Question 1

If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would increase production costs by

Accepted Answer

A) 60 percent. 
B) 45 percent. 
C) 15 percent. 
D) 9 percent. 
A) 60 percent. 
B) 45 percent. 
C) 15 percent. 
D) 9 percent.

Question 2

To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.

Accepted Answer

A) True 
 B)False

Question 3

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP.This rule takes the special form W = MRP (where W is the wage rate) when the

Accepted Answer

A) labor supply curve is upsloping. 
B) supply of labor is inelastic. 
C) firm is hiring labor under purely competitive conditions. 
D) firm is hiring labor under imperfectly competitive conditions. 
A) labor supply curve is upsloping. 
B) supply of labor is inelastic. 
C) firm is hiring labor under purely competitive conditions. 
D) firm is hiring labor under imperfectly competitive conditions.

Question 4

The demand curve for labor would shift leftward as the result of

Accepted Answer

A) an increase in the price of the product labor is producing. 
B) a decrease in the productivity of labor. 
C) an increase in the price of labor. 
D) a decrease in the price of capital, provided the output effect exceeds the substitution effect. 
A) an increase in the price of the product labor is producing. 
B) a decrease in the productivity of labor. 
C) an increase in the price of labor. 
D) a decrease in the price of capital, provided the output effect exceeds the substitution effect.

Question 5

If a firm is selling in an imperfectly competitive product market, then

Accepted Answer

A) average product will be less than marginal product for any number of workers hired. 
B) the marginal products of successive workers must be sold at lower prices. 
C) the marginal products of successive workers can be sold at higher prices. 
D) the marginal products of successive workers can be sold at a constant price. 
A) average product will be less than marginal product for any number of workers hired. 
B) the marginal products of successive workers must be sold at lower prices. 
C) the marginal products of successive workers can be sold at higher prices. 
D) the marginal products of successive workers can be sold at a constant price.

Question 6

A major criticism of the marginal productivity theory of income distribution is that

Accepted Answer

A) the demand for labor resources is price inelastic. 
B) achieving equality in incomes will take time. 
C) imperfectly competitive firms are only interested in profit maximization. 
D) property resources like land are unevenly distributed, which leads to income inequality. 
A) the demand for labor resources is price inelastic. 
B) achieving equality in incomes will take time. 
C) imperfectly competitive firms are only interested in profit maximization. 
D) property resources like land are unevenly distributed, which leads to income inequality.

Question 7

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded increased by 10 percent.We can conclude that

Accepted Answer

A) the labor demand curve must have independently shifted to the right. 
B) labor demand is highly elastic. 
C) the coefficient of labor demand elasticity is less than 1. 
D) labor demand is unit-elastic. 
A) the labor demand curve must have independently shifted to the right. 
B) labor demand is highly elastic. 
C) the coefficient of labor demand elasticity is less than 1. 
D) labor demand is unit-elastic.

Question 8

The demand for a resource depends primarily on

Accepted Answer

A) the supply of that resource. 
B) the demand for the product or service that it helps produce. 
C) the price of that input. 
D) the elasticity of supply of substitute inputs. 
A) the supply of that resource. 
B) the demand for the product or service that it helps produce. 
C) the price of that input. 
D) the elasticity of supply of substitute inputs.

Question 9

The MRP curve for labor

Accepted Answer

A) is downsloping and shows the relationship between wage rates and the quantity of labor demanded. 
B) is perfectly elastic if the firm is selling its output competitively. 
C) is upsloping and lies above the labor supply curve. 
D) will shift location when the wage rate changes. 
A) is downsloping and shows the relationship between wage rates and the quantity of labor demanded. 
B) is perfectly elastic if the firm is selling its output competitively. 
C) is upsloping and lies above the labor supply curve. 
D) will shift location when the wage rate changes.

Question 10

The MRP curve for labor

Accepted Answer

A) intersects the firm's labor demand curve from above. 
B) is the firm's labor demand curve. 
C) lies below the firm's labor demand curve. 
D) lies above the firm's labor demand curve. 
A) intersects the firm's labor demand curve from above. 
B) is the firm's labor demand curve. 
C) lies below the firm's labor demand curve. 
D) lies above the firm's labor demand curve.

Question 11

The marginal product of labor and the marginal revenue product of labor are both measured in the same units, that is, units of output.

Accepted Answer

A) True 
 B)False

Question 12

A change in an input price will alter both production costs and the profit-maximizing output.Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor.This describes the

Accepted Answer

A) output effect. 
B) substitution effect. 
C) idea of derived demand. 
D) law of diminishing returns. 
A) output effect. 
B) substitution effect. 
C) idea of derived demand. 
D) law of diminishing returns.

Question 13

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.Harry should

Accepted Answer

A) hire the second barber because he will add $28 to profits. 
B) hire the second barber because he will add $108 to profits. 
C) not hire the second barber, because he is less productive than the first barber. 
D) not hire the second barber, because he will diminish profits. 
A) hire the second barber because he will add $28 to profits. 
B) hire the second barber because he will add $108 to profits. 
C) not hire the second barber, because he is less productive than the first barber. 
D) not hire the second barber, because he will diminish profits.

Question 14

The demand for airline pilots results from the demand for air travel.This fact is an example of

Accepted Answer

A) resource substitutability. 
B) rising marginal resource cost. 
C) elasticity of resource demand. 
D) the derived demand for labor. 
A) resource substitutability. 
B) rising marginal resource cost. 
C) elasticity of resource demand. 
D) the derived demand for labor.

Question 15

The profit-maximizing and the least-cost combination of inputs are

Accepted Answer

A) the result of unrelated decisions. 
B) always identical. 
C) such that minimizing costs always results in profit maximization. 
D) such that maximizing profits always entails the least-cost combination of inputs. 
A) the result of unrelated decisions. 
B) always identical. 
C) such that minimizing costs always results in profit maximization. 
D) such that maximizing profits always entails the least-cost combination of inputs.

Question 16

A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90.The price of labor is $20, and the price of capital is $30.If the business wants to minimize costs while keeping output constant, 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 17

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

Accepted Answer

A) A decline in the demand for computers in Europe reduces the demand for workers in the domestic computer industry. 
B) The rise of hair salons for both men and women reduces the demand for barbers. 
C) A decrease in the educational skills of manufacturing workers decreases the demand for such workers. 
D) An increase in the price of chemical equipment increases the cost of producing fertilizer, thus decreasing the demand for workers who make fertilizer. 
A) A decline in the demand for computers in Europe reduces the demand for workers in the domestic computer industry. 
B) The rise of hair salons for both men and women reduces the demand for barbers. 
C) A decrease in the educational skills of manufacturing workers decreases the demand for such workers. 
D) An increase in the price of chemical equipment increases the cost of producing fertilizer, thus decreasing the demand for workers who make fertilizer.

Question 18

A cost-minimizing firm using two inputs, x and y, will employ inputs so that

Accepted Answer

A) MPx = MPy. 
B) Px / MPy = Py / MPx. 
C) MPx / Px = MPy / Py. 
D) Px = Py. 
A) MPx = MPy. 
B) Px / MPy = Py / MPx. 
C) MPx / Px = MPy / Py. 
D) Px = Py.

Question 19

The MRP of labor curve is the firm's labor demand curve.

Accepted Answer

A) True 
 B)False

Question 20

A technological improvement that causes an increase in the marginal product of a resource will

Accepted Answer

A) decrease the demand for the resource. 
B) increase the demand for the resource. 
C) decrease the marginal revenue product. 
D) increase the marginal resource cost. 
A) decrease the demand for the resource. 
B) increase the demand for the resource. 
C) decrease the marginal revenue product. 
D) increase the marginal resource cost.

Exam 16: The Demand for Resources

If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would increase production costs by

To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP.This rule takes the special form W = MRP (where W is the wage rate) when the

The demand curve for labor would shift leftward as the result of

If a firm is selling in an imperfectly competitive product market, then

A major criticism of the marginal productivity theory of income distribution is that

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded increased by 10 percent.We can conclude that

The demand for a resource depends primarily on

The MRP curve for labor

The MRP curve for labor

The marginal product of labor and the marginal revenue product of labor are both measured in the same units, that is, units of output.

A change in an input price will alter both production costs and the profit-maximizing output.Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor.This describes 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.Harry should

The demand for airline pilots results from the demand for air travel.This fact is an example of

The profit-maximizing and the least-cost combination of inputs are

A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90.The price of labor is $20, and the price of capital is $30.If the business wants to minimize costs while keeping output constant, then it should

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

A cost-minimizing firm using two inputs, x and y, will employ inputs so that

The MRP of labor curve is the firm's labor demand curve.

A technological improvement that causes an increase in the marginal product of a resource will

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

Filters