Question 1

The demand for inputs is a derived demand because

Accepted Answer

A)  it does not come from competitive markets. 
B)  it depends on the demand for outputs. 
C)  it is derived from nature. 
D)  it is derived from production. 
A)  it does not come from competitive markets. 
B)  it depends on the demand for outputs. 
C)  it is derived from nature. 
D)  it is derived from production.

Question 2

A profit-maximizing firm will continue to employ land until

Accepted Answer

A)  MPLAND = PLAND. 
B)  MRPLAND = 0. 
C)  MRPLAND = MPLAND. 
D)  MRPLAND = PLAND. 
A)  MPLAND = PLAND. 
B)  MRPLAND = 0. 
C)  MRPLAND = MPLAND. 
D)  MRPLAND = PLAND.

Question 3

Refer to the information provided in Figure 10.2 below to answer the questions that follow.   Figure 10.2
-Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1. A likely explanation for this is that

Accepted Answer

A)  the productivity of a variable input declined. 
B)  the price of a variable input decreased. 
C)  the demand for the firm's product decreased. 
D)  the supply of a variable input decreased. 
A)  the productivity of a variable input declined. 
B)  the price of a variable input decreased. 
C)  the demand for the firm's product decreased. 
D)  the supply of a variable input decreased.

Question 4

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

Accepted Answer

A)  MPL = MPK = MPA 
B)  PL = PK = PA 
C)  MPL/PL = MPK/PK = MPA/PA 
D)  MPL = MPK = MPA = 1/PX 
A)  MPL = MPK = MPA 
B)  PL = PK = PA 
C)  MPL/PL = MPK/PK = MPA/PA 
D)  MPL = MPK = MPA = 1/PX

Question 5

Assume that Creative Ceramics can vary both capital and labor. An increase in the amount of capital will

Accepted Answer

A)  have no impact on the productivity of labor. 
B)  cause the firm to move down along the marginal revenue product of labor curve and hire more labor. 
C)  cause the marginal revenue product of labor curve to be more inelastic. 
D)  shift the marginal revenue product of labor curve out to the right. 
A)  have no impact on the productivity of labor. 
B)  cause the firm to move down along the marginal revenue product of labor curve and hire more labor. 
C)  cause the marginal revenue product of labor curve to be more inelastic. 
D)  shift the marginal revenue product of labor curve out to the right.

Question 6

The formula for the marginal revenue product of labor (L is for labor, X is the output) is

Accepted Answer

A)  MPL/PX. 
B)  PX/MPL. 
C)  (MPL)(MRX). 
D)  MPL + PX. 
A)  MPL/PX. 
B)  PX/MPL. 
C)  (MPL)(MRX). 
D)  MPL + PX.

Question 7

Related to the Economics in Practice on page 223: A study discussed in the Economics in Practice found that NFL teams that trade two lower draft picks for one higher pick tend to ________ player productivity and therefore ________ for that pick in terms of the draft-pick trade.

Accepted Answer

A)  underestimate; overpay 
B)  underestimate; underpay 
C)  overestimate; overpay 
D)  overestimate; underpay 
A)  underestimate; overpay 
B)  underestimate; underpay 
C)  overestimate; overpay 
D)  overestimate; underpay

Question 8

Factors of production that can be used together to enhance the other's productivity are

Accepted Answer

A)  substitutable inputs. 
B)  complementary inputs. 
C)  duplicate inputs. 
D)  proportionate inputs. 
A)  substitutable inputs. 
B)  complementary inputs. 
C)  duplicate inputs. 
D)  proportionate inputs.

Question 9

If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10, the firm's marginal revenue product is

Accepted Answer

A)  $1.00. 
B)  $10.00. 
C)  $100.00. 
D)  $1,000.00. 
A)  $1.00. 
B)  $10.00. 
C)  $100.00. 
D)  $1,000.00.

Question 10

The price of any factor of production in a competitive market depends on the value of the final product it is used to produce.

Accepted Answer

A) True 
 B)False

Question 11

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 3 bushels. What would you advise this farmer to do?

Accepted Answer

A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is more than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal. 
A)  Do nothing because the wage rate and the marginal product of the last worker hired are equal. 
B)  Reduce employment because the wage paid is more than the marginal revenue product. 
C)  Increase employment because the wage paid is less than the marginal revenue product. 
D)  Reduce the product price so that the wage and marginal revenue product will be equal.

Question 12

A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur?

Accepted Answer

A)  Capital will be substituted for labor. 
B)  Labor will be substituted for capital. 
C)  Output increases as do the prices of capital and labor. 
D)  Output decreases as does the price of cars. 
A)  Capital will be substituted for labor. 
B)  Labor will be substituted for capital. 
C)  Output increases as do the prices of capital and labor. 
D)  Output decreases as does the price of cars.

Question 13

If Tie-Dyed T-Shirts is currently employing labor so that the wage is less than the marginal revenue product of labor, it must also be true that

Accepted Answer

A)  total revenues would be greater than total costs. 
B)  the wage is greater than marginal cost. 
C)  the price of the product must be less than marginal cost. 
D)  the price of the product must be greater than marginal cost. 
A)  total revenues would be greater than total costs. 
B)  the wage is greater than marginal cost. 
C)  the price of the product must be less than marginal cost. 
D)  the price of the product must be greater than marginal cost.

Question 14

Shifts in factor demand result from changes in

Accepted Answer

A)  demand for outputs. 
B)  the quantity of other factors with which it works. 
C)  the price of other inputs. 
D)  All of the above are correct. 
A)  demand for outputs. 
B)  the quantity of other factors with which it works. 
C)  the price of other inputs. 
D)  All of the above are correct.

Question 15

Households will supply labor as long as the wage they receive is less than the value of their leisure time.

Accepted Answer

A) True 
 B)False

Question 16

If product demand increases and product price increases,

Accepted Answer

A)  the marginal revenue product curve will shift to the right. 
B)  the marginal revenue product curve will shift to the left. 
C)  the firm will move up the marginal revenue product curve and hire fewer units of the input. 
D)  the firm will move down the marginal revenue product curve and hire more units of the input. 
A)  the marginal revenue product curve will shift to the right. 
B)  the marginal revenue product curve will shift to the left. 
C)  the firm will move up the marginal revenue product curve and hire fewer units of the input. 
D)  the firm will move down the marginal revenue product curve and hire more units of the input.

Question 17

Refer to the information provided in Figure 10.2 below to answer the questions that follow.   Figure 10.2
-Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1 A profit-maximizing firm should ________ the amount of output produced and ________ its demand for labor.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  keep constant; increase 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  keep constant; increase

Question 18

If labor and capital are complementary in production and a technological advance increases the productivity of capital, then, ceteris paribus,

Accepted Answer

A)  labor productivity is likely to fall. 
B)  labor productivity is likely to rise. 
C)  wages are likely to fall. 
D)  Both A and C are correct. 
A)  labor productivity is likely to fall. 
B)  labor productivity is likely to rise. 
C)  wages are likely to fall. 
D)  Both A and C are correct.

Question 19

To produce one unit of output, a firm can use either one unit of capital or one unit of labor. In this case, capital and labor are

Accepted Answer

A)  complementary inputs. 
B)  substitutable inputs. 
C)  both complementary and substitutable inputs. 
D)  unrelated inputs. 
A)  complementary inputs. 
B)  substitutable inputs. 
C)  both complementary and substitutable inputs. 
D)  unrelated inputs.

Question 20

Because a famous painting is fixed in supply, its price is

Accepted Answer

A)  demand determined. 
B)  supply determined. 
C)  inelastic. 
D)  independently determined. 
A)  demand determined. 
B)  supply determined. 
C)  inelastic. 
D)  independently determined.

The demand for inputs is a derived demand because

A profit-maximizing firm will continue to employ land until

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1. A likely explanation for this is that

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

Assume that Creative Ceramics can vary both capital and labor. An increase in the amount of capital will

The formula for the marginal revenue product of labor (L is for labor, X is the output) is

Related to the Economics in Practice on page 223: A study discussed in the Economics in Practice found that NFL teams that trade two lower draft picks for one higher pick tend to player productivity and therefore for that pick in terms of the draft-pick trade.

Factors of production that can be used together to enhance the other's productivity are

If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10, the firm's marginal revenue product is

The price of any factor of production in a competitive market depends on the value of the final product it is used to produce.

A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur?

If Tie-Dyed T-Shirts is currently employing labor so that the wage is less than the marginal revenue product of labor, it must also be true that

Shifts in factor demand result from changes in

Households will supply labor as long as the wage they receive is less than the value of their leisure time.

If product demand increases and product price increases,

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1 A profit-maximizing firm should the amount of output produced and its demand for labor.

If labor and capital are complementary in production and a technological advance increases the productivity of capital, then, ceteris paribus,

To produce one unit of output, a firm can use either one unit of capital or one unit of labor. In this case, capital and labor are

Because a famous painting is fixed in supply, its price is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Exam 10: Input Demand: the Labor and Land Markets

The demand for inputs is a derived demand because

A profit-maximizing firm will continue to employ land until

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1. A likely explanation for this is that

Assume the Backwoods Shoe Company hires three inputs: labor (L), capital (K), and land (A) to produce shoes (X). Which of the following conditions must be met so that the firm is using the optimal, or least costly, combination of inputs?

Assume that Creative Ceramics can vary both capital and labor. An increase in the amount of capital will

The formula for the marginal revenue product of labor (L is for labor, X is the output) is

Related to the Economics in Practice on page 223: A study discussed in the Economics in Practice found that NFL teams that trade two lower draft picks for one higher pick tend to ________ player productivity and therefore ________ for that pick in terms of the draft-pick trade.

Factors of production that can be used together to enhance the other's productivity are

If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10, the firm's marginal revenue product is

The price of any factor of production in a competitive market depends on the value of the final product it is used to produce.

A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur?

If Tie-Dyed T-Shirts is currently employing labor so that the wage is less than the marginal revenue product of labor, it must also be true that

Shifts in factor demand result from changes in

Households will supply labor as long as the wage they receive is less than the value of their leisure time.

If product demand increases and product price increases,

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1 A profit-maximizing firm should ________ the amount of output produced and ________ its demand for labor.

If labor and capital are complementary in production and a technological advance increases the productivity of capital, then, ceteris paribus,

To produce one unit of output, a firm can use either one unit of capital or one unit of labor. In this case, capital and labor are

Because a famous painting is fixed in supply, its price is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Related to the Economics in Practice on page 223: A study discussed in the Economics in Practice found that NFL teams that trade two lower draft picks for one higher pick tend to player productivity and therefore for that pick in terms of the draft-pick trade.

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. This firm's marginal cost curve has shifted from MC0 to MC1 A profit-maximizing firm should the amount of output produced and its demand for labor.