Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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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 | | |
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2.
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An
increase in the demand for shoemakers will increase the demand for shoes.
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3.
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A
firm's demand for a resource is a(n) a. | final demand | b. | derived
demand | c. | secondary demand | d. | induced
demand | e. | marginal demand | | |
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4.
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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 | | |
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5.
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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 | | |
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6.
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As a
result of the decline in the demand for beef in the United States, the demand for cattle ranchers
has a. | also decreased
because the demand for cattle ranchers is a derived demand | b. | increased
because the demand for cattle ranchers is a derived demand | c. | also decreased
because the supply of cattle ranchers has increased | d. | increased
because the supply of cattle ranchers has increased | e. | increased
because the supply of cattle ranchers has decreased | | |
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7.
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In
general, a market supply curve of a resource is a. | downward sloping | b. | upward
sloping | c. | horizontal at the market price | d. | vertical | e. | determined by firms | | |
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8.
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As
the relative price paid to a resource in a particular use rises, 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 | | |
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9.
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We
see permanent price differentials in land because a. | the demand for land is high | b. | land has few
uses | c. | location is the
inherent quality that often determines its value | d. | real estate
brokers are inefficient | e. | land is not traded in free markets | | |
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10.
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Permanent resource price differentials are caused by a. | differences in
resource quality | b. | differences in the time and training required to perform the
job | c. | differences in
nonmonetary aspects of the job | d. | a lack of resource mobility | e. | all of the
above | | |
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11.
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If
all of the returns to a resource are in the form of economic rent, a. | the price of
that resource is determined exclusively by supply | b. | the price of
that resource is determined exclusively by demand | c. | the price and
quantity of that resource are determined exclusively by supply | d. | the price and
quantity of that resource are determined exclusively by demand | e. | the equilibrium
price is zero | | |
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12.
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Gooey
Flakes is the only ready-to-eat cereal that has chocolate syrup injected into each flake. The machine
that injects the syrup into the flakes can do nothing else. Which of the following is
true? a. | All of the
machine's earnings are economic rent. | b. | All of the machine's earnings are opportunity
cost. | c. | The supply curve for this machine is
horizontal. | d. | The demand curve for this machine is
horizontal. | e. | The demand curve for this machine is
vertical. | | |
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13.
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In
Exhibit 0168, opportunity cost at equilibrium equals a. | $40 | b. | $80 | c. | $160 | d. | $16 | e. | $8 | | |
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14.
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In
Exhibit 0169, the 100th unit of the resource is earning a wage rate of a. | $10, all of
which is economic rent | b. | $10, none of which is economic rent | c. | $4, all of which
is economic rent | d. | $4, none of which is economic rent | e. | $10, some of
which is economic rent | | |
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15.
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In
Exhibit 0169, opportunity costs at equilibrium equal a. | $40 | b. | $60 | c. | $100 | d. | $700 | e. | $300 | | |
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16.
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The
more elastic the supply of a resource, a. | the greater is economic rent as a proportion of total
earnings | b. | the greater is opportunity cost as a proportion of total
earnings | c. | the fewer alternative uses the resource
has | d. | the greater the
derived demand for the resource | e. | the lower the derived demand for the
resource | | |
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17.
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Marginal revenue product is defined as the a. | change in total
output that results from the employment of an additional unit of a resource | b. | change in total
product that results from the employment of an additional unit of a
resource | c. | change in total revenue that results from the employment of an
additional unit of a resource | d. | change in resource employment that results from a change in
total output | e. | change in marginal revenue that results from a change in the
employment of an additional unit of a resource | | |
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18.
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In a
perfectly competitive labor market, a profit-maximizing firm will hire labor up to the point where
the a. | wage rate =
MRC | b. | wage rate <
MRP | c. | wage rate =
MRP | d. | wage rate >
MRP | e. | wage rate =
MP | | |
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19.
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A
firm's marginal resource cost curve is a. | horizontal only if the firm is a price taker in the product
market | b. | horizontal only if the firm is a price taker in the resource
market | c. | vertical only if the firm is a price taker in the product
market | d. | vertical only if the firm is a price taker in the resource
market | e. | horizontal only if the firm is a price taker in both the
product and resource markets | | |
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20.
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A
firm produces in a perfectly competitive market and hires labor in a perfectly competitive labor
market. The firm hires four workers, the marginal product of the fourth worker is 4, and the wage
rate is $40. The firm produces 100 units of the product, which sell for a price of $10. This firm
is a. | maximizing
profit when it hires four workers | b. | not maximizing profit and should hire more workers to increase
profit | c. | not maximizing profit and should hire fewer workers to increase
profit | d. | not maximizing profit when it produces 100 units of the product
and should increase production to increase profit | e. | not maximizing
profit when it produces 100 units of the product and should decrease production to increase
profit | | |
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21.
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Suppose a firm is a price searcher in the product market and hires labor in a
perfectly competitive labor market. The firm hires four workers, the marginal product of the fourth
worker is 4, and the wage rate is $40. The firm produces 100 units of the product, which sell for a
price of $10 each. This firm is a. | maximizing profit when it hires four
workers | b. | not maximizing profit and should hire more workers to increase
profit | c. | not maximizing profit and should hire fewer workers to increase
profit | d. | maximizing profit when it produces 100 units of the
product | e. | not maximizing profit when it produces 100 units of the product
and should increase production to increase profit | | |
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22.
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Suppose a firm is a price searcher in the product market and hires labor in a
perfectly competitive labor market. If the wage rate is $20, the marginal product of the last worker
hired is 5, and the firm is hiring the profit-maximizing amount of labor, then the marginal revenue
from the last unit of output must be
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23.
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A
profit-maximizing firm will hire an additional unit of a resource as long as the a. | marginal product
of the resource is greater than the marginal resource cost | b. | marginal product
of the resource is less than the marginal resource cost | c. | marginal revenue
product of the resource is greater than the marginal resource cost | d. | marginal revenue
product of the resource is less than the marginal resource cost | e. | price of the
resource is less than the marginal resource cost | | |
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24.
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Unemployment among architects in the United States a. | increased their
wages | b. | drove many architects back to graduate
school | c. | is especially severe among those who design health-care
facilities | d. | was lower in 1991 than it had been in a
decade | e. | is unaffected by real estate prices | | |
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25.
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If
MRPlabor/MRClabor > MRPcapital/MRCcapital, then the
firm should a. | hire more
labor | b. | substitute capital for labor | c. | not change
anything | d. | buy more capital | e. | decrease the
amount of labor | | |
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