Question 1

Employers will hire more units of a resource if the

Accepted Answer

A) price of the resource increases. 
B) productivity of the resource increases. 
C) price of the good being produced declines. 
D) price of a complementary resource rises. 
A) price of the resource increases. 
B) productivity of the resource increases. 
C) price of the good being produced declines. 
D) price of a complementary resource rises.

Question 2

The elasticity of demand for labor varies inversely with the elasticity of demand for the product it is used to produce.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that the production of wheat requires two inputs, labor and fertilizer.The price of labor is $4.50, and the price of fertilizer is $3.00.A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8.If the farmer is a cost-minimizer, he should

Accepted Answer

A) use more labor and less fertilizer. 
B) use more fertilizer and less labor. 
C) use more labor and more fertilizer. 
D) continue using the same amounts of each input. 
A) use more labor and less fertilizer. 
B) use more fertilizer and less labor. 
C) use more labor and more fertilizer. 
D) continue using the same amounts of each input.

Question 4

Marginal resource cost is Accessibility: Keyboard Navigation Blooms: Understand

Accepted Answer

A) the increase in total resource cost associated with the production of one more unit of output. 
B) the increase in total resource cost associated with the hire of one more unit of the resource. 
C) total resource cost divided by the number of inputs employed. 
D) the change in total revenue associated with the employment of one more unit of the resource. 
A) the increase in total resource cost associated with the production of one more unit of output. 
B) the increase in total resource cost associated with the hire of one more unit of the resource. 
C) total resource cost divided by the number of inputs employed. 
D) the change in total revenue associated with the employment of one more unit of the resource.

Question 5

The demand for a resource will increase if the

Accepted Answer

A) price of the resource decreases. 
B) supply of the resource decreases. 
C) price of the product requiring this resource increases. 
D) price of the product requiring this resource decreases. 
A) price of the resource decreases. 
B) supply of the resource decreases. 
C) price of the product requiring this resource increases. 
D) price of the product requiring this resource decreases.

Question 6

A firm should reduce its employment of a resource whose marginal resource cost exceeds its marginal revenue product.

Accepted Answer

A) True 
 B)False

Question 7

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Accepted Answer

A) True 
 B)False

Question 8

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the

Accepted Answer

A) firm's total outlay on resources is minimized. 
B) marginal revenue product of each resource is equal to its price. 
C) price of each resource employed is the same. 
D) marginal revenue product of the last unit of each resource hired is the same. 
A) firm's total outlay on resources is minimized. 
B) marginal revenue product of each resource is equal to its price. 
C) price of each resource employed is the same. 
D) marginal revenue product of the last unit of each resource hired is the same.

Question 9

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by

Accepted Answer

A) adding marginal product to total product as one more unit of labor is employed. 
B) adding marginal revenue to total product as one more unit of labor is employed. 
C) multiplying marginal product by product price. 
D) multiplying marginal product by marginal revenue. 
A) adding marginal product to total product as one more unit of labor is employed. 
B) adding marginal revenue to total product as one more unit of labor is employed. 
C) multiplying marginal product by product price. 
D) multiplying marginal product by marginal revenue.

Question 10

The labor demand curve of a purely competitive seller

Accepted Answer

A) slopes downward because the firm must lower price to sell more output. 
B) slopes downward because labor productivity increases as successive workers are hired. 
C) is perfectly elastic because the firm is hiring an insignificant portion of the total labor supply. 
D) slopes downward because the marginal product of successive workers declines. 
A) slopes downward because the firm must lower price to sell more output. 
B) slopes downward because labor productivity increases as successive workers are hired. 
C) is perfectly elastic because the firm is hiring an insignificant portion of the total labor supply. 
D) slopes downward because the marginal product of successive workers declines.

Question 11

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

Accepted Answer

A) ATC for that output. 
B) MC for that output. 
C) P of that output. 
D) TR of that output. 
A) ATC for that output. 
B) MC for that output. 
C) P of that output. 
D) TR of that output.

Question 12

When the elasticity coefficient for resource demand is less than one, resource demand is

Accepted Answer

A) inelastic. 
B) elastic. 
C) unit-elastic. 
D) infinitely elastic. 
A) inelastic. 
B) elastic. 
C) unit-elastic. 
D) infinitely elastic.

Question 13

The demand for a productive resource is said to be "derived" because the demand for the factor

Accepted Answer

A) depends on the demand for the product it helps to produce. 
B) depends on the demand for a complementary factor. 
C) is derived from the state of the economy. 
D) is derived from government policy. 
A) depends on the demand for the product it helps to produce. 
B) depends on the demand for a complementary factor. 
C) is derived from the state of the economy. 
D) is derived from government policy.

Question 14

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal,

Accepted Answer

A) the more elastic the demand for the product, the less elastic the demand for labor. 
B) the more elastic the demand for the product, the more elastic the demand for labor. 
C) the elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive. 
D) if product demand is perfectly elastic, labor demand will be perfectly inelastic. 
A) the more elastic the demand for the product, the less elastic the demand for labor. 
B) the more elastic the demand for the product, the more elastic the demand for labor. 
C) the elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive. 
D) if product demand is perfectly elastic, labor demand will be perfectly inelastic.

Question 15

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

Accepted Answer

A) True 
 B)False

Question 16

A competitive firm's marginal revenue product of labor will fall as it employs more labor because the price of labor decreases as more of it is employed.

Accepted Answer

A) True 
 B)False

Question 17

The marginal productivity theory of income distribution has been criticized because

Accepted Answer

A) the resulting distribution of income is likely to be too equal to maintain production incentives. 
B) income from inherited property is inconsistent with the theory. 
C) purely competitive conditions characterize most resource markets. 
D) it fails to recognize that resource demand is derived from product demand. 
A) the resulting distribution of income is likely to be too equal to maintain production incentives. 
B) income from inherited property is inconsistent with the theory. 
C) purely competitive conditions characterize most resource markets. 
D) it fails to recognize that resource demand is derived from product demand.

Question 18

Which of the following statements is correct?

Accepted Answer

A) If the profit-maximizing rule is fulfilled, it necessarily follows that the cost-minimization rule is being fulfilled. 
B) The profit-maximizing and the cost-minimizing rules are such that fulfilling one has no bearing on fulfilling the other. 
C) If the profit-maximizing rule is fulfilled, the cost-minimization rule may or may not be fulfilled. 
D) If the cost-minimization rule is fulfilled, it necessarily follows that the profit-maximizing rule is being fulfilled. 
A) If the profit-maximizing rule is fulfilled, it necessarily follows that the cost-minimization rule is being fulfilled. 
B) The profit-maximizing and the cost-minimizing rules are such that fulfilling one has no bearing on fulfilling the other. 
C) If the profit-maximizing rule is fulfilled, the cost-minimization rule may or may not be fulfilled. 
D) If the cost-minimization rule is fulfilled, it necessarily follows that the profit-maximizing rule is being fulfilled.

Question 19

Assume that the resource market is purely competitive.If the price of the resource falls, other factors constant, then a firm that sells its product in a purely competitive market will

Accepted Answer

A) increase production by a larger amount than a firm with some monopoly power in its product market. 
B) increase production by a smaller amount than a firm with some monopoly power in its product market. 
C) decrease production by a larger amount than a firm with some monopoly power in its product market. 
D) decrease production by a smaller amount than a firm with some monopoly power in its product market. 
A) increase production by a larger amount than a firm with some monopoly power in its product market. 
B) increase production by a smaller amount than a firm with some monopoly power in its product market. 
C) decrease production by a larger amount than a firm with some monopoly power in its product market. 
D) decrease production by a smaller amount than a firm with some monopoly power in its product market.

Question 20

If the price of a resource is greater than its marginal revenue product, the firm should

Accepted Answer

A) charge a higher price for its product. 
B) make no change in the units of the resource used. 
C) increase the units of the resource used in order to increase profits. 
D) decrease the units of the resource used in order to increase profits. 
A) charge a higher price for its product. 
B) make no change in the units of the resource used. 
C) increase the units of the resource used in order to increase profits. 
D) decrease the units of the resource used in order to increase profits.

Exam 16: The Demand for Resources

Employers will hire more units of a resource if the

The elasticity of demand for labor varies inversely with the elasticity of demand for the product it is used to produce.

Marginal resource cost is Accessibility: Keyboard Navigation Blooms: Understand

The demand for a resource will increase if the

A firm should reduce its employment of a resource whose marginal resource cost exceeds its marginal revenue product.

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by

The labor demand curve of a purely competitive seller

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

When the elasticity coefficient for resource demand is less than one, resource demand is

The demand for a productive resource is said to be "derived" because the demand for the factor

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal,

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

A competitive firm's marginal revenue product of labor will fall as it employs more labor because the price of labor decreases as more of it is employed.

The marginal productivity theory of income distribution has been criticized because

Which of the following statements is correct?

Assume that the resource market is purely competitive.If the price of the resource falls, other factors constant, then a firm that sells its product in a purely competitive market will

If the price of a resource is greater than its marginal revenue product, the firm should

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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