Question 1

Other things equal, we would expect the labor demand curve of a monopolistic seller to

Accepted Answer

A)  decline more rapidly than that of a purely competitive seller. 
B)  decline less rapidly than that of a purely competitive seller. 
C)  decline at the same rate as that of a purely competitive seller. 
D)  be more elastic than that of a purely competitive seller. 
A)  decline more rapidly than that of a purely competitive seller. 
B)  decline less rapidly than that of a purely competitive seller. 
C)  decline at the same rate as that of a purely competitive seller. 
D)  be more elastic than that of a purely competitive seller.

Question 2

The marginal revenue product of an economic resource for a firm operating in purely competitive product and resource markets

Accepted Answer

A)  is the marginal product of the resource divided by the price of the final product. 
B)  is the increase in total revenue resulting from the addition of one more unit of the resource. 
C)  is equal to the average revenue product at the lowest point of the average revenue product curve. 
D)  decreases as the quantity of output decreases. 
A)  is the marginal product of the resource divided by the price of the final product. 
B)  is the increase in total revenue resulting from the addition of one more unit of the resource. 
C)  is equal to the average revenue product at the lowest point of the average revenue product curve. 
D)  decreases as the quantity of output decreases.

Question 3

(Last Word) The rapid spread of ATMs

Accepted Answer

A)  dramatically reduced employment of bank tellers, and demand remains low because ATMs serve the same functions as bank tellers. 
B)  has resulted in the closure of many bank branches and led to a long-term decline in employment of bank tellers. 
C)  reduced the demand for bank tellers initially, but eventually tellers took on tasks that ATMs are not suited to handle. 
D)  has had no discernible impact on the demand for bank tellers. 
A)  dramatically reduced employment of bank tellers, and demand remains low because ATMs serve the same functions as bank tellers. 
B)  has resulted in the closure of many bank branches and led to a long-term decline in employment of bank tellers. 
C)  reduced the demand for bank tellers initially, but eventually tellers took on tasks that ATMs are not suited to handle. 
D)  has had no discernible impact on the demand for bank tellers.

Question 4

The price of capital is $12 per machine-hour, and the price of labor is $3 per hour. The table gives production schedules for a firm, showing the possible combinations of capital and labor that will produce 100 units of output. Which combination will this cost-minimizing firm choose? $\begin{array}{|c|c|c|c|c|}
\hline \text { A } & \text { Labor: } 20 & \text { Capital: 5 } & \text { MPL: 5 } & \text { MPc: } 20 \
\hline \text { B } & \text { Labor: } 10 & \text { Capital: 10 } & \text { MPL : } 10 & \text { MPc: } 10 \
\hline \text { C } & \text { Labor: 5 } & \text { Capital: 20 } & \text { MPL: } 20 & \text { MPc: } 5 \
\hline \text { D } & \text { Labor: 4 } & \text { Capital: 25 } & \text { MPL : 25 } & \text { MPP: } 4 \
\hline
\end{array}$

Accepted Answer

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

Question 5

If the demand for a product produced by an input decreases, the demand for the input will also decrease.

Accepted Answer

A) True 
 B)False

Question 6

A decrease in the price of a productive resource will result in each of the following except a(n)

Accepted Answer

A)  downward shift in the average-cost curves for all products that use the resource. 
B)  rightward shift in the supply of products which use the resource. 
C)  rightward shift in the demand curves for all products that use the resource. 
D)  increase in the quantity demanded of this productive resource. 
A)  downward shift in the average-cost curves for all products that use the resource. 
B)  rightward shift in the supply of products which use the resource. 
C)  rightward shift in the demand curves for all products that use the resource. 
D)  increase in the quantity demanded of this productive resource.

Question 7

Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect

Accepted Answer

A)  the demand for resource Y to be more elastic than the demand for resource X. 
B)  resources X and Y to be close substitutes. 
C)  resource X to be more expensive than resource Y. 
D)  the demand for resource X to be more elastic than the demand for resource Y. 
A)  the demand for resource Y to be more elastic than the demand for resource X. 
B)  resources X and Y to be close substitutes. 
C)  resource X to be more expensive than resource Y. 
D)  the demand for resource X to be more elastic than the demand for resource Y.

Question 8

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the

Accepted Answer

A)  firm's total outlay on resources is minimized. 
B)  marginal revenue product of each resource is equal to its price. 
C)  price of each resource employed is the same. 
D)  marginal revenue product of the last unit of each resource hired is the same. 
A)  firm's total outlay on resources is minimized. 
B)  marginal revenue product of each resource is equal to its price. 
C)  price of each resource employed is the same. 
D)  marginal revenue product of the last unit of each resource hired is the same.

Question 9

Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus, 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 10

Increased resource productivity will, ceteris paribus, increase a firm's demand for an input.

Accepted Answer

A) True 
 B)False

Question 11

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the

Accepted Answer

A)  output effect. 
B)  substitution effect. 
C)  idea of derived demand. 
D)  law of diminishing returns. 
A)  output effect. 
B)  substitution effect. 
C)  idea of derived demand. 
D)  law of diminishing returns.

Question 12

Marginal revenue product describes the

Accepted Answer

A)  output produced by the last unit of labor employed. 
B)  revenue received for the last unit of output produced. 
C)  price a consumer paid for the last unit of output produced. 
D)  revenue received for the additional output produced by the last unit of labor employed. 
A)  output produced by the last unit of labor employed. 
B)  revenue received for the last unit of output produced. 
C)  price a consumer paid for the last unit of output produced. 
D)  revenue received for the additional output produced by the last unit of labor employed.

Question 13

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, 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 14

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

Accepted Answer

A)  Labor will replace the new capital because labor is now cheaper. 
B)  The new capital will replace labor because it reduces the firms' costs. 
C)  More of both the new capital and labor will be used because firms are more productive. 
D)  Less of both the new capital and labor will be used because the firms do not know how to use the new technology. 
A)  Labor will replace the new capital because labor is now cheaper. 
B)  The new capital will replace labor because it reduces the firms' costs. 
C)  More of both the new capital and labor will be used because firms are more productive. 
D)  Less of both the new capital and labor will be used because the firms do not know how to use the new technology.

Question 15

Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the

Accepted Answer

A)  substitution effect will tend to reduce the demand for labor. 
B)  output effect will tend to reduce the demand for labor. 
C)  demand for labor will necessarily decline. 
D)  demand for labor will necessarily increase. 
A)  substitution effect will tend to reduce the demand for labor. 
B)  output effect will tend to reduce the demand for labor. 
C)  demand for labor will necessarily decline. 
D)  demand for labor will necessarily increase.

Question 16

The labor demand curve of a firm that sells its product in an imperfectly competitive market

Accepted Answer

A)  is downsloping, solely because of the law of diminishing returns. 
B)  is downsloping and flatter than the labor demand curve of a firm that sells its product in a purely competitive market. 
C)  is upsloping. 
D)  is downsloping because of both declining marginal productivity and declining product prices as quantity increases. 
A)  is downsloping, solely because of the law of diminishing returns. 
B)  is downsloping and flatter than the labor demand curve of a firm that sells its product in a purely competitive market. 
C)  is upsloping. 
D)  is downsloping because of both declining marginal productivity and declining product prices as quantity increases.

Question 17

The demand for labor is a derived demand, whereas the demand for capital is not.

Accepted Answer

A) True 
 B)False

Question 18

The substitution effect indicates that a profit-seeking firm will use

Accepted Answer

A)  more of an input whose price has fallen and less of other inputs in producing a given output. 
B)  more of all inputs if production costs fall. 
C)  more of those inputs whose marginal productivity is the greatest. 
D)  less of an input whose price has fallen and more of other inputs in producing a given output. 
A)  more of an input whose price has fallen and less of other inputs in producing a given output. 
B)  more of all inputs if production costs fall. 
C)  more of those inputs whose marginal productivity is the greatest. 
D)  less of an input whose price has fallen and more of other inputs in producing a given output.

Question 19

The demand for capital by a firm is based on the demand for the product that the capital produces. This relationship is referred to as

Accepted Answer

A)  product demand. 
B)  derived demand. 
C)  resource utilization. 
D)  cost minimization. 
A)  product demand. 
B)  derived demand. 
C)  resource utilization. 
D)  cost minimization.

Question 20

What will the elasticity of resource demand be if unit wages rise by 8 percent and the number of employed workers falls by 5 percent?

Accepted Answer

A)  0.63 
B)  1.61 
C)  2.90 
D)  4.00 
A)  0.63 
B)  1.61 
C)  2.90 
D)  4.00

Exam 16: The Demand for Resources

Other things equal, we would expect the labor demand curve of a monopolistic seller to

The marginal revenue product of an economic resource for a firm operating in purely competitive product and resource markets

(Last Word) The rapid spread of ATMs

If the demand for a product produced by an input decreases, the demand for the input will also decrease.

A decrease in the price of a productive resource will result in each of the following except a(n)

Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the

Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus, the demand for labor

Increased resource productivity will, ceteris paribus, increase a firm's demand for an input.

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the

Marginal revenue product describes the

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the

The labor demand curve of a firm that sells its product in an imperfectly competitive market

The demand for labor is a derived demand, whereas the demand for capital is not.

The substitution effect indicates that a profit-seeking firm will use

The demand for capital by a firm is based on the demand for the product that the capital produces. This relationship is referred to as

What will the elasticity of resource demand be if unit wages rise by 8 percent and the number of employed workers falls by 5 percent?

Limits, Alternatives, and Choices

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