Microeconomics Chapter 12—The Supply of and Demand for Productive Resources
MULTIPLE CHOICE
1. The demand curve for a human resource will be more elastic the
a.
more and better substitutes are available for it.
b.
more difficult it is to substitute other resources for it.
c.
more inelastic the demand for the product the resource is used to produce.
d.
shorter the time period under consideration.
2. If skilled labor is three times the cost of unskilled labor, a profit-maximizing firm will vary the
quantity of each type of labor until the
a.
marginal product of each is the same.
b.
amount of unskilled labor used is three times the quantity of skilled labor used.
c.
amount of unskilled labor used is one-third the quantity of skilled labor used.
d.
marginal product of unskilled labor is one-third that of skilled labor.
3. The notion that the demand for inputs depends on the demand for outputs is termed
a.
inverse demand.
b.
derived demand.
c.
proportional demand.
d.
complementary demand.
4. What concept implies that a firm’s marginal revenue product curve for labor will slope downward in
the short run?
a.
diminishing marginal returns
b.
the law of supply
c.
the law of decreasing cost
d.
the price equalization principle
5. Which one of the following labor resources will likely have the most inelastic supply schedule in the
short run?
a.
filling station attendants
b.
sales clerks
c.
construction laborers
d.
dentists
6. Suppose the United Auto Workers’ Union succeeded in obtaining a 10 percent increase in the wages of
its workers and that the wage increase caused automobile prices to rise. Employment in the auto
industry would be most likely to decline significantly if
a.
the demand for American-made automobiles was highly elastic.
b.
the supply of foreign-produced automobiles was highly inelastic.
c.
American consumers considered foreign automobiles a poor substitute for American
automobiles.
d.
the demand for American automobiles was relatively constant and highly inelastic.
7. If the demand for a consumer good decreases, the demand for resources required to make the good will
a.
increase.
b.
remain the same, but the quantity demanded will increase.
c.
decrease.
d.
increase or decrease depending on whether the demand for the product is elastic or
inelastic.
The following table indicates the reductions in total losses due to theft if a jewelry store hires
additional security guards.
Table 12-1
Number
Dollar Value of
of Guards
Thefts Prevented
1
150
2
250
3
340
4
420
5
490
6
540
8. Refer to Table 12-1. If the security guards can be hired for $75 per day, how many guards should the
shop hire?
a.
two
b.
three
c.
four
d.
five
e.
six
9. An increase in the demand for a product will cause
a.
both the demand for and prices of the resources used to produce the product to decline.
b.
both the demand for and prices of the resources used to produce the product to increase.
c.
the demand for the resources used to produce the product to increase and their prices to
decline.
d.
the demand for the resources used to produce the product to decline and their prices to
increase.
10. If the demand for workers with doctorate degrees in economics increases, we would expect
a.
the wages of economists to increase in the short run and the number of economists
employed to increase in the long run.
b.
the supply of economists to increase in the short run and their wages to rise in the long
run.
c.
a rapid increase in the supply of economists, causing wages to remain constant.
d.
the wages of economists to decrease in the short run and the number of economists
employed to increase in the long run.
11. The market where firms purchase factors of production is referred to as the
a.
product market.
b.
resource market.
c.
capital market.
d.
foreign exchange market.
12. Which of the following is the best definition of “physical capital”?
a.
the labor utilized in the production process
b.
man-made resources used to produce other goods
c.
natural resources in their original state
d.
the ownership of stock shares issued by a corporation
13. Which of the following is the best example of an investment in human capital?
a.
on-the-job training received by an apprentice electrician
b.
an increase in the number of hours worked per week by a worker in an unskilled laboring
job
c.
the purchase of company stock by a worker
d.
payments into a retirement pension plan by a skilled laborer
14. Which of the following is the best example of an investment in human capital?
a.
an increase in the number of hours worked per week by a worker in an unskilled laboring
job
b.
the purchase of company stock by a worker
c.
a summer internship at a law firm for someone going to law school
d.
payments into a retirement pension plan by a skilled laborer
15. Which of the following is the best example of an investment in human capital?
a.
the purchase of an industrial development bond
b.
the purchase of company stock by a worker
c.
a student working as a waiter to pay for college
d.
a laid-off stockbroker who is taking nursing courses
16. In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical
high school graduate without additional education has
a.
risen as the demand for skilled labor has increased relative to the demand for unskilled
labor.
b.
risen as the demand for skilled labor has decreased relative to the demand for unskilled
labor.
c.
fallen as the demand for skilled labor has increased relative to the demand for unskilled
labor.
d.
fallen as the demand for skilled labor has decreased relative to the demand for unskilled
labor.
17. When an employer pays the cost of educating a worker, it is likely that the employer
a.
is demonstrating altruistic motives.
b.
is pursuing some objective other than profit-maximization.
c.
hopes to recapture its investment in the form of increased labor productivity.
d.
receives reimbursement from the government for the cost of the education.
18. One way to invest in human capital is by
a.
increasing your education.
b.
avoiding on-the-job training programs.
c.
doing nothing; it is impossible to improve your human capital. Human capital is solely
determined by the abilities that you are born with.
d.
investing in physical capital.
19. Physical and human capital investments are
a.
different in that the opportunity for economic profit is present for physical capital but not
for human capital investments.
b.
different in that human capital decisions do not involve future income considerations,
while physical capital investments do.
c.
similar in that nonmonetary considerations play an equally important role in both.
d.
similar in that both involve forgoing current income (and consumption) in an effort to
achieve higher future income (and consumption).
20. Farmer Ted owned a worn-out piece of farmland for growing cotton, which he had been unable to rent
for years. Suddenly he was getting offers from cotton farmers to lease his land. What is the most likely
explanation of this?
a.
The price of cotton went down.
b.
The physical productivity of the land went up.
c.
Taxes on the land went up.
d.
The price of cotton went up.
21. A firm’s demand curve for labor shifts when the
a.
price of its output changes.
b.
wage rate changes.
c.
number of available workers changes.
d.
All of the above are correct.
22. The derived demand and, consequently, the demand curve for labor are determined by
a.
labor’s wage.
b.
labor’s marginal revenue.
c.
the marginal cost of the input labor.
d.
labor’s marginal revenue product.
23. Which of the following is a correct statement about the labor market?
a.
Workers determine the supply of labor, and firms determine the demand for labor.
b.
Workers determine the demand for labor, and firms determine the supply of labor.
c.
Workers determine the supply of labor, and government determines the demand for labor.
d.
The forces of supply and demand, while present in the labor market, have nothing to
balance in that market.
24. If the price of airline tickets falls, what will happen to the demand curve for flight attendants?
a.
It will shift to the right.
b.
It will shift to the left.
c.
The direction of the shift is ambiguous.
d.
It will remain unchanged.
25. Which of the following events could increase the demand for labor?
a.
a decrease in output price.
b.
a decrease in the amount of capital available for workers to use.
c.
an increase in the marginal productivity of workers.
d.
All of the above are correct.
26. If unskilled labor is relatively plentiful and cheap in many foreign countries, then as the United States
expands its trade with these foreign countries, the domestic demand for
a.
unskilled labor will rise and skilled labor will fall.
b.
skilled labor will rise and unskilled labor will fall.
c.
both skilled and unskilled labor will rise proportionately.
d.
both skilled and unskilled labor will be unaffected, assuming no barriers to free trade.
27. Which of the following scenarios would serve to decrease the demand for unskilled labor in our
country?
a.
increased productivity gains among the unskilled laborers.
b.
increased demand for goods produced by unskilled labor.
c.
increased international trade with countries where unskilled labor is more plentiful.
d.
increased supply of migrant workers.
28. As the price of a resource 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.
29. 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.
30. As the price paid to a resource increases,
a.
the supply of that resource will increase in the resource market.
b.
the supply of that resource will decrease in the resource market.
c.
resources will shift from other resource markets to this one.
d.
resources will shift from this resource market to others.
e.
resource usage will be unaffected.
31. Which of the following most clearly illustrates the concept of “derived demand”?
a.
An increase in the price of steak causes the demand for poultry to increase.
b.
An increase in the demand for new houses leads to an increase in the demand for
construction workers.
c.
An increase in consumer income leads to an increase in the demand for services provided
by the government.
d.
An increase in the demand for new cars causes the demand for used automobiles to rise.
32. Which of the following most clearly illustrates the concept of “derived demand”?
a.
An increase in the price of steak causes the demand for poultry to increase.
b.
As the price of coffee increases, the quantity demanded for coffee declines.
c.
A boom in the housing market leads to an increase in the demand for lumber and
electricians.
d.
An increase in beer advertising on television leads to an increase in per capita beer
consumption.
33. Which of the following best illustrates the concept of “derived demand”?
a.
A decrease in the price of glass causes the demand for plastic to decrease.
b.
An increase in the demand for bread leads to an increase in the demand for flour.
c.
A decrease in the price of air travel leads to an increase in the quantity demanded of air
travel.
d.
An increase in the demand for peanut butter leads to an increase in the demand for jelly.
34. Since the demand for a resource depends on the demand for goods that the resource helps produce, the
demand for each resource is
a.
an elastic demand.
b.
an independent demand.
c.
a derived demand.
d.
inversely related to the marginal productivity of the resource.
35. The demand for accountants is a result of the complicated tax code. This is an example of
a.
dependent demand.
b.
resource demand.
c.
derived demand.
d.
none of the above.
36. The demand for a factor of production depends largely on the
a.
supply of the factor.
b.
supply of other factors of production.
c.
demand for other factors of production.
d.
demand for the products that it helps to produce.
37. When the price of steel rises, Ford uses more aluminum in the production of its cars. This is an
example of
a.
substitution in consumption.
b.
substitution in production.
c.
a change in the marginal productivity of a resource.
d.
derived demand.
38. When the price of a resource goes up and firms seek other suitable resources, this is called the
a.
substitution in production effect.
b.
substitution in demand effect.
c.
elasticity effect.
d.
inelasticity effect.
39. When a firm decides to hire more workers because local wage rates have decreased, this is an example
of
a.
market failure.
b.
substitution in production.
c.
labor exploitation.
d.
substitution in consumption.
40. Suppose the price of aluminum rises, and as a result, a manufacturing company purchases tin to use in
place of the now higher-priced aluminum. This is referred to as
a.
substitution in consumption.
b.
substitution in production.
c.
reverse substitution.
d.
factor reversal.
41. When the price of a resource increases, thereby causing the price of the final product to rise,
consumers will purchase less of the final product. This is called the
a.
substitution in production effect.
b.
substitution in consumption effect.
c.
elasticity effect.
d.
inelasticity effect.
42. An increase in the price of a resource would cause
a.
producers to substitute other inputs for the resource.
b.
consumers to increase consumption of the goods that increase in price as the result of the
higher resource price.
c.
an increase in the demand for products that use the resource intensely.
d.
a reduction in the price of goods produced with the resource.
43. The demand for a factor of production will be more inelastic
a.
when the cost of the factor is small relative to the total cost of the product.
b.
the more elastic the demand for the final product.
c.
the easier it is to substitute other resources for the factor.
d.
the more elastic the supply of products produced with the resource.
44. Other things constant, if the demand for a final product is quite elastic, the demand for a resource used
to produce the product will tend to be
a.
highly inelastic.
b.
of unitary elasticity.
c.
a curve sloping upward to the right.
d.
quite elastic as well.
45. Other things constant, if the demand for a product is inelastic, the demand for a resource used as an
input will tend to be
a.
inelastic as well.
b.
basically elastic.
c.
of unitary elasticity.
d.
the inverse of the elasticity coefficient of the product.
46. The demand for a resource is generally more
a.
elastic in the short run because it takes time to alter the ratio of resources used in many
production processes.
b.
inelastic in the short run because it takes time to alter the ratio of resources used in many
production processes.
c.
elastic in the short run because an increase in the price of the resource may not be
expected to last.
d.
inelastic in the short run because once resource suppliers find out they can charge a higher
price, they will do so in the long run.
47. If steel workers obtain a substantial wage increase, employment in the steel industry will be most
likely to fall if
a.
the demand curve for steel is highly inelastic.
b.
the demand curve for steel is highly elastic.
c.
the demand curve for steel workers is highly inelastic.
d.
there are no good substitutes for steel.
48. The demand for most products is likely to be
a.
more elastic in the long run than in the short run.
b.
less elastic in the long run than in the short run.
c.
equally elastic in the short and long run.
d.
equally inelastic in the short and long run.
49. A sudden increase in the demand for newly built homes will
a.
decrease the demand for lumber, bricks, and steel.
b.
decrease the demand for construction workers and architects.
c.
increase the marginal product of workers in the construction industry.
d.
increase the demand for construction workers and architects.
50. Assume that the demand for paper products increases. Then, we expect that the
a.
demand for trees will also increase.
b.
demand for trees will stay the same.
c.
demand for trees will decrease.
d.
effect on the demand for trees is uncertain; it depends on the elasticity of the demand for
paper.
51. Which of the following would tend to decrease the demand for coal miners?
a.
an increase in the wages of coal miners
b.
an increase in the price of oil
c.
a decrease in the demand for coal
d.
an increase in the supply of coal miners
52. A decrease in the demand for a product will cause output of that product to
a.
increase and the demand for and prices of the resources used to produce the product to
rise.
b.
decrease and both the demand for and prices of the resources used to produce the product
to fall.
c.
decline; the demand for the resources used to produce the product will remain constant.
d.
increase; the price of resources used to produce the product will rise if their supply is
elastic but fall if supply is inelastic.
53. If the demand for a consumer good increases, the demand for resources required to make the good will
a.
remain the same, but the quantity demanded will increase.
b.
decrease if the demand for the consumer good is inelastic, otherwise the demand will
increase.
c.
stay the same, but the quantity demanded will decrease.
d.
increase.
54. Suppose land suitable for wheat production is highly inelastic. An increase in the demand for wheat
bread will most likely
a.
cause the prices of bread and wheat to increase but not affect the incomes paid to owners
of wheat-growing land.
b.
shift the demand curve for bread to the right and the supply curve for wheat to the left.
c.
raise the price of land suitable for wheat production.
d.
depress the incomes of owners of wheat growing land.
55. The demand for a resource depends largely on the
a.
demand for the products that it produces.
b.
price of the resource.
c.
supply of the resource.
d.
cost of producing the resource.
56. 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.
57. 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.
58. According to the principle of marginal productivity, if
a.
the product price is less than MRP, the firm is using too little of the input.
b.
the price of an input rises, the quantity demanded of the input will increase.
c.
MRP is greater than product price, the firm should reduce the use of the input.
d.
price of the input equals MRP, the firm is maximizing profit.
Table 12-2
Quantity of
Number of Baseballs
Labor
Per Day
0
0
1
100
2
240
3
360
4
440
5
500
59. 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
60. 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.
61. 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.
62. 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.
Table 12-3
Days of Labor
Units of Output
0
0
1
10
2
18
3
25
4
30
5
33
6
34
63. Refer to Table 12-3. What is the marginal product of the third worker?
a.
7
b.
8
c.
25
d.
75
64. 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
65. 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
66. 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.
67. 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.
68. 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.
69. 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.
70. 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.
71. 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
72. 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.
73. 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.
74. Troll Corporation sells dolls for $10.00 each in a market that is perfectly competitive. Increasing the
number of workers from 100 to 101 would cause output to rise from 500 to 550 dolls per day. The
marginal revenue product for the 101st worker is
a.
$10.00.
b.
$500.
c.
$5,000.
d.
$1,010.
75. Tucker Corporation sells its product for $5.00. Tucker’s industrial engineers have informed
management that hiring one additional worker will increase output by five units per hour. Tucker
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.
76. A competitive car wash currently hires 4 workers, who together can wash 80 cars per day. The market
price of car washes is $5 per wash, and the price of workers is $60 per day. The car wash should hire a
fifth worker if it would increase total production to at least
a.
92 cars per day.
b.
100 cars per day.
c.
104 cars per day.
d.
110 cars per day.
77. An apple orchard currently hires 10 workers. The owner estimates that hiring an additional worker
would increase apple yields by 20 bushels per day. The price of apples is $15 per bushel. The owner
should hire the extra worker if the wage rate is no greater than
a.
$50 per day.
b.
$150 per day.
c.
$200 per day.
d.
$300 per day.
78. The marginal revenue product of a resource
a.
is defined as the marginal product of the resource multiplied by the resource price.
b.
simply means that a firm should add to its capital stock as long as competition requires it.
c.
equals the extra output produced by an additional unit of the resource multiplied by the
marginal revenue per unit of that output.
d.
equals the average product of the resource multiplied by the cost of hiring an additional
(marginal) unit of the resource.
79. If a college education did not increase worker productivity,
a.
no one would go to college.
b.
the earnings of workers with a college education would tend to be the same as for workers
without a college degree.
c.
the earnings of workers with a college education would still be higher than for those
without a college degree.
d.
the earnings of workers with a college education would be lower than for those without a
college degree.
80. The change in the total revenue of a firm that results from employing one additional unit of a factor of
production is defined as the
a.
total revenue product of the resource.
b.
marginal product of the resource.
c.
marginal revenue product of the resource.
d.
average revenue product of the resource.
81. The marginal revenue product of a resource is best described as the
a.
selling price of the last unit of output produced.
b.
increment of total cost resulting from the use of an additional unit of the resource.
c.
marginal product of the resource divided by the unit price of the good produced.
d.
change in total revenue resulting from employing an additional unit of the resource.
82. Which of the following is the most accurate definition of a worker’s “marginal revenue product”?
a.
the change in the firm’s profits as the result of hiring an additional worker
b.
the change in the firm’s total revenue as the result of hiring an additional worker
c.
the change in the firm’s output as the result of hiring an additional worker
d.
the change in the firm’s cost as the result of hiring an additional worker
83. A profit-maximizing restaurant owner will hire more busboys to keep more tables clean and quickly
available to new customers, as long as the
a.
marginal product of busboys exceeds the marginal product of other employees.
b.
hourly wage of busboys is lower than that of cashiers and cooks.
c.
marginal revenue product of busboys exceeds their wage rate.
d.
wage of busboys exceeds the wage of other employees.
84. Firms should hire additional units of a resource as long as the
a.
marginal product of the resource exceeds the price of the resource multiplied by the
quantity of output produced.
b.
marginal product of the resource is less than the price of the resource.
c.
price of the output produced is positive.
d.
marginal revenue product of the resource exceeds the cost of employing an additional unit
of the resource.
85. The rule for the optimal use of any input states that
a.
when MRP is less than price, profit will increase when more of that resource is utilized.
b.
when MRP is greater than resource price, profit will increase when more of that resource
is utilized.
c.
when MRP equals price, profit will increase when less of that resource is utilized.
d.
when MRP is greater than resource price, profit will increase when less of that resource is
utilized.
e.
resources should be used only if MRP exceeds product price.
86. The optimal level of resource use comes when
a.
MRP exceeds input price.
b.
MRP is less than input price.
c.
MRP equals input price.
d.
use of the resource exhausts the producer’s funds.
87. When the marginal revenue product of an input is less than its price, the
a.
producer should expand the use of that input.
b.
price of the input will automatically rise in a free market.
c.
producer should reduce the use of that input.
d.
marginal physical product of that input must be below its average physical product.
88. If the marginal physical product of more labor is twice as high as the marginal physical product of
more machinery, a profit-maximizing firm will
a.
reduce the labor used and increase the machinery used if labor costs half as much as
machinery.
b.
reduce the labor used and increase the machinery used if labor and machinery cost the
same amount.
c.
reduce the labor used and increase the machinery used only if labor costs more than twice
as much as machinery.
d.
reduce the labor used and increase the machinery used only if labor costs exactly twice as
much as machinery.
89. If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75 and the
price of the machinery per period is $25, in order to achieve optimal input proportions the firm should
use
a.
more labor and less machinery.
b.
more machinery and less labor.
c.
more labor with the same amount of machinery.
d.
the current combination.
90. Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The
firm is able to produce 176 units of output per day when 16 workers are hired (holding other inputs
fixed). Then the marginal product of the 16th worker is
a.
10 units of output.
b.
11 units of output.
c.
16 units of output.
d.
176 units of output.
Table 12-4
Number of Workers
Total Output
Marginal Product
0
0
—
1
30
2
40
3
50
4
40
5
30
91. Refer to Table 12-4. What is total output when 4 workers are hired?
a.
30
b.
40
c.
120
d.
160
Table 12-5
Number of Workers
Output
0
0
1
50
2
110
3
180
4
260
5
330
92. Refer to Table 12-5. What is the marginal product of the fourth worker?
a.
65
b.
70
c.
75
d.
80
93. Refer to Table 12-5. At which number of workers does diminishing marginal product begin?
a.
2