Question 1

A profit-maximizing firm should hire an input as long as the

Accepted Answer

A)  firm can increase its total revenue.
B)  price of the input doesn't exceed the price of the other inputs used in the firm's production.
C)  marginal revenue product of the input is at least as much as the cost of hiring the input.
D)  marginal revenue product of the input is greater than the marginal revenue product of other inputs the firm is using.E) B) and C)
F) A) and C)

Question 2

Suppose that the labor cost to total cost ratio in industry A is 82 percent, while in industry B it is 21 percent. Other things equal, labor demand will be

Accepted Answer

A)  more elastic in industry A than in B.
B)  relatively inelastic in both industries A and B.
C)  more elastic in industry B than in A.
D)  relatively elastic in both industries A and B.E) B) and C)
F) A) and C)

Question 3

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, the firm's economic profits will be

Accepted Answer

A)  $102.
B)  $82.
C)  $67.
D)  $28.E) B) and D)
F) A) and D)

Question 4

The equation MP ₗ / Pₗ = MP C / Pc

Accepted Answer

A)  designates the MR = MC level of output.
B)  assumes imperfect competition in the hiring of labor and capital.
C)  is a sufficient condition for the maximization of profits.
D)  is a necessary, but not sufficient, condition for the maximization of profits.E) A) and B)
F) A) and C)

Question 5

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases from 2016 to 2026?

Accepted Answer

A)  medical assistants
B)  occupational therapy assistants
C)  wind turbine service technicians
D)  statisticiansE) A) and B)
F) B) and C)

Question 6

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MRP of the second barber is

Accepted Answer

A)  18 haircuts.
B)  $108.
C)  42 haircuts.
D)  $126.E) C) and D)
F) A) and B)

Question 7

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 $10 to$12. As a result of the wage increase, firms will hire

Accepted Answer

A)  fewer workers, and the total paid out for wages will increase.
B)  fewer workers, and the total paid out for wages will decline.
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) None of the above
F) B) and C)

Question 8

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 B)
F) A) and C)

Question 9

When the elasticity coefficient for resource demand is greater than one, resource demand is

Accepted Answer

A)  inelastic.
B)  elastic.
C)  unit-elastic.
D)  perfectly inelastic.E) A) and D)
F) B) and C)

Question 10

The labor demand curve of a firm that sells its product in a purely competitive market

Accepted Answer

A)  is horizontal or perfectly elastic.
B)  is downsloping and flatter than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic) market.
C)  is upsloping.
D)  is downsloping and steeper than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic) market.E) A) and C)
F) B) and C)

Question 11

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) None of the above
F) A) and D)

Question 12

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will

Accepted Answer

A)  decrease solely because of the substitution effect.
B)  increase solely because of the substitution effect.
C)  increase solely because of the output effect.
D)  decrease solely because of the output effect.E) None of the above
F) A) and C)

Question 13

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 14

If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that

Accepted Answer

A)  the price of each input equals its MP.
B)  MP D = MP F.
C)  MPd / Pd = MP F / PF .
D)  MPd / PF = MPF / Pd.E) B) and C)
F) A) and C)

Question 15

The table contains data for a profit-maximizing firm. The price of the firm's product is $10 per unit, and the wage rate is a constant $110 a day. How many workers will the firm hire, assuming purely competitive product and resource markets?

Accepted Answer

A)  4
B)  5
C)  6
D)  7E) B) and D)
F) A) and B)

Question 16

Suppose that the labor cost to total cost ratio in industry A is 14 percent, while in industry B it is 68 percent. Other things equal, labor demand will be

Accepted Answer

A)  more elastic in industry B than in A.
B)  relatively inelastic in both industries A and B.
C)  more elastic in industry A than in B.
D)  relatively elastic in both industries A and B.E) B) and C)
F) A) and D)

Question 17

Before ATMs, the average bank branch employed 20 employees; after ATMs, the average branch employed 13 employees, but banks have opened more branches. These developments suggest that

Accepted Answer

A)  ATMs are purely substitutes for labor in banking.
B)  labor and ATMs are substitutes in some bank functions, complements in others.
C)  ATMs are purely complements for labor in banking.
D)  labor and ATMs are neither substitutes nor complements in banks' various functions.E) A) and D)
F) B) and C)

Question 18

Other things equal, we would expect the labor demand curve of a monopolistic seller to

Accepted Answer

A)  decline more rapidly than that of a purely competitive seller.
B)  decline less rapidly than that of a purely competitive seller.
C)  decline at the same rate as that of a purely competitive seller.
D)  be more elastic than that of a purely competitive seller.E) All of the above
F) C) and D)

Question 19

Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity."

Accepted Answer

A) True 
 B)False

Question 20

Refer to the diagram. The production of Q ₁ units of output at an average cost of a

Accepted Answer

A)  is not possible, given present technology and resource prices.
B)  can be achieved if the firm would hire the optimal mix of resources.
C)  would entail X-inefficiency.
D)  can be realized if the last dollar spent on each input were equal to its marginal product.E) A) and B)
F) None of the above

Exam 16: The Demand for Resources

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases from 2016 to 2026?

Correct AnswerverifiedShow Answer

The table contains data for a profit-maximizing firm. The price of the firm's product is $10 per unit, and the wage rate is a constant $110 a day. How many workers will the firm hire, assuming purely competitive product and resource markets?

Correct AnswerverifiedShow Answer

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, the firm's economic profits will be

Correct AnswerverifiedShow Answer

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will

Correct AnswerverifiedShow Answer

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MRP of the second barber is

Correct AnswerverifiedShow Answer

Before ATMs, the average bank branch employed 20 employees; after ATMs, the average branch employed 13 employees, but banks have opened more branches. These developments suggest that

Correct AnswerverifiedShow Answer

Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity."

Correct AnswerverifiedShow Answer

When the elasticity coefficient for resource demand is greater than one, resource demand is

Correct AnswerverifiedShow Answer

Suppose that the labor cost to total cost ratio in industry A is 82 percent, while in industry B it is 21 percent. Other things equal, labor demand will be

Correct AnswerverifiedShow Answer

Suppose that the labor cost to total cost ratio in industry A is 14 percent, while in industry B it is 68 percent. Other things equal, labor demand will be

Correct AnswerverifiedShow Answer

Other things equal, we would expect the labor demand curve of a monopolistic seller to

Correct AnswerverifiedShow Answer

The labor demand curve of a firm that sells its product in a purely competitive market

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

Correct AnswerverifiedShow Answer

The equation MP ₗ / Pₗ = MP C / Pc

Correct AnswerverifiedShow Answer

A profit-maximizing firm should hire an input as long as the

Correct AnswerverifiedShow Answer

If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that

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

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 $10 to$12. As a result of the wage increase, firms will hire

Correct AnswerverifiedShow Answer

Refer to the diagram. The production of Q ₁ units of output at an average cost of a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The equation MP ₗ / Pₗ = MP C / P_c

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified