Question 1

Marginal resource cost is

Accepted Answer

A) the increase in a firm's total cost caused by hiring one additional unit of an input. 
B) a firm's cost of hiring one group of inputs, such as capital or labor. 
C) the firm's demand curve for a productive resource. 
D) determined by the marginal physical product schedule for an input. 
A) the increase in a firm's total cost caused by hiring one additional unit of an input. 
B) a firm's cost of hiring one group of inputs, such as capital or labor. 
C) the firm's demand curve for a productive resource. 
D) determined by the marginal physical product schedule for an input.

Question 2

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.The marginal revenue product of the second worker is

Accepted Answer

A) $24. 
B) $8. 
C) $15. 
D) $9. 
A) $24. 
B) $8. 
C) $15. 
D) $9.

Question 3

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.What is the farmer's profit-maximizing output?

Accepted Answer

A) 20 
B) 32 
C) 37 
D) 40 
A) 20 
B) 32 
C) 37 
D) 40

Question 4

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market.If the wage rate is $11, how many workers will the firm choose to employ?

Accepted Answer

A) 5. 
B) 4. 
C) 3. 
D) 2.Blooms: Understand 
A) 5. 
B) 4. 
C) 3. 
D) 2.Blooms: Understand

Question 5

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units.If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

Accepted Answer

A) $6. 
B) $8. 
C) $48. 
D) $80. 
A) $6. 
B) $8. 
C) $48. 
D) $80.

Question 6

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market.If the wage rate is $20, how many workers will the firm choose to employ?

Accepted Answer

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

Question 7

A firm's demand schedule for a resource is the firm's marginal product schedule for the resource.

Accepted Answer

A) True 
 B)False

Question 8

A firm combines two resources, A and B, to produce an output, Q.Their respective marginal revenue products are $30 and $21.A costs $15 a unit and B $7 a unit.To reduce the cost of Q,

Accepted Answer

A) more B and less A should be used. 
B) more A and less B should be used. 
C) more of both resources should be used. 
D) less of both resources should be used. 
A) more B and less A should be used. 
B) more A and less B should be used. 
C) more of both resources should be used. 
D) less of both resources should be used.

Question 9

If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that

Accepted Answer

A) the price of each input equals its MP. 
B) MPD = MPF. 
C) MPD / PD = MPF / PF. 
D) MPD / PF = MPF / PD. 
A) the price of each input equals its MP. 
B) MPD = MPF. 
C) MPD / PD = MPF / PF. 
D) MPD / PF = MPF / PD.

Question 10

Which would result in a decrease in the elasticity of demand for a particular resource?

Accepted Answer

A) a decrease in the rate at which the marginal product of that resource declines 
B) an increase in the elasticity of demand for the product that the resource helps to produce 
C) a decrease in the percentage of the firm's total costs accounted for by the resource 
D) an increase in the substitutability of other resources for the particular resource 
A) a decrease in the rate at which the marginal product of that resource declines 
B) an increase in the elasticity of demand for the product that the resource helps to produce 
C) a decrease in the percentage of the firm's total costs accounted for by the resource 
D) an increase in the substitutability of other resources for the particular resource

Question 11

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

Accepted Answer

A) True 
 B)False

Question 12

Marginal revenue product measures the

Accepted Answer

A) amount by which the addition of one more worker increases a firm's total revenue. 
B) decline in product price that a firm must accept to sell the extra output of one more worker. 
C) increase in total resource cost resulting from the hire of one extra unit of a resource. 
D) increase in total revenue resulting from the production of one more unit of a product. 
A) amount by which the addition of one more worker increases a firm's total revenue. 
B) decline in product price that a firm must accept to sell the extra output of one more worker. 
C) increase in total resource cost resulting from the hire of one extra unit of a resource. 
D) increase in total revenue resulting from the production of one more unit of a product.

Question 13

Which of the following increases in labor demand is due to a change in the price of a related resource?

Accepted Answer

A) Software sales rise, thus increasing the demand for software developers. 
B) Snowboarding increases in popularity, thus increasing the demand for the workers who make snowboards. 
C) A decrease in the price of wood decreases the cost of furniture, thus increasing the demand for furniture workers. 
D) A technological change increases output per worker in the computer industry, thus increasing the demand for computer workers. 
A) Software sales rise, thus increasing the demand for software developers. 
B) Snowboarding increases in popularity, thus increasing the demand for the workers who make snowboards. 
C) A decrease in the price of wood decreases the cost of furniture, thus increasing the demand for furniture workers. 
D) A technological change increases output per worker in the computer industry, thus increasing the demand for computer workers.

Question 14

Suppose capital is readily substitutable for labor and that the price of capital falls.We can conclude that the

Accepted Answer

A) substitution effect will tend to reduce the demand for labor. 
B) output effect will tend to reduce the demand for labor. 
C) demand for labor will necessarily decline. 
D) demand for labor will necessarily increase. 
A) substitution effect will tend to reduce the demand for labor. 
B) output effect will tend to reduce the demand for labor. 
C) demand for labor will necessarily decline. 
D) demand for labor will necessarily increase.

Question 15

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40.The price of labor is $5, and the price of capital is $8.If the firm wants to minimize costs, then it should

Accepted Answer

A) use more labor and less capital. 
B) use less labor and less capital. 
C) use less labor and more capital. 
D) make no change in resource use. 
A) use more labor and less capital. 
B) use less labor and less capital. 
C) use less labor and more capital. 
D) make no change in resource use.

Question 16

All firms have to incur costs because of

Accepted Answer

A) the resources they use. 
B) buyers they sell to. 
C) the profits they earn. 
D) revenues they receive. 
A) the resources they use. 
B) buyers they sell to. 
C) the profits they earn. 
D) revenues they receive.

Question 17

Other things equal, we would expect the labor demand curve of a monopolistic seller to

Accepted Answer

A) decline more rapidly than that of a purely competitive seller. 
B) decline less rapidly than that of a purely competitive seller. 
C) decline at the same rate as that of a purely competitive seller. 
D) be more elastic than that of a purely competitive seller. 
A) decline more rapidly than that of a purely competitive seller. 
B) decline less rapidly than that of a purely competitive seller. 
C) decline at the same rate as that of a purely competitive seller. 
D) be more elastic than that of a purely competitive seller.

Question 18

Suppose the price of the product that labor is producing increases and simultaneously the price of capital, which is substitutable for labor, decreases.Assuming that the substitution effect is greater than the output effect, 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 19

An example of derived demand in the auto industry is the demand for

Accepted Answer

A) new automobiles. 
B) used automobiles. 
C) auto workers. 
D) drivers' insurance. 
A) new automobiles. 
B) used automobiles. 
C) auto workers. 
D) drivers' insurance.

Question 20

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.How many workers should the farmer hire?

Accepted Answer

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

Exam 16: The Demand for Resources

Marginal resource cost is

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market.If the wage rate is $11, how many workers will the firm choose to employ?

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units.If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market.If the wage rate is $20, how many workers will the firm choose to employ?

A firm's demand schedule for a resource is the firm's marginal product schedule for the resource.

A firm combines two resources, A and B, to produce an output, Q.Their respective marginal revenue products are $30 and $21.A costs $15 a unit and B $7 a unit.To reduce the cost of Q,

If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that

Which would result in a decrease in the elasticity of demand for a particular resource?

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

Marginal revenue product measures the

Which of the following increases in labor demand is due to a change in the price of a related resource?

Suppose capital is readily substitutable for labor and that the price of capital falls.We can conclude that the

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40.The price of labor is $5, and the price of capital is $8.If the firm wants to minimize costs, then it should

All firms have to incur costs because of

Other things equal, we would expect the labor demand curve of a monopolistic seller to

Suppose the price of the product that labor is producing increases and simultaneously the price of capital, which is substitutable for labor, decreases.Assuming that the substitution effect is greater than the output effect, the demand for labor

An example of derived demand in the auto industry is the demand for

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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