Question 1

For a price searcher,marginal revenue product (MRP)differs from the value of marginal product (VMP)because

Accepted Answer

A) MRP equals MP times product price (P),while VMP equals MP times marginal revenue (MR). 
B) VMP equals MP times product price (P),while MRP equals MP times marginal revenue (MR). 
C) VMP equals MP times marginal cost (M
C) ,while MRP equals MP times marginal revenue (MR). 
D) They do not differ;they are the same for every firm. 
A) MRP equals MP times product price (P),while VMP equals MP times marginal revenue (MR). 
B) VMP equals MP times product price (P),while MRP equals MP times marginal revenue (MR). 
C) VMP equals MP times marginal cost (M
C) ,while MRP equals MP times marginal revenue (MR). 
D) They do not differ;they are the same for every firm.

Question 2

If steel workers obtain a substantial wage increase,employment in the steel industry will be likely to fall the most if

Accepted Answer

A) the demand curve for steel is highly inelastic. 
B) the demand curve for steel is highly elastic. 
C) the demand curve for steel workers is highly inelastic. 
D) there are no good substitutes for steel. 
A) the demand curve for steel is highly inelastic. 
B) the demand curve for steel is highly elastic. 
C) the demand curve for steel workers is highly inelastic. 
D) there are no good substitutes for steel.

Question 3

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following?

Accepted Answer

A) work and wage 
B) work and leisure 
C) wage and productivity 
D) technology and wage 
A) work and wage 
B) work and leisure 
C) wage and productivity 
D) technology and wage

Question 4

Since the demand for a resource depends on the demand for goods that the resource helps produce,the demand for each resource is

Accepted Answer

A) an elastic demand. 
B) an independent demand. 
C) a derived demand. 
D) inversely related to the marginal productivity of the resource. 
A) an elastic demand. 
B) an independent demand. 
C) a derived demand. 
D) inversely related to the marginal productivity of the resource.

Question 5

Use the information given in the table below to answer the following question(s).Assume the firm hires labor competitively and sells its product in a competitive price-taker market at a price of $2 per unit.
Table 12-7
  
-Refer to Table 12-7.If the market wage rate rose to $7 per day,how many workers should the firm employ if it wants to maximize profits?

Accepted Answer

A) three 
B) four 
C) five 
D) six 
A) three 
B) four 
C) five 
D) six

Question 6

A firm currently employs 80 units of labor and 50 units of capital equipment to produce 3,000 hamster cages.Given the current input levels utilized,the marginal product of labor is 40 and the marginal product of capital is 10.If we assume that labor costs $20 per unit and capital costs $10 per unit,

Accepted Answer

A) the firm is using the appropriate mix of labor and capital to minimize its costs. 
B) the firm could lower its costs for the same level of output by using more labor and less capital. 
C) the firm could lower its costs for the same level of output by using more capital and less labor. 
D) the current MRP of capital exceeds the current MRP of labor. 
A) the firm is using the appropriate mix of labor and capital to minimize its costs. 
B) the firm could lower its costs for the same level of output by using more labor and less capital. 
C) the firm could lower its costs for the same level of output by using more capital and less labor. 
D) the current MRP of capital exceeds the current MRP of labor.

Question 7

A convenience store is considering renting a surveillance camera from a security company that would prevent $100 in shoplifting per year.The yearly rental rate for the camera is $150.To maximize profits,the firm should

Accepted Answer

A) rent the camera because the firm wants to completely eliminate shoplifting. 
B) not rent the camera because the rental rate exceeds the value of shoplifting prevented. 
C) rent the camera if VMP exceeds MRP,but not rent the camera if VMP is less than MRP. 
D) Without knowing the rate of diminishing marginal returns,there is not enough information to answer the question. 
A) rent the camera because the firm wants to completely eliminate shoplifting. 
B) not rent the camera because the rental rate exceeds the value of shoplifting prevented. 
C) rent the camera if VMP exceeds MRP,but not rent the camera if VMP is less than MRP. 
D) Without knowing the rate of diminishing marginal returns,there is not enough information to answer the question.

Question 8

An increase in the price of a resource would cause

Accepted Answer

A) producers to substitute other inputs for the resource. 
B) consumers to increase consumption of the goods that increase in price as the result of the higher resource price. 
C) an increase in the demand for products that use the resource intensely. 
D) a reduction in the price of goods produced with the resource. 
A) producers to substitute other inputs for the resource. 
B) consumers to increase consumption of the goods that increase in price as the result of the higher resource price. 
C) an increase in the demand for products that use the resource intensely. 
D) a reduction in the price of goods produced with the resource.

Question 9

Tucker Corporation sells its product for $5.00.Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour.Tucker should hire the additional worker only if the wage rate is

Accepted Answer

A) $5.00 or less per hour. 
B) $1.00 or more per hour. 
C) $25.00 or less per hour. 
D) none of the above. 
A) $5.00 or less per hour. 
B) $1.00 or more per hour. 
C) $25.00 or less per hour. 
D) none of the above.

Question 10

Figure 12-1
  
-If one short-run supply curve in Figure 12-1 was for truck drivers and the other was for nuclear physicists (also short-run),which one would probably be the supply curve for physicists?

Accepted Answer

A) Q₂ 
B) Q₃ 
C) Sb 
D) Sa 
A) Q₂ 
B) Q₃ 
C) Sb 
D) Sa

Question 11

Suppose land suitable for wheat production is highly inelastic.An increase in the demand for wheat bread will most likely

Accepted Answer

A) cause the prices of bread and wheat to increase but not affect the incomes paid to owners of wheat-growing land. 
B) shift the demand curve for bread to the right and the supply curve for wheat to the left. 
C) raise the price of land suitable for wheat production. 
D) depress the incomes of owners of wheat growing land. 
A) cause the prices of bread and wheat to increase but not affect the incomes paid to owners of wheat-growing land. 
B) shift the demand curve for bread to the right and the supply curve for wheat to the left. 
C) raise the price of land suitable for wheat production. 
D) depress the incomes of owners of wheat growing land.

Question 12

The marginal productivity principle says that a profit-maximizing firm should

Accepted Answer

A) hire capital until its marginal product is zero. 
B) hire labor until another worker costs more to hire than he can earn for the firm. 
C) hire the quantities of capital and of labor at which their marginal products are equal. 
D) hire capital until its marginal product is negative. 
A) hire capital until its marginal product is zero. 
B) hire labor until another worker costs more to hire than he can earn for the firm. 
C) hire the quantities of capital and of labor at which their marginal products are equal. 
D) hire capital until its marginal product is negative.

Question 13

The Alpha Car Wash is known for the quality way in which every car is hand cleaned.The Beta Car Wash uses machines,so consumers are generally willing to pay a higher price for Alpha's services.The Auto Washers union at Alpha has just succeeded in obtaining a substantial wage increase.What will likely happen as a result?

Accepted Answer

Higher wages will cause the price of an

Question 14

Figure 12-2
  
-The demand D₁ and short-run supply SSR of accountants is indicated in Figure 12-2.Which of the following would most likely shift the demand for accountants from D₁ to D₂?

Accepted Answer

A) an increase in the number of accounting majors in college 
B) enacting legislation that increases the complexity of personal and business tax returns 
C) high wages for accountants 
D) a reduction in the wages of bookkeepers,a substitute resource for accountants 
A) an increase in the number of accounting majors in college 
B) enacting legislation that increases the complexity of personal and business tax returns 
C) high wages for accountants 
D) a reduction in the wages of bookkeepers,a substitute resource for accountants

Question 15

A decrease in resource prices will increase the incentive of

Accepted Answer

A) users to purchase the resource. 
B) suppliers to provide more of the resource. 
C) firms to find and develop substitutes for the resource. 
D) consumers to look for alternatives that do not contain the resource. 
A) users to purchase the resource. 
B) suppliers to provide more of the resource. 
C) firms to find and develop substitutes for the resource. 
D) consumers to look for alternatives that do not contain the resource.

Question 16

If skilled labor is three times the cost of unskilled labor,a profit-maximizing firm will vary the quantity of each type of labor until the

Accepted Answer

A) marginal product of each is the same. 
B) amount of unskilled labor used is three times the quantity of skilled labor used. 
C) amount of unskilled labor used is one-third the quantity of skilled labor used. 
D) marginal product of unskilled labor is one-third that of skilled labor. 
A) marginal product of each is the same. 
B) amount of unskilled labor used is three times the quantity of skilled labor used. 
C) amount of unskilled labor used is one-third the quantity of skilled labor used. 
D) marginal product of unskilled labor is one-third that of skilled labor.

Question 17

If skilled labor costs three times as much as unskilled labor,a profit-maximizing firm will vary the quantity of each type of labor used until the

Accepted Answer

A) amount of unskilled labor used is three times the quantity of skilled labor used. 
B) amount of unskilled labor used is one-third the quantity of skilled labor used. 
C) marginal product of skilled labor is one-third that of unskilled labor. 
D) marginal product of skilled labor is three times as great as that of unskilled labor. 
A) amount of unskilled labor used is three times the quantity of skilled labor used. 
B) amount of unskilled labor used is one-third the quantity of skilled labor used. 
C) marginal product of skilled labor is one-third that of unskilled labor. 
D) marginal product of skilled labor is three times as great as that of unskilled labor.

Question 18

Profit-maximizing firms will expand their employment of each variable resource until

Accepted Answer

A) the Marginal Revenue Product (MRP)of the resource is just equal to the price of the resource. 
B) other firms realize they can't compete. 
C) the MRP of the resource is below the cost of the resource. 
D) the MRP of the resource is above the cost of the resource. 
A) the Marginal Revenue Product (MRP)of the resource is just equal to the price of the resource. 
B) other firms realize they can't compete. 
C) the MRP of the resource is below the cost of the resource. 
D) the MRP of the resource is above the cost of the resource.

Question 19

Physical and human capital investments are

Accepted Answer

A) different in that the opportunity for economic profit is present for physical capital but not for human capital investments. 
B) different in that human capital decisions do not involve future income considerations,while physical capital investments do. 
C) similar in that nonmonetary considerations play an equally important role in both. 
D) similar in that both involve forgoing current income (and consumption)in an effort to achieve higher future income (and consumption). 
A) different in that the opportunity for economic profit is present for physical capital but not for human capital investments. 
B) different in that human capital decisions do not involve future income considerations,while physical capital investments do. 
C) similar in that nonmonetary considerations play an equally important role in both. 
D) similar in that both involve forgoing current income (and consumption)in an effort to achieve higher future income (and consumption).

Question 20

An increase in the demand for a resource

Accepted Answer

A) will cause the price of that resource to fall. 
B) may be the result of a decrease in the demand for products utilizing this resource. 
C) will cause the price of the resource to fall by a smaller amount in the short run than in the long run. 
D) will increase the price of the resource and thereby increase the incentive of potential suppliers to provide the resource in the future. 
A) will cause the price of that resource to fall. 
B) may be the result of a decrease in the demand for products utilizing this resource. 
C) will cause the price of the resource to fall by a smaller amount in the short run than in the long run. 
D) will increase the price of the resource and thereby increase the incentive of potential suppliers to provide the resource in the future.

Exam 25: The Supply of and Demand for Productive Resources

For a price searcher,marginal revenue product (MRP)differs from the value of marginal product (VMP)because

If steel workers obtain a substantial wage increase,employment in the steel industry will be likely to fall the most if

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following?

Since the demand for a resource depends on the demand for goods that the resource helps produce,the demand for each resource is

A convenience store is considering renting a surveillance camera from a security company that would prevent $100 in shoplifting per year.The yearly rental rate for the camera is $150.To maximize profits,the firm should

An increase in the price of a resource would cause

Tucker Corporation sells its product for $5.00.Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour.Tucker should hire the additional worker only if the wage rate is

Figure 12-1 -If one short-run supply curve in Figure 12-1 was for truck drivers and the other was for nuclear physicists (also short-run),which one would probably be the supply curve for physicists?

Suppose land suitable for wheat production is highly inelastic.An increase in the demand for wheat bread will most likely

The marginal productivity principle says that a profit-maximizing firm should

Figure 12-2 -The demand D₁ and short-run supply SSR of accountants is indicated in Figure 12-2.Which of the following would most likely shift the demand for accountants from D₁ to D₂?

A decrease in resource prices will increase the incentive of

If skilled labor is three times the cost of unskilled labor,a profit-maximizing firm will vary the quantity of each type of labor until the

If skilled labor costs three times as much as unskilled labor,a profit-maximizing firm will vary the quantity of each type of labor used until the

Profit-maximizing firms will expand their employment of each variable resource until

Physical and human capital investments are

An increase in the demand for a resource

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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