Question 1

Assume that a purely competitive firm uses two resources, labor (L)  and capital (C) , to produce a certain product. In which situation would the firm be maximizing profit?   MRPL  MRPC  PL  PC  A $100$200$300$400 B $100$200$200$100 C $150$200$150$200 D $300$400$300$200\begin{array}{|c|c|c|c|c|} \hline & 	ext { MRPL } & 	ext { MRPC } & 	ext { PL } & 	ext { PC } \\hline 	ext { A } & \$ 100 & \$ 200 & \$ 300 & \$ 400 \\hline 	ext { B } & \$ 100 & \$ 200 & \$ 200 & \$ 100 \\hline 	ext { C } & \$ 150 & \$ 200 & \$ 150 & \$ 200 \\hline 	ext { D } & \$ 300 & \$ 400 & \$ 300 & \$ 200\\hline \end{array} A  B  C  D ​ MRPL $100$100$150$300​ MRPC $200$200$200$400​ PL $300$200$150$300​ PC $400$100$200$200​​

Accepted Answer

A)   Case A
B)   Case B
C)   Case C
D)   Case D E) B) and D)
F) None of the above

Question 2

"Income receivers should be paid in accordance with the value of output each produces." This statement is consistent with the

Accepted Answer

A)   monopoly theory of income distribution.
B)   marginal productivity theory of income distribution.
C)   least-cost, but not profit-maximizing, combination of inputs.
D)   concept of compensating wage differences.E) A) and D)
F) A) and C)

Question 3

Which of the following increases in labor demand is due to a change in the price of a related resource?

Accepted Answer

A)   Software sales rise, thus increasing the demand for software developers.
B)   Snowboarding increases in popularity, thus increasing the demand for the workers who make snowboards.
C)   A decrease in the price of wood decreases the cost of furniture, thus increasing the demand for furniture workers.
D)   A technological change increases output per worker in the computer industry, thus increasing the demand for computer workers.E) All of the above
F) B) and C)

Question 4

(Last Word)  When they were first introduced, ATMs

Accepted Answer

A)   were a substitute for bank tellers, but eventually became a complement.
B)   were a substitute for bank tellers, and their existence has continued to depress the demand for tellers.
C)   were a complement to bank tellers, but over time have replaced them.
D)   had no effect on the demand for bank tellers.E) B) and D)
F) B) and C)

Question 5

Which of the following is equivalent to the costs that firms incur in acquiring economic resources?

Accepted Answer

A)   revenues from the product
B)   income of the resources
C)   money flowing from the resources
D)   profits from the resources employedE) None of the above
F) B) and D)

Question 6

A change in an input price will alter both production costs and the profit-maximizing output. Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase 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) A) and D)
F) B) and C)

Question 7

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by

Accepted Answer

A)   adding marginal product to total product as one more unit of labor is employed.
B)   adding marginal revenue to total product as one more unit of labor is employed.
C)   multiplying marginal product by product price.
D)   multiplying marginal product by marginal revenue.E) A) and B)
F) C) and D)

Question 8

For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by

Accepted Answer

A)   adding marginal product to total product as one more unit of labor is employed.
B)   adding marginal revenue to total product as one more unit of labor is employed.
C)   multiplying marginal product by product price.
D)   dividing marginal product by product price.E) All of the above
F) None of the above

Question 9

The demand curve for labor will most likely increase when the price of a

Accepted Answer

A)   complementary input increases, provided the substitution effect is greater than the output effect.
B)   substitute input decreases, provided the output effect is greater than the substitution effect.
C)   substitute input increases, provided the output effect is greater than the substitution effect.
D)   substitute input decreases, provided the substitution effect is greater than the output effect.E) A) and B)
F) None of the above

Question 10

If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will

Accepted Answer

A)   decrease the demand for the other input.
B)   increase the demand for the other input.
C)   increase the quantity demanded for the other input.
D)   have no effect on the demand for the other input.E) A) and B)
F) B) and C)

Question 11

A union representative observed that if the union members' wages were increased by some proportion, the workers would eventually suffer a greater than proportional decline in employment. This statement could best be explained if

Accepted Answer

A)   the new wages are to take effect immediately.
B)   union labor can easily be replaced with capital.
C)   union labor is an insignificant portion of the total cost of production.
D)   the demand for the final product the workers produce is relatively inelastic.E) A) and D)
F) B) and D)

Question 12

(Consider This)  According to the Consider This box "Superstars," the high pay of superstars reflects

Accepted Answer

A)   elastic product demand.
B)   high marginal revenue productivity.
C)   blocked occupational entry.
D)   warped societal values.E) B) and C)
F) A) and B)

Question 13

A winner-takes-all market, like that for entertainers, exhibits huge differences between the top talents and the next tier of artists in all of the following aspects, except

Accepted Answer

A)   marginal revenue product.
B)   talent.
C)   earnings.
D)   media hype.E) A) and B)
F) All of the above

Question 14

A firm that hires labor in a purely competitive resource market is a

Accepted Answer

A)   "price maker."
B)   "product taker."
C)   "money maker."
D)   "wage taker."E) A) and D)
F) All of the above

Question 15

Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the MRPs of the last units of X and Y employed are $100 and $60, respectively. Resource X can be hired at $50 per unit and resource Y at $20 per unit. The firm

Accepted Answer

A)   should hire more of both X and Y.
B)   should hire more of Y and less of X.
C)   is producing with the least-costly combination of X and Y but could increase its profits by employing more of X and less of Y.
D)   is using the least-costly combination of X and Y but could increase its profits by employing less of both X and Y.E) None of the above
F) A) and D)

Question 16

(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) B) and C)
F) A) and C)

Question 17

If the substitution effect outweighs the output effect, an increase in the price of a substitute resource will increase the demand for labor.

Accepted Answer

A) True 
 B)False

Question 18

The demand for a resource depends primarily on

Accepted Answer

A)   the supply of that resource.
B)   the demand for the product or service that it helps produce.
C)   the price of that input.
D)   the elasticity of supply of substitute inputs.E) A) and C)
F) C) and D)

Question 19

To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.

Accepted Answer

A) True 
 B)False

Question 20

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

Accepted Answer

A) True 
 B)False

Exam 16: The Demand for Resources

A firm that hires labor in a purely competitive resource market is a

Correct Answer
verified

"Income receivers should be paid in accordance with the value of output each produces." This statement is consistent with the

Correct Answer
verified

A change in an input price will alter both production costs and the profit-maximizing output. Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor. This describes the

Correct Answer
verified

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by

Correct Answer
verified

If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will

Correct Answer
verified

(Consider This) According to the Consider This box "Superstars," the high pay of superstars reflects

Correct Answer
verified

A union representative observed that if the union members' wages were increased by some proportion, the workers would eventually suffer a greater than proportional decline in employment. This statement could best be explained if

Correct Answer
verified

The demand for a resource depends primarily on

Correct Answer
verified

If the substitution effect outweighs the output effect, an increase in the price of a substitute resource will increase the demand for labor.

Correct Answer
verified

Correct Answer
verified

(Last Word) When they were first introduced, ATMs

Correct Answer
verified

Which of the following is equivalent to the costs that firms incur in acquiring economic resources?

Correct Answer
verified

To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.

Correct Answer
verified

For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by

Correct Answer
verified

Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the MRPs of the last units of X and Y employed are $100 and $60, respectively. Resource X can be hired at $50 per unit and resource Y at $20 per unit. The firm

Correct Answer
verified

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

Correct Answer
verified

(Consider This) In the market for superstars,

Correct Answer
verified

The demand curve for labor will most likely increase when the price of a

Correct Answer
verified

A winner-takes-all market, like that for entertainers, exhibits huge differences between the top talents and the next tier of artists in all of the following aspects, except

Correct Answer
verified

Which of the following increases in labor demand is due to a change in the price of a related resource?

Correct Answer
verified

Exam 16: The Demand for Resources

A firm that hires labor in a purely competitive resource market is a

Correct AnswerverifiedShow Answer

"Income receivers should be paid in accordance with the value of output each produces." This statement is consistent with the

Correct AnswerverifiedShow Answer

A change in an input price will alter both production costs and the profit-maximizing output. Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor. This describes the

Correct AnswerverifiedShow Answer

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by

Correct AnswerverifiedShow Answer

If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will

Correct AnswerverifiedShow Answer

(Consider This) According to the Consider This box "Superstars," the high pay of superstars reflects

Correct AnswerverifiedShow Answer

A union representative observed that if the union members' wages were increased by some proportion, the workers would eventually suffer a greater than proportional decline in employment. This statement could best be explained if

Correct AnswerverifiedShow Answer

The demand for a resource depends primarily on

Correct AnswerverifiedShow Answer

If the substitution effect outweighs the output effect, an increase in the price of a substitute resource will increase the demand for labor.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Last Word) When they were first introduced, ATMs

Correct AnswerverifiedShow Answer

Which of the following is equivalent to the costs that firms incur in acquiring economic resources?

Correct AnswerverifiedShow Answer

To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.

Correct AnswerverifiedShow Answer

For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by

Correct AnswerverifiedShow Answer

Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the MRPs of the last units of X and Y employed are $100 and $60, respectively. Resource X can be hired at $50 per unit and resource Y at $20 per unit. The firm

Correct AnswerverifiedShow Answer

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

Correct AnswerverifiedShow Answer

(Consider This) In the market for superstars,

Correct AnswerverifiedShow Answer

The demand curve for labor will most likely increase when the price of a

Correct AnswerverifiedShow Answer

A winner-takes-all market, like that for entertainers, exhibits huge differences between the top talents and the next tier of artists in all of the following aspects, except

Correct AnswerverifiedShow Answer

Which of the following increases in labor demand is due to a change in the price of a related resource?

Correct AnswerverifiedShow Answer

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