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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 |
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| 2 | |
If two resources are substitutable, an increase in the price of one will always increase the demand for the other. |
| | A) | True |
| | B) | False |
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| 3 | |
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 |
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| 4 | |
Production of Mrs. Field's Cookies uses flour and sugar in fixed proportions. An increase in the price of flour will: |
| | A) | increase the demand for sugar solely because of the substitution effect |
| | B) | decrease the demand for sugar solely because of the substitution effect |
| | C) | increase the demand for sugar solely because of the output effect |
| | D) | decrease the demand for sugar solely because of the output effect |
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| 5 | |
A small accounting firm has two CPAs on staff, each preparing 5 tax returns per 8 hour day. Hiring a third CPA would increase the number of returns per day to 14. If each client is charged $120 per return: |
| | A) | the third CPA should be hired |
| | B) | the third CPA should not be hired |
| | C) | the marginal revenue product of the third CPA is $480 |
| | D) | the marginal revenue product of the third CPA is $1680 |
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| 6 | |
Suppose a firm is employing all its inputs such that the marginal product per dollar spent on each is the same. Then: |
| | A) | the price of each input is the same |
| | B) | the firm is producing the profit-maximizing level of output |
| | C) | the quantity of each input is the same |
| | D) | the firm is using the least-cost combination of inputs |
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| 7 | |
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 |
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| 8 | |
Compared to an otherwise identical firm selling its output competitively, a firm with monopoly power: |
| | A) | must lower price to sell additional output, making labor demand more elastic |
| | B) | must lower price to sell additional output, so MRP declines faster than MP |
| | C) | hires more workers |
| | D) | must pay a higher wage |
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| 9 | |
A purely competitive firm is currently hiring the profit-maximizing number of workers at a wage of $16 per hour. If the marginal product of the last worker hired is 4, the firm must be selling its output for: |
| | A) | $4 |
| | B) | $8 |
| | C) | $64 |
| | D) | more information is required |
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| 10 | |
Use the following labor demand data to answer the next question:
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Refer to the data. For the $20 to $18 range of wage rates, labor demand is |
| | A) | perfectly elastic |
| | B) | elastic |
| | C) | inelastic |
| | D) | perfectly inelastic |
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