Question 1

In the marginal productivity theory of income distribution, when all markets are purely competitive, the payment for each unit of a resource is equal to its

Accepted Answer

A)  total product.
B)  marginal product.
C)  marginal revenue product.
D)  total revenue product.E) A) and B)
F) B) and D)

Question 2

The MRP curve is the resource demand curve for

Accepted Answer

A)  neither the purely competitive nor the imperfectly competitive seller.
B)  the imperfectly competitive seller but not the purely competitive seller.
C)  the purely competitive seller but not the imperfectly competitive seller.
D)  both the purely competitive and imperfectly competitive seller.E) B) and C)
F) All of the above

Question 3

What will the elasticity of resource demand be if unit wages rise by 8 percent and the number of employed workers falls by 5 percent?

Accepted Answer

A)  4
B)  2.9
C)  1.61
D)  0.63E) A) and B)
F) C) and D)

Question 4

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, the profit-maximizing firm will hire

Accepted Answer

A)  5 units of labor and 3 of capital.
B)  5 units of labor and 2 of capital.
C)  4 units of labor and 4 of capital.
D)  3 units of labor and 4 of capital.E) A) and D)
F) A) and C)

Question 5

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?

Accepted Answer

A)  Case A
B)  Case B
C)  Case C
D)  Case DE) A) and B)
F) A) and C)

Question 6

Marginal revenue product measures the

Accepted Answer

A)  amount by which the addition of one more worker increases a firm's total revenue.
B)  decline in product price that a firm must accept to sell the extra output of one more worker.
C)  increase in total resource cost resulting from the hire of one extra unit of a resource.
D)  increase in total revenue resulting from the production of one more unit of a product.E) A) and B)
F) B) and C)

Question 7

Hiring the profit-maximizing combination of resources ensures that production costs will be minimized.

Accepted Answer

A) True 
 B)False

Question 8

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of b, then the

Accepted Answer

A)  firm is not fulfilling the least-cost rule in employing resources.
B)  firm may or may not be maximizing profits.
C)  marginal product per dollars' worth of each resource employed is not the same.
D)  firm has achieved minimum efficient scale.E) A) and B)
F) B) and C)

Question 9

Harry owns a barbershop and charges $15 per haircut. By hiring one barber at $12 per hour, the shop can provide 18 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 39 haircuts per day. The MP of the second barber is

Accepted Answer

A)  $315.
B)  $270.
C)  21 haircuts.
D)  39 haircuts.E) B) and D)
F) None of the above

Question 10

The table is for a purely competitive market for resources. At a wage rate of $23 per worker, the firm will choose to employ

Accepted Answer

A)  2 workers.
B)  3 workers.
C)  4 workers.
D)  5 workers.E) B) and C)
F) B) and D)

Question 11

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 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)  $8.
C)  $48.
D)  $80.E) None of the above
F) All of the above

Question 12

Explain how resource pricing relates to money-income determination.

Accepted Answer

Resource prices are a major factor in de...

Question 13

If a firm is hiring inputs under purely competitive conditions, then any level of output will be produced with the least-cost combination of resources A and B when

Accepted Answer

A)  MU of A/price of A = MU of b/price of B.
B)  MRP of A = MRP of B.
C)  the price of A equals the price of B.
D)  MP of A/price of A = MP of b/price of B.E) B) and C)
F) All of the above

Question 14

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively.  If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit?

Accepted Answer

A)  64
B)  42
C)  32
D)  28E) None of the above
F) A) and D)

Question 15

Which of the following will not shift the demand curve for labor?

Accepted Answer

A)  the use of a larger stock of capital with the labor force
B)  a change in the wage rate
C)  an increase in the price of the product that labor is helping to produce
D)  the adoption of a more efficient method of combining labor and capital in the production processE) B) and C)
F) B) and D)

Question 16

The marginal revenue product of a resource depends on the following factors, except

Accepted Answer

A)  the price of the resource.
B)  the price of the product.
C)  the quantity of the resource employed.
D)  the marginal product of the resource.E) B) and D)
F) All of the above

Question 17

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) All of the above
F) None of the above

Question 18

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

Accepted Answer

A)  A decline in the demand for computers in Europe reduces the demand for workers in the domestic computer industry.
B)  The rise of hair salons for both men and women reduces the demand for barbers.
C)  A decrease in the educational skills of manufacturing workers decreases the demand for such workers.
D)  An increase in the price of chemical equipment increases the cost of producing fertilizer, thus decreasing the demand for workers who make fertilizer.E) A) and B)
F) B) and C)

Question 19

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively.  What is the marginal product of the fifth worker?

Accepted Answer

A)  5 units
B)  3 units
C)  4 units
D)  2 unitsE) All of the above
F) None of the above

Question 20

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

Accepted Answer

A)  use more labor and less capital.
B)  use less labor and less capital.
C)  use less labor and more capital.
D)  make no change in resource use.E) All of the above
F) C) and D)

Exam 16: The Demand for Resources

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, the profit-maximizing firm will hire

Correct AnswerverifiedShow Answer

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit?

Correct AnswerverifiedShow Answer

In the marginal productivity theory of income distribution, when all markets are purely competitive, the payment for each unit of a resource is equal to its

Correct AnswerverifiedShow Answer

Which of the following will not shift the demand curve for labor?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The table is for a purely competitive market for resources. At a wage rate of $23 per worker, the firm will choose to employ

Correct AnswerverifiedShow Answer

The MRP curve is the resource demand curve for

Correct AnswerverifiedShow Answer

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. What is the marginal product of the fifth worker?

Correct AnswerverifiedShow Answer

Harry owns a barbershop and charges $15 per haircut. By hiring one barber at $12 per hour, the shop can provide 18 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 39 haircuts per day. The MP of the second barber is

Correct AnswerverifiedShow Answer

If a firm is hiring inputs under purely competitive conditions, then any level of output will be produced with the least-cost combination of resources A and B when

Correct AnswerverifiedShow Answer

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of b, then the

Correct AnswerverifiedShow Answer

Marginal revenue product measures the

Correct AnswerverifiedShow Answer

Hiring the profit-maximizing combination of resources ensures that production costs will be minimized.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

Correct AnswerverifiedShow Answer

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

Correct AnswerverifiedShow Answer

What will the elasticity of resource demand be if unit wages rise by 8 percent and the number of employed workers falls by 5 percent?

Correct AnswerverifiedShow Answer

The marginal revenue product of a resource depends on the following factors, except

Correct AnswerverifiedShow Answer

Explain how resource pricing relates to money-income determination.

Correct AnswerverifiedResource prices are a major factor in de...View AnswerShow 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

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Resource prices are a major factor in de...
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