Question 1

Which of the following can lead to permanent differentials in resource prices?

Accepted Answer

A)   an increase in demand for a product produced by the resource
B)   differences in the inherent quality of resources
C)   differences in the time and money involved in developing necessary skills
D)   differences in the nonmonetary rewards of a job
E)   a lack of resource mobility

Question 2

If an insurance company hires a resource in a perfectly competitive resource market and it wants to maximize profit,it will hire where marginal revenue product equals

Accepted Answer

A)   the price of the resource,which equals its marginal resource cost
B)   the price of the resource,which is greater than its marginal resource cost
C)   the price of the resource,which is less than its marginal resource cost
D)   marginal product
E)   the price of the product

Question 3

A firm's marginal revenue product curve is downward sloping,which means the derived demand curve for an input is downward sloping.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the marginal product of the second worker hired by a firm is 3,and the price of the last unit produced is $7.Which of the following is true of the marginal revenue product of the second worker?

Accepted Answer

A)   It must equal $21.
B)   It must be less than or equal to $21.
C)   It must be greater than or equal to $21.
D)   It equals $21 only if the firm is a price searcher (e.g. ,monopoly) .
E)   We can conclude nothing about marginal revenue product.

Question 5

A game show host who gave up his job as a teacher brags about his salary,saying "the rest is pure gravy." Here,"the rest" refers to

Accepted Answer

A)   opportunity cost
B)   implicit cost
C)   explicit cost
D)   the height of his labor supply curve
E)   economic rent

Question 6

In the resource market,firms demand resources in order to

Accepted Answer

A)   maximize profit
B)   maximize total revenue
C)   maximize marginal revenue
D)   maximize utility
E)   minimize cost

Question 7

Resource price differentials that do not trigger the reallocation of resources are known as

Accepted Answer

A)   temporary differentials
B)   market differentials
C)   conditional differentials
D)   permanent differentials
E)   sustainable differentials

Question 8

Exhibit 11-3
 
-In Exhibit 11-3,total resource earnings in equilibrium equal

Accepted Answer

A)   $12
B)   $10
C)   $720
D)   $1,000
E)   $1,200

Question 9

The resource market is different from the product market because

Accepted Answer

A)   in the resource market,firms don't maximize profit
B)   in the resource market,households don't maximize utility
C)   in the resource market,firms are demanders and households are suppliers
D)   supply and demand do not apply in the resource market
E)   supply and demand do not apply in the product market

Question 10

In a perfectly competitive labor market,a profit-maximizing firm will hire labor up to the point at which the

Accepted Answer

A)   wage rate = MRC
B)   wage rate 
C)   wage rate = MRP
D)   wage rate > MRP
E)   wage rate = MP

Question 11

The fewer alternative uses a resource has,

Accepted Answer

A)   the greater the proportion of its earnings that is economic rent
B)   the smaller the proportion of its earnings that is economic rent
C)   the more elastic its supply
D)   the more elastic its demand
E)   the less elastic its supply

Question 12

Exhibit 11-12
 
-In Exhibit 11-12,the price of rubber is $110 per pound.To maximize profit,the widget producer should produce:

Accepted Answer

A)   45 widgets
B)   35 widgets
C)   20 widgets
D)   10 widgets
E)   5 widgets

Question 13

A profit-maximizing firm will hire extra units of a resource when

Accepted Answer

A)   marginal resource cost exceeds marginal revenue product
B)   marginal resource cost is equal to marginal revenue product
C)   marginal resource cost is less than marginal revenue product
D)   temporary resource price differentials exceed the marginal resource cost
E)   the average resource cost and marginal resource cost curves are equal

Question 14

Exhibit 11-1
 
-In Exhibit 11-1,opportunity cost at equilibrium equals

Accepted Answer

A)   $40
B)   $80
C)   $160
D)   $16
E)   $8

Question 15

The change in total revenue that results from a one-unit change in the amount of a variable resource used is

Accepted Answer

A)   average resource cost
B)   marginal resource cost
C)   marginal product
D)   marginal revenue product
E)   average revenue product

Question 16

As the relative price paid to a resource in a particular use rises,

Accepted Answer

A)   resources will be drawn from lower-valued uses to higher-valued uses
B)   resources will be drawn from higher-valued uses to lower-valued uses
C)   resources will generally remain where they are currently employed
D)   the supply of that resource will shift to the right
E)   the supply of that resource will shift to the left

Question 17

Which resource earns the highest economic rent as a proportion of total earnings?

Accepted Answer

A)   a resource specialized in one task
B)   a nonspecialized resource
C)   a resource with inelastic demand
D)   a resource in low demand
E)   a resource with elastic demand

Question 18

Which of the following is an example of a temporary price differential in a resource market?

Accepted Answer

A)   land downtown is more expensive than land in the suburbs
B)   a superstar professional basketball player is paid more than the average professional player
C)   cable television installers have a higher wage than telephone installers
D)   an airline pilot is paid more than a flight attendant
E)   a worker in a toxic waste plant earns more than a teacher

Question 19

If a firm is maximizing profit and the marginal revenue product of labor is $10 and the marginal revenue product of capital is $30,then

Accepted Answer

A)   the marginal resource cost of labor is $3,and the marginal resource cost of capital is $0.33
B)   the marginal resource cost of labor is $0.33,and the marginal resource cost of capital is $3
C)   the marginal resource cost of labor equals the marginal resource cost of capital;both are $300
D)   the marginal resource cost of labor is 1/3 of the marginal resource cost of capital
E)   we have no way of knowing the marginal resource cost of either labor or capital

Question 20

Exhibit 11-2,
 
-In Exhibit 11-2,economic rent at equilibrium equals

Accepted Answer

A)   $40
B)   $60
C)   $10
D)   $700
E)   $300

Exam 11: Resource Markets

If a firm is maximizing profit and the marginal revenue product of labor is $10 and the marginal revenue product of capital is $30,then

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A game show host who gave up his job as a teacher brags about his salary,saying "the rest is pure gravy." Here,"the rest" refers to

Correct AnswerverifiedShow Answer

As the relative price paid to a resource in a particular use rises,

Correct AnswerverifiedShow Answer

A profit-maximizing firm will hire extra units of a resource when

Correct AnswerverifiedShow Answer

If an insurance company hires a resource in a perfectly competitive resource market and it wants to maximize profit,it will hire where marginal revenue product equals

Correct AnswerverifiedShow Answer

Which resource earns the highest economic rent as a proportion of total earnings?

Correct AnswerverifiedShow Answer

The change in total revenue that results from a one-unit change in the amount of a variable resource used is

Correct AnswerverifiedShow Answer

In a perfectly competitive labor market,a profit-maximizing firm will hire labor up to the point at which the

Correct AnswerverifiedShow Answer

In the resource market,firms demand resources in order to

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The fewer alternative uses a resource has,

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Resource price differentials that do not trigger the reallocation of resources are known as

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Exhibit 11-1 -In Exhibit 11-1,opportunity cost at equilibrium equals

Correct AnswerverifiedShow Answer

Which of the following can lead to permanent differentials in resource prices?

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A firm's marginal revenue product curve is downward sloping,which means the derived demand curve for an input is downward sloping.

Correct AnswerverifiedShow Answer

Exhibit 11-3 -In Exhibit 11-3,total resource earnings in equilibrium equal

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Which of the following is an example of a temporary price differential in a resource market?

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Exhibit 11-2, -In Exhibit 11-2,economic rent at equilibrium equals

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Exhibit 11-12 -In Exhibit 11-12,the price of rubber is $110 per pound.To maximize profit,the widget producer should produce:

Correct AnswerverifiedShow Answer

Suppose the marginal product of the second worker hired by a firm is 3,and the price of the last unit produced is $7.Which of the following is true of the marginal revenue product of the second worker?

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The resource market is different from the product market because

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