Question 1

As the baby boomers in America grow older, the demand for health care workers increases. This would be an example of which determinant of labor demand?

Accepted Answer

A) an increase in labor productivity 
B) an increase in product demand 
C) a decrease in the price of another resource 
D) an increase in the price of another resource 
A) an increase in labor productivity 
B) an increase in product demand 
C) a decrease in the price of another resource 
D) an increase in the price of another resource

Question 2

Refer to the table. The marginal revenue product of the fourth unit of input is approximately

Accepted Answer

A) $27. 
B) $21. 
C) $16. 
D) $13. 
A) $27. 
B) $21. 
C) $16. 
D) $13.

Question 3

The labor demand curve of a purely competitive seller

Accepted Answer

A) slopes downward because the elasticity of demand is always less than unity. 
B) slopes downward because of diminishing marginal productivity. 
C) is perfectly elastic at the going wage rate. 
D) slopes downward because of diminishing marginal utility. 
A) slopes downward because the elasticity of demand is always less than unity. 
B) slopes downward because of diminishing marginal productivity. 
C) is perfectly elastic at the going wage rate. 
D) slopes downward because of diminishing marginal utility.

Question 4

If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will

Accepted Answer

A) decrease the demand for the other input. 
B) increase the demand for the other input. 
C) increase the quantity demanded for the other input. 
D) have no effect on the demand for the other input. 
A) decrease the demand for the other input. 
B) increase the demand for the other input. 
C) increase the quantity demanded for the other input. 
D) have no effect on the demand for the other input.

Question 5

Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information, we can say that

Accepted Answer

A) profits will be increased by hiring additional workers. 
B) profits will be increased by hiring fewer workers. 
C) marginal revenue product must exceed average revenue product. 
D) the restaurant is maximizing profits. 
A) profits will be increased by hiring additional workers. 
B) profits will be increased by hiring fewer workers. 
C) marginal revenue product must exceed average revenue product. 
D) the restaurant is maximizing profits.

Question 6

Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the

Accepted Answer

A) substitution effect will tend to reduce the demand for labor. 
B) output effect will tend to reduce the demand for labor. 
C) demand for labor will necessarily decline. 
D) demand for labor will necessarily increase. 
A) substitution effect will tend to reduce the demand for labor. 
B) output effect will tend to reduce the demand for labor. 
C) demand for labor will necessarily decline. 
D) demand for labor will necessarily increase.

Question 7

Refer to the graph, where TP = total product and L = labor input. If this graph is for a firm that sells its product in a purely competitive market, then its marginal revenue product of labor (MRP)

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 8

Why is the marginal revenue product schedule a demand schedule for the individual firm in a purely competitive resource market and a selling output in a purely competitive product market?

Accepted Answer

The MRP schedule constitutes the firm's

Question 9

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 10

A computer manufacturer's elasticity of demand for labor is not likely to be affected by the

Accepted Answer

A) supply of computers. 
B) price elasticity of demand for computers. 
C) ratio of labor cost to other resource costs in the firm. 
D) ease of substituting capital for labor in producing computers. 
A) supply of computers. 
B) price elasticity of demand for computers. 
C) ratio of labor cost to other resource costs in the firm. 
D) ease of substituting capital for labor in producing computers.

Question 11

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 12

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 13

What is the difference between the demand curve for a resource under pure competition and one for a resource under imperfect competition?

Accepted Answer

The difference in the resource demand cu

Question 14

Refer to the table. The price of the product being produced by this resource

Accepted Answer

A) is constant at all levels of production. 
B) cannot be discerned from the given data. 
C) decreases as production increases. 
D) increases as production increases. 
A) is constant at all levels of production. 
B) cannot be discerned from the given data. 
C) decreases as production increases. 
D) increases as production increases.

Question 15

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that

Accepted Answer

A) the firm will use relatively more capital and relatively less labor. 
B) the firm will use relatively more labor and relatively less capital. 
C) inputs of capital and labor will be unchanged. 
D) the firm's equilibrium output will necessarily increase. 
A) the firm will use relatively more capital and relatively less labor. 
B) the firm will use relatively more labor and relatively less capital. 
C) inputs of capital and labor will be unchanged. 
D) the firm's equilibrium output will necessarily increase.

Question 16

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 17

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. How many workers should the farmer hire?

Accepted Answer

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

Question 18

The demand for a resource is a derived demand based on the demand for the product it helps to produce.

Accepted Answer

A) True 
 B)False

Question 19

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.

Question 20

Wayne's Jacket Shop sells Wayne's jackets for $20 each. Wayne finds that when he hires different numbers of workers, the corresponding total revenues are as shown in the table. What is the marginal revenue product of the fifth worker?

Accepted Answer

A) $160 
B) $400 
C) −$800 
D) $2 
A) $160 
B) $400 
C) −$800 
D) $2

Exam 16: The Demand for Resources

As the baby boomers in America grow older, the demand for health care workers increases. This would be an example of which determinant of labor demand?

Refer to the table. The marginal revenue product of the fourth unit of input is approximately

The labor demand curve of a purely competitive seller

If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will

Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information, we can say that

Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the

Refer to the graph, where TP = total product and L = labor input. If this graph is for a firm that sells its product in a purely competitive market, then its marginal revenue product of labor (MRP)

Why is the marginal revenue product schedule a demand schedule for the individual firm in a purely competitive resource market and a selling output in a purely competitive product market?

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 computer manufacturer's elasticity of demand for labor is not likely to be affected by the

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?

The MRP curve for labor

What is the difference between the demand curve for a resource under pure competition and one for a resource under imperfect competition?

Refer to the table. The price of the product being produced by this resource

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that

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

The demand for a resource is a derived demand based on the demand for the product it helps to produce.

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

Wayne's Jacket Shop sells Wayne's jackets for $20 each. Wayne finds that when he hires different numbers of workers, the corresponding total revenues are as shown in the table. What is the marginal revenue product of the fifth worker?

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