Question 1

If the demand faced by a firm is inelastic,selling one more unit of output will:

Accepted Answer

A) increase revenues. 
B) decrease revenues. 
C) keep revenues constant. 
D) increase profits. 
A) increase revenues. 
B) decrease revenues. 
C) keep revenues constant. 
D) increase profits. B

Question 2

An input's marginal revenue product is given by:

Accepted Answer

A) the input's marginal expense times marginal revenue. 
B) the input's marginal expense times the input's marginal physical productivity. 
C) marginal revenue times the number of units employed. 
D) the input's marginal physical productivity times marginal revenue of the firm's output. 
A) the input's marginal expense times marginal revenue. 
B) the input's marginal expense times the input's marginal physical productivity. 
C) marginal revenue times the number of units employed. 
D) the input's marginal physical productivity times marginal revenue of the firm's output. D

Question 3

If the price of an input falls,a firm would increase the use of that input for two reasons:

Accepted Answer

A) the input is now more productive,and the firm can substitute this input for other relatively more expensive inputs. 
B) the input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production. 
C) overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs. 
D) overall production costs are now lower and the firm will have more of other inputs to use with the one in question. 
A) the input is now more productive,and the firm can substitute this input for other relatively more expensive inputs. 
B) the input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production. 
C) overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs. 
D) overall production costs are now lower and the firm will have more of other inputs to use with the one in question. C

Question 4

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be:

Accepted Answer

A) +1. 
B)   
1) 
C) 0. 
D) infinite. 
A) +1. 
B)   
1) 
C) 0. 
D) infinite.

Question 5

If the firms in perfectly competitive industries each have a production function given by  And the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be:

Accepted Answer

A) 0. 
B)    
C) -1. 
D) -2. 
A) 0. 
B)    
C) -1. 
D) -2.

Question 6

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant:

Accepted Answer

A) the greater the change in output. 
B) the more sharply curved are the firm's isoquants. 
C) the flatter are the firm's isoquants. 
D) the larger the quantity of labor employed. 
A) the greater the change in output. 
B) the more sharply curved are the firm's isoquants. 
C) the flatter are the firm's isoquants. 
D) the larger the quantity of labor employed.

Question 7

A firm's marginal revenue is defined as:

Accepted Answer

A) the ratio of total revenue to total quantity produced. 
B) the additional output produced by lowering price. 
C) the additional revenue received due to technical innovation. 
D) the additional revenue received when selling one more unit of output. 
A) the ratio of total revenue to total quantity produced. 
B) the additional output produced by lowering price. 
C) the additional revenue received due to technical innovation. 
D) the additional revenue received when selling one more unit of output.

Question 8

A profit-maximizing firm will never hire that quantity of a factor of production for which that factor has an increasing marginal productivity because:

Accepted Answer

A) it would not be maximizing output. 
B) it would not be maximizing the productivity of labor. 
C) it would not be minimizing costs. 
D) it would not be maximizing profits. 
A) it would not be maximizing output. 
B) it would not be maximizing the productivity of labor. 
C) it would not be minimizing costs. 
D) it would not be maximizing profits.

Question 9

If the demand faced by a firm is elastic,selling one less unit of output will:

Accepted Answer

A) increase revenue. 
B) decrease revenue. 
C) keep revenues constant. 
D) decrease price. 
A) increase revenue. 
B) decrease revenue. 
C) keep revenues constant. 
D) decrease price.

Question 10

If a firm is a price taker in both the input and output markets,its marginal revenue product of labor is given by:

Accepted Answer

A) the price of its output times the labor's marginal physical productivity. 
B) the marginal value product of labor. 
C) the marginal revenue product of capital times the ratio of the wage rate to the rental rate on capital. 
D) all of the above. 
A) the price of its output times the labor's marginal physical productivity. 
B) the marginal value product of labor. 
C) the marginal revenue product of capital times the ratio of the wage rate to the rental rate on capital. 
D) all of the above.

Question 11

Profit functions are homogeneous of degree:

Accepted Answer

A) zero in input and output prices. 
B) zero in input prices. 
C) one in input and output prices. 
D) one in input prices. 
A) zero in input and output prices. 
B) zero in input prices. 
C) one in input and output prices. 
D) one in input prices.

Question 12

A firm will hire additional units of any input up to the point where:

Accepted Answer

A) the marginal productivity of the input is maximized. 
B) the marginal cost of employing the input is minimized. 
C) the expense of employing the last unit is equal to the revenue brought in by the last unit. 
D) the revenue brought in by the input is maximized. 
A) the marginal productivity of the input is maximized. 
B) the marginal cost of employing the input is minimized. 
C) the expense of employing the last unit is equal to the revenue brought in by the last unit. 
D) the revenue brought in by the input is maximized.

Question 13

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit-maximizing firm?

Accepted Answer

A) The firm is a price taker. 
B) Price exceeds average total cost. 
C) The elasticity of demand facing the firm is -3. 
D) the firm can vary several inputs in the short run. 
A) The firm is a price taker. 
B) Price exceeds average total cost. 
C) The elasticity of demand facing the firm is -3. 
D) the firm can vary several inputs in the short run.

Question 14

If a price-taking firm's production function is given by   ,its profit function is given by:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 15

A firm's demand for labor is known as a "derived demand" because:

Accepted Answer

A) the firm gains utility from hiring more labor. 
B) the amount of labor hired depends upon how much output the firm can sell. 
C) the wage rate paid to workers is derived from the market for labor. 
D) it's derived from the demand for capital. 
A) the firm gains utility from hiring more labor. 
B) the amount of labor hired depends upon how much output the firm can sell. 
C) the wage rate paid to workers is derived from the market for labor. 
D) it's derived from the demand for capital.

Question 16

If a firm wished to maximize total revenues,it should produce where:

Accepted Answer

A) marginal cost is zero. 
B) marginal revenue is zero. 
C) marginal revenue is equal to marginal cost. 
D) marginal revenue is equal to price. 
A) marginal cost is zero. 
B) marginal revenue is zero. 
C) marginal revenue is equal to marginal cost. 
D) marginal revenue is equal to price.

Question 17

One implication of the fact that profit functions are convex in prices is that firms will always prefer:

Accepted Answer

A) stable input and output prices. 
B) input and output prices that fluctuate about a given level. 
C) stable input prices and fluctuating output prices. 
D) fluctuating input prices and stable output prices. 
A) stable input and output prices. 
B) input and output prices that fluctuate about a given level. 
C) stable input prices and fluctuating output prices. 
D) fluctuating input prices and stable output prices.

Question 18

In order to maximize profits,a firm should produce at the output level for which:

Accepted Answer

A) average cost is minimized. 
B) marginal revenue equals marginal cost. 
C) marginal cost is minimized. 
D) price minus average cost is as large as possible. 
A) average cost is minimized. 
B) marginal revenue equals marginal cost. 
C) marginal cost is minimized. 
D) price minus average cost is as large as possible.

Question 19

If a firm is a price taker,its marginal revenue is:

Accepted Answer

A) equal to market price. 
B) less than market price. 
C) greater than market price. 
D) a multiple of market price that may be either greater than or less than one. 
A) equal to market price. 
B) less than market price. 
C) greater than market price. 
D) a multiple of market price that may be either greater than or less than one.

Question 20

If the demand curve a firm faces shifts to the right,usually:

Accepted Answer

A) it would be impossible to tell whether the marginal revenue curve shifts. 
B) the marginal revenue curve would shift to the left. 
C) the marginal revenue curve would shift to the right. 
D) the marginal revenue curve would not shift. 
A) it would be impossible to tell whether the marginal revenue curve shifts. 
B) the marginal revenue curve would shift to the left. 
C) the marginal revenue curve would shift to the right. 
D) the marginal revenue curve would not shift.

If the demand faced by a firm is inelastic,selling one more unit of output will:

An input's marginal revenue product is given by:

If the price of an input falls,a firm would increase the use of that input for two reasons:

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be:

If the firms in perfectly competitive industries each have a production function given by And the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be:

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant:

A firm's marginal revenue is defined as:

A profit-maximizing firm will never hire that quantity of a factor of production for which that factor has an increasing marginal productivity because:

If the demand faced by a firm is elastic,selling one less unit of output will:

If a firm is a price taker in both the input and output markets,its marginal revenue product of labor is given by:

Profit functions are homogeneous of degree:

A firm will hire additional units of any input up to the point where:

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit-maximizing firm?

If a price-taking firm's production function is given by ,its profit function is given by:

A firm's demand for labor is known as a "derived demand" because:

If a firm wished to maximize total revenues,it should produce where:

One implication of the fact that profit functions are convex in prices is that firms will always prefer:

In order to maximize profits,a firm should produce at the output level for which:

If a firm is a price taker,its marginal revenue is:

If the demand curve a firm faces shifts to the right,usually:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 9: Profit Maximization

If the demand faced by a firm is inelastic,selling one more unit of output will:

An input's marginal revenue product is given by:

If the price of an input falls,a firm would increase the use of that input for two reasons:

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be:

If the firms in perfectly competitive industries each have a production function given by And the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be:

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant:

A firm's marginal revenue is defined as:

A profit-maximizing firm will never hire that quantity of a factor of production for which that factor has an increasing marginal productivity because:

If the demand faced by a firm is elastic,selling one less unit of output will:

If a firm is a price taker in both the input and output markets,its marginal revenue product of labor is given by:

Profit functions are homogeneous of degree:

A firm will hire additional units of any input up to the point where:

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit-maximizing firm?

If a price-taking firm's production function is given by ,its profit function is given by:

A firm's demand for labor is known as a "derived demand" because:

If a firm wished to maximize total revenues,it should produce where:

One implication of the fact that profit functions are convex in prices is that firms will always prefer:

In order to maximize profits,a firm should produce at the output level for which:

If a firm is a price taker,its marginal revenue is:

If the demand curve a firm faces shifts to the right,usually:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters