Chapter 16 The Demand for Resources Answer Key
Multiple Choice Questions
1.
Resource pricing is important because
A.
resource prices are a major determinant of money incomes.
2.
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.
3.
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.
16-2
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 16–02 Convey how the marginal revenue productivity of a resource
relates to a firms demand for that resource.
Test Bank: I
Top i c :
Marginal Productivity Theory of Resource Demand
4.
The demand for airline pilots results from the demand for air travel. This fact is an
example of
A.
resource substitutability.
5.
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.
6.
The demand for a resource depends primarily on
A. the supply of that resource.
7.
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.
8.
Marginal revenue product measures the
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.
16-4
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written consent of McGraw-Hill Education.
relates to a firms demand for that resource.
Test Bank: I
Top i c :
Marginal Productivity Theory of Resource Demand
9.
The marginal revenue product schedule is
A. the same whether the firm is selling in a purely competitive or imperfectly competitive
market.
10.
The purely competitive employer of resource A will maximize the profits from A by
equating the
D.
price of A with the MRC of A.
11.
The MRP curve for labor
A. intersects the firm‘s labor demand curve from above.
12.
Marginal product is
A.
the output of the least skilled worker.
13.
The labor demand curve of a purely competitive seller
A. slopes downward because the elasticity of demand is always less than unity.
14.
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.
15.
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.
16.
An employer hiring in a competitive labor market should hire additional labor as long as
D.
MC exceeds MR.
16-7
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty:
02 Medium
Learning Objective: 16–02 Convey how the marginal revenue productivity of a resource
relates to a firms demand for that resource.
Test Bank: I
Top i c :
Marginal Productivity Theory of Resource Demand
17.
A firm will find it profitable to hire workers up to the point at which their
A.
marginal resource cost equals their wage rate.
18.
A profit-maximizing firm employs resources to the point where
A.
MRC = MP.
19.
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.
20.
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.
21.
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
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.
16-9
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 16–02 Convey how the marginal revenue productivity of a resource
relates to a firms demand for that resource.
Test Bank: I
Top i c :
Marginal Productivity Theory of Resource Demand
22.
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.
23.
Assume Manfred‘s Shoe Shine Parlor hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
Units of Labor
Total Product
Marginal
Product
Total
Revenue
0
0
1
14
14
$42
2
10
3
30
90
4
35
5
39
117
6
126
7
44
2
132
How many units of output are produced when 2 workers are employed?
A.
4
24.
Assume Manfred‘s Shoe Shine Parlor hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
Units of Labor
Total Product
Marginal
Product
Total
Revenue
0
0
1
14
14
$42
2
10
3
30
90
4
35
5
39
117
6
126
7
44
2
132
What is the marginal product of the sixth worker?
A. 2 units
16–11
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 16–02 Convey how the marginal revenue productivity of a resource
relates to a firms demand for that resource.
Test Bank: I
Top i c:
Marginal Productivity Theory of Resource Demand
Type: Table
25.
Assume Manfred‘s Shoe Shine Parlor hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
Units of Labor
Total Product
Marginal
Product
Total
Revenue
0
0
1
14
14
$42
2
10
3
30
90
4
35
5
39
117
6
126
7
44
2
132
At what price does each shoe shine sell?
A.
$1
26.
Assume Manfred‘s Shoe Shine Parlor hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
16–12
written consent of McGraw-Hill Education.
Units of Labor
Total Product
Marginal
Product
Total
Revenue
0
0
1
14
14
$42
2
10
3
30
90
4
35
5
39
117
6
126
7
44
2
132
If the wage rate is $11, how many workers will Manfred hire to maximize profits?
A.
1
27.
Assume Manfred‘s Shoe Shine Parlor hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
Units of Labor
Total Product
Marginal
Product
Total
Revenue
0
0
1
14
14
$42
2
10
3
30
90
4
35
5
39
117
6
126
7
44
2
132
If the wage rate is $11 and Manfred‘s only fixed input is capital, the total cost of which is
$30, then what will be his economic profit?
A. $62
28.
Assume that a restaurant is hiring labor in an amount such that the MRC of the last
worker is $16 and her MRP is $12. On the basis of this information, we can say that
A. profits will be increased by hiring additional workers.
29.
Employment
Total Product
0
0
1
12
2
22
3
30
4
36
5
40
6
42
Refer to the given table. This firm is
D.
hiring workers in an imperfectly competitive market.
30.
Employment
Total Product
0
0
1
12
2
22
3
30
4
36
5
40
6
42
Refer to the given table. If the firm is hiring workers under purely competitive conditions at a
wage rate of $22, it will employ
A.
1 worker.
B.
2 workers.
16–15
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written consent of McGraw-Hill Education.
C.
3 workers.
D. 4 workers.
AACSB: Knowledge Application
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 16–02 Convey how the marginal revenue productivity of a resource
relates to a firms demand for that resource.
Test Bank: I
Top i c:
Marginal Productivity Theory of Resource Demand
Type: Table
31.
Employment
Total Product
0
0
1
12
2
22
3
30
4
36
5
40
6
42
Refer to the given table. If the firm is hiring workers under purely competitive conditions at a
wage rate of $10, it will employ
A.
2 workers.
32.
16–16
Employment
Total Product
0
0
1
12
2
22
3
30
4
36
5
40
6
42
Refer to the given table. Which of the following best represents the labor demand schedule
for this firm?
D.
WR
Qd
$40
1
35
2
30
3
25
4
33.
Assuming a firm is selling its output in a purely competitive market, its resource demand
curve can be determined by
A. multiplying total product by product price.
34.
Marginal resource cost is
A. the increase in total resource cost associated with the production of one more unit of
output.
16–18
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 16–02 Convey how the marginal revenue productivity of a resource
relates to a firms demand for that resource.
Test Bank: I
Top i c :
Marginal Productivity Theory of Resource Demand
35.
Unit of Labor
Total Product
Product Price
0
0
$2.20
1
15
2.00
2
28
1.80
3
39
1.60
4
48
1.40
5
55
1.20
6
60
1.10
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
36.
Unit of Labor
Total Product
Product Price
0
0
$2.20
1
15
2.00
2
28
1.80
3
39
1.60
4
48
1.40
5
55
1.20
6
60
1.10
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.
37.
Unit of Labor
Total Product
Product Price
0
0
$2.20
1
15
2.00
2
28
1.80
3
39
1.60
4
48
1.40
5
55
1.20
6
60
1.10
The data in the table reveal that
16–20
A. the firm is selling its product in a purely competitive market.
38.
Other things equal, the resource demand curve of an imperfectly competitive seller will
A.
lie below its marginal revenue product curve.
39.
The MRP curve is the resource demand curve for
A.
neither the purely competitive nor the imperfectly competitive seller.