Question 1

If two resources are highly substitutable for one another,

Accepted Answer

A) a decrease in the price of one will increase unit costs of production. 
B) an increase in the price of one will increase the demand for the other. 
C) an increase in the price of one will reduce the demand for the other. 
D) a decrease in the price of one will increase the demand for the other. 
A) a decrease in the price of one will increase unit costs of production. 
B) an increase in the price of one will increase the demand for the other. 
C) an increase in the price of one will reduce the demand for the other. 
D) a decrease in the price of one will increase the demand for the other.

Question 2

Wage Rate Quantity of Labor Demanded $16 800
14 1,000
12 1,200
10 1,600
8 1,800
Refer to the given data.Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $8 to $10.As a result of the wage increase, firms will hire

Accepted Answer

A) fewer workers, and the total paid out for wages will decline. 
B) fewer workers, but the total paid out for wages will increase. 
C) fewer workers, but the total paid out for wages will remain unchanged. 
D) more capital, if capital and labor are used in fixed proportions in production. 
A) fewer workers, and the total paid out for wages will decline. 
B) fewer workers, but the total paid out for wages will increase. 
C) fewer workers, but the total paid out for wages will remain unchanged. 
D) more capital, if capital and labor are used in fixed proportions in production.

Question 3

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries.As it relates to strawberry pickers, we could expect the

Accepted Answer

A) MRP curve to shift to the right. 
B) MRP curve to shift to the left. 
C) MRC curve to shift downward. 
D) MP curve to shift downward. 
A) MRP curve to shift to the right. 
B) MRP curve to shift to the left. 
C) MRC curve to shift downward. 
D) MP curve to shift downward.

Question 4

A competitive employer will hire inputs up to the point where the

Accepted Answer

A) marginal product of the input reaches a maximum. 
B) price of the input equals the price of the output. 
C) price of the input equals the marginal product of the input. 
D) price of the input equals the marginal revenue product of the input. 
A) marginal product of the input reaches a maximum. 
B) price of the input equals the price of the output. 
C) price of the input equals the marginal product of the input. 
D) price of the input equals the marginal revenue product of the input.

Question 5

Suppose there is a decline in the demand for the product labor is producing.Furthermore, the price of capital, which is complementary to labor, increases.Thus, the demand for labor

Accepted Answer

A) will increase. 
B) will decrease. 
C) may either increase or decrease. 
D) will not change. 
A) will increase. 
B) will decrease. 
C) may either increase or decrease. 
D) will not change.

Question 6

Before ATMs, the average bank branch employed 20 employees; after ATMs, the average branch employed 13 employees, but banks have opened more branches.These developments suggest that

Accepted Answer

A) ATMs are purely substitutes for labor in banking. 
B) labor and ATMs are substitutes in some bank functions, complements in others. 
C) ATMs are purely complements for labor in banking. 
D) labor and ATMs are neither substitutes nor complements in banksâ€™ various functions. 
A) ATMs are purely substitutes for labor in banking. 
B) labor and ATMs are substitutes in some bank functions, complements in others. 
C) ATMs are purely complements for labor in banking. 
D) labor and ATMs are neither substitutes nor complements in banksâ€™ various functions.

Question 7

Assuming pure competition, which of the following are equivalents?

Accepted Answer

A) MRPL / PL = MRPC / PC and Px = 1/MC 
B) MRPL / PL = MRPC / PC and Px = AVC 
C) Px = MC and MRPL / PL = MRPC / PC = 1 
D) Px = MC and MPL / PL = MPC / PC 
A) MRPL / PL = MRPC / PC and Px = 1/MC 
B) MRPL / PL = MRPC / PC and Px = AVC 
C) Px = MC and MRPL / PL = MRPC / PC = 1 
D) Px = MC and MPL / PL = MPC / PC

Question 8

The demand for a resource will shift left if the price of a substitute resource decreases.

Accepted Answer

A) True 
 B)False

Question 9

Other things being equal, a firm's demand for labor is likely to be more elastic than its demand for capital if

Accepted Answer

A) labor costs are a smaller proportion of total costs than capital costs. 
B) the firm uses labor-intensive production techniques. 
C) substitutions of one resource for another are difficult. 
D) the demand for its final product is price elastic. 
A) labor costs are a smaller proportion of total costs than capital costs. 
B) the firm uses labor-intensive production techniques. 
C) substitutions of one resource for another are difficult. 
D) the demand for its final product is price elastic.

Question 10

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use

Accepted Answer

A) more labor as a consequence of the substitution effect. 
B) more labor as a consequence of the output effect. 
C) less labor as a consequence of the substitution effect. 
D) less labor as a consequence of the output effect. 
A) more labor as a consequence of the substitution effect. 
B) more labor as a consequence of the output effect. 
C) less labor as a consequence of the substitution effect. 
D) less labor as a consequence of the output effect.

Question 11

According to the marginal productivity theory of resource demand, the labor-demand schedule for a producer selling in a purely competitive market is

Accepted Answer

A) the same as the marginal resource cost schedule. 
B) the same as the marginal productivity schedule. 
C) the same as the marginal revenue product schedule. 
D) independent of the value of the product being produced. 
A) the same as the marginal resource cost schedule. 
B) the same as the marginal productivity schedule. 
C) the same as the marginal revenue product schedule. 
D) independent of the value of the product being produced.

Question 12

The demand for a resource depends on its productivity and the market value of the product it is producing.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is true? Other things equal, the demand for labor will be less elastic the

Accepted Answer

A) easier it is to substitute capital for labor. 
B) greater the elasticity of resource supply. 
C) greater the elasticity of product demand. 
D) smaller the ratio of labor costs to total costs. 
A) easier it is to substitute capital for labor. 
B) greater the elasticity of resource supply. 
C) greater the elasticity of product demand. 
D) smaller the ratio of labor costs to total costs.

Question 14

Increased resource productivity will, ceteris paribus, increase a firm's demand for an input.

Accepted Answer

A) True 
 B)False

Question 15

The labor demand curve of an imperfectly competitive seller is downsloping

Accepted Answer

A) solely because of diminishing marginal utility. 
B) because of both diminishing returns and the necessity to lower price to sell more output. 
C) solely because product price must be reduced to sell more output. 
D) solely because of diminishing returns.Difficulty: 02 Medium 
A) solely because of diminishing marginal utility. 
B) because of both diminishing returns and the necessity to lower price to sell more output. 
C) solely because product price must be reduced to sell more output. 
D) solely because of diminishing returns.Difficulty: 02 Medium

Question 16

The demand for a resource is a derived demand based on the demand for the product it helps to produce.

Accepted Answer

A) True 
 B)False

Question 17

If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the

Accepted Answer

A) marginal revenue product of each worker is $25. 
B) marginal revenue product of the first worker is $20. 
C) marginal revenue product of the second worker is $20. 
D) data given do not permit the determination of the marginal revenue product of either worker. 
A) marginal revenue product of each worker is $25. 
B) marginal revenue product of the first worker is $20. 
C) marginal revenue product of the second worker is $20. 
D) data given do not permit the determination of the marginal revenue product of either worker.

Question 18

Harry owns a barbershop and charges $6 per haircut.By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day.By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day.The MRP of the second barber is

Accepted Answer

A) 18 haircuts. 
B) $108. 
C) 42 haircuts. 
D) $126. 
A) 18 haircuts. 
B) $108. 
C) 42 haircuts. 
D) $126.

Question 19

Which will not be a determinant of the price elasticity of demand for an input?

Accepted Answer

A) the price of the input 
B) the substitutability of other resources for the input 
C) the elasticity of demand for the product it produces 
D) the total cost of an input as a proportion of the total cost of producing units of output 
A) the price of the input 
B) the substitutability of other resources for the input 
C) the elasticity of demand for the product it produces 
D) the total cost of an input as a proportion of the total cost of producing units of output

Question 20

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker.If a decline in the price of capital occurs, then the demand for labor will

Accepted Answer

A) decrease solely because of the substitution effect. 
B) increase solely because of the substitution effect. 
C) increase solely because of the output effect. 
D) decrease solely because of the output effect. 
A) decrease solely because of the substitution effect. 
B) increase solely because of the substitution effect. 
C) increase solely because of the output effect. 
D) decrease solely because of the output effect.

Exam 16: The Demand for Resources

If two resources are highly substitutable for one another,

Wage Rate Quantity of Labor Demanded $16 800 14 1,000 12 1,200 10 1,600 8 1,800 Refer to the given data.Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $8 to $10.As a result of the wage increase, firms will hire

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries.As it relates to strawberry pickers, we could expect the

A competitive employer will hire inputs up to the point where the

Suppose there is a decline in the demand for the product labor is producing.Furthermore, the price of capital, which is complementary to labor, increases.Thus, the demand for labor

Before ATMs, the average bank branch employed 20 employees; after ATMs, the average branch employed 13 employees, but banks have opened more branches.These developments suggest that

Assuming pure competition, which of the following are equivalents?

The demand for a resource will shift left if the price of a substitute resource decreases.

Other things being equal, a firm's demand for labor is likely to be more elastic than its demand for capital if

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use

According to the marginal productivity theory of resource demand, the labor-demand schedule for a producer selling in a purely competitive market is

The demand for a resource depends on its productivity and the market value of the product it is producing.

Which of the following statements is true? Other things equal, the demand for labor will be less elastic the

Increased resource productivity will, ceteris paribus, increase a firm's demand for an input.

The labor demand curve of an imperfectly competitive seller is downsloping

The demand for a resource is a derived demand based on the demand for the product it helps to produce.

If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the

Harry owns a barbershop and charges $6 per haircut.By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day.By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day.The MRP of the second barber is

Which will not be a determinant of the price elasticity of demand for an input?

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker.If a decline in the price of capital occurs, then the demand for labor will

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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