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1
According to the marginal productivity theory of income distribution, each resource owner receives income:
A)equal to the value of her contribution to total output
B)in proportion to her need
C)in proportion to the amount of property she inherits
D)equal to marginal product divided by price
2
To find the amount by which the production of an additional worker increases a purely competitive firm's total revenue:
A)subtract the wage from marginal product
B)divide marginal product by the wage rate
C)subtract marginal cost from marginal revenue
D)multiply marginal product by product price
3
All else equal, the demand for labor will be most elastic when labor and capital are:
A)highly substitutable and product demand is elastic
B)highly substitutable and product demand is inelastic
C)not easily substituted and product demand is elastic
D)not easily substituted and product demand is inelastic
4
Compared to an otherwise identical firm selling its output competitively, a firm with monopoly power:
A)must lower its price to sell additional output, making labor demand more elastic
B)must lower its price to sell additional output, so MRP declines faster than MP
C)hires more workers
D)must pay a higher wage
5
Use the following diagram to answer the next question.
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Refer to the diagram. Initially, labor demand is given by D1. If labor and capital are complementary inputs, a decrease in the price of capital will cause:
A)a shift in labor demand to D2
B)a shift in labor demand to D3
C)either a shift in labor demand to D2 or D3, depending on the relative strengths of the substitution and output effects
D)a move from a to b along D1
6
Assume a candle manufacturer is employing two resources L and C in such quantities that the MRPs are $20 and $15, respectively. The prices of the resources are $16 and $12, respectively. This firm:
A)is using the least-cost combination of resources to produce its output but should use more of both
B)is using the least-cost combination of resources to produce its output but should use less of both
C)should use relatively more C
D)should use relatively more L
7
Suppose hiring an extra worker increases a firm's output from 90 to 100 units per hour. If the firm has to reduce its price from $1 to $.99 to sell the additional output, the marginal revenue product of the last worker is:
A)$.99
B)$9.00
C)$9.90
D)$10.00
8
The "derived demand" concept suggests that an increase in the demand for computers will:
A)increase the demand for computer software
B)decrease the demand for typewriters
C)increase the price of computers
D)increase the demand for computer design engineers
9
Use the data from the following table for the next question. A law firm has discovered the following relationship between the number of junior associates and its total revenue.

Workers

Revenue

1

$2000

2

3800

3

5400

4

6800

5

8000

Refer to the data. If the market pay for a junior associate is $1500, the law firm should hire:
A)2 associates
B)3 associates
C)4 associates
D)5 associates
10
For a firm that both sells its output and buys its inputs in purely competitive markets, the labor demand curve:
A)slopes downward and the labor supply curve is perfectly elastic
B)slopes downward and the labor supply curve is upward sloping
C)is perfectly elastic and the labor supply curve is upward sloping
D)is perfectly elastic and the labor supply curve is perfectly inelastic







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