Question 1

Assume that skilled labor costs twice as much as unskilled labor, a profit-maximizing firm will

Accepted Answer

A) always hire more skilled labor because it is more productive. 
B) always hire more unskilled labor because it is cheaper. 
C) hire until it equalizes the two marginal products. 
D) hire until the marginal product of unskilled labor is one-half that of skilled labor. 
E) hire until the marginal product of unskilled labor is two times that of skilled labor. 
A) always hire more skilled labor because it is more productive. 
B) always hire more unskilled labor because it is cheaper. 
C) hire until it equalizes the two marginal products. 
D) hire until the marginal product of unskilled labor is one-half that of skilled labor. 
E) hire until the marginal product of unskilled labor is two times that of skilled labor.

Question 2

The rule for the optimal use of any input states that

Accepted Answer

A) when MRP is less than price, profit will increase when more of that resource is utilized. 
B) when MRP is greater than resource price, profit will increase when more of that resource is utilized. 
C) when MRP equals price, profit will increase when less of that resource is utilized. 
D) when MRP is greater than resource price, profit will increase when less of that resource is utilized. 
E) resources should be used only if MRP exceeds product price. 
A) when MRP is less than price, profit will increase when more of that resource is utilized. 
B) when MRP is greater than resource price, profit will increase when more of that resource is utilized. 
C) when MRP equals price, profit will increase when less of that resource is utilized. 
D) when MRP is greater than resource price, profit will increase when less of that resource is utilized. 
E) resources should be used only if MRP exceeds product price.

Question 3

The marginal product of labor is the

Accepted Answer

A) value marginal product of labor multiplied by the price of the good produced. 
B) total output of labor divided by the quantity of labor used. 
C) additional output resulting from employing one additional unit of labor. 
D) same as the marginal revenue product of labor in price-taker markets. 
A) value marginal product of labor multiplied by the price of the good produced. 
B) total output of labor divided by the quantity of labor used. 
C) additional output resulting from employing one additional unit of labor. 
D) same as the marginal revenue product of labor in price-taker markets.

Question 4

If the cost of using skilled labor was twice the cost of using unskilled labor, and both were used by a profit-maximizing firm, the firm would adjust the quantity of each type of labor until

Accepted Answer

A) the marginal product of each was the same. 
B) twice as much unskilled labor was used. 
C) half as much unskilled labor was used. 
D) the marginal product of skilled labor was twice that of unskilled labor. 
A) the marginal product of each was the same. 
B) twice as much unskilled labor was used. 
C) half as much unskilled labor was used. 
D) the marginal product of skilled labor was twice that of unskilled labor.

Question 5

The notion that the demand for inputs depends on the demand for outputs is termed

Accepted Answer

A) inverse demand. 
B) derived demand. 
C) proportional demand. 
D) complementary demand. 
A) inverse demand. 
B) derived demand. 
C) proportional demand. 
D) complementary demand.

Question 6

If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75 and the price of the machinery per period is $25, in order to achieve optimal input proportions the firm should use

Accepted Answer

A) more labor and less machinery. 
B) more machinery and less labor. 
C) more labor with the same amount of machinery. 
D) the current combination. 
A) more labor and less machinery. 
B) more machinery and less labor. 
C) more labor with the same amount of machinery. 
D) the current combination.

Question 7

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 8

Other things constant, if the demand for a product is inelastic, the demand for a resource used as an input will tend to be

Accepted Answer

A) inelastic as well. 
B) basically elastic. 
C) of unitary elasticity. 
D) the inverse of the elasticity coefficient of the product. 
A) inelastic as well. 
B) basically elastic. 
C) of unitary elasticity. 
D) the inverse of the elasticity coefficient of the product.

Question 9

If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect

Accepted Answer

A) economics majors to receive a greater return on their human capital investment. 
B) a decrease in the employment opportunities for economics majors. 
C) lower wages for economics majors. 
D) fewer students to major in economics. 
A) economics majors to receive a greater return on their human capital investment. 
B) a decrease in the employment opportunities for economics majors. 
C) lower wages for economics majors. 
D) fewer students to major in economics.

Question 10

In the short run, the supply of a resource will generally be

Accepted Answer

A) less elastic than in the long run. 
B) more elastic than in the long run. 
C) equally elastic as the supply of the resource in the long run. 
D) inversely related to the elasticity of demand for the product that the resource helps produce. 
A) less elastic than in the long run. 
B) more elastic than in the long run. 
C) equally elastic as the supply of the resource in the long run. 
D) inversely related to the elasticity of demand for the product that the resource helps produce.

Question 11

The demand for a factor of production will be more inelastic

Accepted Answer

A) when the cost of the factor is small relative to the total cost of the product. 
B) the more elastic the demand for the final product. 
C) the easier it is to substitute other resources for the factor. 
D) the more elastic the supply of products produced with the resource. 
A) when the cost of the factor is small relative to the total cost of the product. 
B) the more elastic the demand for the final product. 
C) the easier it is to substitute other resources for the factor. 
D) the more elastic the supply of products produced with the resource.

Question 12

Why is it more expensive to acquire a new house in an urban area than in a rural area if the costs of labor and building materials are the same?

Accepted Answer

A quick glance to the demand side might

Question 13

Developments in the computer software industry have made it extremely easy for firms to keep their books, conduct their own audits, and fill out the various tax forms. If accountants are an input in the accounting services industry, what will likely happen in the market for accountants? Is there a difference between the short run and the long run?

Accepted Answer

We would expect the demand for accountan

Question 14

The demand for accountants is a result of the complicated tax code. This is an example of

Accepted Answer

A) dependent demand. 
B) resource demand. 
C) derived demand. 
D) none of the above. 
A) dependent demand. 
B) resource demand. 
C) derived demand. 
D) none of the above.

Question 15

If there is a shortage of nurses, it is expected that

Accepted Answer

A) wages for nurses will go up as hospitals try to fill these positions. 
B) wages for nurses will go down because of the increased competition between hospitals. 
C) the return on the human capital investment of current nursing majors will decline. 
D) wages for nurses currently practicing will increase, but new nurses will experience lower wages in the future. 
A) wages for nurses will go up as hospitals try to fill these positions. 
B) wages for nurses will go down because of the increased competition between hospitals. 
C) the return on the human capital investment of current nursing majors will decline. 
D) wages for nurses currently practicing will increase, but new nurses will experience lower wages in the future.

Question 16

Generally, the supply of a resource in the short run will be

Accepted Answer

A) more elastic than in the long run. 
B) less elastic than in the long run. 
C) equally elastic as the supply of the resource in the long run. 
D) directly related to the elasticity of demand for the product that the resource helps produce. 
A) more elastic than in the long run. 
B) less elastic than in the long run. 
C) equally elastic as the supply of the resource in the long run. 
D) directly related to the elasticity of demand for the product that the resource helps produce.

Question 17

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 18

When a firm decides to hire more workers because local wage rates have decreased, this is an example of

Accepted Answer

A) market failure. 
B) substitution in production. 
C) labor exploitation. 
D) substitution in consumption. 
A) market failure. 
B) substitution in production. 
C) labor exploitation. 
D) substitution in consumption.

Question 19

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired (holding other inputs fixed). Then the marginal product of the 16th worker is

Accepted Answer

A) 10 units of output. 
B) 11 units of output. 
C) 16 units of output. 
D) 176 units of output. 
A) 10 units of output. 
B) 11 units of output. 
C) 16 units of output. 
D) 176 units of output.

Question 20

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

Exam 12: The Supply of and Demand for Productive Resources

Assume that skilled labor costs twice as much as unskilled labor, a profit-maximizing firm will

The rule for the optimal use of any input states that

The marginal product of labor is the

If the cost of using skilled labor was twice the cost of using unskilled labor, and both were used by a profit-maximizing firm, the firm would adjust the quantity of each type of labor until

The notion that the demand for inputs depends on the demand for outputs is termed

If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75 and the price of the machinery per period is $25, in order to achieve optimal input proportions the firm should use

A decrease in resource prices will increase the incentive of

Other things constant, if the demand for a product is inelastic, the demand for a resource used as an input will tend to be

If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect

In the short run, the supply of a resource will generally be

The demand for a factor of production will be more inelastic

Why is it more expensive to acquire a new house in an urban area than in a rural area if the costs of labor and building materials are the same?

The demand for accountants is a result of the complicated tax code. This is an example of

If there is a shortage of nurses, it is expected that

Generally, the supply of a resource in the short run will be

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

When a firm decides to hire more workers because local wage rates have decreased, this is an example of

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired (holding other inputs fixed). Then the marginal product of the 16th worker is

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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