Chapter 27 - Demand in the Factor Market

1		Statement I. Marginal physical product and margin revenue product are identical. Statement II. As output rises, marginal physical product declines.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
2		As output rises, the marginal revenue product of the imperfect competitor declines ____________ the marginal revenue product of the perfect competitor.
			A)	faster than
			B)	as fast as
			C)	more slowly than
3		Statement I: Changes in resource demand can be brought about by changes in the prices of other resources. Statement II: Productivity changes can induce changes in the demand for a resource.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
4		If the price of a resource rises, the demand for a complementary resource will
			A)	rise.
			B)	remain the same.
			C)	fall
5		A firm will use increasing amounts of a resource until the MRP of that resource
			A)	is greater than its price.
			B)	is equal to its price.
			C)	is less than its price.
6		Statement I: According to the substitution effect, if the price of a resource is lowered, it will be substituted for other resources. Statement II: The output effect is illustrated by an increase in the wage rate of autoworkers leading to a decline in output of autos, thereby lowering the employment of capital and other resources used to produced cars.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
7		When the productivity of capital rises, the MRP curve of capital
			A)	shifts upward.
			B)	shifts downward.
			C)	does not shift.
8		If the demand for swimming lessons rises, the MRP schedule for swimming instructors will
			A)	rise.
			B)	stay the same.
			C)	fall.
9		If the price of farm land goes down, the demand for farm workers will go up if
			A)	the output effect outweighs the substitution effect.
			B)	the substitution effect outweighs the output effect.
			C)	the substitution effect and output effect are equal.
10		The demand for software engineers is
			A)	a final demand.
			B)	a derived demand.
			C)	both a final demand and a derived demand.
			D)	neither a final demand nor a derived demand.
11		Statement I. The demand for a resource rises as it productivity rises and the relative prices of substitutable resources falls. Statement II. The substitution effect is generally stronger than the output effect.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
12		How much of a resource a firm will purchase depends on each of the following except
			A)	the price of that resource.
			B)	the productivity of that resource.
			C)	the selling price of the final product that the resource helps to produce.
			D)	the selling prices of close substitutes of the final product.
			E)	None of these are exceptions.
13		A firm will operate at that point where _____ is equal to 1.
			A)	the marginal physical product of capital/price of capital
			B)	the MRP of capital/price of capital
			C)	the price of capital/marginal physical product of capital
14		The substitution effect and the output effect work in
			A)	the same direction some of the time.
			B)	the same direction all of the time.
			C)	opposite directions some of the time.
			D)	opposite directions all of the time.
15		The additional revenue obtained by selling the output produced by 1 more unit of a resource is its
			A)	marginal revenue product.
			B)	marginal physical product.
			C)	final demand.
			D)	average revenue product.