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Exam 15: The Demand for Resources

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Question 21

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The MRP curve for labor:

A) intersects the firm's labor demand curve from above.
B) is the firm's labor demand curve.
C) lies below the firm's labor demand curve.
D) lies above the firm's labor demand curve.

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Question 22

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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.
B) supply of labor is inelastic.
C) firm is hiring labor under purely competitive conditions.
D) firm is hiring labor under imperfectly competitive conditions.

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Question 23

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If MP_a/P_a = MP_b/P_b and MRP_a/P_a = MRP_b/P_b > 1,this firm is:

Answer the question on the basis of the following information: Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions.The price of labor is P_L and that of capital is P_C.The marginal product of labor is MP_L and that of capital is MP_C.The firm sells its product competitively at a price of P_X. Refer to the given information.Which of the following must pertain if the firm is to minimize the cost of producing any output?

Answer the question on the basis of the following marginal product data for resources a and b.The output of these independent resources sells in a purely competitive market at $1 per unit. $\begin{array}{ccc}\begin{array}{ccc}\text { Inputs } \\\text { of a } & & \mathrm{MP}_{\mathrm{a}} \\\hline1 & & 25 \\2 & & 20 \\3 & & 15 \\4 & & 10 \\5 & & 5 \\6 & & 2 \\7 & & 1\end{array}\begin{array}{c}\begin{array}{c}\text { Inputs } \\\text { of } b\end{array} & & M P_{b} \\\hline1 & & 40 \\2 & & 36 \\3 & & 32 \\4 & & 24 \\5 & & 20 \\6 & & 16 \\7 & & 8\end{array}\end{array}$ Refer to the given data.Assume now that the prices of a and b are $15 and $20 respectively.To maximize profits,what combination of a and b should the employer hire?

A change in an input price will alter both production costs and the profit-maximizing output.Thus,a decline in the price of capital will reduce production costs,increase the profit-maximizing output,and thereby increase the demand for labor.This describes the:

The marginal productivity theory of income distribution suggests that:

A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8.This firm:

The MRP of labor curve is the firm's labor demand curve.

Other things equal,the resource demand curve of an imperfectly competitive seller will:

Suppose a technological improvement increases the productivity of a firm's capital and,simultaneously,its workers' union negotiates a wage increase.We can predict that:

Other things equal,the less competitive the market in which a firm sells its product,the less elastic will be its resource demand curve.

Marginal revenue product measures the:

Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. $\begin{array}{c}\begin{array}{c} \text {Units of}\\\underline{\text {Labor}}\\0\\1\\2\\3\\4\\5\\6\\7\end{array}\begin{array}{c}\text {Total}\\\underline{\text {Product}}\\0\\14\\\\30\\35\\39\\\\44\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Product}}\\\\14\\10\\\\\\\\\\2\end{array}\begin{array}{c}\text {Total}\\\underline{\text {Revenue}}\\\\\$ 42 \\\\90\\\\117\\126\\132\end{array}\end{array}$ Refer to the given data.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?

Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. $\begin{array}{c}\begin{array}{c} \text {Units of}\\\underline{\text {Labor}}\\0\\1\\2\\3\\4\\5\\6\\7\end{array}\begin{array}{c}\text {Total}\\\underline{\text {Product}}\\0\\14\\\\30\\35\\39\\\\44\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Product}}\\\\14\\10\\\\\\\\\\2\end{array}\begin{array}{c}\text {Total}\\\underline{\text {Revenue}}\\\\\$ 42 \\\\90\\\\117\\126\\132\end{array}\end{array}$ Refer to the given data.How many units of output are produced when 2 workers are employed?

A firm will find it profitable to hire workers up to the point at which their:

Elasticity of resource demand is measured by the:

If the price of capital declines,the consequent output effect would be:

The marginal productivity theory of income distribution has been criticized because:

Hiring the least-costly combination of resources ensures that profits will be maximized.