Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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.

Question 3

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 resource can be put to a single use and has no alternative uses then:

Accepted Answer

A) economic rents are zero. 
B) transfer earnings are maximized. 
C) total earnings are zero. 
D) all earnings are economic rents. 
E) all earnings are transfer earnings.

Question 4

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.
-The negative slope of the demand curve of a resource indicates an inverse relationship between the price of the resource and the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 5

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
 
-Which of the following statements is not true?

Accepted Answer

A) Assuming a perfectly competitive labor market, a firm selling in a monopolistic product market will have a lower marginal revenue product curve than a firm in a perfectly competitive product market. 
B) The intersection of market-labor supply with market-labor demand establishes equilibrium in a perfectly competitive labor market. 
C) In monopsonistic labor markets, an individual firm faces a positively sloped labor-supply curve. 
D) In a perfectly competitive labor market, an individual firm can hire as many workers as it needs at the equilibrium wage rate 
E) In a monopsonistic labor market, marginal revenue product is equal to the value of marginal product.

Question 6

The table below 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 revenue product of the third unit of the resource?

Accepted Answer

A) $6.50 
B) $13.00 
C) $17.50 
D) $70.00 
E) $20.00

Question 7

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 $9 per hour, how many workers should this firm hire?

Accepted Answer

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

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.
-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 9

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 monopsonist firm pays a price to a factor that is:

Accepted Answer

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

Question 10

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 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.

Question 11

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
-According to Figure 14.4, if the government imposes a minimum wage of W1, what quantity of labor will a competitive labor market hire?

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) Less than Q2 
E) Greater than Q3

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.
-As the total quantity of land is fixed the payment for land is termed as economic rent.

Accepted Answer

A) True 
 B)False

Question 13

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
 
-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.

Question 14

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2
MRP = MP X MR
 
-If the resource market is perfectly competitive:

Accepted Answer

A) the market demand for the resource is perfectly elastic. 
B) the market demand for the resource is perfectly inelastic. 
C) the suppliers can affect the input price by increasing or reducing their supply. 
D) the input price to each firm is constant. 
E) the supply of the resource is perfectly inelastic.

Question 15

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. 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

Question 16

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2
MRP = MP X 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 3. 
E) optimal number of units of the resource to be used is 7.

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.
-If the price of a product increases, the demand for the resource used in producing that product decreases.

Accepted Answer

A) True 
 B)False

Question 18

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 resource has a 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.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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 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.

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

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:

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 monopsonist firm pays a price to a factor that 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. -As the total quantity of land is fixed the payment for land is termed as economic rent.

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2 MRP = MP X MR -If the resource market is perfectly competitive:

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. A competitive labor market will pay the wage rate _ and hire _ units of labor.

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2 MRP = MP X MR -According to Figure 14.2, the:

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 the price of a product increases, the demand for the resource used in producing that product decreases.

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