Question 1

An addition of a complementary resource would ______ the marginal revenue product of any given resource.

Accepted Answer

Adding a complementary resource would increase the productivity or efficiency of the existing resource, which would lead to an increase in the marginal revenue product. For example, adding skilled workers to a factory would increase the productivity and output of the unskilled workers, leading to a higher marginal revenue product for both groups.

Question 2

If the MRP of labor were $50 and the wage rate were $100,

Accepted Answer

The MRP (Marginal Revenue Product) of labor is less than the wage rate, indicating that the cost of hiring labor exceeds the revenue generated by it, meaning too much labor is being used.

Question 3

Suppose that the marginal revenue product of the eighth worker hired is $12 an hour and the wage rate is $10 an hour. We can say that

Accepted Answer

The marginal revenue product (MRP) represents the additional revenue generated by employing one more unit of a factor, in this case, labor. If the MRP ($12) of the eighth worker is higher than the wage rate ($10), it indicates that hiring the eighth worker adds more to revenue than it costs in wages. Therefore, it suggests that not enough labor is being hired, as additional workers could potentially generate more revenue than their cost.

Question 4

If Max's output per hour were 50 in 1994 and 60 in 1995, how much would his marginal productivity be in 1995?

Accepted Answer

Marginal productivity is calculated as the change in output per unit of change in input. From 1994 to 1995, Max's output increased from 50 to 60, which is an increase of 10 units.

Question 5

As we use more and more units of a resource, the MRP

Accepted Answer

As we use more and more units of a resource, the MRP will eventually decline due to diminishing marginal returns. This means that each additional unit of the resource used will result in less and less additional output, causing the MRP to decrease over time.

Question 6

Statement I. We say that two resources are complements in production if an increase in one requires a decrease in the other. Statement II. Capital and labor are both complementary resources and substitute resources.

Accepted Answer

Statement I is false because complements in production mean that an increase in the use of one resource increases the productivity of another, not requires a decrease. Statement II is true because capital and labor can be substitutes (e.g., machines replacing workers) and complements (e.g., machines enhancing workers' productivity).

Question 7

Marginal output and marginal physical product are

Accepted Answer

Marginal output and marginal physical product are identical terms, both referring to the additional output produced by using one more unit of a particular input, holding all other inputs constant.

Question 8

If the demand for fast food declines sharply, the marginal revenue product curve for fast food workers will

Accepted Answer

A decline in demand for fast food means that fewer workers will be needed, leading to a decrease in the demand for fast food workers and a shift in the marginal revenue product curve to the left.

Question 9

The output effect states that if the price of a resource _________, output of the final product will _________.

Accepted Answer

If the price of a resource rises, it becomes more expensive for firms to produce the final product, which decreases the profit margins. Therefore, firms will produce less output, leading to a decline in output of the final product.

Question 10

In general, as units of resource inputs rise, their marginal revenue product

Accepted Answer

As more units of a resource are used, its marginal productivity will generally decline due to diminishing returns. This means that each additional unit of the resource will add less to the firm's revenue than the previous unit, causing the marginal revenue product to decline.

Question 11

More complementary resources would ____________ the productivity and the marginal revenue product of labor.

Accepted Answer

Complementary resources refer to the resources that are used together with labor to increase productivity. When complementary resources are added, labor becomes more productive, and this increases the marginal revenue product of labor. As a result, more complementary resources tend to raise the productivity and the marginal revenue product of labor.

Question 12

A change in ____ would have the strongest influence on a factor's MRP curve.

Accepted Answer

The MRP (Marginal Revenue Product) curve is most directly influenced by changes in the price of the final product, as MRP is calculated based on the additional revenue generated by employing one more unit of a factor, which in turn depends on the price at which the final product can be sold.

Question 13

The demand for a resource is influenced by each of these factors except

Accepted Answer

The answer of The demand for a resource is influenced...

Question 14

If Kelly's output per hour in 1995 were 100 and her output per hour in 1996 were 105, how much would her productivity be in 1996?

Accepted Answer

Her productivity in 1996 is simply her output per hour in 1996, which is 105.

Question 15

The Bulldog Beanery Coffee Shop is a perfectly competitive firm currently employing 30 workers. The marginal revenue product of the 30th worker is $7/hour. The wage rate is $8/hour. To increase profits, this firm should

Accepted Answer

To maximize profits, a perfectly competitive firm should hire workers until the marginal revenue product (MRP) of labor equals the wage rate. Since the MRP of the 30th worker is $7/hour and the wage rate is $8/hour, the firm should decrease employment until MRP equals the wage rate.

Question 16

If the MRP of an acre of land were $100 and its rent were $50,

Accepted Answer

The answer of If the MRP of an acre of...

Question 17

A rise in the marginal revenue product schedule for labor

Accepted Answer

The answer of A rise in the marginal revenue product...

Question 18

Suppose that the marginal revenue product of the fourth acre of land is $180 and the rent paid on that land is $200 an acre. We can say that

Accepted Answer

The marginal revenue product (MRP) is less than the rent paid on the land ($180<$200), indicating that the cost of renting the land is higher than the revenue generated by using the fourth acre of land. Therefore, it is not profitable to rent that land and it is likely that too much land is being rented beyond the point of profitability.

Question 19

The marginal revenue product schedule is a

Accepted Answer

The marginal revenue product schedule shows the change in a firm's revenue when it hires an additional unit of a resource. This indicates that it is a demand schedule for a resource.

Question 20

If the productivity of an assembly line worker rises from 6 rivets per minute to 9 rivets per minute, we can say that her productivity

Accepted Answer

To find the percentage increase in productivity, we use the formula:

Percentage Increase = [(New Value - Old Value) / Old Value] x 100%

Using this formula, we get:

Percentage Increase = [(9 - 6) / 6] x 100%
Percentage Increase = (3 / 6) x 100%
Percentage Increase = 0.5 x 100%
Percentage Increase = 50%

Therefore, the worker's productivity rose by 50%.

Quiz 14: Demand in the Factor Market