Question 1

Which of the following is not an example of derived demand?
A)More people want to plant gardens in the spring; therefore, demand for hoes and shovels increases then.
B)Strong ticket sales for a concert cause the producers to schedule an extra show and demand more ushers.
C)Increased use of robots leads to a decrease in demand for labor.
D)The development of alternative fuels made from corn leads to an increase in demand for corn.
E)Increasing demand for music leads to the construction of more recording studios.

Accepted Answer

Increased use of robots leads to a decrease in demand for labor.

Question 2

What is true along the demand curve for a resource?
A)Prices of other resources are assumed constant.
B)The marginal product of that resource remains constant.
C)Total cost of production is assumed constant.
D)The price of that particular resource is assumed constant.
E)The quantity of that particular resource is assumed constant.

Accepted Answer

Along the demand curve for a resource, the prices of other resources are assumed constant to isolate the effect of changes in the price of the resource in question on its quantity demanded.

Question 3

An author who writes newspaper columns for $75 each is deciding whether to purchase a personal computer with a laser printer.She figures she'd be able to write two more columns per month than she could on her typewriter.She should
A)buy the computer if the monthly payment is less than $300
B)buy the computer regardless of its price
C)not buy the computer if the monthly payment is greater than $75
D)not buy the computer regardless of the price
E)buy the computer if the monthly payment is less than $150

Accepted Answer

Let's calculate the additional revenue she would earn by writing two more columns per month:
2 (additional columns) x $75 (earnings per column) = $150

So, if the monthly payment for the computer is less than $150, it would be worth it for her to buy it and increase her earnings. Therefore, the best choice is E.

Question 4

In the resource market, firms demand resources in order to
A)maximize profit
B)maximize total revenue
C)maximize marginal revenue
D)maximize utility
E)minimize cost

Accepted Answer

Firms in the resource market demand resources in order to maximize profit. This means they will hire the optimal amount of resources needed to produce a given level of output at the lowest possible cost, ultimately increasing their profits. Maximizing total revenue or marginal revenue may not necessarily lead to the highest level of profit, while maximizing utility is not typically a consideration in the resource market. Minimizing cost is important, but it is not the only factor to consider when hiring resources.

Question 5

As the price of a resource (e.g., labor)decreases,
A)demand for that resource increases
B)the quantity demanded of that resource decreases
C)the supply of that resource increases
D)producers are more willing and able to hire that resource
E)producers are less willing and able to hire that resource

Accepted Answer

When the price of a resource like labor decreases, producers find it cheaper to hire, making them more willing and able to employ more of that resource.

Question 6

The resource market is different from the product market because
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

Accepted Answer

In the resource market, firms are demanders of resources (such as labor, land, and capital) and households are the suppliers of those resources. This is different from the product market where firms supply goods and services and households demand them. Supply and demand still apply in both markets. It is incorrect to say that firms don't maximize profit or that households don't maximize utility in the resource market. It is also incorrect to say that supply and demand do not apply in either market.

Question 7

Derived demand refers to
A)demand curves derived from utility functions
B)an individual demand curve estimated from a market demand curve
C)a market demand curve estimated from individual demand curves
D)demand for a resource derived from the demand for the product produced by that resource
E)demand for a product derived from the demand for the resource used to make that product

Accepted Answer

Derived demand refers to the demand for a resource that is derived from the demand for the product produced by that resource. For example, the demand for steel is derived from the demand for automobiles that use steel as a key input.

Question 8

If the demand for tacos increases,
A)the supply of corn increases
B)the supply of corn decreases
C)the demand for corn increases
D)the demand for corn decreases
E)the price of corn falls

Accepted Answer

The demand for tacos increasing would likely lead to an increase in the demand for corn as corn is used to make tortillas, which are a main component of tacos. This would not affect the supply of corn or the price of corn, so options A, B, and E can be eliminated. The demand for corn would not decrease in this scenario, so option D can also be eliminated.

Question 9

The market demand curve for a resource is the
A)horizontal sum of the demand curves for that resource in all its various uses
B)difference among the demand curves for that resource in all its various uses
C)demand for that resource in its best use
D)sum of the demand curves for that resource in its best two uses
E)vertical sum of the demand curve for that resource in all its various uses

Accepted Answer

The market demand curve for a resource is the horizontal sum of the demand curves for that resource in all its various uses. This means that it represents the total quantity of the resource demanded at each price, taking into account all the different ways in which the resource can be used.

Question 10

Because it is based on the demand for products, the demand for labor is called
A)a substitution demand
B)a complementary demand
C)an income demand
D)a derived demand
E)a marginal demand

Accepted Answer

The demand for labor is based on the demand for products that labor helps produce, making it a derived demand. This means that the demand for labor is derived from the demand for the products that labor helps produce.

Question 11

As the price of land decreases along its demand curve, the relative price of land
A)increases because the prices of other resources have also decreased
B)decreases because the prices of other resources have also decreased
C)increases because the prices of other resources have increased
D)decreases because the prices of other resources are held constant
E)remains constant because the prices of other resources also increase

Accepted Answer

The answer of As the price of land decreases along...

Question 12

Resource owners will supply additional units of a resource as long as doing so
A)decreases their opportunity cost
B)increases their income
C)increases their utility
D)decreases their income taxes
E)improves their working conditions

Accepted Answer

The answer of Resource owners will supply additional units of...

Question 13

Resource owners supply resources in ways that
A)maximize their utility
B)maximize their income
C)minimize the amount of work
D)maximize the amount of work
E)maximize the demand for their resource

Accepted Answer

Resource owners supply resources in ways that maximize their utility, as utility represents the satisfaction or benefit derived from the use of resources.

Question 14

If the price of a resource increases, other things constant, less of that resource will be hired because
A)producers will substitute away from that resource
B)producers fear starting a trend toward higher resource prices
C)the demand curve for the product will shift to the left
D)highly paid resources don't produce as much
E)it makes other resources look expensive as well

Accepted Answer

Producers will substitute away from that resource and hire more of other resources that have become relatively cheaper than the now expensive resource. This will result in a decrease in the demand for the expensive resource and ultimately lead to less of it being hired.

Question 15

An increase in the price of a resource will cause a movement along the demand curve for that resource.

Accepted Answer

When the price of a resource increases, the cost of production increases for firms that use that resource. This results in a decrease in the quantity demanded of the resource, causing a movement along the demand curve.

Question 16

The demand for a resource is derived from the demand for the final product it helps to produce.

Accepted Answer

This statement is true. The demand for a resource is based on the demand for the final product it helps to produce. For example, the demand for lumber is derived from the demand for new homes, furniture, and other wood products.

Question 17

An increase in the demand for shoemakers will increase the demand for shoes.

Accepted Answer

An increase in the demand for shoemakers suggests a higher demand for shoe production, but it does not directly imply an increase in the demand for shoes. Demand for shoes is driven by consumer preferences and purchasing power, not the demand for shoemakers.

Question 18

If the price of a resource falls, other things constant,
A)demand for the product it produces will increase
B)demand for a substitute product will increase
C)demand for a substitute resource will fall
D)supply of that resource will rise
E)supply of a substitute resource will also rise

Accepted Answer

When the price of a resource falls, the demand for a substitute resource will fall because the cheaper resource becomes more attractive to use.

Question 19

Both sugar and fructose can be used in the production of candy.If the price of sugar increases,
A)the demand for sugar increases
B)sugar becomes relatively more expensive than fructose only if the price of fructose falls
C)sugar becomes relatively more expensive than fructose, other things constant
D)the price of fructose immediately increases
E)the price of fructose immediately decreases

Accepted Answer

When the price of sugar increases, it becomes relatively more expensive than fructose, all else constant. This means that candy manufacturers may switch to using fructose instead of sugar in their production process, leading to a decrease in the demand for sugar. However, if the price of fructose also increases, then both sugar and fructose will become more expensive and candy manufacturers may look to alternative sweeteners or ways to reduce their use of sweeteners altogether.

Question 20

Resource owners will supply additional units of a resource as long as
A)doing so increases their costs
B)doing so increases production
C)the quantity of the resource demanded exceeds the resource price
D)resource users demand the resource
E)doing so increases their utility

Accepted Answer

Resource owners will supply additional units of a resource as long as doing so increases their utility, which means they are receiving enough benefit or satisfaction from supplying more of the resource.

Quiz 11: Resource Markets

Which of the following is not an example of derived demand?

What is true along the demand curve for a resource?

An author who writes newspaper columns for $75 each is deciding whether to purchase a personal computer with a laser printer.She figures she'd be able to write two more columns per month than she could on her typewriter.She should

In the resource market, firms demand resources in order to

As the price of a resource (e.g., labor) decreases,

The resource market is different from the product market because

Derived demand refers to

If the demand for tacos increases,

The market demand curve for a resource is the

Because it is based on the demand for products, the demand for labor is called

As the price of land decreases along its demand curve, the relative price of land

Resource owners will supply additional units of a resource as long as doing so

Resource owners supply resources in ways that

If the price of a resource increases, other things constant, less of that resource will be hired because

An increase in the price of a resource will cause a movement along the demand curve for that resource.

The demand for a resource is derived from the demand for the final product it helps to produce.

An increase in the demand for shoemakers will increase the demand for shoes.

If the price of a resource falls, other things constant,

Both sugar and fructose can be used in the production of candy.If the price of sugar increases,

Resource owners will supply additional units of a resource as long as