Question 1

When dealing with the demand for inputs

Accepted Answer

A) substitution and output effects work in opposite directions for substitutes 
B) substitution and output effects always work in the same direction 
C) substitution output effects work in opposite directions for compliments 
D) substitution output effects work in opposite directions for inferior goods 
A) substitution and output effects work in opposite directions for substitutes 
B) substitution and output effects always work in the same direction 
C) substitution output effects work in opposite directions for compliments 
D) substitution output effects work in opposite directions for inferior goods

Question 2

Suppose MP = 10/L. If the firm sells its output in a competitive market at a price of $8, how much labour will the firm hire if the wage rate is $5 per unit of labour?

Accepted Answer

A) 4 
B) 6 
C) 2 
D) 10 
A) 4 
B) 6 
C) 2 
D) 10

Question 3

The marginal factor cost curve is:

Accepted Answer

A) equal to input prices. 
B) below an upward sloping input supply curve. 
C) downward sloping. 
D) the ratio of changes in total factor cost to quantity purchased. 
A) equal to input prices. 
B) below an upward sloping input supply curve. 
C) downward sloping. 
D) the ratio of changes in total factor cost to quantity purchased.

Question 4

If a resource is exhaustible, its supply curve in a single period is:

Accepted Answer

A) downward sloping. 
B) perfectly elastic. 
C) upward sloping. 
D) perfectly inelastic. 
A) downward sloping. 
B) perfectly elastic. 
C) upward sloping. 
D) perfectly inelastic.

Question 5

In perfectly competitive input markets

Accepted Answer

A) all units of the same input command the same price 
B) there may be cases when there's only one seller 
C) not all information is known by all parties 
D) some units of input might be slightly different from others 
A) all units of the same input command the same price 
B) there may be cases when there's only one seller 
C) not all information is known by all parties 
D) some units of input might be slightly different from others

Question 6

The demand for labor will increase in response to:

Accepted Answer

A) increased labour productivity. 
B) a decrease in the supply of labor. 
C) a decrease in the price of capital that can be used in place of the labor. 
D) lower product prices. 
A) increased labour productivity. 
B) a decrease in the supply of labor. 
C) a decrease in the price of capital that can be used in place of the labor. 
D) lower product prices.

Question 7

An increase in the interest rate will:

Accepted Answer

A) shift the MRP curve to the right. 
B) shift the MRP curve to the left. 
C) not affect the MRP curve. 
D) rotate the MRP curve. 
A) shift the MRP curve to the right. 
B) shift the MRP curve to the left. 
C) not affect the MRP curve. 
D) rotate the MRP curve.

Question 8

Explain how a firm determines the optimal amount of capital.

Accepted Answer

Since capital provides input services ov

Question 9

A firm which is a monopolist in an output market and a competitor in an input market is:

Accepted Answer

A) inefficient because MFC > w. 
B) inefficient because VMP > MRP and MFC > w. 
C) inefficient because VMP > MRP. 
D) efficient. 
A) inefficient because MFC > w. 
B) inefficient because VMP > MRP and MFC > w. 
C) inefficient because VMP > MRP. 
D) efficient.

Question 10

The most general profit maximization rule is to choose quantity such that the quantity of an input employed makes:

Accepted Answer

A) w = VMP. 
B) MFC = MRP. 
C) MFC = VMP. 
D) w = MRP. 
A) w = VMP. 
B) MFC = MRP. 
C) MFC = VMP. 
D) w = MRP.

Question 11

If leisure is a normal good:

Accepted Answer

A) then the supply of leisure is downward sloping. 
B) then the supply of labour might be downward sloping. 
C) then the demand for leisure is upward sloping. 
D) then the demand for labour is upward sloping. 
A) then the supply of leisure is downward sloping. 
B) then the supply of labour might be downward sloping. 
C) then the demand for leisure is upward sloping. 
D) then the demand for labour is upward sloping.

Question 12

The demand for labour:

Accepted Answer

A) is not the result of a maximization process. 
B) is related to the demand for leisure. 
C) is identical to the value of the marginal product when there is one input. 
D) is identical to the value of the marginal product when there are two inputs. 
A) is not the result of a maximization process. 
B) is related to the demand for leisure. 
C) is identical to the value of the marginal product when there is one input. 
D) is identical to the value of the marginal product when there are two inputs.

Question 13

Which of the following is not a potential source of monopsony power?

Accepted Answer

A) many firms competing for the same input 
B) strong attachments of individuals to their home towns 
C) costs of transporting bulky material inputs 
D) immobility of inputs 
A) many firms competing for the same input 
B) strong attachments of individuals to their home towns 
C) costs of transporting bulky material inputs 
D) immobility of inputs

Question 14

Show what happens to the wage paid to workers and the quantity of labour hired in a monopsony labour market when the supply of labour decreases.

Accepted Answer

If a monopsonist wants to hire one more

Question 15

Input z is the only variable input for Joe's manna factory. The supply function of the input is 10 + 2z and the MRP function is 110 - z. Then:

Accepted Answer

A) w* = 60. 
B) w* = 90, z* = 20. 
C) w* = 50, z* = 20. 
D) w* = 100/3. 
A) w* = 60. 
B) w* = 90, z* = 20. 
C) w* = 50, z* = 20. 
D) w* = 100/3.

Question 16

Consider the following production function for a firm using two inputs x and y,
Q=20x+14y- 2x2+2xy- y2 where q denotes the quantity of output that is produced. An increase in the quantity of y:

Accepted Answer

A) is ambiguous in terms of the effect it has on the marginal product of x. 
B) does nothing to the marginal product of x. 
C) increases the marginal product of x. 
D) decreases the marginal product of x. 
A) is ambiguous in terms of the effect it has on the marginal product of x. 
B) does nothing to the marginal product of x. 
C) increases the marginal product of x. 
D) decreases the marginal product of x.

Question 17

If the marginal products of all inputs are identical, for the firm to be in long- run equilibrium:

Accepted Answer

A) input prices cannot be identical. 
B) the output market must be perfectly competitive. 
C) the firm must use just two inputs. 
D) all input prices must be identical. 
A) input prices cannot be identical. 
B) the output market must be perfectly competitive. 
C) the firm must use just two inputs. 
D) all input prices must be identical.

Question 18

The marginal revenue product of labour in the local saw mill is MRPL = 20 - .5L, where L = the number of workers. If the wage of saw mill workers is $10 per hour, then how many workers will the mill hire?

Accepted Answer

A) 20 
B) 30 
C) 10 
D) 25 
A) 20 
B) 30 
C) 10 
D) 25

Question 19

Holding quantities of all other inputs constant, a firm's MRP curve is:

Accepted Answer

A) its demand curve for the input regardless of market structure. 
B) below its VMP curve if it is a monopolist in its output market. 
C) its VMP curve if it is a monopolist in its output market. 
D) above its VMP curve if it is a monopolist in its output market. 
A) its demand curve for the input regardless of market structure. 
B) below its VMP curve if it is a monopolist in its output market. 
C) its VMP curve if it is a monopolist in its output market. 
D) above its VMP curve if it is a monopolist in its output market.

Question 20

If a firm is a monopolist in its output market and a competitor in an input market, its input bundle will be chosen so that:

Accepted Answer

A) VMP is not equal MRP for that input. B) VMP = MRP for that input. C) VMP > MRP for that input. D) VMP < MRP for that input. A) VMP is not equal MRP for that input. B) VMP = MRP for that input. C) VMP > MRP for that input. D) VMP < MRP for that input.

When dealing with the demand for inputs

Suppose MP = 10/L. If the firm sells its output in a competitive market at a price of $8, how much labour will the firm hire if the wage rate is $5 per unit of labour?

The marginal factor cost curve is:

If a resource is exhaustible, its supply curve in a single period is:

In perfectly competitive input markets

The demand for labor will increase in response to:

An increase in the interest rate will:

Explain how a firm determines the optimal amount of capital.

A firm which is a monopolist in an output market and a competitor in an input market is:

The most general profit maximization rule is to choose quantity such that the quantity of an input employed makes:

If leisure is a normal good:

The demand for labour:

Which of the following is not a potential source of monopsony power?

Show what happens to the wage paid to workers and the quantity of labour hired in a monopsony labour market when the supply of labour decreases.

Input z is the only variable input for Joe's manna factory. The supply function of the input is 10 + 2z and the MRP function is 110 - z. Then:

Consider the following production function for a firm using two inputs x and y, Q=20x+14y- 2x²+2xy- y²where q denotes the quantity of output that is produced. An increase in the quantity of y:

If the marginal products of all inputs are identical, for the firm to be in long- run equilibrium:

The marginal revenue product of labour in the local saw mill is MRPL = 20 - .5L, where L = the number of workers. If the wage of saw mill workers is $10 per hour, then how many workers will the mill hire?

Holding quantities of all other inputs constant, a firm's MRP curve is:

If a firm is a monopolist in its output market and a competitor in an input market, its input bundle will be chosen so that:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 11: Input Markets and the Allocation of Resources

When dealing with the demand for inputs

Suppose MP = 10/L. If the firm sells its output in a competitive market at a price of $8, how much labour will the firm hire if the wage rate is $5 per unit of labour?

The marginal factor cost curve is:

If a resource is exhaustible, its supply curve in a single period is:

In perfectly competitive input markets

The demand for labor will increase in response to:

An increase in the interest rate will:

Explain how a firm determines the optimal amount of capital.

A firm which is a monopolist in an output market and a competitor in an input market is:

The most general profit maximization rule is to choose quantity such that the quantity of an input employed makes:

If leisure is a normal good:

The demand for labour:

Which of the following is not a potential source of monopsony power?

Show what happens to the wage paid to workers and the quantity of labour hired in a monopsony labour market when the supply of labour decreases.

Input z is the only variable input for Joe's manna factory. The supply function of the input is 10 + 2z and the MRP function is 110 - z. Then:

Consider the following production function for a firm using two inputs x and y, Q=20x+14y- 2x2+2xy- y2 where q denotes the quantity of output that is produced. An increase in the quantity of y:

If the marginal products of all inputs are identical, for the firm to be in long- run equilibrium:

The marginal revenue product of labour in the local saw mill is MRPL = 20 - .5L, where L = the number of workers. If the wage of saw mill workers is $10 per hour, then how many workers will the mill hire?

Holding quantities of all other inputs constant, a firm's MRP curve is:

If a firm is a monopolist in its output market and a competitor in an input market, its input bundle will be chosen so that:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Consider the following production function for a firm using two inputs x and y, Q=20x+14y- 2x²+2xy- y²where q denotes the quantity of output that is produced. An increase in the quantity of y: