Question 1

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, at the profit-maximizing level, the firm's total output will be

Accepted Answer

A) 38 units. 
B) 60 units. 
C) 64 units. 
D) 27 units. 
A) 38 units. 
B) 60 units. 
C) 64 units. 
D) 27 units.

Question 2

To firms, resource prices are a major part of

Accepted Answer

A) revenues. 
B) total product. 
C) costs. 
D) profits. 
A) revenues. 
B) total product. 
C) costs. 
D) profits.

Question 3

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

Question 4

Use the graph to answer the question about the labor resource market faced by producers of good X. What will shift D ₁ to D ₂?

Accepted Answer

A) an increase in the price of a substitute input (if output effect > substitution effect) 
B) a decrease in the price of a substitute input (if substitution effect > output effect) 
C) a decrease in the price of a substitute input (if output effect > substitution effect) 
D) an increase in the price of a complementary resource 
A) an increase in the price of a substitute input (if output effect > substitution effect) 
B) a decrease in the price of a substitute input (if substitution effect > output effect) 
C) a decrease in the price of a substitute input (if output effect > substitution effect) 
D) an increase in the price of a complementary resource

Question 5

Other things being equal, if a once-competitive firm attains a high degree of monopoly power in its product market, then its resource demand will

Accepted Answer

A) become perfectly inelastic. 
B) remain perfectly elastic. 
C) become more elastic. 
D) become more inelastic. 
A) become perfectly inelastic. 
B) remain perfectly elastic. 
C) become more elastic. 
D) become more inelastic.

Question 6

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore,

Accepted Answer

A) capital is very highly substitutable for labor. 
B) the output effect is greater than the substitution effect. 
C) the income effect is greater than the output effect. 
D) the substitution effect is greater than the output effect. 
A) capital is very highly substitutable for labor. 
B) the output effect is greater than the substitution effect. 
C) the income effect is greater than the output effect. 
D) the substitution effect is greater than the output effect.

Question 7

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be

Accepted Answer

A) $106. 
B) $126. 
C) $47. 
D) $90. 
A) $106. 
B) $126. 
C) $47. 
D) $90.

Question 8

The marginal revenue product schedule is

Accepted Answer

A) the same whether the firm is selling in a purely competitive or imperfectly competitive market. 
B) the firm's resource demand schedule. 
C) the firm's resource supply schedule. 
D) upsloping. 
A) the same whether the firm is selling in a purely competitive or imperfectly competitive market. 
B) the firm's resource demand schedule. 
C) the firm's resource supply schedule. 
D) upsloping.

Question 9

The elasticity of resource demand will be greater the

Accepted Answer

A) smaller the portion of the product's total costs accounted for by the resource. 
B) less the elasticity of demand for the product it is producing. 
C) easier it is to substitute other resources in production. 
D) less the elasticity of resource supply. 
A) smaller the portion of the product's total costs accounted for by the resource. 
B) less the elasticity of demand for the product it is producing. 
C) easier it is to substitute other resources in production. 
D) less the elasticity of resource supply.

Question 10

The labor demand curve of a firm that sells its product in an imperfectly competitive market

Accepted Answer

A) is downsloping, solely because of the law of diminishing returns. 
B) is downsloping and flatter than the labor demand curve of a firm that sells its product in a purely competitive market. 
C) is upsloping. 
D) is downsloping because of both declining marginal productivity and declining product prices as quantity increases. 
A) is downsloping, solely because of the law of diminishing returns. 
B) is downsloping and flatter than the labor demand curve of a firm that sells its product in a purely competitive market. 
C) is upsloping. 
D) is downsloping because of both declining marginal productivity and declining product prices as quantity increases.

Question 11

Refer to the given data. For the $16 to $14 range of wage rates, labor demand is

Accepted Answer

A) perfectly elastic. 
B) elastic. 
C) unit elastic. 
D) inelastic. 
A) perfectly elastic. 
B) elastic. 
C) unit elastic. 
D) inelastic.

Question 12

Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ

Accepted Answer

A) 1 worker. 
B) 2 workers. 
C) 3 workers. 
D) 4 workers. 
A) 1 worker. 
B) 2 workers. 
C) 3 workers. 
D) 4 workers.

Question 13

According to the Consider This box "Superstars," the high pay of superstars reflects

Accepted Answer

A) elastic product demand. 
B) high marginal revenue productivity. 
C) blocked occupational entry. 
D) warped societal values. 
A) elastic product demand. 
B) high marginal revenue productivity. 
C) blocked occupational entry. 
D) warped societal values.

Question 14

The marginal revenue product of an economic resource for a firm operating in purely competitive product and resource markets

Accepted Answer

A) is the marginal product of the resource divided by the price of the final product. 
B) is the increase in total revenue resulting from the addition of one more unit of the resource. 
C) is equal to the average revenue product at the lowest point of the average revenue product curve. 
D) decreases as the quantity of output decreases. 
A) is the marginal product of the resource divided by the price of the final product. 
B) is the increase in total revenue resulting from the addition of one more unit of the resource. 
C) is equal to the average revenue product at the lowest point of the average revenue product curve. 
D) decreases as the quantity of output decreases.

Question 15

The marginal product of labor is expressed in _______, while the marginal revenue product of labor is expressed in __________.

Accepted Answer

A) units of output per unit of labor; dollars per unit of labor 
B) units of output per unit of labor; units of output per unit of labor also 
C) dollars per unit of labor; units of output per unit of labor 
D) dollars per unit of labor; dollars per unit of labor also 
A) units of output per unit of labor; dollars per unit of labor 
B) units of output per unit of labor; units of output per unit of labor also 
C) dollars per unit of labor; units of output per unit of labor 
D) dollars per unit of labor; dollars per unit of labor also

Question 16

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 17

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 18

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively.   What is the marginal product of the sixth worker?

Accepted Answer

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

Question 19

Use the graph to answer the question about the labor resource market faced by producers of good X. What will shift D ₁ to D ₂?

Accepted Answer

A) a decrease in the price of labor 
B) a decrease in demand for good X 
C) an increase in the price of a complementary input 
D) an increase in the price of good X 
A) a decrease in the price of labor 
B) a decrease in demand for good X 
C) an increase in the price of a complementary input 
D) an increase in the price of good X

Question 20

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

Accepted Answer

A) labor is not readily substitutable for capital. 
B) the law of diminishing returns is not applicable. 
C) the firms are producing an inferior good. 
D) the demand for capital is highly price elastic. 
A) labor is not readily substitutable for capital. 
B) the law of diminishing returns is not applicable. 
C) the firms are producing an inferior good. 
D) the demand for capital is highly price elastic.

Exam 16: The Demand for Resources

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, at the profit-maximizing level, the firm's total output will be

To firms, resource prices are a major part of

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

Use the graph to answer the question about the labor resource market faced by producers of good X. What will shift D ₁ to D ₂?

Other things being equal, if a once-competitive firm attains a high degree of monopoly power in its product market, then its resource demand will

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore,

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be

The marginal revenue product schedule is

The elasticity of resource demand will be greater the

The labor demand curve of a firm that sells its product in an imperfectly competitive market

Refer to the given data. For the $16 to $14 range of wage rates, labor demand is

Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ

According to the Consider This box "Superstars," the high pay of superstars reflects

The marginal revenue product of an economic resource for a firm operating in purely competitive product and resource markets

The marginal product of labor is expressed in _______, while the marginal revenue product of labor is expressed in __________.

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

All firms have to incur costs because of

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. What is the marginal product of the sixth worker?

Use the graph to answer the question about the labor resource market faced by producers of good X. What will shift D ₁ to D ₂?

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

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