Question 1

A firm is hiring resources X,Y,and Z in the profit-maximizing amounts when:

Accepted Answer

A)   MRPx/Px equals MRPy/Py equals MRPz/Pz equals 1.
B)   the sum of the MRPs of the three resources is at a minimum.
C)   the marginal revenue productivity of all three resources is the same.
D)   the marginal revenue product of the last dollar spent on each of the three resources is the same.E) A) and D)
F) A) and C)

Question 2

Resource X has many close substitutes,whereas resource Y has no close substitutes.Other things equal,we would expect:

Accepted Answer

A)   the demand for resource Y to be more elastic than the demand for resource X.
B)   resources X and Y to be close substitutes.
C)   resource X to be more expensive than resource Y.
D)   the demand for resource X to be more elastic than the demand for resource Y.E) C) and D)
F) B) and D)

Question 3

Answer the question on the basis of the following marginal product data for resources a and b.The output of these independent resources sells in a purely competitive market at $1 per unit.   Inputs  of a MPa125220315410556271 Inputs  of bMPb14023633242452061678\begin{array}{ccc}\begin{array}{ccc}	ext { Inputs } \	ext { of a } & & \mathrm{MP}_{\mathrm{a}} \\hline1 & & 25 \2 & & 20 \3 & & 15 \4 & & 10 \5 & & 5 \6 & & 2 \7 & & 1\end{array}\begin{array}{c}\begin{array}{c}	ext { Inputs } \	ext { of } b\end{array} & & M P_{b} \\hline1 & & 40 \2 & & 36 \3 & & 32 \4 & & 24 \5 & & 20 \6 & & 16 \7 & & 8\end{array}\end{array} Inputs  of a 1234567​​MPa​25201510521​​ Inputs  of b​1234567​​MPb​4036322420168​​​  Refer to the given data.Assuming the prices of resources a and b are $5 and $8 respectively,what is the profit-maximizing combination of resources?

Accepted Answer

A)   7 of a and 7 of b.
B)   6 of a and 4 of b.
C)   5 of a and 7 of b.
D)   4 of a and 4 of b. E) B) and C)
F) A) and C)

Question 4

Answer the question on the basis of the following information: 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. Refer to the given information.In competitive labor markets,the marginal cost of an additional unit of labor:

Accepted Answer

A)   is equal to PL × MPL.
B)   is equal to MPL/PL.
C)   is equal to PL.
D)   cannot be determined from the information given.E) All of the above
F) C) and D)

Question 5

A profit-maximizing firm employs resources to the point where:

Accepted Answer

A)   MRC = MP.
B)   resource price equals product price.
C)   MRP = MRC.
D)   MP = product price.E) C) and D)
F) A) and D)

Question 6

The labor demand curve of a purely competitive seller:

Accepted Answer

A)   slopes downward because the elasticity of demand is always less than unity.
B)   slopes downward because of diminishing marginal productivity.
C)   is perfectly elastic at the going wage rate.
D)   slopes downward because of diminishing marginal utility.E) B) and D)
F) C) and D)

Question 7

Answer the question on the basis of the data contained in the following table.Assume that the firm is hiring labor in a purely competitive market.   Units of  Labor  Total  Product 00115228339448555660ProductPrice$2.202.001.801.601.401.201.10\begin{array}{ccc}\begin{array}{ccc}\begin{array}{c}	ext { Units of } \	ext { Labor }\\hline\end{array} && \begin{array}{c}	ext { Total } \	ext { Product }\\hline\end{array} \0 & & 0 \1 & & 15 \2 & & 28 \3 & & 39 \4 & & 48 \5 & & 55 \6 & & 60\end{array}\begin{array}{c}Product\Price\\hline \$ 2.20\  2.00 \ 1.80 \ 1.60 \1.40 \ 1.20 \ 1.10 \end{array}\end{array} Units of  Labor ​​0123456​​ Total  Product ​​0152839485560​ProductPrice$2.202.001.801.601.401.201.10​​​  Refer to the given data.If the wage rate is $11,how many workers will the firm choose to employ?

Accepted Answer

A)   5.
B)   4.
C)   3.
D)   2. E) None of the above
F) All of the above

Question 8

Which of the following occupations is among the ten projected most rapidly declining U.S.occupations in terms of percentage increases?

Accepted Answer

A)   Medical assistants.
B)   Veterinarians.
C)   College professors.
D)   Postal service workers.E) All of the above
F) A) and D)

Question 9

Other things equal,the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the:

Accepted Answer

A)   demand for labor will be elastic only if labor accounts for less than 50 percent of total costs.
B)   demand for labor will be elastic only if labor accounts for 50 percent or more of total costs.
C)   larger the labor cost-total cost ratio,the smaller will be the elasticity of labor demand.
D)   larger the labor cost-total cost ratio,the greater will be the elasticity of labor demand.E) B) and C)
F) A) and D)

Question 10

Assume the price of capital doubles and,as a result,firms make no change in the relative quantities of capital and labor they employ.This implies that:

Accepted Answer

A)   labor is not readily substitutable for capital.
B)   the law of diminishing returns is not applicable.
C)   the firms are producing an inferior good.
D)   the demand for capital is highly price elastic.E) A) and B)
F) None of the above

Question 11

The marginal productivity theory of income distribution holds that all resources are paid according to their marginal contribution to society's output.

Accepted Answer

A) True 
 B)False

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

Answer the question on the basis of the following information: 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. Refer to the given information.If MPC/PC > MPL/PL,the firm:

Accepted Answer

A)   may be maximizing profits,but it is not minimizing costs.
B)   may be minimizing costs,but it is not maximizing profits.
C)   is neither minimizing costs nor maximizing profits.
D)   is minimizing costs and maximizing profits.E) C) and D)
F) B) and D)

Question 14

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units.If the product sells for $6 per unit in a purely competitive market,the MRP of this additional worker is:

Accepted Answer

A)   $6.
B)   $12.
C)   $36.
D)   $72.E) C) and D)
F) A) and B)

Question 15

(Consider This) In the market for superstars:

Accepted Answer

A)   earnings reflect pricing power rather than marginal revenue product.
B)   small differences in talent get magnified into huge differences in pay.
C)   entry and exit rarely occur.
D)   product demand is typically highly elastic.E) None of the above
F) B) and D)

Question 16

A firm will employ more of an input whose relative price has fallen and,conversely,will use less of an input whose relative price has risen.Thus,a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor.This describes the:

Accepted Answer

A)   output effect.
B)   substitution effect.
C)   idea of derived demand.
D)   law of diminishing returns.E) B) and C)
F) A) and C)

Question 17

(Last Word) "The Case of ATMs" best illustrates the:

Accepted Answer

A)   law of diminishing marginal utility.
B)   the substitutability of resources.
C)   idea of derived demand.
D)   principle of unintended side-effects.E) All of the above
F) A) and B)

Question 18

Answer the question on the basis of the following data:  QuantityMPofMRPofQuantity ofMPofMRPofofLaborLaborLaborCapitalCapitalCapital115$4518$242123626183927351546184412539539613626\begin{array}{cccccc}Quantity &MP of& MRP of &	ext{Quantity of}& MP of &MRP of\of Labor& Labor& Labor& Capital &Capital &Capital\\hline1 & 15 & \$ 45 & 1 & 8 & \$ 24 \2 & 12 & 36 & 2 & 6 & 18 \3 & 9 & 27 & 3 & 5 & 15 \4 & 6 & 18 & 4 & 4 & 12 \5 & 3 & 9 & 5 & 3 & 9 \6 & 1 & 3 & 6 & 2 & 6\end{array}QuantityofLabor123456​MPofLabor15129631​MRPofLabor$4536271893​Quantity ofCapital123456​MPofCapital865432​MRPofCapital$2418151296​​  Refer to the given data.If the prices of labor and capital are $9 and $15 respectively,at the profit-maximizing level,the firm's total output will be:

Accepted Answer

A)   38 units.
B)   60 units.
C)   64 units.
D)   27 units. E) None of the above
F) A) and C)

Question 19

Producers should hire resources until the total output of each is equal.

Accepted Answer

A) True 
 B)False

Question 20

The MRP curve for labor:

Accepted Answer

A)   is downsloping and shows the relationship between wage rates and the quantity of labor demanded.
B)   is perfectly elastic if the firm is selling its output competitively.
C)   is upsloping and lies above the labor supply curve.
D)   will shift location when the wage rate changes.E) B) and D)
F) None of the above

Exam 15: The Demand for Resources

Other things equal,the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the:

Correct Answer
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A firm is hiring resources X,Y,and Z in the profit-maximizing amounts when:

Correct Answer
verified

A profit-maximizing firm employs resources to the point where:

Correct Answer
verified

Assume the price of capital doubles and,as a result,firms make no change in the relative quantities of capital and labor they employ.This implies that:

Correct Answer
verified

The labor demand curve of a purely competitive seller:

Correct Answer
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Which of the following occupations is among the ten projected most rapidly declining U.S.occupations in terms of percentage increases?

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

Correct Answer
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The MRP curve for labor:

Correct Answer
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Correct Answer
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Correct Answer
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The marginal productivity theory of income distribution holds that all resources are paid according to their marginal contribution to society's output.

Correct Answer
verified

Producers should hire resources until the total output of each is equal.

Correct Answer
verified

A firm will employ more of an input whose relative price has fallen and,conversely,will use less of an input whose relative price has risen.Thus,a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor.This describes the:

Correct Answer
verified

(Consider This) In the market for superstars:

Correct Answer
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Correct Answer
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Resource X has many close substitutes,whereas resource Y has no close substitutes.Other things equal,we would expect:

Correct Answer
verified

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units.If the product sells for $6 per unit in a purely competitive market,the MRP of this additional worker is:

Correct Answer
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Correct Answer
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(Last Word) "The Case of ATMs" best illustrates the:

Correct Answer
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Correct Answer
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Exam 15: The Demand for Resources

Other things equal,the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the:

Correct AnswerverifiedShow Answer

A firm is hiring resources X,Y,and Z in the profit-maximizing amounts when:

Correct AnswerverifiedShow Answer

A profit-maximizing firm employs resources to the point where:

Correct AnswerverifiedShow Answer

Assume the price of capital doubles and,as a result,firms make no change in the relative quantities of capital and labor they employ.This implies that:

Correct AnswerverifiedShow Answer

The labor demand curve of a purely competitive seller:

Correct AnswerverifiedShow Answer

Which of the following occupations is among the ten projected most rapidly declining U.S.occupations in terms of percentage increases?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The MRP curve for labor:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The marginal productivity theory of income distribution holds that all resources are paid according to their marginal contribution to society's output.

Correct AnswerverifiedShow Answer

Producers should hire resources until the total output of each is equal.

Correct AnswerverifiedShow Answer

A firm will employ more of an input whose relative price has fallen and,conversely,will use less of an input whose relative price has risen.Thus,a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor.This describes the:

Correct AnswerverifiedShow Answer

(Consider This) In the market for superstars:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Resource X has many close substitutes,whereas resource Y has no close substitutes.Other things equal,we would expect:

Correct AnswerverifiedShow Answer

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units.If the product sells for $6 per unit in a purely competitive market,the MRP of this additional worker is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Last Word) "The Case of ATMs" best illustrates the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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