Deck 12: The Supply of and Demand for Productive Resources

Question 1

An increase in the demand for a product will cause

A) both the demand for and prices of the resources used to produce the product to decline.
B) both the demand for and prices of the resources used to produce the product to increase.
C) the demand for the resources used to produce the product to increase and their prices to decline.
D) the demand for the resources used to produce the product to decline and their prices to increase.

Answer 1

both the demand for and prices of the resources used to produce the product to increase.

Question 2

Figure 12-3
Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at point A. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20, then the employment level

A) increases from 6,000 to 10,000.
B) increases from 3,000 to 10,000.
C) decreases from 10,000 to 3,000.
D) decreases from 6,000 to 3,000.

Answer 2

decreases from 6,000 to 3,000.

Question 3

The demand curve for a human resource will be more elastic when

A) there are more and better substitutes are available for it.
B) it is more difficult to substitute other resources for it.
C) the demand for the product the resource is used to produce becomes more inelastic.
D) the time period under consideration is shorter.

Answer 3

there are more and better substitutes are available for it.

Question 4

Use the figure to answer the following question(s).
Figure 12-1
If Figure 12-1 indicated the short-run and long-run supply curves for a resource, which of the following would probably be the long-run supply curve of the resource?

A) Q₂
B) Q₃
C) S_b
D) S_a

Question 5

According to the principle of marginal productivity, if

A) the product price is less than marginal revenue product (MRP), the firm is using too little of the input.
B) the price of an input rises, the quantity demanded of the input will increase.
C) MRP is greater than product price, the firm should reduce the use of the input.
D) price of the input equals MRP, the firm is maximizing profit.

Question 6

If the demand for a consumer good decreases, the demand for resources required to make the good will

A) increase.
B) remain the same, but the quantity demanded will increase.
C) decrease.
D) increase or decrease depending on whether the demand for the product is elastic or inelastic.

Question 7

The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
Refer to Figure 12-4. As the number of workers increases,

A) total output increases, but at a decreasing rate.
B) marginal product increases, but at a decreasing rate.
C) marginal product increases at an increasing rate.
D) total output decreases.

Question 8

A new government study reveals that daily consumption of peanut butter increases life expectancy by 10 years. What will this do to the input markets for peanuts and peanut butter factory workers? Assuming bologna is a substitute for peanut butter, what will happen in the market for bologna factory workers?

Question 9

Suppose the United Auto Workers' Union succeeded in obtaining a 10 percent increase in the wages of its workers and that the wage increase caused automobile prices to rise. Employment in the auto industry would be most likely to decline significantly if

A) the demand for American-made automobiles was highly elastic.
B) the supply of foreign-produced automobiles was highly inelastic.
C) American consumers considered foreign automobiles a poor substitute for American automobiles.
D) the demand for American automobiles was relatively constant and highly inelastic.

Question 10

Use the figure to answer the following question(s).
Figure 12-2
If an unanticipated increase in demand in Figure 12-2 shifts the demand for accountants from D₁ to D₂, how will the higher level of demand influence the wages of accountants in the short run and the long run?

A) In the short run, wages will increase to W₂, but the wage increase will be smaller in the long run.
B) In the short run, wages will be less than W₂, but in the long run, they will rise to W₂.
C) In the short run, wages will increase to W₂, and in the long run, they will be even higher than W₂.
D) Employment will increase, but the higher level of demand will not alter the wages of accountants.

Question 11

If the demand for workers with doctorate degrees in economics increases, we would expect

A) the wages of economists to increase in the short run and the number of economists employed to increase in the long run.
B) the supply of economists to increase in the short run and their wages to rise in the long run.
C) a rapid increase in the supply of economists, causing wages to remain constant.
D) the wages of economists to decrease in the short run and the number of economists employed to increase in the long run.

Question 12

Which one of the following labor resources will likely have the most inelastic supply schedule in the short run?

A) filling station attendants
B) sales clerks
C) construction laborers
D) dentists

Question 13

If skilled labor is three times the cost of unskilled labor, a profit-maximizing firm will vary the quantity of each type of labor until the

A) marginal product of each is the same.
B) amount of unskilled labor used is three times the quantity of skilled labor used.
C) amount of unskilled labor used is one-third the quantity of skilled labor used.
D) marginal product of unskilled labor is one-third that of skilled labor.

Question 14

Use the figure to answer the following question(s).
Figure 12-2
The demand D₁ and short-run supply S_SR of accountants is indicated in Figure 12-2. Which of the following would most likely shift the demand for accountants from D₁ to D₂?

A) an increase in the number of accounting majors in college
B) enacting legislation that increases the complexity of personal and business tax returns
C) high wages for accountants
D) a reduction in the wages of bookkeepers, a substitute resource for accountants

Question 15

Use the figure to answer the following question(s).
Figure 12-1
If one short-run supply curve in Figure 12-1 was for truck drivers and the other was for nuclear physicists (also short-run), which one would probably be the supply curve for physicists?

A) Q₂
B) Q₃
C) S_b
D) S_a

Question 16

Figure 12-3
Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at point A. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20, then there will be an excess

A) supply of 3,000 workers.
B) demand of 7,000 workers.
C) supply of 4,000 workers.
D) supply of 7,000 workers.

Question 17

What concept implies that a firm's marginal revenue product curve for labor will slope downward in the short run?

A) diminishing marginal returns
B) the law of supply
C) the law of decreasing cost
D) the price equalization principle

Question 18

The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
Refer to Figure 12-4. With regard to cookie production, the figure implies

A) diminishing marginal product of workers.
B) diminishing marginal cost of cookie production.
C) decreasing cost of cookie production.
D) increasing marginal product of workers.

Question 19

The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and output increased by twelve units. Since the hammer increased the marginal product more than Bob did, and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why or why not?

Question 20

The notion that the demand for inputs depends on the demand for outputs is termed

A) inverse demand.
B) derived demand.
C) proportional demand.
D) complementary demand.

Question 21

Suppose that workers immigrate to Minnesota from Canada. Which of the following correctly describes what would happen in the market for labor in Minnesota?

A) The equilibrium wage would increase, as would the quantity of labor. With more workers, the added output from an extra worker is larger.
B) The equilibrium wage would decrease, as would the quantity of labor. With fewer workers, the added output from an extra worker is smaller.
C) The equilibrium wage would decrease, and the quantity of labor would increase. With more workers, the added output from an extra worker is smaller.
D) The equilibrium wage would decrease, and the quantity of labor would increase. With more workers, the added output from an extra worker is larger.

Question 22

The supply curve of truck drivers is upward sloping and demand curve is downward sloping. A reduction in the price of hauling freight by truck relative to the price of hauling freight by rail will ____ the equilibrium wage of truck drivers and ____ the number of drivers employed.

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

Question 23

Why is it more expensive to acquire a new house in an urban area than in a rural area if the costs of labor and building materials are the same?

Question 24

An unexpected decrease in the demand for accountants will lead to

A) an increase in the earnings of accountants.
B) an increase in the incentive of students to prepare for a career in accounting.
C) a reduction in the future supply of accountants.
D) an increase in the employment opportunities of accountants.

Question 25

Which of the following is most likely to result from an increase in the demand for computer technicians?

A) an increase in the wages of computer technicians, which will attract additional technicians in the long run
B) an increase in the employment of computer technicians, which will depress current wage rates but eventually lead to higher wage rates for technicians
C) a decline in the number of persons preparing themselves for careers as computer technicians
D) lower wage rates and a shortage of computer technicians

Question 26

When the supply of workers is plentiful, one would predict that market wages would be

A) determined solely by factors that affect supply.
B) determined solely by factors that affect demand.
C) low, other things equal.
D) high, other things equal.

Question 27

Developments in the computer software industry have made it extremely easy for firms to keep their books, conduct their own audits, and fill out the various tax forms. If accountants are an input in the accounting services industry, what will likely happen in the market for accountants? Is there a difference between the short run and the long run?

Question 28

Why is a college graduate more likely to get a job in management than is someone with only a high school diploma, even when the job has nothing to do with a specific type of education?

Question 29

Cattle manure is an input often used in making fertilizer. Suppose a technique is discovered that can transform cattle manure into quality gasoline. What would happen in the fertilizer industry?

Question 30

If the demand for computer scientists increases relative to their supply,

A) the wages of computer scientists will decline.
B) a computer science major will be more attractive to college students.
C) the employment of computer scientists will fall.
D) there will be a surplus of computer scientists.

Question 31

There is an Italian soccer player who makes more than $10 million a year. Why?

Question 32

The Alpha Car Wash is known for the quality way in which every car is hand cleaned. The Beta Car Wash uses machines, so consumers are generally willing to pay a higher price for Alpha's services. The Auto Washers union at Alpha has just succeeded in obtaining a substantial wage increase. What will likely happen as a result?

Question 33

Other things equal, when the supply of workers is scarce, one would predict that market wages would be

A) relatively high.
B) relatively low.
C) determined solely by factors that affect demand.
D) determined outside the domain of economic theory.

Question 34

Assume the average salary for a college philosophy professor is $50,000. Suppose businesses decide they need in-house instructors to teach ethics to employees, and they begin hiring philosophy professors at a salary of $75,000. What are the short-term and long-term effects of this supposition?

Question 35

An unanticipated decline in the demand for legal services will

A) increase both the wages of lawyers and the rate of return they can expect to derive from their legal education.
B) lead to a shortage in the market for legal services.
C) reduce the wages of lawyers but not the quantity of legal services supplied.
D) reduce the wages of lawyers and the rate of return on a legal education..

Question 36

Other things constant, if the demand for computer scientists rises,

A) the wages of computer scientists will tend to fall.
B) employment of computer scientists will tend to rise.
C) there will be a surplus of computer scientists.
D) there will be a shortage of computer scientists.

Question 37

Consider the labor market for nurses, which initially is in equilibrium. Suppose the output price for nursing services increases. Holding all else equal, what effect will this have on the labor market for nurses?

A) The equilibrium wage will increase, and the equilibrium quantity of nurses will increase.
B) The equilibrium wage will increase, and the equilibrium quantity of nurses will decrease.
C) The equilibrium wage will decrease, and the equilibrium quantity of nurses will increase.
D) The equilibrium wage will decrease, and the equilibrium quantity of nurses will decrease.

Question 38

An unexpected increase in the demand for accountants will lead to

A) an increase in their earnings and an expansion in the future supply of accountants.
B) a decrease in the incentive of students to prepare for a career in accounting.
C) a reduction in the current earnings of accountants, followed by a reduction in the future supply of accountants.
D) a reduction in the employment of accountants but not their wage rates.

Question 39

If there is a shortage of nurses, it is expected that

A) wages for nurses will go up as hospitals try to fill these positions.
B) wages for nurses will go down because of the increased competition between hospitals.
C) the return on the human capital investment of current nursing majors will decline.
D) wages for nurses currently practicing will increase, but new nurses will experience lower wages in the future.

Question 40

When a resource price is below equilibrium,

A) excess supply will be present.
B) excess demand will be present.
C) the supply of the resource will be inelastic.
D) the demand for the resource will be inelastic.

Question 41

The supply of human capital to a particular use is

A) perfectly inelastic in the short run.
B) perfectly elastic in the long run.
C) more inelastic in the short run since it takes time for persons to acquire a particular skill.
D) more elastic in the short run since individuals who already possess the particular skill can be attracted into the labor force in the short run.

Question 42

The labor supply curve reflects how

A) workers' decisions about the labor-leisure tradeoff respond to a change in the wage.
B) workers' decisions about the opportunity cost of labor respond to a change in the quantity of labor supplied.
C) firms' decisions about the labor-leisure tradeoff respond to the quantity of labor demanded.
D) firms' decisions about how the quantity of labor they hire respond to changes in their opportunities to earn profits.

Question 43

When the price of a resource is set below equilibrium,

A) excess demand for the resource will occur.
B) excess supply of the resource will result.
C) the supply of the resource will be inelastic.
D) the demand for the resource will be inelastic.

Question 44

If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect

A) economics majors to receive a greater return on their human capital investment.
B) a decrease in the employment opportunities for economics majors.
C) lower wages for economics majors.
D) fewer students to major in economics.

Question 45

Generally, the supply of a resource in the short run will be

A) more elastic than in the long run.
B) less elastic than in the long run.
C) equally elastic as the supply of the resource in the long run.
D) directly related to the elasticity of demand for the product that the resource helps produce.

Question 46

What happens to labor supply in the pear-picking market when the wage paid to apple pickers increases?

A) The labor supply will stay unchanged until the wages paid to pear pickers change.
B) The labor supply will decrease.
C) The labor supply will increase.
D) The labor supply may fall or rise, depending on the price of pears.

Question 47

If the price of crude oil fell significantly, which of the following would be most likely to happen?

A) The price of air travel would increase.
B) The demand for large cars would increase.
C) The price of gasoline would increase.
D) The wages of workers in the automobile industry would fall.

Question 48

If a construction boom leads to an increase in the price of lumber, how will the higher lumber prices influence the wood furniture market?

A) The demand for wood furniture will decline, and furniture prices will fall.
B) There will be a shortage of wood furniture.
C) There will be a surplus of wood furniture.
D) The supply of wood furniture will decline, and furniture prices will increase.

Question 49

Relative to a mobile factor of production, economic theory suggests that the price elasticity of supply for a highly immobile factor of production (for example, land) will be

A) more elastic.
B) less elastic.
C) of unitary elasticity.
D) this is a trick question; the price elasticity of supply for factors of production is not affected by factor mobility.

Question 50

The supply of a resource, such as oil, is likely to be

A) equally elastic in both the short and long run.
B) more elastic in the long run than in the short run.
C) more elastic in the short run than in the long run.
D) determined by the demand for the resource.

Question 51

A decrease in the price of a resource would cause

A) producers to substitute other inputs for the resource.
B) the cost of products made from the resource to fall.
C) producers to use more of the resource.
D) none of the above.
E) both b and c above.

Question 52

A decrease in resource prices will increase the incentive of

A) users to purchase the resource.
B) suppliers to provide more of the resource.
C) firms to find and develop substitutes for the resource.
D) consumers to look for alternatives that do not contain the resource.

Question 53

The supply curve of a human resource will be more elastic the

A) easier it is to obtain the skill and knowledge necessary to provide the resource.
B) more elastic the demand for the product.
C) more inelastic the demand for the product.
D) higher the skill level necessary to perform the job.

Question 54

The supply of both physical and human resources in the long run is determined primarily by

A) the presence or absence of economies of scale.
B) investment choices and resource depreciation.
C) sunk costs; what happens in the present cannot change the future.
D) the law of diminishing marginal returns.

Question 55

If an advance in computer technology reduces the need for businesses to hire accountants, students majoring in accounting should expect

A) a lower rate of return on their human capital investment.
B) an increase in their employment prospects.
C) a higher wage rate than they were expecting when they selected their major.
D) an increase in the demand for accountants.

Question 56

If the price of cotton increases

A) consumers will buy more cotton clothes.
B) consumers will increase their purchases of clothing made of other materials.
C) clothing producers will stop making cotton clothes.
D) clothing producers will not be able to adjust their output.

Question 57

Prices in resource markets

A) provide users with information concerning the relative scarcity of resources.
B) encourage the use of a resource now if its price is expected to rise in the future.
C) provide suppliers with little incentive to develop more of those resources that are intensely demanded by users.
D) have little impact on productive decisions unless they are closely regulated by the government.

Question 58

An increase in the demand for a resource

A) will cause the price of that resource to fall.
B) may be the result of a decrease in the demand for products utilizing this resource.
C) will cause the price of the resource to fall by a smaller amount in the short run than in the long run.
D) will increase the price of the resource and, thereby, increase the incentive of potential suppliers to provide the resource in the future.

Question 59

Unions often attempt to obtain stricter certification requirements and/or longer apprenticeships. These changes will tend to raise union workers' wages because they

A) create unnecessary unemployment.
B) shift the labor supply curve leftward.
C) decrease the marginal product of labor.
D) increase the demand for the product.

Question 60

Suppose a new oxygen-enrichment process will cut in half the energy required to smelt copper. The firm selling licenses for this patented process will experience a greater demand for its product when

A) the price of copper falls and smelters become more desperate to economize.
B) energy prices are expected to fall.
C) energy prices are expected to rise.
D) the price of steel, a substitute for copper, declines.

Question 61

An improvement in technology that allows workers to process twice as many insurance forms in an hour than before will cause

A) more labor to be employed because its marginal revenue product has fallen.
B) an increase in insurance premiums.
C) fewer workers to be employed because their marginal revenue product has decreased.
D) more workers to be employed because their marginal revenue product has increased.
E) fewer workers to be employed because their marginal revenue product has increased.

Question 62

Table 12-3

Refer to Table 12-3. What is the marginal product of the third worker?

A) 7
B) 8
C) 25
D) 75

Question 63

An increase in the demand for automobiles will increase the demand for labor used to produce the automobiles due to

A) an increase in the marginal revenue product of labor.
B) a decrease in the marginal revenue product of labor.
C) an increase in the marginal revenue product of automobiles.
D) a decrease in the marginal revenue product of automobiles.
E) a decrease in the price of automobiles.

Question 64

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil

A) will increase the demand for coal.
B) will reduce the demand for coal.
C) will increase the supply of coal.
D) will reduce the supply of coal.
E) will not affect the demand for coal.

Question 65

Marginal revenue product is the

A) additional revenue from one additional dollar increase in price.
B) change in the revenue product resulting from one additional unit of input.
C) additional revenue from one additional unit of input.
D) change in revenue resulting in one additional dollar in price.

Question 66

If the marginal revenue product of the fifth worker hired by a firm is $15 and the price of a unit of output is $5 regardless of how much is sold, then the marginal product of the fifth worker is

A) 15 units of output.
B) 5 units of output.
C) 3 units of output.
D) 45 units of output.
E) 75 units of output.

Question 67

Table 12-2

Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. If the firm is maximizing the marginal product of labor, what is the firm's marginal revenue product?

A) 140 baseballs.
B) $300.
C) $400.
D) $700.

Question 68

Table 12-3

Refer to Table 12-3. Suppose that the firm pays its workers $75 per day. Each unit of output sells for $10. How many days of labor should the firm hire?

A) 1
B) 2
C) 3
D) 4

Question 69

In the short run, the supply of a resource will generally be

A) less elastic than in the long run.
B) more elastic than in the long run.
C) equally elastic as the supply of the resource in the long run.
D) inversely related to the elasticity of demand for the product that the resource helps produce.

Question 70

Table 12-2

Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?

A) 1 worker
B) 2 workers
C) 3 workers
D) 4 workers

Question 71

Ten cases of spring water are sold for $6 each, and the marginal product of the last unit of labor is 5. If the price of a case increases from $6 to $8, then the marginal revenue product of the last unit of labor would

A) decrease by $10.
B) increase by $40.
C) decrease by $30.
D) increase by $10.
E) not change.

Question 72

Suppose a company sells its product for $5.00. It's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. The company should hire the additional worker only if the wage rate is

A) $5.00 or less per hour.
B) $1.00 or more per hour.
C) $25.00 or less per hour.
D) none of the above.

Question 73

Table 12-3

Refer to Table 12-3. Suppose that the firm pays its workers $55 per day. Each unit of output sells for $12. How many days of labor should the firm hire?

A) 3
B) 4
C) 5
D) 6

Question 74

Diane's Auto World installs tires on automobiles, light trucks, and sport utility vehicles. She is a profit-maximizing business owner whose firm operates in a competitive market. The marginal cost of installing a tire is $10. The marginal productivity of the last worker that Diane hired was 2 tires per hour. What is the maximum hourly wage that Diane was willing to pay the last worker hired?

A) $5
B) $10
C) $20
D) There is insufficient information to answer this question.

Question 75

If a firm is using a resource hired in a perfectly competitive market, and if the marginal resource cost is less than its marginal revenue product,

A) more of the resource should be used.
B) less of the resource should be used.
C) the firm should pay a lower price for the resource.
D) the firm should pay a higher price for the resource.
E) the firm is using the optimal amount of the resource.

Question 76

If a firm is using a resource hired in a perfectly competitive market, and if the price of the resource exceeds the marginal revenue product of the resource,

A) more of the resource should be used.
B) less of the resource should be used.
C) the firm should pay a lower price for the resource.
D) the firm should pay a higher price for the resource.
E) the firm is using the optimal amount of the resource

Question 77

The marginal productivity principle says that a profit-maximizing firm should

A) hire capital until its marginal product is zero.
B) hire labor until another worker costs more to hire than he can earn for the firm.
C) hire the quantities of capital and of labor at which their marginal products are equal.
D) hire capital until its marginal product is negative.

Question 78

Table 12-2

Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. What is the total revenue per day that the firm will earn if it employs five workers?

A) $500.
B) $300.
C) $2200.
D) $2500.

Question 79

Which of the following labor resources will likely have the most elastic supply schedule in the short run?

A) nuclear physicists
B) surgeons
C) retail cashiers
D) graduate-level math professors

Question 80

If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product?

A) Its wage always equals its marginal revenue product.
B) Its wage is always greater than its marginal revenue product.
C) Its wage is always total revenue minus marginal revenue product.
D) Its wage is always less than or equal to its marginal revenue product.