Question 1

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

Accepted Answer

A)   labor is not readily substitutable for capital.
B)   the law of diminishing returns is not applicable.
C)   the firms are producing an inferior good.
D)   the demand for capital is highly price elastic.

Question 2

The profit-maximizing and the least-cost combination of inputs are

Accepted Answer

A)   the result of unrelated decisions.
B)   always identical.
C)   such that minimizing costs always results in profit maximization.
D)   such that maximizing profits always entails the least-cost combination of inputs.

Question 3

Which of the following statements best illustrates the concept of derived demand?

Accepted Answer

A)   As income goes up, the demand for farm products will increase by a smaller relative amount.
B)   A decline in the price of margarine will reduce the demand for butter.
C)   A decline in the demand for shoes will cause the demand for leather to decline.
D)   When the price of gasoline goes up, the demand for motor oil will decline.

Question 4

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

Accepted Answer

A)   the demand for the products produced by the employers.
B)   the price of labor that the employers must pay.
C)   the prices of other resources that the firms must use.
D)   occupational trends affecting the particular labor in the market.

Question 5

Other things equal, the less competitive the market in which a firm sells its product, the less elastic will be its resource demand curve.

Accepted Answer

A) True 
 B)False

Question 6

A firm is both hiring labor and selling output in purely competitive markets and is maximizing profits. It is currently operating in the elastic range of its MRP curve. If the wage rate increases, its total spending on wages at the new equilibrium will

Accepted Answer

A)   be larger.
B)   be smaller.
C)   be unchanged.
D)   change in an undetermined direction.

Question 7

The marginal productivity theory of income distribution has been criticized because

Accepted Answer

A)   the resulting distribution of income is likely to be too equal to maintain production incentives.
B)   income from inherited property is inconsistent with the theory.
C)   purely competitive conditions characterize most resource markets.
D)   it fails to recognize that resource demand is derived from product demand.

Question 8

Other things being equal, the elasticity of demand for labor will be greater the

Accepted Answer

A)   smaller the proportion of total costs accountable for by labor costs.
B)   smaller the elasticity of demand for the product it produces.
C)   larger the number of close substitute resources available.
D)   more rapid the decline in its marginal productivity.

Question 9

Holding revenues constant, cost minimization by firms is equivalent to

Accepted Answer

A)   sales maximization.
B)   price optimization.
C)   profit maximization.
D)   quantity minimization.

Question 10

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively.   Units of Labor  Total Product  Marginal  Product  Total  Revenue 0011414$422103309043553911761267442132\begin{array} {| c | c | c | c|} 	ext { Units of Labor } & 	ext { Total Product } & \begin{array} { c } 	ext { Marginal } \	ext { Product }\end{array} & \begin{array} { c } 	ext { Total } \	ext { Revenue }\end{array} \\hline 0 & 0 & & \\hline 1 & 14 & 14 & \$ 42 \\hline 2 & & 10 & \\hline 3 & 30 & & 90 \\hline 4 & 35 & & \\hline 5 & 39 & & 117 \\hline 6 & & & 126 \\hline 7 & 44 & 2 & 132 \\hline\end{array} Units of Labor 01234567​ Total Product 01430353944​ Marginal  Product ​14102​ Total  Revenue ​$4290117126132​​  At what price does each shoe shine sell?

Accepted Answer

A)   $1
B)   $2
C)   $3
D)   $2.50

Question 11

The marginal revenue product of labor refers to the

Accepted Answer

A)   additional output produced by adding one more unit of labor.
B)   marginal product of an additional unit of labor.
C)   additional revenue resulting from using one more unit of labor.
D)   number of units of output produced by a given number of units of labor.

Question 12

The demand for computers is derived from the demand for the capital resources that are used to produce computers.

Accepted Answer

A) True 
 B)False

Question 13

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit-elastic.
D)   infinitely elastic.

Question 15

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 16

The demand for airline pilots results from the demand for air travel. This fact is an example of

Accepted Answer

A)   resource substitutability.
B)   rising marginal resource cost.
C)   elasticity of resource demand.
D)   the derived demand for labor.

Question 17

The marginal productivity theory of income distribution suggests that

Accepted Answer

A)   government should subsidize the most productive workers through a system of transfer payments.
B)   each individual receives income based on his or her contribution to total output.
C)   resource owners should receive income based on the idea of "from each according to his ability, to each according to his wants."
D)   resource owners should receive income based upon their needs.

Question 18

An increase in the price of capital will reduce the demand for labor if capital and labor are complementary resources.

Accepted Answer

A) True 
 B)False

Question 19

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

Accepted Answer

A) True 
 B)False

Question 20

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

Accepted Answer

A) True 
 B)False

Exam 16: The Demand for Resources

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

Correct Answer
verified

The profit-maximizing and the least-cost combination of inputs are

Correct Answer
verified

A firm is both hiring labor and selling output in purely competitive markets and is maximizing profits. It is currently operating in the elastic range of its MRP curve. If the wage rate increases, its total spending on wages at the new equilibrium will

Correct Answer
verified

The demand for airline pilots results from the demand for air travel. This fact is an example of

Correct Answer
verified

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

Correct Answer
verified

An increase in the price of capital will reduce the demand for labor if capital and labor are complementary resources.

Correct Answer
verified

The marginal productivity theory of income distribution has been criticized because

Correct Answer
verified

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

Correct Answer
verified

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

Correct Answer
verified

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Correct Answer
verified

Other things equal, the less competitive the market in which a firm sells its product, the less elastic will be its resource demand curve.

Correct Answer
verified

The marginal revenue product of labor refers to the

Correct Answer
verified

Holding revenues constant, cost minimization by firms is equivalent to

Correct Answer
verified

The demand for computers is derived from the demand for the capital resources that are used to produce computers.

Correct Answer
verified

Correct Answer
verified

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

Correct Answer
verified

Which of the following statements best illustrates the concept of derived demand?

Correct Answer
verified

The marginal productivity theory of income distribution suggests that

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

Other things being equal, the elasticity of demand for labor will be greater the

Correct Answer
verified

Exam 16: The Demand for Resources

Changes in the price of a product would not shift the demand for the resources needed to produce the product.

Correct AnswerverifiedShow Answer

The profit-maximizing and the least-cost combination of inputs are

Correct AnswerverifiedShow Answer

A firm is both hiring labor and selling output in purely competitive markets and is maximizing profits. It is currently operating in the elastic range of its MRP curve. If the wage rate increases, its total spending on wages at the new equilibrium will

Correct AnswerverifiedShow Answer

The demand for airline pilots results from the demand for air travel. This fact is an example of

Correct AnswerverifiedShow Answer

In a given labor market, the demand for labor by employers will shift to the right or left with changes in all of the following, except

Correct AnswerverifiedShow Answer

An increase in the price of capital will reduce the demand for labor if capital and labor are complementary resources.

Correct AnswerverifiedShow Answer

The marginal productivity theory of income distribution has been criticized because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The marginal productivity theory of resource demand suggests that those resources whose productivity levels are high will end up getting a higher share of the economy's income.

Correct AnswerverifiedShow Answer

The more elastic the demand for a product, the less elastic will be the demand for the resources employed in producing it.

Correct AnswerverifiedShow Answer

Other things equal, the less competitive the market in which a firm sells its product, the less elastic will be its resource demand curve.

Correct AnswerverifiedShow Answer

The marginal revenue product of labor refers to the

Correct AnswerverifiedShow Answer

Holding revenues constant, cost minimization by firms is equivalent to

Correct AnswerverifiedShow Answer

The demand for computers is derived from the demand for the capital resources that are used to produce computers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that

Correct AnswerverifiedShow Answer

Which of the following statements best illustrates the concept of derived demand?

Correct AnswerverifiedShow Answer

The marginal productivity theory of income distribution suggests that

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

Other things being equal, the elasticity of demand for labor will be greater the

Correct AnswerverifiedShow Answer

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