Question 1

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

Accepted Answer

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

Question 2

The introduction of automatic elevator equipment allowed firms to handle the movement of people in a multistory building at less cost, thus decreasing the demand for elevator operators. The best explanation for this change is that the

Accepted Answer

A)  marginal product of elevator operators was equal to its price. 
B)  marginal product of automatic elevator equipment was equal to its price. 
C)  marginal product of automatic elevator equipment divided by its price was greater than that for elevator operators. 
D)  marginal product of elevator operators divided by its price was greater than that for automatic elevator equipment. 
A)  marginal product of elevator operators was equal to its price. 
B)  marginal product of automatic elevator equipment was equal to its price. 
C)  marginal product of automatic elevator equipment divided by its price was greater than that for elevator operators. 
D)  marginal product of elevator operators divided by its price was greater than that for automatic elevator equipment.

Question 3

The demand for a resource will increase if the

Accepted Answer

A)  price of the resource decreases. 
B)  supply of the resource decreases. 
C)  price of the product requiring this resource increases. 
D)  price of the product requiring this resource decreases. 
A)  price of the resource decreases. 
B)  supply of the resource decreases. 
C)  price of the product requiring this resource increases. 
D)  price of the product requiring this resource decreases.

Question 4

The labor demand curve of an imperfectly competitive seller is downsloping

Accepted Answer

A)  solely because of diminishing marginal utility. 
B)  because of both diminishing returns and the necessity to lower price to sell more output. 
C)  solely because product price must be reduced to sell more output. 
D)  solely because of diminishing returns. 
A)  solely because of diminishing marginal utility. 
B)  because of both diminishing returns and the necessity to lower price to sell more output. 
C)  solely because product price must be reduced to sell more output. 
D)  solely because of diminishing returns.

Question 5

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. If MPC / PC > MPL / PL, the firm

Accepted Answer

A)  may be maximizing profits, but it is not minimizing costs. 
B)  may be minimizing costs, but it is not maximizing profits. 
C)  is neither minimizing costs nor maximizing profits. 
D)  is minimizing costs and maximizing profits. 
A)  may be maximizing profits, but it is not minimizing costs. 
B)  may be minimizing costs, but it is not maximizing profits. 
C)  is neither minimizing costs nor maximizing profits. 
D)  is minimizing costs and maximizing profits.

Question 6

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded increased by 10 percent. We can conclude that

Accepted Answer

A)  the labor demand curve must have independently shifted to the right. 
B)  labor demand is highly elastic. 
C)  the coefficient of labor demand elasticity is less than 1. 
D)  labor demand is unit-elastic. 
A)  the labor demand curve must have independently shifted to the right. 
B)  labor demand is highly elastic. 
C)  the coefficient of labor demand elasticity is less than 1. 
D)  labor demand is unit-elastic.

Question 7

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a

Accepted Answer

A)  large proportion of total costs and product demand is elastic. 
B)  small proportion of total costs and product demand is elastic. 
C)  large proportion of total costs and product demand is inelastic. 
D)  small proportion of total costs and product demand is inelastic. 
A)  large proportion of total costs and product demand is elastic. 
B)  small proportion of total costs and product demand is elastic. 
C)  large proportion of total costs and product demand is inelastic. 
D)  small proportion of total costs and product demand is inelastic.

Question 8

Suppose that the production of wheat requires two inputs, labor and fertilizer. The price of labor is $4.50, and the price of fertilizer is $3.00. A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8. If the farmer is a cost-minimizer, he should

Accepted Answer

A)  use more labor and less fertilizer. 
B)  use more fertilizer and less labor. 
C)  use more labor and more fertilizer. 
D)  continue using the same amounts of each input. 
A)  use more labor and less fertilizer. 
B)  use more fertilizer and less labor. 
C)  use more labor and more fertilizer. 
D)  continue using the same amounts of each input.

Question 9

Other things being equal, a firm's demand for labor is likely to be more elastic than its demand for capital if

Accepted Answer

A)  labor costs are a smaller proportion of total costs than capital costs. 
B)  the firm uses labor-intensive production techniques. 
C)  substitutions of one resource for another are difficult. 
D)  the demand for its final product is price elastic. 
A)  labor costs are a smaller proportion of total costs than capital costs. 
B)  the firm uses labor-intensive production techniques. 
C)  substitutions of one resource for another are difficult. 
D)  the demand for its final product is price elastic.

Question 10

A profit-maximizing firm should hire an input as long as the

Accepted Answer

A)  firm can increase its total revenue. 
B)  price of the input doesn't exceed the price of the other inputs used in the firm's production. 
C)  marginal revenue product of the input is at least as much as the cost of hiring the input. 
D)  marginal revenue product of the input is greater than the marginal revenue product of other inputs the firm is using. 
A)  firm can increase its total revenue. 
B)  price of the input doesn't exceed the price of the other inputs used in the firm's production. 
C)  marginal revenue product of the input is at least as much as the cost of hiring the input. 
D)  marginal revenue product of the input is greater than the marginal revenue product of other inputs the firm is using.

Question 11

Marginal product is

Accepted Answer

A)  the output of the least skilled worker. 
B)  a worker's output multiplied by the price at which each unit can be sold. 
C)  the amount an additional worker adds to the firm's total output. 
D)  the amount any given worker contributes to the firm's total revenue. 
A)  the output of the least skilled worker. 
B)  a worker's output multiplied by the price at which each unit can be sold. 
C)  the amount an additional worker adds to the firm's total output. 
D)  the amount any given worker contributes to the firm's total revenue.

Question 12

The labor demand curve of a purely competitive seller

Accepted Answer

A)  slopes downward because the elasticity of demand is always less than unity. 
B)  slopes downward because of diminishing marginal productivity. 
C)  is perfectly elastic at the going wage rate. 
D)  slopes downward because of diminishing marginal utility. 
A)  slopes downward because the elasticity of demand is always less than unity. 
B)  slopes downward because of diminishing marginal productivity. 
C)  is perfectly elastic at the going wage rate. 
D)  slopes downward because of diminishing marginal utility.

Question 13

If two resources are highly substitutable for one another,

Accepted Answer

A)  a decrease in the price of one will increase unit costs of production. 
B)  an increase in the price of one will increase the demand for the other. 
C)  an increase in the price of one will reduce the demand for the other. 
D)  a decrease in the price of one will increase the demand for the other. 
A)  a decrease in the price of one will increase unit costs of production. 
B)  an increase in the price of one will increase the demand for the other. 
C)  an increase in the price of one will reduce the demand for the other. 
D)  a decrease in the price of one will increase the demand for the other.

Question 14

The fact that monopoly and monopsony exist in resource markets means that

Accepted Answer

A)  the marginal productivity theory of income distribution is valid. 
B)  resource prices do not always measure contributions to output. 
C)  the resulting income distribution is ethically correct. 
D)  income shares do not exhaust the total output. 
A)  the marginal productivity theory of income distribution is valid. 
B)  resource prices do not always measure contributions to output. 
C)  the resulting income distribution is ethically correct. 
D)  income shares do not exhaust the total output.

Question 15

The prices of resources are an important factor in the determination of money income.

Accepted Answer

A) True 
 B)False

Question 16

The change in a firm's total revenue that results from hiring an additional worker is measured by

Accepted Answer

A)  the marginal product. 
B)  the marginal revenue. 
C)  the marginal revenue product. 
D)  the average revenue product. 
A)  the marginal product. 
B)  the marginal revenue. 
C)  the marginal revenue product. 
D)  the average revenue product.

Question 17

(Last Word) The case of ATMs and bank tellers illustrates that

Accepted Answer

A)  capital is primarily a substitute for labor. 
B)  capital is, overall, a complement for labor, not a substitute. 
C)  capital and labor are almost always used in fixed proportions. 
D)  technological innovation is generally detrimental to employment. 
A)  capital is primarily a substitute for labor. 
B)  capital is, overall, a complement for labor, not a substitute. 
C)  capital and labor are almost always used in fixed proportions. 
D)  technological innovation is generally detrimental to employment.

Question 18

A firm's demand curve for labor

Accepted Answer

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

Question 19

The marginal revenue product curve for an input is downsloping because of the law of diminishing returns.

Accepted Answer

A) True 
 B)False

Question 20

In percentage terms, which of the following occupations is expected by the U.S. Bureau of Labor Statistics to be the fastest growing from 2014 to 2024?

Accepted Answer

A)  wind turbine service technicians 
B)  statisticians 
C)  nurse practitioners 
D)  postal service sorters and processors 
A)  wind turbine service technicians 
B)  statisticians 
C)  nurse practitioners 
D)  postal service sorters and processors

Exam 16: The Demand for Resources

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

The introduction of automatic elevator equipment allowed firms to handle the movement of people in a multistory building at less cost, thus decreasing the demand for elevator operators. The best explanation for this change is that the

The demand for a resource will increase if the

The labor demand curve of an imperfectly competitive seller is downsloping

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. If MPC / PC > MPL / PL, the firm

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded increased by 10 percent. We can conclude that

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a

Other things being equal, a firm's demand for labor is likely to be more elastic than its demand for capital if

A profit-maximizing firm should hire an input as long as the

Marginal product is

The labor demand curve of a purely competitive seller

If two resources are highly substitutable for one another,

The fact that monopoly and monopsony exist in resource markets means that

The prices of resources are an important factor in the determination of money income.

The change in a firm's total revenue that results from hiring an additional worker is measured by

(Last Word) The case of ATMs and bank tellers illustrates that

A firm's demand curve for labor

The marginal revenue product curve for an input is downsloping because of the law of diminishing returns.

In percentage terms, which of the following occupations is expected by the U.S. Bureau of Labor Statistics to be the fastest growing from 2014 to 2024?

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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