Question 1

Other things being equal, the elasticity of demand for labor will be greater the

Accepted Answer

A)  smaller the proportion of total costs accountable for by labor costs. 
B)  smaller the elasticity of demand for the product it produces. 
C)  larger the number of close substitute resources available. 
D)  more rapid the decline in its marginal productivity. 
A)  smaller the proportion of total costs accountable for by labor costs. 
B)  smaller the elasticity of demand for the product it produces. 
C)  larger the number of close substitute resources available. 
D)  more rapid the decline in its marginal productivity.

Question 2

The demand for computers is derived from the demand for the capital resources that are used to produce computers.

Accepted Answer

A) True 
 B)False

Question 3

The demand for airline pilots results from the demand for air travel. This fact is an example of

Accepted Answer

A)  resource substitutability. 
B)  rising marginal resource cost. 
C)  elasticity of resource demand. 
D)  the derived demand for labor. 
A)  resource substitutability. 
B)  rising marginal resource cost. 
C)  elasticity of resource demand. 
D)  the derived demand for labor.

Question 4

The marginal productivity theory of income distribution has been criticized because

Accepted Answer

A)  the resulting distribution of income is likely to be too equal to maintain production incentives. 
B)  income from inherited property is inconsistent with the theory. 
C)  purely competitive conditions characterize most resource markets. 
D)  it fails to recognize that resource demand is derived from product demand. 
A)  the resulting distribution of income is likely to be too equal to maintain production incentives. 
B)  income from inherited property is inconsistent with the theory. 
C)  purely competitive conditions characterize most resource markets. 
D)  it fails to recognize that resource demand is derived from product demand.

Question 5

Which of the following statements best illustrates the concept of derived demand?

Accepted Answer

A)  As income goes up, the demand for farm products will increase by a smaller relative amount. 
B)  A decline in the price of margarine will reduce the demand for butter. 
C)  A decline in the demand for shoes will cause the demand for leather to decline. 
D)  When the price of gasoline goes up, the demand for motor oil will decline. 
A)  As income goes up, the demand for farm products will increase by a smaller relative amount. 
B)  A decline in the price of margarine will reduce the demand for butter. 
C)  A decline in the demand for shoes will cause the demand for leather to decline. 
D)  When the price of gasoline goes up, the demand for motor oil will decline.

Question 6

Holding revenues constant, cost minimization by firms is equivalent to

Accepted Answer

A)  sales maximization. 
B)  price optimization. 
C)  profit maximization. 
D)  quantity minimization. 
A)  sales maximization. 
B)  price optimization. 
C)  profit maximization. 
D)  quantity minimization.

Question 7

The marginal productivity theory of income distribution suggests that

Accepted Answer

A)  government should subsidize the most productive workers through a system of transfer payments. 
B)  each individual receives income based on his or her contribution to total output. 
C)  resource owners should receive income based on the idea of "from each according to his ability, to each according to his wants." 
D)  resource owners should receive income based upon their needs. 
A)  government should subsidize the most productive workers through a system of transfer payments. 
B)  each individual receives income based on his or her contribution to total output. 
C)  resource owners should receive income based on the idea of "from each according to his ability, to each according to his wants." 
D)  resource owners should receive income based upon their needs.

Question 8

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

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $2.50 
A)  $1 
B)  $2 
C)  $3 
D)  $2.50

Question 9

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Accepted Answer

A) True 
 B)False

Question 10

Other things equal, the less competitive the market in which a firm sells its product, the less elastic will be its resource demand curve.

Accepted Answer

A) True 
 B)False

Question 11

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

Accepted Answer

A) True 
 B)False

Question 12

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

Accepted Answer

A)  the demand for the products produced by the employers. 
B)  the price of labor that the employers must pay. 
C)  the prices of other resources that the firms must use. 
D)  occupational trends affecting the particular labor in the market. 
A)  the demand for the products produced by the employers. 
B)  the price of labor that the employers must pay. 
C)  the prices of other resources that the firms must use. 
D)  occupational trends affecting the particular labor in the market.

Question 13

The marginal revenue product of labor refers to the

Accepted Answer

A)  additional output produced by adding one more unit of labor. 
B)  marginal product of an additional unit of labor. 
C)  additional revenue resulting from using one more unit of labor. 
D)  number of units of output produced by a given number of units of labor. 
A)  additional output produced by adding one more unit of labor. 
B)  marginal product of an additional unit of labor. 
C)  additional revenue resulting from using one more unit of labor. 
D)  number of units of output produced by a given number of units of labor.

Question 14

The profit-maximizing and the least-cost combination of inputs are

Accepted Answer

A)  the result of unrelated decisions. 
B)  always identical. 
C)  such that minimizing costs always results in profit maximization. 
D)  such that maximizing profits always entails the least-cost combination of inputs. 
A)  the result of unrelated decisions. 
B)  always identical. 
C)  such that minimizing costs always results in profit maximization. 
D)  such that maximizing profits always entails the least-cost combination of inputs.

Question 15

An increase in the price of capital will reduce the demand for labor if capital and labor are complementary resources.

Accepted Answer

A) True 
 B)False

Question 16

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

Accepted Answer

A) True 
 B)False

Question 17

When the elasticity coefficient for resource demand is less than one, resource demand is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit-elastic. 
D)  infinitely elastic. 
A)  inelastic. 
B)  elastic. 
C)  unit-elastic. 
D)  infinitely elastic.

Question 18

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

Accepted Answer

A) True 
 B)False

Question 19

A firm is both hiring labor and selling output in purely competitive markets and is maximizing profits. It is currently operating in the elastic range of its MRP curve. If the wage rate increases, its total spending on wages at the new equilibrium will

Accepted Answer

A)  be larger. 
B)  be smaller. 
C)  be unchanged. 
D)  change in an undetermined direction. 
A)  be larger. 
B)  be smaller. 
C)  be unchanged. 
D)  change in an undetermined direction.

Question 20

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

Accepted Answer

A)  labor is not readily substitutable for capital. 
B)  the law of diminishing returns is not applicable. 
C)  the firms are producing an inferior good. 
D)  the demand for capital is highly price elastic. 
A)  labor is not readily substitutable for capital. 
B)  the law of diminishing returns is not applicable. 
C)  the firms are producing an inferior good. 
D)  the demand for capital is highly price elastic.

Exam 16: The Demand for Resources

Other things being equal, the elasticity of demand for labor will be greater the

The demand for computers is derived from the demand for the capital resources that are used to produce computers.

The demand for airline pilots results from the demand for air travel. This fact is an example of

The marginal productivity theory of income distribution has been criticized because

Which of the following statements best illustrates the concept of derived demand?

Holding revenues constant, cost minimization by firms is equivalent to

The marginal productivity theory of income distribution suggests that

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Other things equal, the less competitive the market in which a firm sells its product, the less elastic will be its resource demand curve.

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

The marginal revenue product of labor refers to the

The profit-maximizing and the least-cost combination of inputs are

An increase in the price of capital will reduce the demand for labor if capital and labor are complementary resources.

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

When the elasticity coefficient for resource demand is less than one, resource demand is

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

A firm is both hiring labor and selling output in purely competitive markets and is maximizing profits. It is currently operating in the elastic range of its MRP curve. If the wage rate increases, its total spending on wages at the new equilibrium will

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

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

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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