Question 1

The strength of the demand for a resource depends on the following factors, except the

Accepted Answer

A)  supply of the resource. 
B)  productivity of the resource. 
C)  price of the product the resource helps to produce. 
D)  demand for the product the resource helps to produce. 
A)  supply of the resource. 
B)  productivity of the resource. 
C)  price of the product the resource helps to produce. 
D)  demand for the product the resource helps to produce.

Question 2

Other things equal, the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the

Accepted Answer

A)  demand for labor will be elastic only if labor accounts for less than 50 percent of total costs. 
B)  demand for labor will be elastic only if labor accounts for 50 percent or more of total costs. 
C)  larger the labor cost to total cost ratio, the smaller will be the elasticity of labor demand. 
D)  larger the labor cost to total cost ratio, the greater will be the elasticity of labor demand. 
A)  demand for labor will be elastic only if labor accounts for less than 50 percent of total costs. 
B)  demand for labor will be elastic only if labor accounts for 50 percent or more of total costs. 
C)  larger the labor cost to total cost ratio, the smaller will be the elasticity of labor demand. 
D)  larger the labor cost to total cost ratio, the greater will be the elasticity of labor demand.

Question 3

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MRP of the second barber is

Accepted Answer

A)  18 haircuts. 
B)  $108. 
C)  42 haircuts. 
D)  $126. 
A)  18 haircuts. 
B)  $108. 
C)  42 haircuts. 
D)  $126.

Question 4

An employer hiring in a competitive labor market should hire additional labor as long as

Accepted Answer

A)  the MRP exceeds the wage rate. 
B)  the wage rate is less than MP. 
C)  average product exceeds MP. 
D)  MC exceeds MR. 
A)  the MRP exceeds the wage rate. 
B)  the wage rate is less than MP. 
C)  average product exceeds MP. 
D)  MC exceeds MR.

Question 5

A firm's demand schedule for a resource is the firm's marginal product schedule for the resource.

Accepted Answer

A) True 
 B)False

Question 6

If the wage rate increases,

Accepted Answer

A)  a purely competitive producer will hire less labor, but an imperfectly competitive producer will not. 
B)  an imperfectly competitive producer will hire less labor, but a purely competitive producer will not. 
C)  a purely competitive producer and an imperfectly competitive producer will both hire less labor. 
D)  an imperfectly competitive producer may find it profitable to hire either more or less labor. 
A)  a purely competitive producer will hire less labor, but an imperfectly competitive producer will not. 
B)  an imperfectly competitive producer will hire less labor, but a purely competitive producer will not. 
C)  a purely competitive producer and an imperfectly competitive producer will both hire less labor. 
D)  an imperfectly competitive producer may find it profitable to hire either more or less labor.

Question 7

The marginal revenue product schedule is

Accepted Answer

A)  the same whether the firm is selling in a purely competitive or imperfectly competitive market. 
B)  the firm's resource demand schedule. 
C)  the firm's resource supply schedule. 
D)  upsloping. 
A)  the same whether the firm is selling in a purely competitive or imperfectly competitive market. 
B)  the firm's resource demand schedule. 
C)  the firm's resource supply schedule. 
D)  upsloping.

Question 8

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. $\begin{array} {| c | c | c | c|} 
\text { Units of Labor } & \text { Total Product } & \begin{array} { c } 
\text { Marginal } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} \
\hline 0 & 0 & & \
\hline 1 & 14 & 14 & \$ 42 \
\hline 2 & & 10 & \
\hline 3 & 30 & & 90 \
\hline 4 & 35 & & \
\hline 5 & 39 & & 117 \
\hline 6 & & & 126 \
\hline 7 & 44 & 2 & 132 \
\hline
\end{array}$ If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit?

Accepted Answer

A)  $62 
B)  $42 
C)  $28 
D)  $32 
A)  $62 
B)  $42 
C)  $28 
D)  $32

Question 9

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will

Accepted Answer

A)  decrease solely because of the substitution effect. 
B)  increase solely because of the substitution effect. 
C)  increase solely because of the output effect. 
D)  decrease solely because of the output effect. 
A)  decrease solely because of the substitution effect. 
B)  increase solely because of the substitution effect. 
C)  increase solely because of the output effect. 
D)  decrease solely because of the output effect.

Question 10

We say that the demand for labor is a derived demand because

Accepted Answer

A)  labor is a necessary input in the production of every good or service. 
B)  we demand the product that labor helps produce rather than labor service per se. 
C)  the forces of supply and demand do not apply directly to labor markets. 
D)  labor is hired using the MRP = MRC rule. 
A)  labor is a necessary input in the production of every good or service. 
B)  we demand the product that labor helps produce rather than labor service per se. 
C)  the forces of supply and demand do not apply directly to labor markets. 
D)  labor is hired using the MRP = MRC rule.

Question 11

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. $\begin{array} {| c | c | c | c|} 
\text { Units of Labor } & \text { Total Product } & \begin{array} { c } 
\text { Marginal } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} \
\hline 0 & 0 & & \
\hline 1 & 14 & 14 & \$ 42 \
\hline 2 & & 10 & \
\hline 3 & 30 & & 90 \
\hline 4 & 35 & & \
\hline 5 & 39 & & 117 \
\hline 6 & & & 126 \
\hline 7 & 44 & 2 & 132 \
\hline
\end{array}$ What is the marginal product of the sixth worker?

Accepted Answer

A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units 
A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units

Question 12

In a competitive resource market, a decrease in the demand for a productive resource, ceteris paribus, will cause all of the following except a(n)

Accepted Answer

A)  decrease in the price of the resource. 
B)  increase in the price of the resource. 
C)  decrease in the total income earned by all units of the resource. 
D)  decrease in the number of units of the resource that are employed. 
A)  decrease in the price of the resource. 
B)  increase in the price of the resource. 
C)  decrease in the total income earned by all units of the resource. 
D)  decrease in the number of units of the resource that are employed.

Question 13

Critics of the marginal productivity theory of income distribution claim that the theory is flawed because of

Accepted Answer

A)  the law of diminishing returns. 
B)  the existence of imperfect competition, such as of monopoly and monopsony, in output and resource markets. 
C)  the problem of comparing different kinds of resources, such as capital and labor. 
D)  government policies that redistribute income. 
A)  the law of diminishing returns. 
B)  the existence of imperfect competition, such as of monopoly and monopsony, in output and resource markets. 
C)  the problem of comparing different kinds of resources, such as capital and labor. 
D)  government policies that redistribute income.

Question 14

According to the marginal productivity theory of resource demand, the labor-demand schedule for a producer selling in a purely competitive market is

Accepted Answer

A)  the same as the marginal resource cost schedule. 
B)  the same as the marginal productivity schedule. 
C)  the same as the marginal revenue product schedule. 
D)  independent of the value of the product being produced. 
A)  the same as the marginal resource cost schedule. 
B)  the same as the marginal productivity schedule. 
C)  the same as the marginal revenue product schedule. 
D)  independent of the value of the product being produced.

Question 15

Suppose a competitive firm in both the resource and product markets is using inputs such that the marginal product of labor is 16 and the price of labor is $4 per unit, while the marginal product of capital is 12 and the price of capital is $3 per unit. At the maximum profit equilibrium point, the price of the product is

Accepted Answer

A)  $3. 
B)  $4. 
C)  $0.25. 
D)  between $3 and $4. 
A)  $3. 
B)  $4. 
C)  $0.25. 
D)  between $3 and $4.

Question 16

A computer manufacturer's elasticity of demand for labor is not likely to be affected by the

Accepted Answer

A)  supply of computers. 
B)  price elasticity of demand for computers. 
C)  ratio of labor cost to other resource costs in the firm. 
D)  ease of substituting capital for labor in producing computers. 
A)  supply of computers. 
B)  price elasticity of demand for computers. 
C)  ratio of labor cost to other resource costs in the firm. 
D)  ease of substituting capital for labor in producing computers.

Question 17

Assume that a purely competitive firm uses two resources, labor (L) and capital (C), to produce a product. In which situation would the firm be maximizing profit? $\begin{array}{|c|c|c|c|c|}
\hline & \text { MRPL } & \text { MRPC } & \text { PL } & \text { PC } \
\hline \text { A } & 20 & 40 & 60 & 80 \
\hline \mathrm{B} & 20 & 40 & 20 & 40 \
\hline \mathrm{C} & 30 & 30 & 20 & 20 \
\hline \mathrm{D} & 60 & 80 & 20 & 10 \
\hline
\end{array}$

Accepted Answer

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

Question 18

Producers should hire resources until the total output of each is equal.

Accepted Answer

A) True 
 B)False

Question 19

The equation MPL / PL = MPC / PC

Accepted Answer

A)  designates the MR = MC level of output. 
B)  assumes imperfect competition in the hiring of labor and capital. 
C)  is a sufficient condition for the maximization of profits. 
D)  is a necessary, but not sufficient, condition for the maximization of profits. 
A)  designates the MR = MC level of output. 
B)  assumes imperfect competition in the hiring of labor and capital. 
C)  is a sufficient condition for the maximization of profits. 
D)  is a necessary, but not sufficient, condition for the maximization of profits.

Question 20

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases?

Accepted Answer

A)  medical assistants 
B)  occupational therapy assistants 
C)  wind turbine service technicians 
D)  statisticians 
A)  medical assistants 
B)  occupational therapy assistants 
C)  wind turbine service technicians 
D)  statisticians

Exam 16: The Demand for Resources

The strength of the demand for a resource depends on the following factors, except the

Other things equal, the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MRP of the second barber is

An employer hiring in a competitive labor market should hire additional labor as long as

A firm's demand schedule for a resource is the firm's marginal product schedule for the resource.

If the wage rate increases,

The marginal revenue product schedule is

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will

We say that the demand for labor is a derived demand because

In a competitive resource market, a decrease in the demand for a productive resource, ceteris paribus, will cause all of the following except a(n)

Critics of the marginal productivity theory of income distribution claim that the theory is flawed because of

According to the marginal productivity theory of resource demand, the labor-demand schedule for a producer selling in a purely competitive market is

A computer manufacturer's elasticity of demand for labor is not likely to be affected by the

Assume that a purely competitive firm uses two resources, labor (L) and capital (C), to produce a product. In which situation would the firm be maximizing profit? MRPL MRPC PL PC A 20 40 60 80 20 40 20 40 30 30 20 20 60 80 20 10

Producers should hire resources until the total output of each is equal.

The equation MPL / PL = MPC / PC

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases?

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

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

The equation MP_L/ P_L= MP_C/ P_C