Question 1

An improvement in technology that allows workers to process twice as many insurance forms in an hour than before will cause
A) more labor to be employed because its marginal revenue product has fallen.
B) an increase in insurance premiums.
C) fewer workers to be employed because their marginal revenue product has decreased.
D) more workers to be employed because their marginal revenue product has increased.
E) fewer workers to be employed because their marginal revenue product has increased.

Accepted Answer

An improvement in technology that increases worker productivity will increase the marginal revenue product of labor, leading to more workers being employed.

Question 2

Table 12-3
 
-Refer to Table 12-3. What is the marginal product of the third worker?
A) 7
B) 8
C) 25
D) 75

Accepted Answer

The answer of Table 12-3
 
-Refer to Table 12-3. What...

Question 3

An increase in the demand for automobiles will increase the demand for labor used to produce the automobiles due to
A) an increase in the marginal revenue product of labor.
B) a decrease in the marginal revenue product of labor.
C) an increase in the marginal revenue product of automobiles.
D) a decrease in the marginal revenue product of automobiles.
E) a decrease in the price of automobiles.

Accepted Answer

An increase in the demand for automobiles raises the price and quantity sold, which increases the marginal revenue product of labor, as labor becomes more valuable in producing the higher-demanded automobiles.

Question 4

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil
A) will increase the demand for coal.
B) will reduce the demand for coal.
C) will increase the supply of coal.
D) will reduce the supply of coal.
E) will not affect the demand for coal.

Accepted Answer

An increase in the price of oil makes it more expensive relative to coal, leading producers to substitute coal for oil, thus increasing the demand for coal.

Question 5

Marginal revenue product is the
A) additional revenue from one additional dollar increase in price.
B) change in the revenue product resulting from one additional unit of input.
C) additional revenue from one additional unit of input.
D) change in revenue resulting in one additional dollar in price.

Accepted Answer

Marginal revenue product is the additional revenue generated from employing one more unit of input, holding all else constant.

Question 6

If the marginal revenue product of the fifth worker hired by a firm is $15 and the price of a unit of output is $5 regardless of how much is sold, then the marginal product of the fifth worker is
A) 15 units of output.
B) 5 units of output.
C) 3 units of output.
D) 45 units of output.
E) 75 units of output.

Accepted Answer

The marginal revenue product (MRP) is calculated as the marginal product (MP) of the worker multiplied by the price of the output. Given MRP = $15 and price = $5, MP = MRP/price = $15/$5 = 3 units of output.

Question 7

Table 12-2
 
-Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. If the firm is maximizing the marginal product of labor, what is the firm's marginal revenue product?
A) 140 baseballs.
B) $300.
C) $400.
D) $700.

Accepted Answer

The answer of Table 12-2
 
-Refer to Table 12-2. This...

Question 8

Table 12-3
 
-Refer to Table 12-3. Suppose that the firm pays its workers $75 per day. Each unit of output sells for $10. How many days of labor should the firm hire?
A) 1
B) 2
C) 3
D) 4

Accepted Answer

The answer of Table 12-3
 
-Refer to Table 12-3. Suppose...

Question 9

In the short run, the supply of a resource will generally be
A) less elastic than in the long run.
B) more elastic than in the long run.
C) equally elastic as the supply of the resource in the long run.
D) inversely related to the elasticity of demand for the product that the resource helps produce.

Accepted Answer

In the short run, suppliers have limited ability to change production levels due to fixed resources and constraints, making supply less elastic compared to the long run where adjustments and resource allocations can be made more freely.

Question 10

Table 12-2
 
-Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?
A) 1 worker
B) 2 workers
C) 3 workers
D) 4 workers

Accepted Answer

The answer of Table 12-2
 
-Refer to Table 12-2. This...

Question 11

Ten cases of spring water are sold for $6 each, and the marginal product of the last unit of labor is 5. If the price of a case increases from $6 to $8, then the marginal revenue product of the last unit of labor would
A) decrease by $10.
B) increase by $40.
C) decrease by $30.
D) increase by $10.
E) not change.

Accepted Answer

The answer of Ten cases of spring water are sold...

Question 12

Suppose a company sells its product for $5.00. It's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. The company should hire the additional worker only if the wage rate is
A) $5.00 or less per hour.
B) $1.00 or more per hour.
C) $25.00 or less per hour.
D) none of the above.

Accepted Answer

The additional worker increases output by 5 units per hour, generating $25 in revenue (5 units x $5 per unit). The company should hire the worker if the wage is $25 or less, as this ensures the cost does not exceed the revenue generated.

Question 13

Table 12-3
 
-Refer to Table 12-3. Suppose that the firm pays its workers $55 per day. Each unit of output sells for $12. How many days of labor should the firm hire?
A) 3
B) 4
C) 5
D) 6

Accepted Answer

The answer of Table 12-3
 
-Refer to Table 12-3. Suppose...

Question 14

Diane's Auto World installs tires on automobiles, light trucks, and sport utility vehicles. She is a profit-maximizing business owner whose firm operates in a competitive market. The marginal cost of installing a tire is $10. The marginal productivity of the last worker that Diane hired was 2 tires per hour. What is the maximum hourly wage that Diane was willing to pay the last worker hired?
A) $5
B) $10
C) $20
D) There is insufficient information to answer this question.

Accepted Answer

The maximum hourly wage Diane is willing to pay is equal to the value of the marginal product of labor, which is the marginal productivity of the worker (2 tires per hour) multiplied by the marginal cost of installing a tire ($10), resulting in $20 per hour.

Question 15

If a firm is using a resource hired in a perfectly competitive market, and if the marginal resource cost is less than its marginal revenue product,
A) more of the resource should be used.
B) less of the resource should be used.
C) the firm should pay a lower price for the resource.
D) the firm should pay a higher price for the resource.
E) the firm is using the optimal amount of the resource.

Accepted Answer

If the marginal resource cost is less than the marginal revenue product, the firm can increase its profit by using more of the resource, as each additional unit of the resource adds more to revenue than it costs.

Question 16

If a firm is using a resource hired in a perfectly competitive market, and if the price of the resource exceeds the marginal revenue product of the resource,
A) more of the resource should be used.
B) less of the resource should be used.
C) the firm should pay a lower price for the resource.
D) the firm should pay a higher price for the resource.
E) the firm is using the optimal amount of the resource

Accepted Answer

If the price of the resource exceeds the marginal revenue product, the firm is paying more for the resource than the revenue it generates, indicating that less of the resource should be used to maximize profit.

Question 17

The marginal productivity principle says that a profit-maximizing firm should
A) hire capital until its marginal product is zero.
B) hire labor until another worker costs more to hire than he can earn for the firm.
C) hire the quantities of capital and of labor at which their marginal products are equal.
D) hire capital until its marginal product is negative.

Accepted Answer

The marginal productivity principle states that a firm should hire labor until the cost of hiring an additional worker equals the revenue generated by that worker, ensuring that the firm maximizes profit.

Question 18

Table 12-2
 
-Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. What is the total revenue per day that the firm will earn if it employs five workers?
A) $500.
B) $300.
C) $2200.
D) $2500.

Accepted Answer

The answer of Table 12-2
 
-Refer to Table 12-2. This...

Question 19

Which of the following labor resources will likely have the most elastic supply schedule in the short run?
A) nuclear physicists
B) surgeons
C) retail cashiers
D) graduate-level math professors

Accepted Answer

Retail cashiers typically require less specialized training and skills, making it easier for more people to enter or leave the occupation in response to wage changes, leading to a more elastic supply.

Question 20

If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product?
A) Its wage always equals its marginal revenue product.
B) Its wage is always greater than its marginal revenue product.
C) Its wage is always total revenue minus marginal revenue product.
D) Its wage is always less than or equal to its marginal revenue product.

Accepted Answer

A profit-maximizing firm will hire additional labor as long as the wage is less than or equal to the marginal revenue product of labor, ensuring that the cost of hiring is justified by the revenue generated.

Quiz 12: The Supply of and Demand for Productive Resources

An improvement in technology that allows workers to process twice as many insurance forms in an hour than before will cause

Table 12-3 -Refer to Table 12-3. What is the marginal product of the third worker?

An increase in the demand for automobiles will increase the demand for labor used to produce the automobiles due to

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil

Marginal revenue product is the

If the marginal revenue product of the fifth worker hired by a firm is $15 and the price of a unit of output is $5 regardless of how much is sold, then the marginal product of the fifth worker is

Table 12-3 -Refer to Table 12-3. Suppose that the firm pays its workers $75 per day. Each unit of output sells for $10. How many days of labor should the firm hire?

In the short run, the supply of a resource will generally be

Table 12-2 -Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?

Ten cases of spring water are sold for $6 each, and the marginal product of the last unit of labor is 5. If the price of a case increases from $6 to $8, then the marginal revenue product of the last unit of labor would

Suppose a company sells its product for $5.00. It's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. The company should hire the additional worker only if the wage rate is

Table 12-3 -Refer to Table 12-3. Suppose that the firm pays its workers $55 per day. Each unit of output sells for $12. How many days of labor should the firm hire?

If a firm is using a resource hired in a perfectly competitive market, and if the marginal resource cost is less than its marginal revenue product,

If a firm is using a resource hired in a perfectly competitive market, and if the price of the resource exceeds the marginal revenue product of the resource,

The marginal productivity principle says that a profit-maximizing firm should

Table 12-2 -Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. What is the total revenue per day that the firm will earn if it employs five workers?

Which of the following labor resources will likely have the most elastic supply schedule in the short run?

If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product?