Question 1

The labor demand curve of a firm

Accepted Answer

A)  will shift to the left if the price of the product that the labor is producing falls. 
B)  is perfectly elastic if the firm is selling its product in a purely competitive market. 
C)  reflects a direct relationship between the number of workers hired and the money wage rate. 
D)  is the same as its marginal product curve. 
A)  will shift to the left if the price of the product that the labor is producing falls. 
B)  is perfectly elastic if the firm is selling its product in a purely competitive market. 
C)  reflects a direct relationship between the number of workers hired and the money wage rate. 
D)  is the same as its marginal product curve. A

Question 2

If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would increase production costs by

Accepted Answer

A)  60 percent. 
B)  45 percent. 
C)  15 percent. 
D)  9 percent. 
A)  60 percent. 
B)  45 percent. 
C)  15 percent. 
D)  9 percent. D

Question 3

Which type of occupation is expected by the U.S. Bureau of Labor Statistics to be the fastest growing from 2014 to 2024 ?

Accepted Answer

A)  manufacturing 
B)  service 
C)  construction 
D)  mining 
A)  manufacturing 
B)  service 
C)  construction 
D)  mining B

Question 4

A major criticism of the marginal productivity theory of income distribution is that

Accepted Answer

A)  the demand for labor resources is price inelastic. 
B)  achieving equality in incomes will take time. 
C)  imperfectly competitive firms are only interested in profit maximization. 
D)  property resources like land are unevenly distributed, which leads to income inequality. 
A)  the demand for labor resources is price inelastic. 
B)  achieving equality in incomes will take time. 
C)  imperfectly competitive firms are only interested in profit maximization. 
D)  property resources like land are unevenly distributed, which leads to income inequality.

Question 5

A profit-maximizing firm employs resources to the point where

Accepted Answer

A)  MRC = MP. 
B)  resource price equals product price. 
C)  MRP = MRC. 
D)  MP = product price. 
A)  MRC = MP. 
B)  resource price equals product price. 
C)  MRP = MRC. 
D)  MP = product price.

Question 6

If MRP of labor < wage rate, a firm should hire more workers.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A purely competitive firm in the factor and product markets sells its output for $1 and pays factors PL = $4 and PC = $3. What is the profit-maximizing combination of L and C for the firm?
$\begin{array} { | c | c | c | c | } 
\hline \text { Q. } & \text { MPL } & \text { QC } & \text { MPC } \
\hline 1 & 28 & 1 & 18 \
\hline 2 & 24 & 2 & 15 \
\hline 3 & 20 & 3 & 12 \
\hline 4 & 16 & 4 & 9 \
\hline 5 & 9 & 5 & 6 \
\hline 6 & 4 & 6 & 3 \
\hline 7 & 2 & 7 & 2 \
\hline 8 & 1 & 8 & 1.5 \
\hline 9 & 0.5 & 9 & 1 \
\hline
\end{array}$

Accepted Answer

A)  8 of L and 8 of C 
B)  4 of L and 3 of C 
C)  5 of L and 2 of C 
D)  6 of L and 6 of C 
A)  8 of L and 8 of C 
B)  4 of L and 3 of C 
C)  5 of L and 2 of C 
D)  6 of L and 6 of C

Question 9

As the baby boomers in America grow old, the demand for health care workers increases. This would be an example of which determinant of labor demand?

Accepted Answer

A)  an increase in labor productivity 
B)  an increase in product demand 
C)  a decrease in the price of another resource 
D)  an increase in the price of another resource 
A)  an increase in labor productivity 
B)  an increase in product demand 
C)  a decrease in the price of another resource 
D)  an increase in the price of another resource

Question 10

Which of the following will not shift the demand curve for labor?

Accepted Answer

A)  the use of a larger stock of capital with the labor force 
B)  a change in the wage rate 
C)  an increase in the price of the product that labor is helping to produce 
D)  the adoption of a more efficient method of combining labor and capital in the production process 
A)  the use of a larger stock of capital with the labor force 
B)  a change in the wage rate 
C)  an increase in the price of the product that labor is helping to produce 
D)  the adoption of a more efficient method of combining labor and capital in the production process

Question 11

If the price of a resource is greater than its marginal revenue product, the firm should

Accepted Answer

A)  charge a higher price for its product. 
B)  make no change in the units of the resource used. 
C)  increase the units of the resource used in order to increase profits. 
D)  decrease the units of the resource used in order to increase profits. 
A)  charge a higher price for its product. 
B)  make no change in the units of the resource used. 
C)  increase the units of the resource used in order to increase profits. 
D)  decrease the units of the resource used in order to increase profits.

Question 12

A firm is hiring resources X, Y, and Z in the profit-maximizing amounts when

Accepted Answer

A)  $\text { MRP }_{x} / P_{x} \text { equals } \mathrm{MR} \mathrm{P}_{y} / P_{y} \text { equals } \mathrm{MRP}_{z} / P_{z} \text { equals } 1 \text {. }$ 
B)  the sum of the MRPs of the three resources is at a minimum. 
C)  the marginal revenue productivity of all three resources is the same. 
D)  the marginal revenue product of the last dollar spent on each of the three resources is the same. 
A)  $\text { MRP }_{x} / P_{x} \text { equals } \mathrm{MR} \mathrm{P}_{y} / P_{y} \text { equals } \mathrm{MRP}_{z} / P_{z} \text { equals } 1 \text {. }$ 
B)  the sum of the MRPs of the three resources is at a minimum. 
C)  the marginal revenue productivity of all three resources is the same. 
D)  the marginal revenue product of the last dollar spent on each of the three resources is the same.

Question 13

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

Accepted Answer

A)  ATC for that output. 
B)  MC for that output. 
C)  P of that output. 
D)  TR of that output. 
A)  ATC for that output. 
B)  MC for that output. 
C)  P of that output. 
D)  TR of that output.

Question 14

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 15

A profit-maximizing firm will use additional units of resources for production until

Accepted Answer

A)  total, average, and marginal cost are equal. 
B)  total, average, and marginal revenue are equal. 
C)  the marginal revenue product equals the marginal resource cost. 
D)  the marginal revenue product is greater than the marginal resource cost. 
A)  total, average, and marginal cost are equal. 
B)  total, average, and marginal revenue are equal. 
C)  the marginal revenue product equals the marginal resource cost. 
D)  the marginal revenue product is greater than the marginal resource cost.

Question 16

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal product of the second worker is

Accepted Answer

A)  24. 
B)  8. 
C)  5. 
D)  1 
A)  24. 
B)  8. 
C)  5. 
D)  1

Question 17

In which of the cases given below will the elasticity of demand for workers who produce yo-yos be most inelastic? The price elasticity of demand for yo-yos is

Accepted Answer

A)  5, and labor's share of total costs is 20 percent. 
B)  5, and labor's share of total costs is 75 percent. 
C)  .1, and labor's share of total costs is 20 percent. 
D)  .1, and labor's share of total costs is 75 percent. 
A)  5, and labor's share of total costs is 20 percent. 
B)  5, and labor's share of total costs is 75 percent. 
C)  .1, and labor's share of total costs is 20 percent. 
D)  .1, and labor's share of total costs is 75 percent.

Question 18

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that

Accepted Answer

A)  the firm will use relatively more capital and relatively less labor. 
B)  the firm will use relatively more labor and relatively less capital. 
C)  inputs of capital and labor will be unchanged. 
D)  the firm's equilibrium output will necessarily increase. 
A)  the firm will use relatively more capital and relatively less labor. 
B)  the firm will use relatively more labor and relatively less capital. 
C)  inputs of capital and labor will be unchanged. 
D)  the firm's equilibrium output will necessarily increase.

Question 19

Two resource inputs, capital and labor, are complementary and used in fixed proportions. An increase in the price of capital will

Accepted Answer

A)  increase the demand for labor. 
B)  decrease the demand for labor. 
C)  decrease the quantity demanded for labor. 
D)  have no effect, because the relationship is fixed. 
A)  increase the demand for labor. 
B)  decrease the demand for labor. 
C)  decrease the quantity demanded for labor. 
D)  have no effect, because the relationship is fixed.

Question 20

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $48. 
D)  $80. 
A)  $6. 
B)  $8. 
C)  $48. 
D)  $80.

Exam 16: The Demand for Resources

The labor demand curve of a firm

If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would increase production costs by

Which type of occupation is expected by the U.S. Bureau of Labor Statistics to be the fastest growing from 2014 to 2024 ?

A major criticism of the marginal productivity theory of income distribution is that

A profit-maximizing firm employs resources to the point where

If MRP of labor < wage rate, a firm should hire more workers.

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

A purely competitive firm in the factor and product markets sells its output for $1 and pays factors PL = $4 and PC = $3. What is the profit-maximizing combination of L and C for the firm? Q. MPL QC MPC 1 28 1 18 2 24 2 15 3 20 3 12 4 16 4 9 5 9 5 6 6 4 6 3 7 2 7 2 8 1 8 1.5 9 0.5 9 1

As the baby boomers in America grow old, the demand for health care workers increases. This would be an example of which determinant of labor demand?

Which of the following will not shift the demand curve for labor?

If the price of a resource is greater than its marginal revenue product, the firm should

A firm is hiring resources X, Y, and Z in the profit-maximizing amounts when

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

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 profit-maximizing firm will use additional units of resources for production until

In which of the cases given below will the elasticity of demand for workers who produce yo-yos be most inelastic? The price elasticity of demand for yo-yos is

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that

Two resource inputs, capital and labor, are complementary and used in fixed proportions. An increase in the price of capital will

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

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Pure Competition in the Short Run

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A purely competitive firm in the factor and product markets sells its output for $1 and pays factors P_L= $4 and P_C= $3. What is the profit-maximizing combination of L and C for the firm? Q. MPL QC MPC 1 28 1 18 2 24 2 15 3 20 3 12 4 16 4 9 5 9 5 6 6 4 6 3 7 2 7 2 8 1 8 1.5 9 0.5 9 1