Question 1

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the

Accepted Answer

A) law of diminishing returns. 
B) law of diminishing marginal utility. 
C) homogeneity of the product. 
D) free mobility of resources. 
A) law of diminishing returns. 
B) law of diminishing marginal utility. 
C) homogeneity of the product. 
D) free mobility of resources.

Question 2

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. As it relates to strawberry pickers, we could expect the

Accepted Answer

A) MRP curve to shift to the right. 
B) MRP curve to shift to the left. 
C) MRC curve to shift downward. 
D) MP curve to shift downward. 
A) MRP curve to shift to the right. 
B) MRP curve to shift to the left. 
C) MRC curve to shift downward. 
D) MP curve to shift downward.

Question 3

Which would result in a decrease in the elasticity of demand for a particular resource?

Accepted Answer

A) a decrease in the rate at which the marginal product of that resource declines 
B) an increase in the elasticity of demand for the product that the resource helps to produce 
C) a decrease in the percentage of the firm's total costs accounted for by the resource 
D) an increase in the substitutability of other resources for the particular resource 
A) a decrease in the rate at which the marginal product of that resource declines 
B) an increase in the elasticity of demand for the product that the resource helps to produce 
C) a decrease in the percentage of the firm's total costs accounted for by the resource 
D) an increase in the substitutability of other resources for the particular resource

Question 4

A major criticism of the marginal productivity theory of income distribution is that

Accepted Answer

A) the demand for labor resources is price inelastic. 
B) achieving equality in incomes will take time. 
C) imperfectly competitive firms are only interested in profit maximization. 
D) property resources like land are unevenly distributed, which leads to income inequality. 
A) the demand for labor resources is price inelastic. 
B) achieving equality in incomes will take time. 
C) imperfectly competitive firms are only interested in profit maximization. 
D) property resources like land are unevenly distributed, which leads to income inequality.

Question 5

Refer to the table. The resource demand data indicate that the firm is

Accepted Answer

A) buying its resource in an imperfectly competitive market. 
B) buying its resource in a perfectly competitive market. 
C) selling its product in a perfectly competitive market. 
D) selling its product in an imperfectly competitive market. 
A) buying its resource in an imperfectly competitive market. 
B) buying its resource in a perfectly competitive market. 
C) selling its product in a perfectly competitive market. 
D) selling its product in an imperfectly competitive market.

Question 6

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 7

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market. If the wage rate is $56, how many workers will the firm choose to employ?

Accepted Answer

A) 3 
B) 2 
C) 0 
D) 1 
A) 3 
B) 2 
C) 0 
D) 1

Question 8

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 9

Resource pricing is important because

Accepted Answer

A) resource prices are a major determinant of money incomes. 
B) resource prices allocate scarce resources among alternative uses. 
C) resource prices, along with resource productivity, are important to firms in minimizing their costs. 
D) of all these reasons. 
A) resource prices are a major determinant of money incomes. 
B) resource prices allocate scarce resources among alternative uses. 
C) resource prices, along with resource productivity, are important to firms in minimizing their costs. 
D) of all these reasons.

Question 10

Hiring the least-costly combination of resources ensures that profits will be maximized.

Accepted Answer

A) True 
 B)False

Question 11

The demand curve for labor would shift leftward as the result of

Accepted Answer

A) an increase in the price of the product labor is producing. 
B) a decrease in the productivity of labor. 
C) an increase in the price of labor. 
D) a decrease in the price of capital, provided the output effect exceeds the substitution effect. 
A) an increase in the price of the product labor is producing. 
B) a decrease in the productivity of labor. 
C) an increase in the price of labor. 
D) a decrease in the price of capital, provided the output effect exceeds the substitution effect.

Question 12

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. What is the farmer's profit-maximizing output?

Accepted Answer

A) 20 
B) 32 
C) 40 
D) 37 
A) 20 
B) 32 
C) 40 
D) 37

Question 13

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 6 and 3, respectively, and the prices of a and b are $12 and $6, respectively. If profit-maximizing equilibrium exists, the price of X will be

Accepted Answer

A) $1. 
B) $0.5. 
C) $2. 
D) $5. 
A) $1. 
B) $0.5. 
C) $2. 
D) $5.

Question 14

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market. The prices of l and m are $10 and $4, respectively. In equilibrium, the MPs of l and m, respectively, are

Accepted Answer

A) 1 and 1. 
B) 2 and 5. 
C) 10 and 4. 
D) 5 and 2. 
A) 1 and 1. 
B) 2 and 5. 
C) 10 and 4. 
D) 5 and 2.

Question 15

If a firm is selling in an imperfectly competitive product market, then

Accepted Answer

A) average product will be less than marginal product for any number of workers hired. 
B) the marginal products of successive workers must be sold at lower prices. 
C) the marginal products of successive workers can be sold at higher prices. 
D) the marginal products of successive workers can be sold at a constant price. 
A) average product will be less than marginal product for any number of workers hired. 
B) the marginal products of successive workers must be sold at lower prices. 
C) the marginal products of successive workers can be sold at higher prices. 
D) the marginal products of successive workers can be sold at a constant price.

Question 16

If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that

Accepted Answer

A) the substitution effect is greater than the output effect. 
B) the output effect is greater than the substitution effect. 
C) the income effect is greater than the output effect. 
D) labor cannot be easily substituted for capital. 
A) the substitution effect is greater than the output effect. 
B) the output effect is greater than the substitution effect. 
C) the income effect is greater than the output effect. 
D) labor cannot be easily substituted for capital.

Question 17

The demand for telephone operators is expected by the U.S. Bureau of Labor Statistics to decline from 2016 to 2026, largely due to

Accepted Answer

A) "labor-saving" technological change. 
B) a decline in the wages paid to this type of labor. 
C) an increase in the cost per unit of this type of labor. 
D) weakening demand for machine-sewn products. 
A) "labor-saving" technological change. 
B) a decline in the wages paid to this type of labor. 
C) an increase in the cost per unit of this type of labor. 
D) weakening demand for machine-sewn products.

Question 18

Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus, 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 19

We say that the demand for labor is a derived demand because

Accepted Answer

A) labor is a necessary input in the production of every good or service. 
B) we demand the product that labor helps produce rather than labor service per se. 
C) the forces of supply and demand do not apply directly to labor markets. 
D) labor is hired using the MRP = MRC rule. 
A) labor is a necessary input in the production of every good or service. 
B) we demand the product that labor helps produce rather than labor service per se. 
C) the forces of supply and demand do not apply directly to labor markets. 
D) labor is hired using the MRP = MRC rule.

Question 20

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.

Exam 16: The Demand for Resources

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. As it relates to strawberry pickers, we could expect the

Which would result in a decrease in the elasticity of demand for a particular resource?

A major criticism of the marginal productivity theory of income distribution is that

Refer to the table. The resource demand data indicate that the firm is

Employers will hire more units of a resource if the

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market. If the wage rate is $56, how many workers will the firm choose to employ?

Resource pricing is important because

Hiring the least-costly combination of resources ensures that profits will be maximized.

The demand curve for labor would shift leftward as the result of

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market. The prices of l and m are $10 and $4, respectively. In equilibrium, the MPs of l and m, respectively, are

If a firm is selling in an imperfectly competitive product market, then

If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that

The demand for telephone operators is expected by the U.S. Bureau of Labor Statistics to decline from 2016 to 2026, largely due to

Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus, the demand for labor

We say that the demand for labor is a derived demand because

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

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

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters