Question 1

A firm will find it profitable to hire workers up to the point at which their

Accepted Answer

A)  marginal resource cost equals their wage rate. 
B)  wage rate equals product price. 
C)  MP is equal to their MRP. 
D)  marginal resource cost is equal to their MRP. 
A)  marginal resource cost equals their wage rate. 
B)  wage rate equals product price. 
C)  MP is equal to their MRP. 
D)  marginal resource cost is equal to their MRP.

Question 2

If the price of capital declines, the consequent output effect would be

Accepted Answer

A)  greater, the more elastic the demand for the product. 
B)  greater, the less elastic the demand for the product. 
C)  negative. 
D)  of consequence only if capital and labor are used in fixed proportions. 
A)  greater, the more elastic the demand for the product. 
B)  greater, the less elastic the demand for the product. 
C)  negative. 
D)  of consequence only if capital and labor are used in fixed proportions.

Question 3

Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is PL, and that of capital is PC. The marginal product of labor is MPL, and that of capital is MPC. The firm sells its product competitively at a price of PX. In competitive labor markets, the marginal cost of an additional unit of labor

Accepted Answer

A)  is equal to PL × MPL. 
B)  is equal to MPL/PL. 
C)  is equal tp PL 
D)  cannot be determined from the information given. 
A)  is equal to PL × MPL. 
B)  is equal to MPL/PL. 
C)  is equal tp PL 
D)  cannot be determined from the information given.

Question 4

The marginal productivity theory of income distribution holds that all resources are paid according to their marginal contribution to society's output.

Accepted Answer

A) True 
 B)False

Question 5

In the United States, professional football players earn much higher incomes than professional soccer players. This occurs because

Accepted Answer

A)  most football players are good soccer players, while the reverse is not true. 
B)  consumers have a greater demand for football games than for soccer games. 
C)  football and soccer games are highly substitutable products for most consumers. 
D)  the marginal productivity of soccer players exceeds that of football players. 
A)  most football players are good soccer players, while the reverse is not true. 
B)  consumers have a greater demand for football games than for soccer games. 
C)  football and soccer games are highly substitutable products for most consumers. 
D)  the marginal productivity of soccer players exceeds that of football players.

Question 6

Which would result in a decrease in the elasticity of demand for a particular resource?

Accepted Answer

A)  a decrease in the rate at which the marginal product of that resource declines 
B)  an increase in the elasticity of demand for the product that the resource helps to produce 
C)  a decrease in the percentage of the firm's total costs accounted for by the resource 
D)  an increase in the substitutability of other resources for the particular resource 
A)  a decrease in the rate at which the marginal product of that resource declines 
B)  an increase in the elasticity of demand for the product that the resource helps to produce 
C)  a decrease in the percentage of the firm's total costs accounted for by the resource 
D)  an increase in the substitutability of other resources for the particular resource

Question 7

Hiring the least-costly combination of resources ensures that profits will be maximized.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following occupations is among the 10 projected most rapidly declining U.S. occupations in terms of percentage decreases?

Accepted Answer

A)  medical assistants 
B)  veterinarians 
C)  college professors 
D)  postal service mail sorters and processors 
A)  medical assistants 
B)  veterinarians 
C)  college professors 
D)  postal service mail sorters and processors

Question 9

Assuming pure competition, which of the following are equivalents?

Accepted Answer

A)  $\mathrm { MRP } L _ { 1 } / P _ { L } = \mathrm { MRP } _ { C } / P _ { C } \text { and } P _ { x } = 1 / \mathrm { MC }$ 
B)  $\mathrm { MRP } _ { L }/ P _ { L } = \mathrm { MRP } C / P C \text { and } P _ { x } = \mathrm { AVC }$ 
C)  $P _ { X } = \mathrm { MC } \text { and } \mathrm { MRP } _ { L } / P _ { L } = \mathrm { MRP } C / P C = 1$ 
D)  $P _ { x } = \mathrm { MC } \text { and } \mathrm { MP } _ { L } / P _ { L } = M P _ { C } / P _ { C}$ 
A)  $\mathrm { MRP } L _ { 1 } / P _ { L } = \mathrm { MRP } _ { C } / P _ { C } \text { and } P _ { x } = 1 / \mathrm { MC }$ 
B)  $\mathrm { MRP } _ { L }/ P _ { L } = \mathrm { MRP } C / P C \text { and } P _ { x } = \mathrm { AVC }$ 
C)  $P _ { X } = \mathrm { MC } \text { and } \mathrm { MRP } _ { L } / P _ { L } = \mathrm { MRP } C / P C = 1$ 
D)  $P _ { x } = \mathrm { MC } \text { and } \mathrm { MP } _ { L } / P _ { L } = M P _ { C } / P _ { C}$

Question 10

Suppose the productivity of labor increases and at the same time the price of capital, which is complementary to labor, increases. As a result, the demand for labor

Accepted Answer

A)  will increase. 
B)  will decrease. 
C)  may either increase or decrease. 
D)  will not change. 
A)  will increase. 
B)  will decrease. 
C)  may either increase or decrease. 
D)  will not change.

Question 11

The more inelastic the demand for a resource, the

Accepted Answer

A)  less elastic its marginal revenue product curve. 
B)  more elastic its marginal revenue product curve. 
C)  greater the potential for resource substitution. 
D)  greater the productivity of the resource. 
A)  less elastic its marginal revenue product curve. 
B)  more elastic its marginal revenue product curve. 
C)  greater the potential for resource substitution. 
D)  greater the productivity of the resource.

Question 12

If a firm is selling in an imperfectly competitive product market, then

Accepted Answer

A)  average product will be less than marginal product for any number of workers hired. 
B)  the marginal products of successive workers must be sold at lower prices. 
C)  the marginal products of successive workers can be sold at higher prices. 
D)  the marginal products of successive workers can be sold at a constant price. 
A)  average product will be less than marginal product for any number of workers hired. 
B)  the marginal products of successive workers must be sold at lower prices. 
C)  the marginal products of successive workers can be sold at higher prices. 
D)  the marginal products of successive workers can be sold at a constant price.

Question 13

Marginal revenue product measures the

Accepted Answer

A)  amount by which the addition of one more worker increases a firm's total revenue. 
B)  decline in product price that a firm must accept to sell the extra output of one more worker. 
C)  increase in total resource cost resulting from the hire of one extra unit of a resource. 
D)  increase in total revenue resulting from the production of one more unit of a product. 
A)  amount by which the addition of one more worker increases a firm's total revenue. 
B)  decline in product price that a firm must accept to sell the extra output of one more worker. 
C)  increase in total resource cost resulting from the hire of one extra unit of a resource. 
D)  increase in total revenue resulting from the production of one more unit of a product.

Question 14

The elasticity of demand for labor varies inversely with the elasticity of demand for the product it is used to produce.

Accepted Answer

A) True 
 B)False

Question 15

If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that

Accepted Answer

A)  the substitution effect is greater than the output effect. 
B)  the output effect is greater than the substitution effect. 
C)  the income effect is greater than the output effect. 
D)  labor cannot be easily substituted for capital. 
A)  the substitution effect is greater than the output effect. 
B)  the output effect is greater than the substitution effect. 
C)  the income effect is greater than the output effect. 
D)  labor cannot be easily substituted for capital.

Question 16

Marginal revenue product (MRP) is the change in total product (total output) associated with hiring an additional unit of labor.

Accepted Answer

A) True 
 B)False

Question 17

The labor demand curve of a purely competitive seller

Accepted Answer

A)  slopes downward because the firm must lower price to sell more output. 
B)  slopes downward because labor productivity increases as successive workers are hired. 
C)  is perfectly elastic because the firm is hiring an insignificant portion of the total labor supply. 
D)  slopes downward because the marginal product of successive workers declines. 
A)  slopes downward because the firm must lower price to sell more output. 
B)  slopes downward because labor productivity increases as successive workers are hired. 
C)  is perfectly elastic because the firm is hiring an insignificant portion of the total labor supply. 
D)  slopes downward because the marginal product of successive workers declines.

Question 18

The introduction of ATMs in the banking industry illustrates that ATMs

Accepted Answer

A)  can be substitutes for labor in handling cash deposits and withdrawals, but they can be complements for labor in other banking functions. 
B)  are more productive substitutes for labor in most banking transactions, thereby reducing the long-term demand for labor by banks. 
C)  increased the demand for labor by banks because the ATMs proved to be less productive substitutes for labor. 
D)  are much better complements for labor, causing banks to reduce the number of their branch locations. 
A)  can be substitutes for labor in handling cash deposits and withdrawals, but they can be complements for labor in other banking functions. 
B)  are more productive substitutes for labor in most banking transactions, thereby reducing the long-term demand for labor by banks. 
C)  increased the demand for labor by banks because the ATMs proved to be less productive substitutes for labor. 
D)  are much better complements for labor, causing banks to reduce the number of their branch locations.

Question 19

A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90. The price of labor is $20, and the price of capital is $30. If the business wants to minimize costs while keeping output constant, then it should

Accepted Answer

A)  use more labor and less capital. 
B)  use less labor and less capital. 
C)  use less labor and more capital. 
D)  make no change in resource use. 
A)  use more labor and less capital. 
B)  use less labor and less capital. 
C)  use less labor and more capital. 
D)  make no change in resource use.

Question 20

Income from inherited wealth and property resources provides strong support for the marginal productivity theory of income distribution.

Accepted Answer

A) True 
 B)False

Exam 16: The Demand for Resources

A firm will find it profitable to hire workers up to the point at which their

If the price of capital declines, the consequent output effect would be

The marginal productivity theory of income distribution holds that all resources are paid according to their marginal contribution to society's output.

In the United States, professional football players earn much higher incomes than professional soccer players. This occurs because

Which would result in a decrease in the elasticity of demand for a particular resource?

Hiring the least-costly combination of resources ensures that profits will be maximized.

Which of the following occupations is among the 10 projected most rapidly declining U.S. occupations in terms of percentage decreases?

Assuming pure competition, which of the following are equivalents?

Suppose the productivity of labor increases and at the same time the price of capital, which is complementary to labor, increases. As a result, the demand for labor

The more inelastic the demand for a resource, the

If a firm is selling in an imperfectly competitive product market, then

Marginal revenue product measures the

The elasticity of demand for labor varies inversely with the elasticity of demand for the product it is used to produce.

If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that

Marginal revenue product (MRP) is the change in total product (total output) associated with hiring an additional unit of labor.

The labor demand curve of a purely competitive seller

The introduction of ATMs in the banking industry illustrates that ATMs

A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90. The price of labor is $20, and the price of capital is $30. If the business wants to minimize costs while keeping output constant, then it should

Income from inherited wealth and property resources provides strong support for the marginal productivity theory of income distribution.

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

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