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Exam 16: The Demand for Resources

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Question 51

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Those who advocate the marginal productivity theory of income distribution argue that

A) government policy should be used to redistribute income based on need.
B) family income should be based on a family's demand for products.
C) resource markets will set incomes based on workers' contributions to the output of scarce goods and services.
D) monopoly and monopsony power do not affect resource payments of the overall distribution of income.

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Question 52

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A firm is producing 100 pencils per week. The production process requires labor and capital as inputs. Labor costs $6 per labor hour, and capital costs $12 per machine hour. Currently, the marginal product of labor is 18 pencils and the marginal product of capital is 36 pencils. To minimize the cost of producing this level of output, the firm should use

A) more capital and less labor.
B) more labor and less capital.
C) less labor and less capital.
D) the current amounts of labor and capital.

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Question 53

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272. cost-minimizing firm using two inputs, x and y, will employ inputs so that

Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity."

Employers will hire more units of a resource if the

If a firm pays labor $5 and receives an MP_L of 10, while paying capital $100 and receiving an MP_C of 100, to lower production costs it should hire more labor and less capital.

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal revenue product of the second worker is

The MRP curve is the resource demand curve for

Under pure competition, the market price of an output is $3. The output schedule of a firm using input X is listed in the table. If the price of input X is $12, how many units of input X will the firm employ to maximize profits? $\begin{array} { | c | c | } \hline \text { Units of X } & \begin{array} { c } \text { Mrringl } \\\text { Product }\end{array} \\\hline 1 & 10.0 \\\hline 2 & 9.9 \\\hline 3 & 8.8 \\\hline 4 & 7.7 \\\hline 5 & 6.6 \\\hline 6 & 5.5 \\\hline 7 & 4.4 \\\hline 8 & 3.3 \\\hline 9 & 2.2 \\\hline\end{array}$

Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. $\begin{array} {| c | c | c | c|} \text { Units of Labor } & \text { Total Product } & \begin{array} { c } \text { Marginal } \\\text { Product }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue }\end{array} \\\hline 0 & 0 & & \\\hline 1 & 14 & 14 & \$ 42 \\\hline 2 & & 10 & \\\hline 3 & 30 & & 90 \\\hline 4 & 35 & & \\\hline 5 & 39 & & 117 \\\hline 6 & & & 126 \\\hline 7 & 44 & 2 & 132 \\\hline\end{array}$ If the wage rate is $11, how many workers will Manfred hire to maximize profits?

The demand curve for labor would shift leftward as the result of

Other things being equal, if a once-competitive firm attains a high degree of monopoly power in its product market, then its resource demand will

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

The MRP curve for labor

The elasticity of resource demand measures the

If the marginal revenue product (MRP) of labor is less than the wage rate,

In the marginal productivity theory of income distribution, when all markets are purely competitive, the payment for each unit of a resource is equal to its

An example of derived demand in the auto industry is the demand for

Resource pricing is important because

The demand for a resource depends on its productivity and the market value of the product it is producing.