Question 1

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 2

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

Accepted Answer

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

Question 3

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.

Question 4

Why is the marginal revenue product curve of a factor negatively sloped?

Accepted Answer

A) Additional revenue generated from an additional unit of a factor remains constant as more resources are hired. 
B) Additional revenue generated from an additional unit of a factor declines as more resources are hired. 
C) Additional revenue generated from an additional unit of a factor usually becomes zero as more resources are hired. 
D) Additional revenue generated from an additional unit of a factor increases as more resources are hired. 
E) Additional revenue generated from an additional unit of a factor doubles every time new resources are hired.

Question 5

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 6

The marginal-revenue product (MRP)is the:

Accepted Answer

A) value of the additional output that an extra unit of a resource can produce. 
B) cost of hiring an additional unit of a resource. 
C) extra cost of producing an additional unit of output. 
D) increase in total output when an additional unit of an input is hired. 
E) change in total revenue when an additional unit of a good is sold.

Question 7

Monopsonists tend to exploit the resources as they are the sole employers of the resources.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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, if the marginal cost of the resource is $600:

Accepted Answer

A) 1 unit of the resource is hired. 
B) 3 units of the resource are hired. 
C) any number of units beyond 3 units is hired. 
D) zero unit of the resource is hired. 
E) 7 units of the resource are acquired.

Question 10

Which of the following statements best illustrates the relationship between the market for products and the market for resources?

Accepted Answer

A) An increase in the price of cameras will decrease the demand for film. 
B) As income rises, people demand relatively smaller amounts of food. 
C) An increase in demand for textiles will increase the demand for textile workers. 
D) An increase in the price of butter will cause more people to buy margarine. 
E) A decrease in demand for tea will increase the demand for coffee.

Question 11

An automobile manufacturer uses land, labor, capital, and entrepreneurial ability to produce cars and trucks.If the price of trucks increases, the automobile manufacturer would not _____.

Accepted Answer

A) pay a lower wage rate to labor 
B) increase truck production 
C) hire more workers 
D) increase capital used in production 
E) increase land used in production

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.
Refer to Scenario 14.1.If the worker joins Firm B, his opportunity cost is:

Accepted Answer

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

Question 13

Households' expenditure on goods and services are sources of revenue for the firms.

Accepted Answer

A) True 
 B)False

Question 14

If the labor market is perfectly competitive the wage rate will be less than the marginal revenue product of labor.

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

Under perfect competition in the resource market, the marginal factor cost curve:

Accepted Answer

A) is positively sloped. 
B) is vertical. 
C) is negatively sloped. 
D) is horizontal. 
E) does not exist.

Question 17

The producer can raise the level of profit by hiring more units of a resource if:

Accepted Answer

A) the marginal revenue product of the resource is equal to the marginal factor cost. 
B) the marginal factor cost becomes negative. 
C) the marginal revenue product of the resource is greater than the marginal factor cost. 
D) the marginal revenue product falls to zero. 
E) the marginal revenue product of the resource is less than the marginal factor cost.

Question 18

Which of the following goods is likely to have a derived demand?

Accepted Answer

A) Tractor 
B) T-shirt 
C) Italian food 
D) Residential buildings 
E) Cigarettes

Question 19

During the recession witnessed in early 2001, many firms laid off their employees and downsized.The reason for this decrease in the demand for employees was:

Accepted Answer

A) a reduction in the demand for the final good. 
B) a reduction in the price of the final good. 
C) an increase in the demand for the final good. 
D) an increase in the price of the final good. 
E) the incompetency and poor performance of the employees.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 24: Resource Markets

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

A firm will demand more units of a resource if:

Why is the marginal revenue product curve of a factor negatively sloped?

If the resource market is perfectly competitive:

The marginal-revenue product (MRP) is the:

Monopsonists tend to exploit the resources as they are the sole employers of the resources.

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

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, if the marginal cost of the resource is $600:

Which of the following statements best illustrates the relationship between the market for products and the market for resources?

An automobile manufacturer uses land, labor, capital, and entrepreneurial ability to produce cars and trucks.If the price of trucks increases, the automobile manufacturer would not _____.

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 opportunity cost is:

Households' expenditure on goods and services are sources of revenue for the firms.

If the labor market is perfectly competitive the wage rate will be less than the marginal revenue product of labor.

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

Under perfect competition in the resource market, the marginal factor cost curve:

The producer can raise the level of profit by hiring more units of a resource if:

Which of the following goods is likely to have a derived demand?

During the recession witnessed in early 2001, many firms laid off their employees and downsized.The reason for this decrease in the demand for employees was:

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