal to marginal factor cost. 
C) marginal revenue product is equal to zero. 
D) marginal factor cost is equal to zero. 
E) marginal revenue product is less than marginal factor cost.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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
 
-In Figure 14.5, the firm is:

Accepted Answer

A) a monopsonist in the labor market and a perfect competitor in the output market. 
B) a monopsonist in the labor market and a monopolist in the output market. 
C) a perfect competitor in all markets. 
D) a perfect competitor in the labor market and a monopolist in the output market. 
E) either a monopolist or a monopsonist, but not both.

Question 14

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
SS1U1B11S1U1B0: Supply curve of automobiles prior to regulation
SS1U1B12S1U1B0: Supply curve of automobiles after regulation
FG: Clean up cost per unit
-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 marginal revenue product of this additional worker is:

Accepted Answer

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

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. 
-After hiring 151 units of the variable input (say labor) a firm determines the marginal fixed cost (MFC) to be $0.33 and the marginal revenue product (MRP) to be $0.30. The firm should:

Accepted Answer

A) increase its production. 
B) increase the use of labor. 
C) decrease the use of labor. 
D) produce 151 units. 
E) produce 33 units of the output.

Question 16

The following figure represents the equilibrium in the labor market.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. If the government imposes a minimum wage of W2, how many units of labor will a monopsonist hire?

Accepted Answer

A) Q2 
B) Between Q2 and Q3 
C) Q1 
D) Q3 
E) Between Q1 and Q2

Question 17

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.
-Economic rent is the sum of actual earning and transfer earning.

Accepted Answer

A) True 
 B)False

Question 18

The following figure represents the equilibrium in the labor market.Figure 14.4
  In the figure,
MFC: Marginal Factor Cost curve
D: Demand or the Marginal Revenue Product curve
S: Supply curve
-A monopolist hiring labor in a perfectly competitive resource market is faced with a:

Accepted Answer

A) perfectly elastic demand curve for labor. 
B) horizontal marginal factor cost curve. 
C) perfectly inelastic demand curve for labor. 
D) vertical supply curve of labor. 
E) positively sloped marginal factor cost curve.

Question 19

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
 
-The value of the marginal product of a resource is equal to:

Accepted Answer

A) the marginal revenue of the firm, if the product market is perfectly competitive. 
B) the market price of the product divided by the price of the resource. 
C) the market price of the product divided by the marginal product of the resource. 
D) the marginal revenue product of the resource, if the product market is perfectly competitive. 
E) the marginal product of the resource divided by the price of the resource.

Question 20

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.
-A firm is said to be a monopsonist if it is the sole seller of a commodity in the market.

Accepted Answer

A) True 
 B)False

Exam 15: Resource Markets

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

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2 MRP = MP X MR -A firm under any market structure maximizes profits at a point where:

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

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 -In Figure 14.5, the firm is:

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. -Economic rent is the sum of actual earning and transfer earning.

The following figure represents the equilibrium in the labor market.Figure 14.4 In the figure, MFC: Marginal Factor Cost curve D: Demand or the Marginal Revenue Product curve S: Supply curve -A monopolist hiring labor in a perfectly competitive resource market is faced with a:

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. -A firm is said to be a monopsonist if it is the sole seller of a commodity in the market.