Question 1

Refer to the given data. This firm is selling its product in

Accepted Answer

A) an imperfectly competitive market at prices that decline as sales increase. 
B) a purely competitive market at $3 per unit. 
C) a purely competitive market at $2 per unit. 
D) an imperfectly competitive market at $3 per unit. 
A) an imperfectly competitive market at prices that decline as sales increase. 
B) a purely competitive market at $3 per unit. 
C) a purely competitive market at $2 per unit. 
D) an imperfectly competitive market at $3 per unit.

Question 2

Marginal revenue product (MRP)is the change in total product (total output)associated with hiring an additional unit of labor.

Accepted Answer

A) True 
 B)False

Question 3

The table shows the total output a firm will be able to produce if it employs varying amounts of resource X while holding the amounts of the other resources constant. Assume that the product price is constant at $3.00 per unit. How many units of resource X will be employed if its price is $24 per unit?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 6 
A) 3 
B) 4 
C) 5 
D) 6

Question 4

If the price of capital declines, the consequent output effect would be

Accepted Answer

A) greater, the more elastic the demand for the product. 
B) greater, the less elastic the demand for the product. 
C) negative. 
D) of consequence only if capital and labor are used in fixed proportions. 
A) greater, the more elastic the demand for the product. 
B) greater, the less elastic the demand for the product. 
C) negative. 
D) of consequence only if capital and labor are used in fixed proportions.

Question 5

If two resources are complementary, an increase in the price of one will increase the demand for the other.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the graph. Each of the three labor demand curves shown slopes downward because of the

Accepted Answer

A) law of diminishing marginal utility. 
B) law of increasing opportunity costs. 
C) principal-agent problem. 
D) law of diminishing returns. 
A) law of diminishing marginal utility. 
B) law of increasing opportunity costs. 
C) principal-agent problem. 
D) law of diminishing returns.

Question 7

Other things being equal, how would the market for tablet computers be affected by a large increase in productivity in the tablet-computer industry?

Accepted Answer

A) a decrease in price and a leftward movement along the supply curve 
B) a decrease in price and a rightward movement along the demand curve 
C) a decrease in price and a rightward movement along the supply curve 
D) an increase in price and a rightward movement along the demand curve 
A) a decrease in price and a leftward movement along the supply curve 
B) a decrease in price and a rightward movement along the demand curve 
C) a decrease in price and a rightward movement along the supply curve 
D) an increase in price and a rightward movement along the demand curve

Question 8

A firm is producing with the least-cost combination of resources when the

Accepted Answer

A) last dollar spent on each resource yields the same marginal product. 
B) total dollars spent on each resource are all the same. 
C) unit prices of the resources are equalized. 
D) marginal product of each of the resources is all the same. 
A) last dollar spent on each resource yields the same marginal product. 
B) total dollars spent on each resource are all the same. 
C) unit prices of the resources are equalized. 
D) marginal product of each of the resources is all the same.

Question 9

Refer to the given data. For the $12 to $10 range of wage rates, labor demand is

Accepted Answer

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

Question 10

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use

Accepted Answer

A) more labor as a consequence of the substitution effect. 
B) more labor as a consequence of the output effect. 
C) less labor as a consequence of the substitution effect. 
D) less labor as a consequence of the output effect. 
A) more labor as a consequence of the substitution effect. 
B) more labor as a consequence of the output effect. 
C) less labor as a consequence of the substitution effect. 
D) less labor as a consequence of the output effect.

Question 11

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

Accepted Answer

A) True 
 B)False

Question 12

The table shows a total-product schedule for a resource. Assume that the quantities of other resources the firm employs remain constant. If the firm can sell 24 units of output at a price of $1.00 and 42 units of output at a price of $0.80, the marginal revenue product of the second unit of the resource is

Accepted Answer

A) $5.40. 
B) $7.80. 
C) $9.60. 
D) $12.20. 
A) $5.40. 
B) $7.80. 
C) $9.60. 
D) $12.20.

Question 13

If the demand for a product produced by an input decreases, the demand for the input will also decrease.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that the production of wheat requires two inputs, labor and fertilizer. The price of labor is $4.50, and the price of fertilizer is $3.00. A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8. If the farmer is a cost-minimizer, he should

Accepted Answer

A) use more labor and less fertilizer. 
B) use more fertilizer and less labor. 
C) use more labor and more fertilizer. 
D) continue using the same amounts of each input. 
A) use more labor and less fertilizer. 
B) use more fertilizer and less labor. 
C) use more labor and more fertilizer. 
D) continue using the same amounts of each input.

Question 15

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

Accepted Answer

A) the demand for the products produced by the employers. 
B) the price of labor that the employers must pay. 
C) the prices of other resources that the firms must use. 
D) occupational trends affecting the particular labor in the market. 
A) the demand for the products produced by the employers. 
B) the price of labor that the employers must pay. 
C) the prices of other resources that the firms must use. 
D) occupational trends affecting the particular labor in the market.

Question 16

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. The MP of the second barber is

Accepted Answer

A) $240. 
B) $108. 
C) 18 haircuts. 
D) 42 haircuts. 
A) $240. 
B) $108. 
C) 18 haircuts. 
D) 42 haircuts.

Question 17

The marginal revenue product of labor is measured in dollars per unit of labor.

Accepted Answer

A) True 
 B)False

Question 18

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

Accepted Answer

A) Labor will replace the new capital because labor is now cheaper. 
B) The new capital will replace labor because it reduces the firms' costs. 
C) More of both the new capital and labor will be used because firms are more productive. 
D) Less of both the new capital and labor will be used because the firms do not know how to use the new technology. 
A) Labor will replace the new capital because labor is now cheaper. 
B) The new capital will replace labor because it reduces the firms' costs. 
C) More of both the new capital and labor will be used because firms are more productive. 
D) Less of both the new capital and labor will be used because the firms do not know how to use the new technology.

Question 19

The purely competitive employer of resource A will maximize the profits from A by equating the

Accepted Answer

A) price of A with the MRP of A. 
B) marginal productivity of A with the MRC of A. 
C) marginal productivity of A with the price of A. 
D) price of A with the MRC of A. 
A) price of A with the MRP of A. 
B) marginal productivity of A with the MRC of A. 
C) marginal productivity of A with the price of A. 
D) price of A with the MRC of A.

Question 20

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

Accepted Answer

A) True 
 B)False

Exam 16: The Demand for Resources

Refer to the given data. This firm is selling its product in

Marginal revenue product (MRP)is the change in total product (total output)associated with hiring an additional unit of labor.

If the price of capital declines, the consequent output effect would be

If two resources are complementary, an increase in the price of one will increase the demand for the other.

Refer to the graph. Each of the three labor demand curves shown slopes downward because of the

Other things being equal, how would the market for tablet computers be affected by a large increase in productivity in the tablet-computer industry?

A firm is producing with the least-cost combination of resources when the

Refer to the given data. For the $12 to $10 range of wage rates, labor demand is

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

If the demand for a product produced by an input decreases, the demand for the input will also decrease.

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

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. The MP of the second barber is

The marginal revenue product of labor is measured in dollars per unit of labor.

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

The purely competitive employer of resource A will maximize the profits from A by equating the

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

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

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