Question 1

The output effect of a change in the wage rate on a firm's demand for labor input will be greater

Accepted Answer

A) the larger the share of labor costs in total costs and the greater the price elasticity of demand for output. 
B) the larger the share of labor costs in total costs and the smaller the price elasticity of demand for output. 
C) the larger the share of labor costs in total costs and the higher the quantity demanded. 
D) the smaller the possibilities of substituting capital for labor. 
A) the larger the share of labor costs in total costs and the greater the price elasticity of demand for output. 
B) the larger the share of labor costs in total costs and the smaller the price elasticity of demand for output. 
C) the larger the share of labor costs in total costs and the higher the quantity demanded. 
D) the smaller the possibilities of substituting capital for labor. A

Question 2

Short-run producer surplus can be caluculated by integration as (where q* is the firm's profit maximizing output level and MC(q)is its marginal cost function)

Accepted Answer

A)  $\int _ { 0 } ^ { q ^ { *  } } M C ( q ) d q - p$ . 
B)  $\int _ { 0 } ^ { q ^ { * } } [ M C ( q ) - p q ] d q$ . 
C)  $\int _ { 0 } ^ { q ^ { * } } p q - M C ( q ) d q$ . 
D)  $\int _ { 0 } ^ { q ^ { * } } [ p - M C ( q ) ] d q$ . 
A)  $\int _ { 0 } ^ { q ^ { *  } } M C ( q ) d q - p$ . 
B)  $\int _ { 0 } ^ { q ^ { * } } [ M C ( q ) - p q ] d q$ . 
C)  $\int _ { 0 } ^ { q ^ { * } } p q - M C ( q ) d q$ . 
D)  $\int _ { 0 } ^ { q ^ { * } } [ p - M C ( q ) ] d q$ . D

Question 3

Input demand functions that are calculated from profit functions differ from those calculated from cost functions because

Accepted Answer

A) they assume cost-minimization. 
B) they hold output constant. 
C) they assume output price is constant. 
D) they assume output is set at its profit-maximizing level. 
A) they assume cost-minimization. 
B) they hold output constant. 
C) they assume output price is constant. 
D) they assume output is set at its profit-maximizing level. D

Question 4

If a firm is a price taker in both the input and output markets,its marginal revenue product of labor is given by

Accepted Answer

A) the price of its output times labor's marginal physical productivity. 
B) the marginal value product of labor. 
C) the marginal revenue product of capital times the ratio of the wage rate to the rental rate on capital. 
D) all of the other answers are correct. 
A) the price of its output times labor's marginal physical productivity. 
B) the marginal value product of labor. 
C) the marginal revenue product of capital times the ratio of the wage rate to the rental rate on capital. 
D) all of the other answers are correct.

Question 5

If demand facing the firm is price-inelastic,marginal revenue will be

Accepted Answer

A) positive. 
B) zero. 
C) negative. 
D) constant. 
A) positive. 
B) zero. 
C) negative. 
D) constant.

Question 6

One implication of the fact that profit functions are convex in prices is that firms will always prefer

Accepted Answer

A) stable input and output prices. 
B) input and output prices that fluctuate about a given level. 
C) stable input prices and fluctuating output prices. 
D) fluctuating input prices and stable output prices. 
A) stable input and output prices. 
B) input and output prices that fluctuate about a given level. 
C) stable input prices and fluctuating output prices. 
D) fluctuating input prices and stable output prices.

Question 7

A firm's marginal revenue is defined as

Accepted Answer

A) the ratio of total revenue to total quantity produced. 
B) the additional output produced by lowering price. 
C) the additional revenue received due to technical innovation. 
D) the additional revenue received when selling one more unit of output. 
A) the ratio of total revenue to total quantity produced. 
B) the additional output produced by lowering price. 
C) the additional revenue received due to technical innovation. 
D) the additional revenue received when selling one more unit of output.

Question 8

If the firms in perfectly competitive industries each have a production function given by $q = k ^ { 1 / 4 } l ^ { 3 / 4 }$ and the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be

Accepted Answer

A) 0. 
B)  $- \infty$ 
C) -1. 
D) -2. 
A) 0. 
B)  $- \infty$ 
C) -1. 
D) -2.

Question 9

If the demand faced by a firm is inelastic,selling one more unit of output will

Accepted Answer

A) increase revenues. 
B) decrease revenues. 
C) keep revenues constant. 
D) increase profits. 
A) increase revenues. 
B) decrease revenues. 
C) keep revenues constant. 
D) increase profits.

Question 10

If the price of an input falls,a firm would increase the use of that input for two reasons:

Accepted Answer

A) The input is now more productive,and the firm can substitute this input for other relatively more expensive inputs. 
B) The input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production. 
C) Overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs. 
D) Overall production costs are now lower and the firm will have more of other inputs to use with the one in question. 
A) The input is now more productive,and the firm can substitute this input for other relatively more expensive inputs. 
B) The input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production. 
C) Overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs. 
D) Overall production costs are now lower and the firm will have more of other inputs to use with the one in question.

Question 11

In order to maximize profits,a firm should produce at the output level for which

Accepted Answer

A) average cost is minimized. 
B) marginal revenue equals marginal cost. 
C) marginal cost is minimized. 
D) price minus average cost is as large as possible. 
A) average cost is minimized. 
B) marginal revenue equals marginal cost. 
C) marginal cost is minimized. 
D) price minus average cost is as large as possible.

Question 12

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be

Accepted Answer

A) +1. 
B) -1. 
C) 0. 
D) infinite. 
A) +1. 
B) -1. 
C) 0. 
D) infinite.

Question 13

If a price-taking firm's production function is given by $q = \sqrt { l }$ ,its supply function is given by

Accepted Answer

A) q = 2pw. 
B) q = p/2w. 
C) q = 2p/w. 
D) q = 2w/p. 
A) q = 2pw. 
B) q = p/2w. 
C) q = 2p/w. 
D) q = 2w/p.

Question 14

An input's marginal revenue product is given by

Accepted Answer

A) the input's marginal expense times marginal revenue. 
B) the input's marginal expense times the input's marginal physical productivity. 
C) marginal revenue times the number of units employed. 
D) the input's marginal physical productivity times marginal revenue of the firm's output. 
A) the input's marginal expense times marginal revenue. 
B) the input's marginal expense times the input's marginal physical productivity. 
C) marginal revenue times the number of units employed. 
D) the input's marginal physical productivity times marginal revenue of the firm's output.

Question 15

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except

Accepted Answer

A) what percentage of total costs are made up of labor costs. 
B) how much quantity demanded in the output market will be reduced by a higher price. 
C) the capital to labor ratio before the wage increase. 
D) how easily other inputs can be substituted for labor. 
A) what percentage of total costs are made up of labor costs. 
B) how much quantity demanded in the output market will be reduced by a higher price. 
C) the capital to labor ratio before the wage increase. 
D) how easily other inputs can be substituted for labor.

Question 16

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit-maximizing firm?

Accepted Answer

A) The firm is a price taker. 
B) Price exceeds average total cost. 
C) The elasticity of demand facing the firm is -3. 
D) The firm can vary several inputs in the short run. 
A) The firm is a price taker. 
B) Price exceeds average total cost. 
C) The elasticity of demand facing the firm is -3. 
D) The firm can vary several inputs in the short run.

Question 17

A profit-maximizing firm's demand function for labor can be found by differentiating

Accepted Answer

A) the profit function with respect to w. 
B) the cost function with respect to w. 
C) the supply function with respect to w. 
D) the production function with respect to w. 
A) the profit function with respect to w. 
B) the cost function with respect to w. 
C) the supply function with respect to w. 
D) the production function with respect to w.

Question 18

If the demand faced by a firm is elastic,selling one less unit of output will

Accepted Answer

A) increase revenue. 
B) decrease revenue. 
C) keep revenues constant. 
D) decrease price. 
A) increase revenue. 
B) decrease revenue. 
C) keep revenues constant. 
D) decrease price.

Question 19

If the demand curve a firm faces shifts to the right,usually

Accepted Answer

A) it would be impossible to tell whether the marginal revenue curve shifts. 
B) the marginal revenue curve would shift to the left. 
C) the marginal revenue curve would shift to the right. 
D) the marginal revenue curve would not shift. 
A) it would be impossible to tell whether the marginal revenue curve shifts. 
B) the marginal revenue curve would shift to the left. 
C) the marginal revenue curve would shift to the right. 
D) the marginal revenue curve would not shift.

Question 20

In an input market,economic rent is defined as the

Accepted Answer

A) total remuneration paid to a factor of production. 
B) minimum amount required to retain a factor of production in its present use. 
C) total cost for a firm of renting land,equipment,and buildings. 
D) extent to which payments to a factor of production exceed the minimum amount required to retain it in its present use. 
A) total remuneration paid to a factor of production. 
B) minimum amount required to retain a factor of production in its present use. 
C) total cost for a firm of renting land,equipment,and buildings. 
D) extent to which payments to a factor of production exceed the minimum amount required to retain it in its present use.

The output effect of a change in the wage rate on a firm's demand for labor input will be greater

Short-run producer surplus can be caluculated by integration as (where q* is the firm's profit maximizing output level and MC(q)is its marginal cost function)

Input demand functions that are calculated from profit functions differ from those calculated from cost functions because

If a firm is a price taker in both the input and output markets,its marginal revenue product of labor is given by

If demand facing the firm is price-inelastic,marginal revenue will be

One implication of the fact that profit functions are convex in prices is that firms will always prefer

A firm's marginal revenue is defined as

If the firms in perfectly competitive industries each have a production function given by $q = k ^ { 1 / 4 } l ^ { 3 / 4 }$ and the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be

If the demand faced by a firm is inelastic,selling one more unit of output will

If the price of an input falls,a firm would increase the use of that input for two reasons:

In order to maximize profits,a firm should produce at the output level for which

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be

If a price-taking firm's production function is given by $q = \sqrt { l }$ ,its supply function is given by

An input's marginal revenue product is given by

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit-maximizing firm?

A profit-maximizing firm's demand function for labor can be found by differentiating

If the demand faced by a firm is elastic,selling one less unit of output will

If the demand curve a firm faces shifts to the right,usually

In an input market,economic rent is defined as the

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty and Information

Strategy and Game Theory

Production Functions

Cost Functions

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 9: Profit Maximization

The output effect of a change in the wage rate on a firm's demand for labor input will be greater

Short-run producer surplus can be caluculated by integration as (where q* is the firm's profit maximizing output level and MC(q)is its marginal cost function)

Input demand functions that are calculated from profit functions differ from those calculated from cost functions because

If a firm is a price taker in both the input and output markets,its marginal revenue product of labor is given by

If demand facing the firm is price-inelastic,marginal revenue will be

One implication of the fact that profit functions are convex in prices is that firms will always prefer

A firm's marginal revenue is defined as

If the firms in perfectly competitive industries each have a production function given by q=k1/4l3/4q = k ^ { 1 / 4 } l ^ { 3 / 4 }q=k1/4l3/4 and the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be

If the demand faced by a firm is inelastic,selling one more unit of output will

If the price of an input falls,a firm would increase the use of that input for two reasons:

In order to maximize profits,a firm should produce at the output level for which

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero.Then the wage elasticity of demand for labor by widget makers will be

If a price-taking firm's production function is given by q=lq = \sqrt { l }q=l​ ,its supply function is given by

An input's marginal revenue product is given by

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit-maximizing firm?

A profit-maximizing firm's demand function for labor can be found by differentiating

If the demand faced by a firm is elastic,selling one less unit of output will

If the demand curve a firm faces shifts to the right,usually

In an input market,economic rent is defined as the

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty and Information

Strategy and Game Theory

Production Functions

Cost Functions

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

If the firms in perfectly competitive industries each have a production function given by $q = k ^ { 1 / 4 } l ^ { 3 / 4 }$ and the price elasticity of demand for the industry's output is -1,the wage elasticity of demand for labor by the industry will be

If a price-taking firm's production function is given by $q = \sqrt { l }$ ,its supply function is given by