Question 1

The demand for any factor of production in a competitive industry depends on

Accepted Answer

A)  its productivity and upon the value of its output in the marketplace. 
B)  its productivity and the productivity of all other inputs. 
C)  the productivity of all the other inputs and how these inputs are valued in the marketplace. 
D)  the amount of the factor that is used and the amounts of all the other factors that are used. 
A)  its productivity and upon the value of its output in the marketplace. 
B)  its productivity and the productivity of all other inputs. 
C)  the productivity of all the other inputs and how these inputs are valued in the marketplace. 
D)  the amount of the factor that is used and the amounts of all the other factors that are used.

Question 2

Refer to the information provided in Figure 10.4 below to answer the questions that follow.   Figure 10.4
-Refer to Figure 10.4. Firms will

Accepted Answer

A)  hire 175 units of labor at a market wage of $15. 
B)  hire 100 units of labor at a market wage of $15 and have a surplus of $5 per unit of labor. 
C)  hire 100 workers at a wage of $25. 
D)  indeterminate from the given information. 
A)  hire 175 units of labor at a market wage of $15. 
B)  hire 100 units of labor at a market wage of $15 and have a surplus of $5 per unit of labor. 
C)  hire 100 workers at a wage of $25. 
D)  indeterminate from the given information.

Question 3

Which of the following situations is most likely to generate the largest output effect from a decrease in the price of one of a firm's inputs?

Accepted Answer

A)  The demand for a firm's product is inelastic. 
B)  The demand for a firm's product is elastic. 
C)  The inputs used in production are highly substitutable. 
D)  The inputs used in production are highly complementary. 
A)  The demand for a firm's product is inelastic. 
B)  The demand for a firm's product is elastic. 
C)  The inputs used in production are highly substitutable. 
D)  The inputs used in production are highly complementary.

Question 4

In the product market, changes in technology affect the marginal ________ of a unit of output. In the labor market, changes in technology affect the marginal ________ of a unit of labor input.

Accepted Answer

A)  cost; cost 
B)  revenue; revenue 
C)  revenue product; cost 
D)  cost; revenue product 
A)  cost; cost 
B)  revenue; revenue 
C)  revenue product; cost 
D)  cost; revenue product

Question 5

If the price of the product produced by labor increases, the marginal revenue product of labor curve will

Accepted Answer

A)  be unaffected because productivity of labor has not changed. 
B)  shift to the left. 
C)  shift to the right. 
D)  become more elastic. 
A)  be unaffected because productivity of labor has not changed. 
B)  shift to the left. 
C)  shift to the right. 
D)  become more elastic.

Question 6

If a product's demand decreases as its supply simultaneously increases, the marginal revenue product curve will

Accepted Answer

A)  shift to the right. 
B)  shift to the left. 
C)  remain unchanged. 
D)  either shift to the left, shift to the right, or remain unchanged depending upon what happens to product price. 
A)  shift to the right. 
B)  shift to the left. 
C)  remain unchanged. 
D)  either shift to the left, shift to the right, or remain unchanged depending upon what happens to product price.

Question 7

Refer to the information provided in Figure 10.3 below to answer the questions that follow.   Figure 10.3
-Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1; after the firm is fully able to adjust all inputs, the firm will hire ________ units of labor to maximize profits.

Accepted Answer

A)  I0 
B)  I1 
C)  I2 
D)  I3 
A)  I0 
B)  I1 
C)  I2 
D)  I3

Question 8

If the price of labor falls,

Accepted Answer

A)  we can conclude that the demand for capital will always decrease because only the factor substitution effect is relevant. 
B)  we can conclude that the demand for capital will always increase because only the output effect is relevant. 
C)  the change in the demand for capital cannot be predicted because the factor substitution effect and output effect work in opposite directions. 
D)  the demand for capital will be unaffected, because only a change in the price of capital would change the demand for capital. 
A)  we can conclude that the demand for capital will always decrease because only the factor substitution effect is relevant. 
B)  we can conclude that the demand for capital will always increase because only the output effect is relevant. 
C)  the change in the demand for capital cannot be predicted because the factor substitution effect and output effect work in opposite directions. 
D)  the demand for capital will be unaffected, because only a change in the price of capital would change the demand for capital.

Question 9

The marginal revenue product of labor curve will always shift to the right if

Accepted Answer

A)  the wage rate rises. 
B)  product demand decreases and product price decreases. 
C)  product demand increases and product price increases. 
D)  the price of capital rises. 
A)  the wage rate rises. 
B)  product demand decreases and product price decreases. 
C)  product demand increases and product price increases. 
D)  the price of capital rises.

Question 10

The idea that the demand for auto workers stems from the demand for automobiles is

Accepted Answer

A)  the value of the marginal product of auto workers. 
B)  derived demand. 
C)  indirect demand. 
D)  output demand. 
A)  the value of the marginal product of auto workers. 
B)  derived demand. 
C)  indirect demand. 
D)  output demand.

Question 11

The return to any factor of production that is in fixed supply is

Accepted Answer

A)  pure profit. 
B)  pure rent. 
C)  producer surplus. 
D)  factor surplus. 
A)  pure profit. 
B)  pure rent. 
C)  producer surplus. 
D)  factor surplus.

Question 12

The marginal revenue product

Accepted Answer

A)  is the product of the marginal product of labor and the price of the output. 
B)  eventually increases as labor input increases. 
C)  measures the benefit to the firm from hiring an additional unit of labor. 
D)  Both A and C are correct. 
A)  is the product of the marginal product of labor and the price of the output. 
B)  eventually increases as labor input increases. 
C)  measures the benefit to the firm from hiring an additional unit of labor. 
D)  Both A and C are correct.

Question 13

Refer to the information provided in Figure 10.3 below to answer the questions that follow.   Figure 10.3
-Refer to Figure 10.3. The market wage is initially W0 and the firm is initially at Point A. Labor supply decreases from S0 to S1, if the firm does not change the amount of capital it employs, the firm will move to Point ________ to maximize profits.

Accepted Answer

A)  B 
B)  C 
C)  E 
D)  F 
A)  B 
B)  C 
C)  E 
D)  F

Question 14

Refer to the data provided in Table 10.1 below to answer the following questions.
Table 10.1 $\begin{array}{l}
\begin{array}{cccc}
\text { Total Labor Units}& \text {Total Product}&\text { Marginal Product of }&\text {Price per }\
\text { (employees) } & \text { (T-shirts per day) } & \text { Labor (per day) } & \text { T-shirt } \
\hline 0 & 0 & -- & -- \
1 & 20 & 20 & \$ 5 \
2 & 50 & 30 & 5 \
3 & 75 & 25 & 5 \
4 & 95 & 20 & 5 \
5 & 110 & 15 & 5
\end{array}
\end{array}$
-Refer to Table 10.1. The marginal revenue product of the ________ worker is $150.

Accepted Answer

A)  second 
B)  third 
C)  fourth 
D)  fifth 
A)  second 
B)  third 
C)  fourth 
D)  fifth

Question 15

If capital and labor are complementary inputs and the firm increases the amount of capital employed in production, the marginal revenue product of labor will

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain constant because the amount of labor was not changed. 
D)  either increase, decrease or remain constant depending on how complementary labor and capital are in production. 
A)  decrease. 
B)  increase. 
C)  remain constant because the amount of labor was not changed. 
D)  either increase, decrease or remain constant depending on how complementary labor and capital are in production.

Question 16

According to the output effect of a factor price increase, the demand for

Accepted Answer

A)  the factor whose price has increased will decrease, but the demand for the other factors will increase. 
B)  all factors decreases. 
C)  all factors increases. 
D)  the factor whose price has increased will increase, but the demand for the other factors will decrease. 
A)  the factor whose price has increased will decrease, but the demand for the other factors will increase. 
B)  all factors decreases. 
C)  all factors increases. 
D)  the factor whose price has increased will increase, but the demand for the other factors will decrease.

Question 17

According to the output effect of a factor price change, if supply of labor decreases, then once the firm fully adjusts to the labor supply change, it

Accepted Answer

A)  increases output and thus demand for all inputs increases. 
B)  decreases output and thus demand for all inputs decreases. 
C)  decreases demand for labor alone and there is no change in its output level. 
D)  decreases output and decreases demand for labor. 
A)  increases output and thus demand for all inputs increases. 
B)  decreases output and thus demand for all inputs decreases. 
C)  decreases demand for labor alone and there is no change in its output level. 
D)  decreases output and decreases demand for labor.

Question 18

Assume that automobiles are a normal good. An increase in income will

Accepted Answer

A)  shift the marginal revenue product curve of auto workers to the left. 
B)  move a firm down the marginal revenue product curve of auto workers. 
C)  shift the marginal revenue product curve of auto workers to the right. 
D)  have no effect on the marginal revenue product curve of auto workers. 
A)  shift the marginal revenue product curve of auto workers to the left. 
B)  move a firm down the marginal revenue product curve of auto workers. 
C)  shift the marginal revenue product curve of auto workers to the right. 
D)  have no effect on the marginal revenue product curve of auto workers.

Question 19

If capital and labor are substitute inputs, the productivity of labor falls as the use of capital increases.

Accepted Answer

A) True 
 B)False

Question 20

Because marginal revenue product reflects productivity, increases in productivity directly shift

Accepted Answer

A)  input supply curves to the left. 
B)  input demand curves to the left. 
C)  input supply curves to the right. 
D)  input demand curves to the right. 
A)  input supply curves to the left. 
B)  input demand curves to the left. 
C)  input supply curves to the right. 
D)  input demand curves to the right.

The demand for any factor of production in a competitive industry depends on

Refer to the information provided in Figure 10.4 below to answer the questions that follow. Figure 10.4 -Refer to Figure 10.4. Firms will

Which of the following situations is most likely to generate the largest output effect from a decrease in the price of one of a firm's inputs?

In the product market, changes in technology affect the marginal of a unit of output. In the labor market, changes in technology affect the marginal of a unit of labor input.

If the price of the product produced by labor increases, the marginal revenue product of labor curve will

If a product's demand decreases as its supply simultaneously increases, the marginal revenue product curve will

If the price of labor falls,

The marginal revenue product of labor curve will always shift to the right if

The idea that the demand for auto workers stems from the demand for automobiles is

The return to any factor of production that is in fixed supply is

The marginal revenue product

If capital and labor are complementary inputs and the firm increases the amount of capital employed in production, the marginal revenue product of labor will

According to the output effect of a factor price increase, the demand for

According to the output effect of a factor price change, if supply of labor decreases, then once the firm fully adjusts to the labor supply change, it

Assume that automobiles are a normal good. An increase in income will

If capital and labor are substitute inputs, the productivity of labor falls as the use of capital increases.

Because marginal revenue product reflects productivity, increases in productivity directly shift

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 any factor of production in a competitive industry depends on

Refer to the information provided in Figure 10.4 below to answer the questions that follow. Figure 10.4 -Refer to Figure 10.4. Firms will

Which of the following situations is most likely to generate the largest output effect from a decrease in the price of one of a firm's inputs?

In the product market, changes in technology affect the marginal ________ of a unit of output. In the labor market, changes in technology affect the marginal ________ of a unit of labor input.

If the price of the product produced by labor increases, the marginal revenue product of labor curve will

If a product's demand decreases as its supply simultaneously increases, the marginal revenue product curve will

If the price of labor falls,

The marginal revenue product of labor curve will always shift to the right if

The idea that the demand for auto workers stems from the demand for automobiles is

The return to any factor of production that is in fixed supply is

The marginal revenue product

If capital and labor are complementary inputs and the firm increases the amount of capital employed in production, the marginal revenue product of labor will

According to the output effect of a factor price increase, the demand for

According to the output effect of a factor price change, if supply of labor decreases, then once the firm fully adjusts to the labor supply change, it

Assume that automobiles are a normal good. An increase in income will

If capital and labor are substitute inputs, the productivity of labor falls as the use of capital increases.

Because marginal revenue product reflects productivity, increases in productivity directly shift

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

In the product market, changes in technology affect the marginal of a unit of output. In the labor market, changes in technology affect the marginal of a unit of labor input.