Question 1

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

Accepted Answer

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 2

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

Accepted Answer

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 3

Use the information in the table below to answer the following question(s). The firm hires labor competitively and sells its product in a competitive price-taker market.
Table 12-6
 Refer to Table 12-6. What is the marginal revenue product of the fifth unit of labor?

Accepted Answer

A)  $6 
B)  $36 
C)  $54 
D)  $324

Question 4

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?

Accepted Answer

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

Question 5

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

Accepted Answer

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 6

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

Accepted Answer

A)  remain the same, but the quantity demanded will increase. 
B)  decrease if the demand for the consumer good is inelastic, otherwise the demand will increase. 
C)  stay the same, but the quantity demanded will decrease. 
D)  increase.

Question 7

When a resource price is below equilibrium,

Accepted Answer

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 8

A decrease in the price of a resource would cause

Accepted Answer

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 9

In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical high school graduate without additional education has

Accepted Answer

A)  risen as the demand for skilled labor has increased relative to the demand for unskilled labor. 
B)  risen as the demand for skilled labor has decreased relative to the demand for unskilled labor. 
C)  fallen as the demand for skilled labor has increased relative to the demand for unskilled labor. 
D)  fallen as the demand for skilled labor has decreased relative to the demand for unskilled labor.

Question 10

Which of the following is the best definition of "physical capital"?

Accepted Answer

A)  the labor utilized in the production process 
B)  man-made resources used to produce other goods 
C)  natural resources in their original state 
D)  the ownership of stock shares issued by a corporation

Question 11

An unexpected decrease in the demand for accountants will lead to

Accepted Answer

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 12

Suppose a change in technology increases the marginal product of labor. The result is

Accepted Answer

A)  a downward movement along the demand for labor curve. 
B)  a rightward shift in the demand for labor curve. 
C)  a leftward shift in the demand for labor curve. 
D)  an upward movement along the demand for labor curve.

Question 13

When the marginal revenue product of an input is less than its price, the

Accepted Answer

A)  producer should expand the use of that input. 
B)  price of the input will automatically rise in a free market. 
C)  producer should reduce the use of that input. 
D)  marginal physical product of that input must be below its average physical product.

Question 14

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?

Accepted Answer

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

Question 15

Firms should hire additional units of a resource as long as the

Accepted Answer

A)  marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. 
B)  marginal product of the resource is less than the price of the resource. 
C)  price of the output produced is positive. 
D)  marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource.

Question 16

Harold Brown runs a company that sells encyclopedia sets for $250. The following schedule indicates the number of sets per week that are sold as employment increases.
 If Brown's costs increase by $1,300 per week as additional workers are employed, how many workers should be employed in order to maximize profit?

Accepted Answer

A)  five 
B)  six 
C)  seven 
D)  eight

Question 17

Jim Smith runs a company that sells encyclopedia sets for $200 each. When he employs 5 workers, they can sell 20 sets per week, whereas only 17 sets are sold when 4 workers are employed. What is the weekly marginal revenue product of the fifth worker?

Accepted Answer

A)  $3 
B)  $200 
C)  $600 
D)  $4,000

Question 18

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

Accepted Answer

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 19

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

Accepted Answer

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 20

Because the demand for a resource is highly dependent upon the demand for the final goods that the resource helps produce, the demand for a resource is called a(n)

Accepted Answer

A)  derived demand. 
B)  independent demand. 
C)  declining proportions demand. 
D)  elastic demand.

Exam 12: The Supply of and Demand for Productive Resources