Deck 16: The Demand for Resources

Question 1

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

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

Answer 1

$108.

Question 2

An employer hiring in a competitive labor market should hire additional labor as long as

A)the MRP exceeds the wage rate.
B)the wage rate is less than MP.
C)average product exceeds MP.
D)MC exceeds MR.

Answer 2

the MRP exceeds the wage rate.

Question 3

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

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 Medium

Answer 3

we demand the product that labor helps produce rather than labor service per se.

Question 4

Resource pricing is important because

A)resource prices are a major determinant of money incomes.
B)resource prices allocate scarce resources among alternative uses.
C)resource prices, along with resource productivity, are important to firms in minimizing their costs.
D)of all of these reasons.

Question 5

The marginal revenue product schedule is

A)the same whether the firm is selling in a purely competitive or imperfectly competitive market.
B)the firm's resource demand schedule.
C)the firm's resource supply schedule.
D)upsloping.

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 MP of the second barber is

A)$240.
B)$108.
C)18 haircuts.
D)42 haircuts.

Question 7

The demand for a resource depends primarily on

A)the supply of that resource.
B)the demand for the product or service that it helps produce.
C)the price of that input.
D)the elasticity of supply of substitute inputs.

Question 8

A profit-maximizing firm employs resources to the point where

A)MRC = MP.
B)resource price equals product price.
C)MRP = MRC.
D)MP = product price.

Question 9

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

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 10

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

A)$6.
B)$8.
C)$48.
D)$80.

Question 11

The MRP curve for labor

A)intersects the firm's labor demand curve from above.
B)is the firm's labor demand curve.
C)lies below the firm's labor demand curve.
D)lies above the firm's labor demand curve.

Question 12

In the United States, professional football players earn much higher incomes than professional soccer players.This occurs because

A)most football players are good soccer players, while the reverse is not true.
B)consumers have a greater demand for football games than for soccer games.
C)football and soccer games are highly substitutable products for most consumers.
D)the marginal productivity of soccer players exceeds that of football players.

Question 13

The labor demand curve of a purely competitive seller

A)slopes downward because the elasticity of demand is always less than unity.
B)slopes downward because of diminishing marginal productivity.
C)is perfectly elastic at the going wage rate.
D)slopes downward because of diminishing marginal utility.

Question 14

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

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

Question 15

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.Harry should

A)hire the second barber because he will add $28 to profits.
B)hire the second barber because he will add $108 to profits.
C)not hire the second barber, because he is less productive than the first barber.
D)not hire the second barber, because he will diminish profits.

Question 16

Marginal revenue product measures the

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.

Question 17

When economists say that the demand for labor is a derived demand, they mean that it is

A)dependent on government expenditures for public goods and services.
B)related to the demand for the product or service labor is producing.
C)based on the desire of businesses to exploit labor by paying below equilibrium wage rates.
D)based on the assumption that workers are trying to maximize their money incomes.

Question 18

Marginal product is

A)the output of the least skilled worker.
B)a worker's output multiplied by the price at which each unit can be sold.
C)the amount an additional worker adds to the firm's total output.
D)the amount any given worker contributes to the firm's total revenue.

Question 19

A firm will find it profitable to hire workers up to the point at which their

A)marginal resource cost equals their wage rate.
B)wage rate equals product price.
C)MP is equal to their MRP.
D)marginal resource cost is equal to their MRP.

Question 20

If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the

A)marginal revenue product of each worker is $25.
B)marginal revenue product of the first worker is $20.
C)marginal revenue product of the second worker is $20.
D)data given do not permit the determination of the marginal revenue product of either worker.

Question 21

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by

A)adding marginal product to total product as one more unit of labor is employed.
B)adding marginal revenue to total product as one more unit of labor is employed.
C)multiplying marginal product by product price.
D)multiplying marginal product by marginal revenue.

Question 22

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market.If the wage rate is $11, how many workers will the firm choose to employ?

A)5.
B)4.
C)3.
D)2.Blooms: Understand

Question 23

The MRP curve for labor

A)is downsloping and shows the relationship between wage rates and the quantity of labor demanded.
B)is perfectly elastic if the firm is selling its output competitively.
C)is upsloping and lies above the labor supply curve.
D)will shift location when the wage rate changes.

Question 24

The MRP curve is the resource demand curve for

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.

Question 25

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP.This rule takes the special form W = MRP (where W is the wage rate) when the

A)labor supply curve is upsloping.
B)supply of labor is inelastic.
C)firm is hiring labor under purely competitive conditions.
D)firm is hiring labor under imperfectly competitive conditions.

Question 26

Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market.If the wage rate is $20, how many workers will the firm choose to employ?

A)5
B)4
C)3
D)2

Question 27

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.The marginal product of the second worker is

A)24.
B)8.
C)5.
D)1.

Question 28

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.What is the farmer's profit-maximizing output?

A)20
B)32
C)37
D)40

Question 29

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.The marginal revenue product of the second worker is

A)$24.
B)$8.
C)$15.
D)$9.

Question 30

If the wage rate increases,

A)a purely competitive producer will hire less labor, but an imperfectly competitive producer will not.
B)an imperfectly competitive producer will hire less labor, but a purely competitive producer will not.
C)a purely competitive producer and an imperfectly competitive producer will both hire less labor.
D)an imperfectly competitive producer may find it profitable to hire either more or less labor.

Question 31

Marginal resource cost is Accessibility: Keyboard Navigation Blooms: Understand

A)the increase in total resource cost associated with the production of one more unit of output.
B)the increase in total resource cost associated with the hire of one more unit of the resource.
C)total resource cost divided by the number of inputs employed.
D)the change in total revenue associated with the employment of one more unit of the resource.

Question 32

A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8.This firm

A)should hire more labor because this will increase profits.
B)should hire more labor, although this may either increase or decrease profits.
C)is currently hiring the profit-maximizing amount of labor.
D)is selling its product in an imperfectly competitive market.

Question 33

The change in a firm's total revenue that results from hiring an additional worker is measured by

A)the marginal product.
B)the marginal revenue.
C)the marginal revenue product.
D)the average revenue product.

Question 34

Other things equal, the resource demand curve of an imperfectly competitive seller will

A)lie below its marginal revenue product curve.
B)be subject to increasing marginal productivity.
C)be less elastic than that of a purely competitive seller.
D)be more elastic than that of a purely competitive seller.

Question 35

The labor demand curve of a purely competitive seller

A)slopes downward because the firm must lower price to sell more output.
B)slopes downward because labor productivity increases as successive workers are hired.
C)is perfectly elastic because the firm is hiring an insignificant portion of the total labor supply.
D)slopes downward because the marginal product of successive workers declines.

Question 36

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired.The farmer's product sells for $3 per unit, and the wage rate is $13 per worker.How many workers should the farmer hire?

A)1
B)2
C)3
D)4

Question 37

For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by

A)adding marginal product to total product as one more unit of labor is employed.
B)adding marginal revenue to total product as one more unit of labor is employed.
C)multiplying marginal product by product price.
D)dividing marginal product by product price.

Question 38

If a firm is selling in an imperfectly competitive product market, then

A)average product will be less than marginal product for any number of workers hired.
B)the marginal products of successive workers must be sold at lower prices.
C)the marginal products of successive workers can be sold at higher prices.
D)the marginal products of successive workers can be sold at a constant price.

Question 39

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

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.

Question 40

The labor demand curve of an imperfectly competitive seller is downsloping

A)solely because of diminishing marginal utility.
B)because of both diminishing returns and the necessity to lower price to sell more output.
C)solely because product price must be reduced to sell more output.
D)solely because of diminishing returns.Difficulty: 02 Medium

Question 41

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

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.

Question 42

The demand curve for labor would shift leftward as the result of

A)an increase in the price of the product labor is producing.
B)a decrease in the productivity of labor.
C)an increase in the price of labor.
D)a decrease in the price of capital, provided the output effect exceeds the substitution effect.

Question 43

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases.Therefore,

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.

Question 44

The substitution effect indicates that a profit-seeking firm will use

A)more of an input whose price has fallen and less of other inputs in producing a given output.
B)more of all inputs if production costs fall.
C)more of those inputs whose marginal productivity is the greatest.
D)less of an input whose price has fallen and more of other inputs in producing a given output.

Question 45

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use

A)more labor as a consequence of the substitution effect.
B)more labor as a consequence of the output effect.
C)less labor as a consequence of the substitution effect.
D)less labor as a consequence of the output effect.

Question 46

Suppose there is a decline in the demand for the product labor is producing.Furthermore, the price of capital, which is complementary to labor, increases.Thus, the demand for labor

A)will increase.
B)will decrease.
C)may either increase or decrease.
D)will not change.

Question 47

Which of the following will not cause a shift in the demand for resource X?

A)a decline in the price of resource X
B)an increase in the price of the product that resource X is producing
C)a decrease in the price of substitute resource Y
D)an increase in the productivity of resource X

Question 48

Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries.As it relates to strawberry pickers, we could expect the

A)MRP curve to shift to the right.
B)MRP curve to shift to the left.
C)MRC curve to shift downward.
D)MP curve to shift downward.

Question 49

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

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 process

Question 50

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

A)school teachers
B)statisticians
C)physical therapist assistants
D)wind turbine service technicians

Question 51

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase.We can predict that

A)the firm will use relatively more capital and relatively less labor.
B)the firm will use relatively more labor and relatively less capital.
C)inputs of capital and labor will be unchanged.
D)the firm's equilibrium output will necessarily increase.

Question 52

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen.Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor.This describes the

A)output effect.
B)substitution effect.
C)idea of derived demand.
D)law of diminishing returns.

Question 53

A change in an input price will alter both production costs and the profit-maximizing output.Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor.This describes the

A)output effect.
B)substitution effect.
C)idea of derived demand.
D)law of diminishing returns.

Question 54

The labor demand curve of a firm

A)will shift to the left if the price of the product that the labor is producing falls.
B)is perfectly elastic if the firm is selling its product in a purely competitive market.
C)reflects a direct relationship between the number of workers hired and the money wage rate.
D)is the same as its marginal product curve.

Question 55

If two resources are highly substitutable for one another,

A)a decrease in the price of one will increase unit costs of production.
B)an increase in the price of one will increase the demand for the other.
C)an increase in the price of one will reduce the demand for the other.
D)a decrease in the price of one will increase the demand for the other.

Question 56

Employers will hire more units of a resource if the

A)price of the resource increases.
B)productivity of the resource increases.
C)price of the good being produced declines.
D)price of a complementary resource rises.

Question 57

If the price of capital declines, the consequent output effect would be

A)greater, the more elastic the demand for the product.
B)greater, the less elastic the demand for the product.
C)negative.
D)of consequence only if capital and labor are used in fixed proportions.

Question 58

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

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 59

Suppose the productivity of labor increases and at the same time the price of capital, which is complementary to labor, increases.As a result, the demand for labor

A)will increase.
B)will decrease.
C)may either increase or decrease.
D)will not change.

Question 60

Suppose the price of the product that labor is producing increases and simultaneously the price of capital, which is substitutable for labor, decreases.Assuming that the substitution effect is greater than the output effect, the demand for labor

A)will increase.
B)will decrease.
C)may either increase or decrease.
D)will not change.

Question 61

Other things equal, the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the

A)demand for labor will be elastic only if labor accounts for less than 50 percent of total costs.
B)demand for labor will be elastic only if labor accounts for 50 percent or more of total costs.
C)larger the labor cost to total cost ratio, the smaller will be the elasticity of labor demand.
D)larger the labor cost to total cost ratio, the greater will be the elasticity of labor demand.

Question 62

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal,

A)the more elastic the demand for the product, the less elastic the demand for labor.
B)the more elastic the demand for the product, the more elastic the demand for labor.
C)the elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive.
D)if product demand is perfectly elastic, labor demand will be perfectly inelastic.

Question 63

Resource X has many close substitutes, whereas resource Y has no close substitutes.Other things equal, we would expect

A)the demand for resource Y to be more elastic than the demand for resource X.
B)resources X and Y to be close substitutes.
C)resource X to be more expensive than resource Y.
D)the demand for resource X to be more elastic than the demand for resource Y.

Question 64

Which of the following statements is true? Other things equal, the demand for labor will be less elastic the

A)easier it is to substitute capital for labor.
B)greater the elasticity of resource supply.
C)greater the elasticity of product demand.
D)smaller the ratio of labor costs to total costs.

Question 65

Which of the following occupations is among the 10 projected most rapidly declining U.S.occupations in terms of percentage decreases?

A)medical assistants
B)veterinarians
C)college professors
D)postal service mail sorters and processors

Question 66

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

A)medical assistants
B)occupational therapy assistants
C)wind turbine service technicians
D)statisticians

Question 67

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

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

Question 68

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a

A)large proportion of total costs and product demand is elastic.
B)small proportion of total costs and product demand is elastic.
C)large proportion of total costs and product demand is inelastic.
D)small proportion of total costs and product demand is inelastic.

Question 69

The elasticity of resource demand measures the

A)responsiveness of workers to changes in wage rates.
B)responsiveness of producers to changes in resource prices.
C)ratio of marginal revenue product to resource price.
D)sensitivity of marginal revenue product to changes in product price.

Question 70

The elasticity of resource demand will be greater the

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.

Question 71

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded decreased by 10 percent.Given a fixed labor demand curve, we can conclude that

A)the labor demand curve is upsloping.
B)labor demand is elastic.
C)labor demand is unit-elastic.
D)the coefficient of elasticity of labor demand is less than 1.

Question 72

If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market, labor demand is

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

Question 73

Elasticity of resource demand is measured by the

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.

Question 74

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded increased by 10 percent.We can conclude that

A)the labor demand curve must have independently shifted to the right.
B)labor demand is highly elastic.
C)the coefficient of labor demand elasticity is less than 1.
D)labor demand is unit-elastic.

Question 75

Which of the following statements is most accurate about the occupations projected to be the fastest growing in the U.S.in terms of percentage increases?

A)The majority are in engineering professions.
B)The majority are in manufacturing industries.
C)The majority are in health care related professions.
D)The majority are in unskilled jobs.

Question 76

Wage Rate Quantity of Labor Demanded $16 800
14 1,000
12 1,200
10 1,600
8 1,800
Refer to the given data.Over the $10 to $8 range of wage rates, the demand for labor is

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

Question 77

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

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

Question 78

Wage Rate Quantity of Labor Demanded $16 800
14 1,000
12 1,200
10 1,600
8 1,800
Refer to the given data.For the $16 to $14 range of wage rates, labor demand is

A)perfectly elastic.
B)elastic.
C)perfectly inelastic.
D)inelastic.

Question 79

Wage Rate Quantity of Labor Demanded $16 800
14 1,000
12 1,200
10 1,600
8 1,800
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 $8 to $10.As a result of the wage increase, firms will hire

A)fewer workers, and the total paid out for wages will decline.
B)fewer workers, but the total paid out for wages will increase.
C)fewer workers, but the total paid out for wages will remain unchanged.
D)more capital, if capital and labor are used in fixed proportions in production.

Question 80

Which of the following statements is most accurate about the occupations projected to be the most rapidly declining in the U.S.in terms of percentage decreases?

A)The majority are in education related professions.
B)The majority are in health care related professions.
C)The majority are in manufacturing related professions.
D)The majority are in unskilled jobs.