Question 1

The optimal level of resource use comes when

Accepted Answer

A)  MRP exceeds input price. 
B)  MRP is less than input price. 
C)  MRP equals input price. 
D)  use of the resource exhausts the producer's funds. 
A)  MRP exceeds input price. 
B)  MRP is less than input price. 
C)  MRP equals input price. 
D)  use of the resource exhausts the producer's funds.

Question 2

In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical high school graduate without additional education has

Accepted Answer

A)  risen as the demand for skilled labor has increased relative to the demand for unskilled labor. 
B)  risen as the demand for skilled labor has decreased relative to the demand for unskilled labor. 
C)  fallen as the demand for skilled labor has increased relative to the demand for unskilled labor. 
D)  fallen as the demand for skilled labor has decreased relative to the demand for unskilled labor. 
A)  risen as the demand for skilled labor has increased relative to the demand for unskilled labor. 
B)  risen as the demand for skilled labor has decreased relative to the demand for unskilled labor. 
C)  fallen as the demand for skilled labor has increased relative to the demand for unskilled labor. 
D)  fallen as the demand for skilled labor has decreased relative to the demand for unskilled labor.

Question 3

If the price of cotton increases

Accepted Answer

A)  consumers will buy more cotton clothes. 
B)  consumers will increase their purchases of clothing made of other materials. 
C)  clothing producers will stop making cotton clothes. 
D)  clothing producers will not be able to adjust their output. 
A)  consumers will buy more cotton clothes. 
B)  consumers will increase their purchases of clothing made of other materials. 
C)  clothing producers will stop making cotton clothes. 
D)  clothing producers will not be able to adjust their output.

Question 4

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.

Question 5

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 6

An unanticipated decline in the demand for legal services will

Accepted Answer

A)  increase both the wages of lawyers and the rate of return they can expect to derive from their legal education. 
B)  lead to a shortage in the market for legal services. 
C)  reduce the wages of lawyers but not the quantity of legal services supplied. 
D)  reduce the wages of lawyers and the rate of return on a legal education.. 
A)  increase both the wages of lawyers and the rate of return they can expect to derive from their legal education. 
B)  lead to a shortage in the market for legal services. 
C)  reduce the wages of lawyers but not the quantity of legal services supplied. 
D)  reduce the wages of lawyers and the rate of return on a legal education..

Question 7

The following schedule shows how many jars of Jaynie's Jam can be produced daily with various amounts of labor (assume that the jam is sold in a competitive price-taker market).  
If Jaynie must pay each worker $65 per day and she can sell her jam for $10 per jar, how many workers should she hire if she wants to maximize profits?

Accepted Answer

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

Question 8

Which of the following most clearly illustrates the concept of "derived demand"?

Accepted Answer

A)  An increase in the price of steak causes the demand for poultry to increase. 
B)  As the price of coffee increases, the quantity demanded for coffee declines. 
C)  A boom in the housing market leads to an increase in the demand for lumber and electricians. 
D)  An increase in beer advertising on television leads to an increase in per capita beer consumption. 
A)  An increase in the price of steak causes the demand for poultry to increase. 
B)  As the price of coffee increases, the quantity demanded for coffee declines. 
C)  A boom in the housing market leads to an increase in the demand for lumber and electricians. 
D)  An increase in beer advertising on television leads to an increase in per capita beer consumption.

Question 9

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 10

Firms should hire additional units of a resource as long as the

Accepted Answer

A)  marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. 
B)  marginal product of the resource is less than the price of the resource. 
C)  price of the output produced is positive. 
D)  marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource. 
A)  marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. 
B)  marginal product of the resource is less than the price of the resource. 
C)  price of the output produced is positive. 
D)  marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource.

Question 11

Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as

Accepted Answer

A)  overhead expenditures. 
B)  investments in human capital. 
C)  sunk expenditures. 
D)  social capital. 
A)  overhead expenditures. 
B)  investments in human capital. 
C)  sunk expenditures. 
D)  social capital.

Question 12

Which of the following is the best example of an investment in human capital?

Accepted Answer

A)  the purchase of an industrial development bond 
B)  the purchase of company stock by a worker 
C)  a student working as a waiter to pay for college 
D)  a laid-off stockbroker who is taking nursing courses 
A)  the purchase of an industrial development bond 
B)  the purchase of company stock by a worker 
C)  a student working as a waiter to pay for college 
D)  a laid-off stockbroker who is taking nursing courses

Question 13

Table 12-6
The firm hires labor competitively and sells its product in a competitive price-taker market.
  
-Refer to Table 12-6. If the market wage rate is $25 per day, how many workers should the firm hire if it wants to maximize profits?

Accepted Answer

A)  4 
B)  5 
C)  6 
D)  7 
A)  4 
B)  5 
C)  6 
D)  7

Question 14

As the price of land decreases along its demand curve, the relative price of land

Accepted Answer

A)  increases because the prices of other resources have also decreased. 
B)  decreases because the prices of other resources have also decreased. 
C)  increases because the prices of other resources have increased. 
D)  decreases because the prices of other resources are held constant. 
E)  remains constant because the prices of other resources also increase. 
A)  increases because the prices of other resources have also decreased. 
B)  decreases because the prices of other resources have also decreased. 
C)  increases because the prices of other resources have increased. 
D)  decreases because the prices of other resources are held constant. 
E)  remains constant because the prices of other resources also increase.

Question 15

The following figure indicates the reductions in total losses due to theft if a jewelry store hires additional security guards.  
If the security guards can be hired for $45 per day, how many guards should the shop hire?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
E)  6 
A)  2 
B)  3 
C)  4 
D)  5 
E)  6

Question 16

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 17

Table 12-6
The firm hires labor competitively and sells its product in a competitive price-taker market.
  
-Refer to Table 12-6. What is the marginal revenue product of the fifth unit of labor?

Accepted Answer

A)  $6 
B)  $36 
C)  $54 
D)  $324 
A)  $6 
B)  $36 
C)  $54 
D)  $324

Question 18

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 19

When the price of steel rises, Ford uses more aluminum in the production of its cars. This is an example of

Accepted Answer

A)  substitution in consumption. 
B)  substitution in production. 
C)  a change in the marginal productivity of a resource. 
D)  derived demand. 
A)  substitution in consumption. 
B)  substitution in production. 
C)  a change in the marginal productivity of a resource. 
D)  derived demand.

Question 20

The demand for a resource is generally more

Accepted Answer

A)  elastic in the short run because it takes time to alter the ratio of resources used in many production processes. 
B)  inelastic in the short run because it takes time to alter the ratio of resources used in many production processes. 
C)  elastic in the short run because an increase in the price of the resource may not be expected to last. 
D)  inelastic in the short run because once resource suppliers find out they can charge a higher price, they will do so in the long run. 
A)  elastic in the short run because it takes time to alter the ratio of resources used in many production processes. 
B)  inelastic in the short run because it takes time to alter the ratio of resources used in many production processes. 
C)  elastic in the short run because an increase in the price of the resource may not be expected to last. 
D)  inelastic in the short run because once resource suppliers find out they can charge a higher price, they will do so in the long run.

Exam 25: The Supply of and Demand for Productive Resources

The optimal level of resource use comes when

In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical high school graduate without additional education has

If the price of cotton increases

An increase in the demand for a resource

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

An unanticipated decline in the demand for legal services will

Which of the following most clearly illustrates the concept of "derived demand"?

Physical and human capital investments are

Firms should hire additional units of a resource as long as the

Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as

Which of the following is the best example of an investment in human capital?

Table 12-6 The firm hires labor competitively and sells its product in a competitive price-taker market. -Refer to Table 12-6. If the market wage rate is $25 per day, how many workers should the firm hire if it wants to maximize profits?

As the price of land decreases along its demand curve, the relative price of land

The following figure indicates the reductions in total losses due to theft if a jewelry store hires additional security guards. If the security guards can be hired for $45 per day, how many guards should the shop hire?

The marginal product of labor is the

Table 12-6 The firm hires labor competitively and sells its product in a competitive price-taker market. -Refer to Table 12-6. What is the marginal revenue product of the fifth unit of labor?

An increase in the price of a resource would cause

When the price of steel rises, Ford uses more aluminum in the production of its cars. This is an example of

The demand for a resource is generally more

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

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an 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

A : Money and the Banking System

B : Money 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

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

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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