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The labor demand curve of a firm


A) will shift to the left if the price of the product that the labor is producing falls.
B) is perfectly elastic if the firm is selling its product in a purely competitive market.
C) reflects a direct relationship between the number of workers hired and the money wage rate.
D) is the same as its marginal product curve.

E) A) and D)
F) All of the above

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The elasticity of resource demand measures the


A) responsiveness of workers to changes in wage rates.
B) responsiveness of producers to changes in resource prices.
C) ratio of marginal revenue product to resource price.
D) sensitivity of marginal revenue product to changes in product price.

E) All of the above
F) B) and C)

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If MP x > MP y, a firm should hire more x and less y.

A) True
B) False

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Refer to the table. The marginal revenue product of the third unit of the resource is A) $3. B) $5. C) $19. D) $36. Refer to the table. The marginal revenue product of the third unit of the resource is


A) $3.
B) $5.
C) $19.
D) $36.

E) C) and D)
F) B) and D)

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Refer to the given data. Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $12 to $14. As a result of the wage increase, firms will hire A) fewer workers, and the total paid out for wages will decline. B) fewer workers, and the total paid out for wages will increase. C) fewer workers, and the total paid out for wages will remain unchanged. D) more capital, if capital and labor are used in fixed proportions in production. Refer to the given data. Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $12 to $14. As a result of the wage increase, firms will hire


A) fewer workers, and the total paid out for wages will decline.
B) fewer workers, and the total paid out for wages will increase.
C) fewer workers, and the total paid out for wages will remain unchanged.
D) more capital, if capital and labor are used in fixed proportions in production.

E) B) and D)
F) A) and B)

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The substitution effect indicates that a profit-seeking firm will use


A) more of an input whose price has fallen and less of other inputs in producing a given output.
B) more of all inputs if production costs fall.
C) more of those inputs whose marginal productivity is the greatest.
D) less of an input whose price has fallen and more of other inputs in producing a given output.

E) B) and C)
F) A) and D)

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A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table. A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table. To achieve an optimal factor mix for its current output, the firm should employ more A) A and B and less C. B) A and B and C. C) A and C and less B. D) B and less A and C. To achieve an optimal factor mix for its current output, the firm should employ more


A) A and B and less C.
B) A and B and C.
C) A and C and less B.
D) B and less A and C.

E) None of the above
F) A) and C)

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Refer to the table. How many units of a resource would the profit-maximizing firm use if the price of this resource was $19.00? A) 1 B) 2 C) 3 D) 4 Refer to the table. How many units of a resource would the profit-maximizing firm use if the price of this resource was $19.00?


A) 1
B) 2
C) 3
D) 4

E) None of the above
F) C) and D)

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Assume that labor and capital are substitutes in production. If there is an increase in the price of capital, how can this lead to either an increase or decrease in the demand for labor?

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According to the substitution effect, an...

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Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will employ A) 2 workers. B) 3 workers. C) 5 workers. D) 4 workers. Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will employ


A) 2 workers.
B) 3 workers.
C) 5 workers.
D) 4 workers.

E) A) and B)
F) A) and C)

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

A) True
B) False

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Assuming a firm is selling its output in a purely competitive market, its resource demand curve can be determined by


A) multiplying total product by product price.
B) multiplying marginal product by product price.
C) dividing total revenue by marginal product.
D) comparing marginal product with various possible input prices.

E) None of the above
F) A) and C)

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The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $10 and $20 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be A) $140. B) $222. C) $117. D) $82. The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $10 and $20 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be


A) $140.
B) $222.
C) $117.
D) $82.

E) B) and C)
F) A) and C)

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A profit-maximizing firm employs resources to the point where


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

E) B) and D)
F) A) and B)

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Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ A) 3 workers. B) 5 workers. C) 4 workers. D) 2 workers. Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ


A) 3 workers.
B) 5 workers.
C) 4 workers.
D) 2 workers.

E) B) and C)
F) All of the above

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What is a firm's MRP?

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A firm's MRP is the change in ...

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What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 9 percent?


A) 3.00
B) 2.36
C) 0.56
D) 1.80

E) C) and D)
F) A) and C)

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The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $5 and $8 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be A) $76. B) $138. C) $145. D) $170. The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $5 and $8 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be


A) $76.
B) $138.
C) $145.
D) $170.

E) All of the above
F) C) and D)

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


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) None of the above

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


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 D)
F) A) and C)

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