Question 1

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market.The prices of l and m are $10 and $4, respectively.In equilibrium, the MPs of l and m, respectively, are

Accepted Answer

A)  1 and 1.
B)  2 and 5.
C)  10 and 4.
D)  5 and 2.E) A) and B)
F) B) and D)

Question 2

We say that the demand for labor is a derived demand because

Accepted Answer

A)  labor is a necessary input in the production of every good or service.
B)  we demand the product that labor helps produce rather than labor service per se.
C)  the forces of supply and demand do not apply directly to labor markets.
D)  labor is hired using the MRP = MRC rule.Difficulty: 02 MediumE) B) and C)
F) A) and D)

Question 3

A computer manufacturer's elasticity of demand for labor is not likely to be affected by the

Accepted Answer

A)  supply of computers.
B)  price elasticity of demand for computers.
C)  ratio of labor cost to other resource costs in the firm.
D)  ease of substituting capital for labor in producing computers.E) None of the above
F) A) and D)

Question 4

Critics of the marginal productivity theory of income distribution claim that the theory is flawed because of

Accepted Answer

A)  the law of diminishing returns.
B)  the existence of imperfect competition, such as of monopoly and monopsony, in output and resource markets.
C)  the problem of comparing different kinds of resources, such as capital and labor.
D)  government policies that redistribute income.E) All of the above
F) A) and D)

Question 5

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

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

Question 8

The elasticity of resource demand will be greater the

Accepted Answer

A)  smaller the portion of the product's total costs accounted for by the resource.
B)  less the elasticity of demand for the product it is producing.
C)  easier it is to substitute other resources in production.
D)  less the elasticity of resource supply.E) A) and B)
F) B) and C)

Question 9

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) None of the above

Question 10

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

Question 11

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 D)
F) A) and C)

Question 12

The introduction of ATMs in the banking industry illustrates that ATMs

Accepted Answer

A)  can be substitutes for labor in handling cash deposits and withdrawals, but they can be complements for labor in other banking functions.
B)  are more productive substitutes for labor in most banking transactions, thereby reducing the long-term demand for labor by banks.
C)  increased the demand for labor by banks because the ATMs proved to be less productive substitutes for labor.
D)  are much better complements for labor, causing banks to reduce the number of their branch locations.E) C) and D)
F) A) and B)

Question 13

(Last Word)  The case of ATMs and bank tellers illustrates that

Accepted Answer

A)  capital is primarily a substitute for labor.
B)  capital is, overall, a complement for labor, not a substitute.
C)  capital and labor are almost always used in fixed proportions.
D)  technological innovation is generally detrimental to employment.E) B) and D)
F) A) and B)

Question 14

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 C)
F) A) and D)

Question 15

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

Question 16

To firms, resource prices are a major part of

Accepted Answer

A)  revenues.
B)  total product.
C)  costs.
D)  profits.E) B) and C)
F) All of the above

Question 17

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 C)
F) A) and B)

Question 18

The strength of the demand for a resource depends on the following factors, except the

Accepted Answer

A)  supply of the resource.
B)  productivity of the resource.
C)  price of the product the resource helps to produce.
D)  demand for the product the resource helps to produce.E) A) and D)
F) B) and C)

Question 19

The less the elasticity of product demand, the greater the elasticity of resource demand.

Accepted Answer

A) True 
 B)False

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
B)  MPC = PC and MPL = PL
C)  MPC / PC = MPL / PL
D)  MPC / PX = MPL / PXE) None of the above
F) All of the above

Exam 16: The Demand for Resources

(Last Word) The case of ATMs and bank tellers illustrates that

Correct Answer
verified

To firms, resource prices are a major part of

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

A computer manufacturer's elasticity of demand for labor is not likely to be affected by the

Correct Answer
verified

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

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

We say that the demand for labor is a derived demand because

Correct Answer
verified

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

Correct Answer
verified

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

Elasticity of resource demand is measured by the

Correct Answer
verified

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market.The prices of l and m are $10 and $4, respectively.In equilibrium, the MPs of l and m, respectively, are

Correct Answer
verified

The elasticity of resource demand will be greater the

Correct Answer
verified

The strength of the demand for a resource depends on the following factors, except the

Correct Answer
verified

The introduction of ATMs in the banking industry illustrates that ATMs

Correct Answer
verified

Correct Answer
verified

Critics of the marginal productivity theory of income distribution claim that the theory is flawed because of

Correct Answer
verified

The less the elasticity of product demand, the greater the elasticity of resource demand.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 16: The Demand for Resources

(Last Word) The case of ATMs and bank tellers illustrates that

Correct AnswerverifiedShow Answer

To firms, resource prices are a major part of

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

A computer manufacturer's elasticity of demand for labor is not likely to be affected by the

Correct AnswerverifiedShow Answer

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

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

We say that the demand for labor is a derived demand because

Correct AnswerverifiedShow Answer

If the price of labor increases relative to the price of capital, and as a result the quantity of capital hired increases, the output effect of the price increase is greater than the substitution effect.

Correct AnswerverifiedShow Answer

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

Elasticity of resource demand is measured by the

Correct AnswerverifiedShow Answer

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market.The prices of l and m are $10 and $4, respectively.In equilibrium, the MPs of l and m, respectively, are

Correct AnswerverifiedShow Answer

The elasticity of resource demand will be greater the

Correct AnswerverifiedShow Answer

The strength of the demand for a resource depends on the following factors, except the

Correct AnswerverifiedShow Answer

The introduction of ATMs in the banking industry illustrates that ATMs

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Critics of the marginal productivity theory of income distribution claim that the theory is flawed because of

Correct AnswerverifiedShow Answer

The less the elasticity of product demand, the greater the elasticity of resource demand.

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

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

Correct AnswerverifiedShow Answer

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