Deck 11: Resource Markets

Question 1

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

Answer 1

D

Question 2

The resource market is different from the product market because

A) in the resource market,firms don't maximize profit
B) in the resource market,households don't maximize utility
C) in the resource market,firms are demanders and households are suppliers
D) supply and demand do not apply in the resource market
E) supply and demand do not apply in the product market

Answer 2

C

Question 3

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

Answer 3

True

Question 4

Other things constant,people supply their resources to the higher paying alternative.

Question 5

If the price of a resource increases,other things constant,less of that resource 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 6

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

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

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 9

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

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

Question 10

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

Question 11

The dean of your college is considering hiring another economics professor.If the additional revenue that the college can earn from employing the professor exceeds the additional cost,the college should

A) do nothing
B) continue to study the issue
C) hire the professor
D) stop offering economics classes
E) not hire the professor and lay off a professor already on the faculty

Question 12

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.

Question 13

An author who writes newspaper columns for $75 each is deciding whether to purchase a personal computer with a laser printer.She figures she'd be able 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 14

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

Question 15

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

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 16

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 17

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 18

The demand for corn syrup is derived from:

A) The demand for corn
B) The supply of corn syrup
C) The supply of corn
D) The demand for goods made with corn syrup
E) The supply of goods made with corn syrup

Question 19

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 20

Which of the following resources will a producer demand another unit of so long as the additional unit's marginal revenue exceeds its marginal cost?

A) labor
B) capital
C) natural resources
D) entrepreneurial ability
E) All of the answers are correct.

Question 21

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 22

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

A) resources will be drawn from lower-valued uses to higher-valued uses
B) resources will be drawn from higher-valued uses to lower-valued 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 23

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 24

Suppose that the wage for drive-thru clerks is $7 an hour at Burger King and $6.50 at McDonald's.The jobs are alike in all other respects.We would expect

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 drive-thru clerks at Burger King
C) a decrease in the supply of drive-thru clerks at Burger King but no change in demand
D) an increase in the supply of drive-thru 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 25

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 26

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 27

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 28

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 29

Both sugar and fructose can be used in the production of candy.If the price of 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 30

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

Question 31

The market supply curve of labor is

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

Question 32

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 33

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 34

A higher price for corn will:

A) Increase the quantity supplied of corn
B) Increase the supply of corn
C) Increase the demand for corn
D) Increase the quantity demanded of corn
E) Decrease the demand for corn

Question 35

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 36

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

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

Question 37

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

Question 38

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 39

If the demand for tacos increases,

A) the supply of corn increases
B) the supply of corn decreases
C) the demand for corn increases
D) the demand for corn decreases
E) the price of corn falls

Question 40

As resources move from low-valued uses in a resource market to highly-valued uses in another resource market,the price paid to the resource in the highly-valued 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 41

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 42

Permanent differentials in resource prices will cause

A) all of the following
B) the allocation of fewer resources to lower-paid 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 higher-paid uses

Question 43

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

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

Question 44

Coal-miners in JimmyVille earn $30 an hour,and the coal-miners in PurpleTown earn $25 an hour.Which of the following is incorrect?

A) The supply of coal-miners in PurpleTown will decrease
B) The supply of coal-miners in JimmyVille will increase
C) Because of resource reallocation,the coal-miners in PurpleTown will earn the same wage as those in JimmyVille
D) Coal-miners are moving from PurpleTown to JimmyVille
E) The supply of coal-miners in PurpleTown will increase

Question 45

Which of the following is an example of a temporary price differential in a resource 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 46

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 47

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 48

Which of the following is an example of a permanent resource price differential?

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 49

Resource price differentials that trigger the reallocation of resources so as to 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 50

If the supply of oceanfront lots is fixed and perfectly inelastic,

A) the demand for the resource determines its price and the level of economic rent
B) the supply of the resource determines its price and the level of economic rent
C) the supply of the resource determines its price and the demand for the resource determines the level of economic rent
D) the demand for the resource determines its price and the supply of the resource determines the level of economic rent
E) the supply curve is horizontal

Question 51

The difference between the average earnings of eye surgeons and those of janitors is an example of

A) a temporary differential
B) a permanent differential
C) a resource price difference that will cause a reallocation of resources to different uses
D) a temporary difference that will be eliminated through the reallocation of resources to different uses
E) a differential caused by a lack of resource mobility

Question 52

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 53

Which of the following can lead to permanent differentials in resource prices?

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 54

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 55

A resource's earnings are all economic rent when the resource has no alternative uses.

Question 56

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 57

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 highly-valued uses to lower-valued uses
D) caused by Congress increasing the federal minimum wage
E) a result of firms using the MRP = MRC rule in hiring resources

Question 58

When resource markets are free to adjust,temporary differentials will cause

A) b,c,and e to occur
B) the allocation of fewer resources to lower-paid 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 higher-paid uses

Question 59

A guarded barbed wire fence separates East and West Bovinia.Soccer players are paid twice as much in West Bovinia as in East Bovinia.This is an 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 60

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 higher-paid areas
E) caused by minimum wage legislation

Question 61

Exhibit 11-2,

In Exhibit 11-2,opportunity cost in equilibrium equals

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

Question 62

Consider two resource markets in which the demand curves slope downward.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 is vertical,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 63

Consider two resource markets in which the demand curves slope downward.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 is vertical,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 64

Exhibit 11-1

In Exhibit 11-1,opportunity cost at equilibrium equals

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

Question 65

Consider two resource markets in which the demand curves slope downward.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 is vertical,equilibrium price is $20,and 30 units of the resource are hired.Which of the following is true?

A) Total resource earnings are the same in both markets.
B) Total resource earnings are greater in market A.
C) Total resource earnings are greater in market B.
D) There is more economic rent in market A.
E) There is derived demand in market A,but not in market B.

Question 66

Exhibit 11-1

In Exhibit 11-1,which unit of the resource is earning the least economic rent?

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

Question 67

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 68

Exhibit 11-1

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

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

Question 69

Exhibit 11-2,

In Exhibit 11-2,total resource earnings at equilibrium equal

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

Question 70

Exhibit 11-1

In Exhibit 11-1,total earnings at equilibrium equal

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

Question 71

Exhibit 11-2,

In Exhibit 11-2,economic rent at equilibrium equals

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

Question 72

Exhibit 11-1

In Exhibit 11-1,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 73

Exhibit 11-1

In Exhibit 11-1,economic rent at equilibrium equals

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

Question 74

Exhibit 11-1

In Exhibit 11-1,which unit of the resource is earning the most economic rent?

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

Question 75

Exhibit 11-2,

In Exhibit 11-2,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 76

John is a soccer player who used to be a mechanic.Aside from the money,he enjoys both jobs equally.He earned $30,000 as a mechanic,and now he earns $250,000 as a soccer player.If John is a soccer player,which of the following statements is correct?

A) Total earnings = $280,000;Economic rent = $250,000;Opportunity cost = $30,000
B) Total earnings = $280,000;Economic rent = $30,000;Opportunity cost = $220,000
C) Total earnings = $250,000;Economic rent = $250,000;Opportunity cost = $0
D) Total earnings = $250,000;Economic rent = $280,000;Opportunity cost = $30,000
E) Total earnings = $250,000;Economic rent = $220,000;Opportunity cost = $30,000

Question 77

Exhibit 11-1

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

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

Question 78

Exhibit 11-1

In Exhibit 11-1,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 79

Exhibit 11-1

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

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

Question 80

Gooey Flakes is the only ready-to-eat cereal that has chocolate syrup injected into each flake.The machine that injects the syrup into the flakes can do nothing else.Which of the following is true?

A) All of the machine's earnings are economic rent.
B) All of the machine's earnings are opportunity cost.
C) The supply curve for this machine is horizontal.
D) The demand curve for this machine is horizontal.
E) The demand curve for this machine is vertical.