Question 1

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a

Accepted Answer

A) large proportion of total costs and product demand is elastic. 
B) small proportion of total costs and product demand is elastic. 
C) large proportion of total costs and product demand is inelastic. 
D) small proportion of total costs and product demand is inelastic. 
A) large proportion of total costs and product demand is elastic. 
B) small proportion of total costs and product demand is elastic. 
C) large proportion of total costs and product demand is inelastic. 
D) small proportion of total costs and product demand is inelastic.

Question 2

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

Accepted Answer

A) True 
 B)False

Question 3

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 4

List the factors that will shift the resource demand curve.

Accepted Answer

A resource demand curve will s

Question 5

Assume a firm purchases resources a and b under purely competitive conditions and combines these resources to produce X. Product X is sold in a purely competitive market. The MPs of a and b are 12 and 6, respectively, and the prices of a and b are $6 and $3, respectively. If profit-maximizing equilibrium exists, the price of X will be

Accepted Answer

A) $1. 
B) $2. 
C) $0.50. 
D) $5. 
A) $1. 
B) $2. 
C) $0.50. 
D) $5.

Question 6

The price of capital is $12 per machine-hour, and the price of labor is $3 per hour. The table gives production schedules for a firm, showing the possible combinations of capital and labor that will produce 100 units of output. Which combination will this cost-minimizing firm choose?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 7

Why is the demand for resources called a "derived" demand?

Accepted Answer

Resource demand is a derived demand, whi

Question 8

Assume a pencil manufacturer is employing resources C and D in such quantities that the MRPs of the last units hired are $80 and $50, respectively. The price of resource C is $90, and the price of D is $35. This firm

Accepted Answer

A) should hire less of C and more of D. 
B) should hire more of both C and D. 
C) should hire less of both C and D. 
D) is using the least-cost combination of C and D. 
A) should hire less of C and more of D. 
B) should hire more of both C and D. 
C) should hire less of both C and D. 
D) is using the least-cost combination of C and D.

Question 9

Elasticity of resource demand is measured by the

Accepted Answer

A) absolute change in resource quantity demanded divided by the absolute change in resource price. 
B) percentage change in resource quantity demanded divided by the percentage change in resource price. 
C) absolute change in resource price divided by the absolute change in resource quantity demanded. 
D) percentage change in resource price divided by the percentage change in resource quantity demanded. 
A) absolute change in resource quantity demanded divided by the absolute change in resource price. 
B) percentage change in resource quantity demanded divided by the percentage change in resource price. 
C) absolute change in resource price divided by the absolute change in resource quantity demanded. 
D) percentage change in resource price divided by the percentage change in resource quantity demanded.

Question 10

An employer hiring in a competitive labor market should hire additional labor as long as

Accepted Answer

A) the MRP exceeds the wage rate. 
B) the wage rate is less than MP. 
C) average product exceeds MP. 
D) MC exceeds MR. 
A) the MRP exceeds the wage rate. 
B) the wage rate is less than MP. 
C) average product exceeds MP. 
D) MC exceeds MR.

Question 11

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 12

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 13

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 14

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

Accepted Answer

A) unity. 
B) zero. 
C) greater than one. 
D) less than one, but greater than zero. 
A) unity. 
B) zero. 
C) greater than one. 
D) less than one, but greater than zero.

Question 15

Income from inherited wealth and property resources provides strong support for the marginal productivity theory of income distribution.

Accepted Answer

A) True 
 B)False

Question 16

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively.   How many units of output are produced when 2 workers are employed?

Accepted Answer

A) 4 
B) 16 
C) 24 
D) 10 
A) 4 
B) 16 
C) 24 
D) 10

Question 17

Refer to the graph, where TP = total product and L = labor input. The marginal product of labor (MP)

Accepted Answer

A) is constant at all levels of L. 
B) increases at an increasing rate as L increases. 
C) decreases as the labor input L increases. 
D) increases at a decreasing rate as L increases. 
A) is constant at all levels of L. 
B) increases at an increasing rate as L increases. 
C) decreases as the labor input L increases. 
D) increases at a decreasing rate as L increases.

Question 18

The rapid spread of ATMs

Accepted Answer

A) dramatically reduced employment of bank tellers, and demand remains low because ATMs serve the same functions as bank tellers. 
B) has resulted in the closure of many bank branches and led to a long-term decline in employment of bank tellers. 
C) reduced the demand for bank tellers initially, but eventually tellers took on tasks that ATMs are not suited to handle. 
D) has had no discernible impact on the demand for bank tellers. 
A) dramatically reduced employment of bank tellers, and demand remains low because ATMs serve the same functions as bank tellers. 
B) has resulted in the closure of many bank branches and led to a long-term decline in employment of bank tellers. 
C) reduced the demand for bank tellers initially, but eventually tellers took on tasks that ATMs are not suited to handle. 
D) has had no discernible impact on the demand for bank tellers.

Question 19

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 20

The labor demand curve of an imperfectly competitive seller is downsloping

Accepted Answer

A) solely because of diminishing marginal utility. 
B) because of both diminishing returns and the necessity to lower price to sell more output. 
C) solely because product price must be reduced to sell more output. 
D) solely because of diminishing returns. 
A) solely because of diminishing marginal utility. 
B) because of both diminishing returns and the necessity to lower price to sell more output. 
C) solely because product price must be reduced to sell more output. 
D) solely because of diminishing returns.

Exam 16: The Demand for Resources

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

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

List the factors that will shift the resource demand curve.

The price of capital is $12 per machine-hour, and the price of labor is $3 per hour. The table gives production schedules for a firm, showing the possible combinations of capital and labor that will produce 100 units of output. Which combination will this cost-minimizing firm choose?

Why is the demand for resources called a "derived" demand?

Assume a pencil manufacturer is employing resources C and D in such quantities that the MRPs of the last units hired are $80 and $50, respectively. The price of resource C is $90, and the price of D is $35. This firm

Elasticity of resource demand is measured by the

An employer hiring in a competitive labor market should hire additional labor as long as

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

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

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

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

Income from inherited wealth and property resources provides strong support for the marginal productivity theory of income distribution.

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. How many units of output are produced when 2 workers are employed?

Refer to the graph, where TP = total product and L = labor input. The marginal product of labor (MP)

The rapid spread of ATMs

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 labor demand curve of an imperfectly competitive seller is downsloping

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

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Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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