Ch. 14 Part 2

A delivery company is considering adding another vehicle to its delivery fleet; each is rented for $100/day. Assume that the additional vehicle would be capable of delivering 1,500 packages/day & that each package that is delivered brings in $.10 in revenue. Also assume that adding the delivery vehicle would not affect any other costs. What are the MRP & MRC? Should the firm add the delivery vehicle?

A delivery company is considering adding another vehicle to its delivery fleet; each is rented for $200/day. Assume that the additional vehicle would be capable of delivering 1,500 packages/day & that each package that is delivered brings in $.10 in revenue. Also assume that adding the delivery vehicle would not affect any other costs. What are the MRP & MRC? Should the firm add the delivery vehicle?

A delivery company is considering adding another vehicle to its delivery fleet; each is rented for $100/day. Assume that the additional vehicle would be capable of delivering 750 packages/day & that each package that is delivered brings in $.10 in revenue. Also assume that adding the delivery vehicle would not affect any other costs. What are the MRP & MRC? Should the firm add the delivery vehicle?

Which of the following will not cause a shift in the demand for resource X? A. A decline in the price of resource X. B. An increase in the price of the product resource X is producing. C. A decrease in the price of substitute resource D. An increase in the productivity of resource X.

A decline in the price of resource A will: A. Increase the demand for complementary resource B. B. Shift the demand curve for A to the left. C. Shift the demand curve for A to the right. D. Reduce the demand for complementary resource B.

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore:

Which of the following will not shift the demand curve for labor? A. The use of a larger stock of capital with the labor force. B. A change in the wage rate. C. An increase in the price of the product that labor is helping to produce. D. The adoption of a more efficient method of combining labor and capital in the production process

Employers will hire more units of a resource if the: A. Price of the resource increases. B. Productivity of the resource increases. C. Price of the good being produced declines. D. Price of a complementary resource rises.

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use: A. More labor as a consequence of the substitution effect. B. More labor as a consequence of the output effect. C. Less labor as a consequence of the substitution effect. correct D. Less labor as a consequence of the output effect

If two resources are highly substitutable for one another:

Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will: A. Decrease solely because of the substitution effect. B. Increase solely because of the substitution effect. C. Increase solely because of the output effect. D. Decrease solely because of the output effect.

The demand curve for labor would shift leftward as the result of: A. An increase in the price of the product labor is producing. B. A decrease in the productivity of labor. C. An increase in the price of labor. D. Decrease in the price of capital, provided the output effect exceeds the substitution effect

If the price of capital declines, the consequent output effect would be: A. Greater, the more elastic the demand for the product. B. Greater, the less elastic the demand for the product. C. Negative. D. Of consequence only if capital and labor are used in fixed proportions.

"The Case of ATMs" best illustrates the

Imperfect competitor

Other things equal, the resource demand curve of an imperfectly competitive seller will: A. Lie below its marginal revenue product curve. B. Be subject to increasing marginal productivity. C. Be less elastic than that of a purely competitive seller. D. Be more elastic than that of a purely competitive seller.

Suppose that a union successfully negotiated a 10% wage increase and the quantity of labor demanded decreased by 10 percent. Given a fixed labor demand curve, we can conclude that: A. The labor demand curve is upsloping. B. Labor demand is elastic. C. Labor demand is unit-elastic. D. The coefficient of elasticity of labor demand is less than 1.

Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect: A. The demand for resource Y to be more elastic than the demand for resource X. C. Resource X to be more expensive than resource Y. D. The demand for resource X to be more elastic than the demand for resource Y.

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal: A. The more elastic the demand for the product, the less elastic the demand for labor. B. The more elastic the demand for the product, the more elastic the demand for labor. C. The elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive. D. If product demand is perfectly elastic, labor demand will be perfectly inelastic.

Other things equal, the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the: A. Demand for labor will be elastic only if labor accounts for less than 50 percent of total costs. B. Demand for labor will be elastic only if labor C. Larger the labor cost-total cost ratio, the smaller will be the elasticity of labor demand. D. Larger the labor cost-total cost ratio, the greater will be the elasticity of labor demand.

A firm will find it profitable to hire workers up to the point at which their: A. Marginal resource cost equals their wage rate. B. Wage rate equals product price. C. MP is equal to their MRP. correct D. Marginal resource cost is equal to their MRP

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the: A. Firm's total outlay on resources is minimized. correct B. Marginal revenue product of each resource is equal to its price. C. Price of each resource employed is the same. D. Marginal revenue product of the last unit of each resource hired is the same.

Which of the following statements is correct? A. If the profit-maximizing rule is fulfilled, it necessarily follows that the cost-minimization rule is being fulfilled. B. The profit-maximizing and the cost-minimizing rules are such that the fulfilling of one has no bearing on the fulfilling of the other. C. If the profit-maximizing rule is fulfilled, the cost-minimization rule may or may not be fulfilled. D. If the cost-minimization rule is fulfilled, it necessarily follows that the profit-maximizing rule is being fulfilled.

"Income receivers should be paid in accordance with the value of output each produces." This statement is consistent with the: A. Monopoly theory of income distribution. B. Marginal productivity theory of income distribution. C. Least-cost, but not profit-maximizing, combination of inputs. D. Concept of compensating wage differences.

Marginal productivity theory of income distribution:

The fact that monopoly and monopsony exist in resource markets means that: A. The marginal productivity theory of income distribution is valid. B. Resource prices do not always measure contributions to output. C. The resulting income distribution is ethically correct. D. Income shares do not exhaust the total output.

Monopsony: