Deck 11: Resource Markets

Question 1

Resource owners will supply additional units of a resource as long as

A)doing so increases their costs
B)doing so increases production
C)the quantity of the resource demanded exceeds the resource price
D)resource users demand the resource
E)doing so increases their utility

Answer 1

E

Question 2

Which of the following is not an example of derived demand?

A)More people want to plant gardens in the spring; therefore, demand for hoes and shovels increases then.
B)Strong ticket sales for a concert cause the producers to schedule an extra show and demand more ushers.
C)Increased use of robots leads to a decrease in demand for labor.
D)The development of alternative fuels made from corn leads to an increase in demand for corn.
E)Increasing demand for music leads to the construction of more recording studios.

Answer 2

C

Question 3

An increase in the price of a resource will cause a movement along thedemand curve for that resource.

Answer 3

True

Question 4

Which of the following is not an example of derived demand?

A)As more high school graduates go on to college, more professors are hired.
B)As consumers buy more computers, they demand more powerful computers as they become available.
C)As people let their hair grow longer, fewer people become barbers.
D)As people buy more tennis shoes instead of sandals, they buy more shoe laces.
E)Increased demand for overnight delivery speeds up orders for new delivery trucks.

Question 5

As the price of a resource (e.g., labor) decreases,

A)demand for that resource increases
B)the quantity demanded of that resource decreases
C)the supply of that resource increases
D)producers are more willing and able to hire that resource
E)producers are less willing and able to hire that resource

Question 6

If the price of a resource falls, other things constant,

A)demand for the product it produces will increase
B)demand for a substitute product will increase
C)demand for a substitute resource will fall
D)supply of that resource will rise
E)supply of a substitute resource will also rise

Question 7

In the resource market, firms demand resources in order to

A)maximize profit
B)maximize total revenue
C)maximize marginal revenue
D)maximize utility
E)minimize cost

Question 8

The demand for a resource is derived from the demand for the final productit helps to produce.

Question 9

Because it is based on the demand for products, the demand for labor iscalled

A)a substitution demand
B)a complementary demand
C)an income demand
D)a derived demand
E)a marginal demand

Question 10

Resource owners supply resources in ways that

A)maximize their utility
B)maximize their income
C)minimize the amount of work
D)maximize the amount of work
E)maximize the demand for their resource

Question 11

What is true along the demand curve for a resource?

A)Prices of other resources are assumed constant.
B)The marginal product of that resource remains constant.
C)Total cost of production is assumed constant.
D)The price of that particular resource is assumed constant.
E)The quantity of that particular resource is assumed constant.

Question 12

Both sugar and fructose can be used in the production of candy.If the priceof sugar increases,

A)the demand for sugar increases
B)sugar becomes relatively more expensive than fructose only if the price of fructose falls
C)sugar becomes relatively more expensive than fructose, other things constant
D)the price of fructose immediately increases
E)the price of fructose immediately decreases

Question 13

Derived demand refers to

A)demand curves derived from utility functions
B)an individual demand curve estimated from a market demand curve
C)a market demand curve estimated from individual demand curves
D)demand for a resource derived from the demand for the product produced by that resource
E)demand for a product derived from the demand for the resource used to make that product

Question 14

The market demand curve for a resource is the

A)horizontal sum of the demand curves for that resource in all its various uses
B)difference among the demand curves for that resource in all its various uses
C)demand for that resource in its best use
D)sum of the demand curves for that resource in its best two uses
E)vertical sum of the demand curve for that resource in all its various uses

Question 15

Which of the following best illustrates the concept of derived demand?

A)As income rises, the demand for TVs rises.
B)A fall in the price of cameras will increase the demand for film.
C)A fall in the demand for tires will reduce the demand for rubber.
D)When the price of gasoline rises, the demand for automobile repair falls.
E)If consumers expect the price of coffee to rise, demand for coffee rises.

Question 16

An increase in the demand for shoemakers will increase the demand forshoes.

Question 17

If the price of a resource increases, other things constant, less of thatresource will be hired because

A)producers will substitute away from that resource
B)producers fear starting a trend toward higher resource prices
C)the demand curve for the product will shift to the left
D)highly paid resources don't produce as much
E)it makes other resources look expensive as well

Question 18

An author who writes newspaper columns for $75 each is deciding whetherto purchase a personal computer with a laser printer.She figures she'd beable to write two more columns per month than she could on her typewriter.She should

A)buy the computer if the monthly payment is less than $300
B)buy the computer regardless of its price
C)not buy the computer if the monthly payment is greater than $75
D)not buy the computer regardless of the price
E)buy the computer if the monthly payment is less than $150

Question 19

Resource owners will supply additional units of a resource as long as doingso

A)decreases their opportunity cost
B)increases their income
C)increases their utility
D)decreases their income taxes
E)improves their working conditions

Question 20

As the price of land decreases along its demand curve, the relative price ofland

A)increases because the prices of other resources have also decreased
B)decreases because the prices of other resources have also decreased
C)increases because the prices of other resources have increased
D)decreases because the prices of other resources are held constant
E)remains constant because the prices of other resources also increase

Question 21

We see permanent price differentials in land because

A)the demand for land is high
B)land has few uses
C)location is the inherent quality that often determines its value
D)real estate brokers are inefficient
E)land is not traded in free markets

Question 22

Along the supply curve of lifeguards at local public pools,

A)the wage paid to lifeguards is held constant
B)the number of lifeguards is held constant
C)the wage paid to lifeguards at private clubs is held constant
D)the demand for lifeguards is assumed constant
E)the admission price to these public pools rises as the wage rate for lifeguards increases

Question 23

A firm's demand for a resource is a(n)

A)final demand
B)derived demand
C)secondary demand
D)induced demand
E)marginal demand

Question 24

The market supply curve of a resource is

A)downward sloping
B)upward sloping
C)horizontal at the market price
D)vertical
E)determined by firms

Question 25

As the relative price paid to a resource in a particular use rises,

A)resources will be drawn from lower­valued uses to higher­valued uses
B)resources will be drawn from higher­valued uses to lower­valued uses
C)resources will generally remain where they are currently employed
D)the supply of that resource will shift to the right
E)the supply of that resource will shift to the left

Question 26

The difference in land prices between Washington,D.C., and Tulsa,Oklahoma, is an example of a permanent resource price differential.

Question 27

An increase in the price of a resource will cause a rightward shift of itssupply curve.

Question 28

Permanent differentials in resource prices will cause

A)all of the following
B)the allocation of fewer resources to lower­paid uses
C)the equalization of payments for the same resource in different uses
D)no change in the allocation of resources
E)the allocation of more resources to higher­paid uses

Question 29

One determinant of the derived demand for a resource is the

A)price of the product made using the resource
B)extra cost of the resource
C)marginal resource cost of the resource
D)availability of the resource in the marketplace
E)quantity of the resource demanded

Question 30

As resources move from low­valued uses in a resource market to highly­valued uses in another resource market, the price paid to the resource in thehighly­valued market will

A)not be affected, if the change is temporary
B)increase, if the change is temporary
C)remain the same
D)decrease
E)increase, if the change is permanent

Question 31

The market supply curve of capital is

A)upward sloping
B)perfectly inelastic
C)upward sloping at first but then bends backward
D)downward sloping
E)perfectly elastic

Question 32

Which of the following is an example of a permanent resource pricedifferential?

A)When the price of oil increases, oil exploration increases.
B)When the price of CDs falls, CD production decreases.
C)When demand for land in a city increases, its price increases above prices of land elsewhere.
D)When demand for computer programmers increased, more people went into that field.
E)When the price of oil rose, demand for solar panels increased.

Question 33

Other things equal, similar resources in alternative uses will be paid

A)different amounts based on their different uses
B)different amounts based on the alternative uses
C)different amounts if resources are mobile
D)similar amounts if resources are not mobile
E)similar amounts if resources are mobile

Question 34

Which of the following can lead to permanent differentials in resourceprices?

A)an increase in demand for a product produced by the resource
B)differences in the inherent quality of resources
C)differences in the time and money involved in developing necessary skills
D)differences in the nonmonetary rewards of a job
E)a lack of resource mobility

Question 35

Resource price differentials that trigger the reallocation of resources so asto equalize payments for similar resources are known as

A)permanent differentials
B)trigger price differentials
C)reallocation differentials
D)equal differentials
E)temporary differentials

Question 36

As the price paid to a resource increases,

A)the supply of that resource will increase in the resource market
B)the supply of that resource will decrease in the resource market
C)resources will shift from other resource markets to this one
D)resources will shift from this resource market to others
E)resource usage will be unaffected

Question 37

Suppose that the wage for drive­thru clerks is $7 an hour at Burger Kingand $6.50 at McDonald's.The jobs are alike in all other respects.We wouldexpect

A)an increase in the supply of and demand for drive­ thru clerks at Burger King
B)an increase in the supply and a decrease in the demand for drive­thru clerks at Burger King
C)a decrease in the supply of drive­thru clerks at Burger King but no change in demand
D)an increase in the supply of drive­thru clerks at Burger King but no change in demand
E)a decrease in the supply of and demand for drive­ thru clerks at Burger King

Question 38

A temporary resource price differential refers to a price difference

A)that will not lead to a shift of resources among users
B)caused by lack of resource mobility
C)caused by economic rent
D)that, for example, causes more workers to move to higher­paid areas
E)caused by minimum wage legislation

Question 39

Resource price differentials that do not trigger the reallocation of resourcesare known as

A)temporary differentials
B)market differentials
C)conditional differentials
D)permanent differentials
E)sustainable differentials

Question 40

When resource markets are free to adjust, temporary differentials willcause

A)b, c, and e to occur
B)the allocation of fewer resources to lower­paid uses
C)the equalization of payments for the same resource in different uses
D)no change in the allocation of resources
E)the allocation of more resources to higher­paid uses

Question 41

In Exhibit 11­1, the tenth unit of the resource is earning a wage of

A)$4, all of which is economic rent
B)$4, none of which is economic rent
C)$8, all of which is economic rent
D)$8, none of which is economic rent
E)$8, half of which is economic rent

Question 42

Consider two resource markets in which the demand curves slopedownward.In market A, the supply curve is horizontal, equilibrium price is$6, and 100 units of the resource are hired.In market B, the supply curve isvertical, equilibrium price is $20, and 30 units of the resource are hired.Which of the following is true?

A)All of the resource earnings in market A are economic rent.
B)All of the resource earnings in both markets are economic rent.
C)All of the resource earnings in market B are economic rent.
D)None of the resource earnings in either market is an opportunity cost.
E)None of the resource earnings in either market is economic rent.

Question 43

Exhibit 11­1 In Exhibit 11­1, opportunity cost at equilibrium is represented by area

A)a
B)b
C)c
D)a + b
E)b + c

Question 44

Exhibit 11­1 In Exhibit 11­1, the twentieth unit of the resource is earning a wage of

A)$4, all of which is economic rent
B)$4, none of which is economic rent
C)$8, all of which is economic rent
D)$8, none of which is economic rent
E)$8, half of which is economic rent

Question 45

In Exhibit 11­1, which unit of the resource is earning the least economicrent?

A)the fifth
B)the tenth
C)the fifteenth
D)the twentieth
E)they are all earning the same economic rent

Question 46

If all of the income paid to a resource is opportunity costs,

A)the price and quantity of that resource are determined exclusively by supply
B)the price and quantity of that resource are determined exclusively by demand
C)the quantity of that resource is determined exclusively by supply
D)the price of that resource is determined exclusively by demand
E)the quantity of that resource is determined exclusively by demand

Question 47

Exhibit 11­1 In Exhibit 11­1, total earnings at equilibrium equal

A)$40
B)$80
C)$160
D)$16
E)$8

Question 48

A relaxation of U.S.immigration laws and regulations would

A)further reduce wages in poorer countries
B)turn some permanent resource differentials into temporary ones
C)increase the demand for labor in the United States
D)turn some temporary resource differentials into permanent ones
E)increase the supply of labor in poorer countries

Question 49

Consider two resource markets in which the demand curves slopedownward.In market A, the supply curve is horizontal, equilibrium price is$6, and 100 units of the resource are hired.In market B, the supply curve isvertical, equilibrium price is $20, and 30 units of the resource are hired.Which of the following is true?

A)All of the resource earnings in market A are opportunity costs.
B)All of the resource earnings in both markets are opportunity costs.
C)All of the resource earnings in market B are opportunity costs.
D)None of the resource earnings in either market is an opportunity cost.
E)None of the resource earnings in either market is economic rent.

Question 50

Permanent resource price differentials are caused by

A)differences in resource quality
B)differences in the time and training required to perform the job
C)differences in nonmonetary aspects of the job
D)a lack of resource mobility
E)all of the above

Question 51

Which of the following is an example of a temporary price differential in aresource market?

A)land downtown is more expensive than land in the suburbs
B)a superstar professional basketball player is paid more than the average professional player
C)cable television installers have a higher wage than telephone installers
D)an airline pilot is paid more than a flight attendant
E)a worker in a toxic waste plant earns more than a teacher

Question 52

A resource's earnings are all economic rent when the resource has noalternative uses.

Question 53

) In Exhibit 11­1, total earnings at equilibrium are represented by area

A)a
B)b
C)c
D)a + b
E)b + c

Question 54

A temporary price differential in resource markets is

A)eliminated by resource movements
B)caused by a failure of firms to maximize profits
C)eliminated by resources moving from highly­valued uses to lower­valued uses
D)caused by Congress increasing the federal minimum wage
E)a result of firms using the MRP = MRC rule in hiring resources

Question 55

) In Exhibit 11­1, economic rent at equilibrium is represented by area

A)a
B)b
C)c
D)a + b
E)b + c

Question 56

If all of the returns to a resource are in the form of economic rent,

A)the price of that resource is determined exclusively by supply
B)the price of that resource is determined exclusively by demand
C)the price and quantity of that resource are determined exclusively by supply
D)the price and quantity of that resource are determined exclusively by demand
E)the equilibrium price is zero

Question 57

The fewer alternative uses a resource has,

A)the greater the proportion of its earnings that is economic rent
B)the smaller the proportion of its earnings that is economic rent
C)the more elastic its supply
D)the more elastic its demand
E)the less elastic its supply

Question 58

If all of the returns to a resource are in the form of economic rent,

A)the demand curve for that resource must be horizontal
B)the demand curve for that resource must be vertical
C)the supply curve of that resource must be horizontal
D)the supply curve of that resource must be vertical
E)the demand curve for that resource must be perfectly elastic

Question 59

In Exhibit 11­1, economic rent at equilibrium equals

A)$40
B)$80
C)$160
D)$16
E)$8

Question 60

A guarded barbed wire fence separates East and West Bovinia.Soccerplayers are paid twice as much in West Bovinia as in East Bovinia.This isan example of

A)inelastic supply
B)a temporary resource price differential
C)a permanent resource price differential
D)diminishing marginal revenue product
E)economic rent

Question 61

In Exhibit 11­3, the equilibrium price of the resource is

A)$16
B)$12
C)$10
D)less than $10
E)unable to tell from the information given

Question 62

The more elastic the supply of a resource,

A)the greater is economic rent as a proportion of total earnings
B)the greater is opportunity cost as a proportion of total earnings
C)the fewer alternative uses the resource has
D)the greater the derived demand for the resource
E)the lower the derived demand for the resource

Question 63

In Exhibit 11­2, total resource earnings at equilibrium equal

A)$40
B)$60
C)$400
D)$1,000
E)$300

Question 64

Which resource earns the highest economic rent as a proportion of totalearnings?

A)a resource specialized in one task
B)a nonspecialized resource
C)a resource with inelastic demand
D)a resource in low demand
E)a resource with elastic demand

Question 65

Exhibit 11­4 In Exhibit 11­4, what is the equilibrium price for the resource?

A)$16
B)$12
C)$10
D)less than $10
E)unable to determine from information given

Question 66

Exhibit 11­3 In Exhibit 11­3, the equilibrium quantity of the resource exchanged is

A)more than 100 units
B)100 units
C)60 units
D)less than 60 units
E)unable to tell from the information given

Question 67

Exhibit 11­2 In Exhibit 11­2, which unit of the resource is earning the most economicrent?

A)the first
B)the tenth
C)the fifteenth
D)the hundredth
E)they are all earning the same economic rent

Question 68

Exhibit 11­2 In Exhibit 11­2, economic rent at equilibrium equals

A)$40
B)$60
C)$10
D)$700
E)$300

Question 69

Exhibit 11­4 In Exhibit 11­4, which unit of the resource is earning the most economicrent?

A)none earns economic rent
B)the first
C)the sixtieth
D)the hundredth
E)they are all earning the same positive economic rent

Question 70

Exhibit 11­2 In Exhibit 11­2, the 100th unit of the resource is earning a resource price of

A)$10, all of which is economic rent
B)$10, none of which is economic rent
C)$4, all of which is economic rent
D)$4, none of which is economic rent
E)$10, some of which is economic rent

Question 71

In Exhibit 11­4, total resource earnings in equilibrium equal

A)$12
B)$10
C)$720
D)$1,000
E)$1,200

Question 72

In Exhibit 11­3, total resource earnings in equilibrium equal

A)$12
B)$10
C)$720
D)$1,000
E)$1,200

Question 73

Exhibit 11­4 In Exhibit 11­4, economic rent in equilibrium equals

A)$0
B)$120
C)$1,000
D)$300
E)$1,300

Question 74

Economic rent is defined as

A)the opportunity cost of a resource
B)the payment to a resource in excess of its opportunity cost
C)opportunity cost
D)total earnings
E)the part of a homeowner's housing that is included in GDP accounts

Question 75

Exhibit 11­3 In Exhibit 11­3, economic rent in equilibrium equals

A)$6
B)$120
C)$1,000
D)$300
E)$1,300

Question 76

In Exhibit 11­2, opportunity cost in equilibrium equals

A)$40
B)$60
C)$100
D)$700
E)$300

Question 77

In Exhibit 11­4, opportunity cost in equilibrium equals

A)$0
B)$120
C)$1,000
D)$300
E)$1,300

Question 78

A TV actor used to be a teacher.Aside from the salary, he likes both jobsequally well.If he can earn $50,000 as a teacher and $300,000 as an actor,what are his economic rent and opportunity costs as an actor?

A)Economic rent is $250,000; opportunity costs are $50,000.
B)Economic rent is $50,000; opportunity costs are $250,000.
C)Economic rent is $50,000; opportunity costs are $300,000.
D)Economic rent is $300,000; opportunity costs are $50,000.
E)Economic rent is $300,000; opportunity costs are $350,000.

Question 79

In Exhibit 11­3, opportunity costs in equilibrium equal

A)$0
B)$120
C)$1,000
D)$300
E)$1,300

Question 80

In Exhibit 11­4, what is the equilibrium amount of the resource exchangedin the market?

A)more than 100 units
B)100 units
C)60 units
D)fewer than 60 units
E)unable to determine from information given