Question 1

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 2

Assume that labor and capital are substitutes in production. If there is an increase in the price of capital, how can this lead to either an increase or decrease in the demand for labor?

Accepted Answer

According to the substitution effect, an

Question 3

The demand curve for labor will most likely increase when the price of a

Accepted Answer

A) complementary input increases, provided the substitution effect is greater than the output effect. 
B) substitute input decreases, provided the output effect is greater than the substitution effect. 
C) substitute input increases, provided the output effect is greater than the substitution effect. 
D) substitute input decreases, provided the substitution effect is greater than the output effect. 
A) complementary input increases, provided the substitution effect is greater than the output effect. 
B) substitute input decreases, provided the output effect is greater than the substitution effect. 
C) substitute input increases, provided the output effect is greater than the substitution effect. 
D) substitute input decreases, provided the substitution effect is greater than the output effect.

Question 4

What is a firm's MRP?

Accepted Answer

A firm's MRP is the change in

Question 5

What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 9 percent?

Accepted Answer

A) 3.00 
B) 2.36 
C) 0.56 
D) 1.80 
A) 3.00 
B) 2.36 
C) 0.56 
D) 1.80

Question 6

Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will employ

Accepted Answer

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

Question 7

Assuming a firm is selling its output in a purely competitive market, its resource demand curve can be determined by

Accepted Answer

A) multiplying total product by product price. 
B) multiplying marginal product by product price. 
C) dividing total revenue by marginal product. 
D) comparing marginal product with various possible input prices. 
A) multiplying total product by product price. 
B) multiplying marginal product by product price. 
C) dividing total revenue by marginal product. 
D) comparing marginal product with various possible input prices.

Question 8

The elasticity of resource demand measures the

Accepted Answer

A) responsiveness of workers to changes in wage rates. 
B) responsiveness of producers to changes in resource prices. 
C) ratio of marginal revenue product to resource price. 
D) sensitivity of marginal revenue product to changes in product price. 
A) responsiveness of workers to changes in wage rates. 
B) responsiveness of producers to changes in resource prices. 
C) ratio of marginal revenue product to resource price. 
D) sensitivity of marginal revenue product to changes in product price.

Question 9

A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table.   To achieve an optimal factor mix for its current output, the firm should employ more

Accepted Answer

A) A and B and less C. 
B) A and B and C. 
C) A and C and less B. 
D) B and less A and C. 
A) A and B and less C. 
B) A and B and C. 
C) A and C and less B. 
D) B and less A and C.

Question 10

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

Question 11

Refer to the table. The marginal revenue product of the third unit of the resource is

Accepted Answer

A) $3. 
B) $5. 
C) $19. 
D) $36. 
A) $3. 
B) $5. 
C) $19. 
D) $36.

Question 12

The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $10 and $20 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be

Accepted Answer

A) $140. 
B) $222. 
C) $117. 
D) $82. 
A) $140. 
B) $222. 
C) $117. 
D) $82.

Question 13

Refer to the table. How many units of a resource would the profit-maximizing firm use if the price of this resource was $19.00?

Accepted Answer

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

Question 14

The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $5 and $8 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be

Accepted Answer

A) $76. 
B) $138. 
C) $145. 
D) $170. 
A) $76. 
B) $138. 
C) $145. 
D) $170.

Question 15

The labor demand curve of a firm

Accepted Answer

A) will shift to the left if the price of the product that the labor is producing falls. 
B) is perfectly elastic if the firm is selling its product in a purely competitive market. 
C) reflects a direct relationship between the number of workers hired and the money wage rate. 
D) is the same as its marginal product curve. 
A) will shift to the left if the price of the product that the labor is producing falls. 
B) is perfectly elastic if the firm is selling its product in a purely competitive market. 
C) reflects a direct relationship between the number of workers hired and the money wage rate. 
D) is the same as its marginal product curve.

Question 16

The substitution effect indicates that a profit-seeking firm will use

Accepted Answer

A) more of an input whose price has fallen and less of other inputs in producing a given output. 
B) more of all inputs if production costs fall. 
C) more of those inputs whose marginal productivity is the greatest. 
D) less of an input whose price has fallen and more of other inputs in producing a given output. 
A) more of an input whose price has fallen and less of other inputs in producing a given output. 
B) more of all inputs if production costs fall. 
C) more of those inputs whose marginal productivity is the greatest. 
D) less of an input whose price has fallen and more of other inputs in producing a given output.

Question 17

If MP x > MP y, a firm should hire more x and less y.

Accepted Answer

A) True 
 B)False

Question 18

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 19

A profit-maximizing firm employs resources to the point where

Accepted Answer

A) MRC = MP. 
B) resource price equals product price. 
C) MRP = MRC. 
D) MP = product price. 
A) MRC = MP. 
B) resource price equals product price. 
C) MRP = MRC. 
D) MP = product price.

Question 20

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 $12 to $14. 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, and the total paid out for wages will increase. 
C) fewer workers, and 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, and the total paid out for wages will increase. 
C) fewer workers, and the total paid out for wages will remain unchanged. 
D) more capital, if capital and labor are used in fixed proportions in production.

Exam 16: The Demand for Resources

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

Assume that labor and capital are substitutes in production. If there is an increase in the price of capital, how can this lead to either an increase or decrease in the demand for labor?

The demand curve for labor will most likely increase when the price of a

What is a firm's MRP?

What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 9 percent?

Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will employ

Assuming a firm is selling its output in a purely competitive market, its resource demand curve can be determined by

The elasticity of resource demand measures the

A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table. To achieve an optimal factor mix for its current output, the firm should employ more

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

Refer to the table. The marginal revenue product of the third unit of the resource is

Refer to the table. How many units of a resource would the profit-maximizing firm use if the price of this resource was $19.00?

The labor demand curve of a firm

The substitution effect indicates that a profit-seeking firm will use

If MP x > MP y, a firm should hire more x and less y.

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

A profit-maximizing firm employs resources to the point where

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 $12 to $14. As a result of the wage increase, firms will hire

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