Question 1

To firms, resource prices are a major part of

Accepted Answer

A)   revenues.
B)   total product.
C)   costs.
D)   profits.E) B) and D)
F) B) and C)

Question 2

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

Accepted Answer

A)   unity.
B)   zero.
C)   greater than one.
D)   less than one, but greater than zero.E) All of the above
F) B) and D)

Question 3

Assume a firm purchases resources a and b under purely competitive conditions and combines these resources to produce X. Product X is sold in a purely competitive market. The MPs of a and b are 6 and 3, respectively, and the prices of a and b are $12 and $6, respectively. If equilibrium exists, the price of X will be

Accepted Answer

A)   $1.
B)   $0.50.
C)   $2.
D)   $5.E) A) and B)
F) A) and C)

Question 4

If MPa / Pa = MPb / Pb and MRPa / Pa = MRPb / Pb > 1, this firm is

Accepted Answer

A)   producing its output with the least costly combination of resources but is not producing the profit-maximizing output.
B)   maximizing profits but failing to minimize costs.
C)   neither maximizing profits nor minimizing costs.
D)   combining resources a and b so as to minimize costs and maximize profits.E) None of the above
F) B) and C)

Question 5

If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market, labor demand is

Accepted Answer

A)   unit-elastic.
B)   elastic.
C)   inelastic.
D)   perfectly elastic.E) A) and B)
F) A) and C)

Question 6

Assume that the resource market is purely competitive. If the price of the resource falls, other factors constant, then a firm that sells its product in a purely competitive market will

Accepted Answer

A)   increase production by a larger amount than a firm with some monopoly power in its product market.
B)   increase production by a smaller amount than a firm with some monopoly power in its product market.
C)   decrease production by a larger amount than a firm with some monopoly power in its product market.
D)   decrease production by a smaller amount than a firm with some monopoly power in its product market.E) A) and B)
F) B) and D)

Question 7

Elasticity of resource demand is measured by the

Accepted Answer

A)   absolute change in resource quantity demanded divided by the absolute change in resource price.
B)   percentage change in resource quantity demanded divided by the percentage change in resource price.
C)   absolute change in resource price divided by the absolute change in resource quantity demanded.
D)   percentage change in resource price divided by the percentage change in resource quantity demanded.E) B) and D)
F) All of the above

Question 8

Which of the following statements is correct?

Accepted Answer

A)   If the profit-maximizing rule is fulfilled, it necessarily follows that the cost-minimization rule is being fulfilled.
B)   The profit-maximizing and the cost-minimizing rules are such that fulfilling one has no bearing on fulfilling the other.
C)   If the profit-maximizing rule is fulfilled, the cost-minimization rule may or may not be fulfilled.
D)   If the cost-minimization rule is fulfilled, it necessarily follows that the profit-maximizing rule is being fulfilled.E) None of the above
F) A) and B)

Question 9

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the

Accepted Answer

A)   law of diminishing returns.
B)   law of diminishing marginal utility.
C)   homogeneity of the product.
D)   free mobility of resources.E) B) and C)
F) None of the above

Question 10

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore,

Accepted Answer

A)   capital is very highly substitutable for labor.
B)   the output effect is greater than the substitution effect.
C)   the income effect is greater than the output effect.
D)   the substitution effect is greater than the output effect.E) B) and C)
F) All of the above

Question 11

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. How many workers should the farmer hire?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) C) and D)
F) A) and D)

Question 12

A firm should reduce its employment of a resource whose marginal resource cost exceeds its marginal revenue product.

Accepted Answer

A) True 
 B)False

Question 13

The labor demand curve of a firm that sells its product in a purely competitive market

Accepted Answer

A)   is horizontal or perfectly elastic.
B)   is downsloping and flatter than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic)  market.
C)   is upsloping.
D)   is downsloping and steeper than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic)  market.E) A) and C)
F) A) and B)

Question 14

The marginal product of labor is expressed in , while the marginal revenue product of labor is expressed in .

Accepted Answer

A)   units of output per unit of labor; dollars per unit of labor
B)   units of output per unit of labor; units of output per unit of labor also
C)   dollars per unit of labor; units of output per unit of labor
D)   dollars per unit of labor; dollars per unit of labor alsoE) B) and C)
F) None of the above

Question 15

In firm X labor costs are 85 percent of production costs, while in firm Y labor costs are 40 percent of production costs. A 20 percent increase in wages would increase production costs by

Accepted Answer

A)   23 percent in firm X and 20 percent in firm Y.
B)   19 percent in firm X and 15 percent in firm Y.
C)   15 percent in firm X and 6 percent in firm Y.
D)   17 percent in firm X and 8 percent in firm Y.E) B) and C)
F) All of the above

Question 16

Which of the following occupations is not among the 10 projected fastest-growing U.S. occupations in terms of percentage increases?

Accepted Answer

A)   school teachers
B)   statisticians
C)   physical therapist assistants
D)   wind turbine service techniciansE) A) and B)
F) A) and C)

Question 17

The general rule for hiring any input (say, labor)  in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate)  when the

Accepted Answer

A)   labor supply curve is upsloping.
B)   supply of labor is inelastic.
C)   firm is hiring labor under purely competitive conditions.
D)   firm is hiring labor under imperfectly competitive conditions.E) None of the above
F) All of the above

Question 18

The demand for labor would most likely become less inelastic as a result of

Accepted Answer

A)   a decrease in the elasticity of the demand for the product that the labor produces.
B)   a decrease in the time for employers to make technological changes or purchase new equipment.
C)   a decrease in the proportion of labor costs to total costs.
D)   an increase in the proportion of labor cost to total costs.E) A) and B)
F) B) and D)

Question 19

A firm is producing with the least-cost combination of resources when the

Accepted Answer

A)   last dollar spent on each resource yields the same marginal product.
B)   total dollars spent on each resource are all the same.
C)   unit prices of the resources are equalized.
D)   marginal product of each of the resources is all the same.E) A) and C)
F) A) and D)

Question 20

Suppose a firm hires both labor (L)  and capital (C)  under purely competitive conditions. The price of labor is PL, and that of capital is PC. The marginal product of labor is MPL, and that of capital is MPC. The firm sells its product competitively at a price of PX. Which of the following must pertain if the firm is to minimize the cost of producing any output?

Accepted Answer

A)    MPC=MPL=PX\mathrm { MP }_ { C }  = \mathrm { MP }_ { L }  = P _ { X } MPC​=MPL​=PX​ 
B)    MPCC=PC and MPL=PL\mathrm{MPC}_{C}=P_{C} 	ext { and } \mathrm{MP}_{L}=P_{L}MPCC​=PC​ and MPL​=PL​ 
C)    MPC/PC=MPL/PL\mathrm{MP} _{C} / P_{C}=\mathrm{MP}_{L} / P_{L}MPC​/PC​=MPL​/PL​ 
D)    MPC/PX=MMPL/PX\mathrm { MP } _{C} / P _{X} = M \mathrm { MP } _ { L } / P _{X} MPC​/PX​=MMPL​/PX​  E) A) and C)
F) None of the above

Exam 16: The Demand for Resources

The demand for labor would most likely become less inelastic as a result of

Correct Answer
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If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

Correct Answer
verified

To firms, resource prices are a major part of

Correct Answer
verified

If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market, labor demand is

Correct Answer
verified

The marginal product of labor is expressed in , while the marginal revenue product of labor is expressed in .

Correct Answer
verified

Correct Answer
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Assume that the resource market is purely competitive. If the price of the resource falls, other factors constant, then a firm that sells its product in a purely competitive market will

Correct Answer
verified

The labor demand curve of a firm that sells its product in a purely competitive market

Correct Answer
verified

Elasticity of resource demand is measured by the

Correct Answer
verified

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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A firm is producing with the least-cost combination of resources when the

Correct Answer
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Which of the following occupations is not among the 10 projected fastest-growing U.S. occupations in terms of percentage increases?

Correct Answer
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In firm X labor costs are 85 percent of production costs, while in firm Y labor costs are 40 percent of production costs. A 20 percent increase in wages would increase production costs by

Correct Answer
verified

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the

Correct Answer
verified

A firm should reduce its employment of a resource whose marginal resource cost exceeds its marginal revenue product.

Correct Answer
verified

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore,

Correct Answer
verified

If MP_a/ P_a= MP_b/ P_band MRP_a/ P_a= MRP_b/ P_b> 1, this firm is

Correct Answer
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Exam 16: The Demand for Resources

The demand for labor would most likely become less inelastic as a result of

Correct AnswerverifiedShow Answer

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

Correct AnswerverifiedShow Answer

To firms, resource prices are a major part of

Correct AnswerverifiedShow Answer

If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market, labor demand is

Correct AnswerverifiedShow Answer

The marginal product of labor is expressed in , while the marginal revenue product of labor is expressed in .

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume that the resource market is purely competitive. If the price of the resource falls, other factors constant, then a firm that sells its product in a purely competitive market will

Correct AnswerverifiedShow Answer

The labor demand curve of a firm that sells its product in a purely competitive market

Correct AnswerverifiedShow Answer

Elasticity of resource demand is measured by the

Correct AnswerverifiedShow Answer

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A firm is producing with the least-cost combination of resources when the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following occupations is not among the 10 projected fastest-growing U.S. occupations in terms of percentage increases?

Correct AnswerverifiedShow Answer

In firm X labor costs are 85 percent of production costs, while in firm Y labor costs are 40 percent of production costs. A 20 percent increase in wages would increase production costs by

Correct AnswerverifiedShow Answer

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the

Correct AnswerverifiedShow Answer

A firm should reduce its employment of a resource whose marginal resource cost exceeds its marginal revenue product.

Correct AnswerverifiedShow Answer

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore,

Correct AnswerverifiedShow Answer

If MPa / Pa = MPb / Pb and MRPa / Pa = MRPb / Pb > 1, this firm is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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If MP_a/ P_a= MP_b/ P_band MRP_a/ P_a= MRP_b/ P_b> 1, this firm is

Correct Answer
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Correct Answer
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