Multiple Choice Questions:
1. Which of the following is false about input markets?
a. The greatest fraction of national income goes to wages and salaries for labor services.
b. The price and quantity of an input traded depends on its supply and demand.
c. The demand for an input is a derived demand.
d. The price of an input tends to increase when the demand for the output produced by the input increases.
e. All of the preceding are true.
2. Marginal revenue product
a. Is the additional revenue that a firm obtains by employing one more unit of an input.
b. Will increase if an input’s productivity increases.
c. Will decrease if the price of the output produced by the input falls.
d. Is characterized by all of the preceding.
3. The marginal resource cost of an input
a. Is the amount an added unit of an input adds to a firm’s total cost.
b. Exceeds the market wage in a competitive industry.
c. Is less than the market wage in a competitive industry.
d. Is characterized by both a and b.
e. Is characterized by both a and c.
4. If an additional salesclerk is hired to work in a furniture store, the clerk’s sales efforts will contribute $700 to the store’s total revenue. The store’s profits will rise if the additional salesclerk is hired whenever the cost of hiring the clerk is ________ in wages and other costs.
a. $700
b. Less than $700
c. More than $700
d. Not enough information is given to make a determination.
5. A firm will increase its profits by adding one more unit of an input when
a. MRP < MRC.
b. MRP = MRC.
c. MRP > MRC.
d. None of the above.
6. Assuming competitive markets, a worker’s contribution to revenue is given by
a. The production function.
b. The marginal revenue product of labor.
c. The marginal resource cost of labor.
d. The marginal product minus marginal cost.
7. In a competitive labor market,
a. A firm is a wage taker.
b. A firm can hire all the labor it wishes to at the market wage.
c. A firm hires a small fraction of the total market quantity of labor supplied.
d. All of the preceding are true.
8. MRP falls as more labor is hired in a competitive labor market because
a. MRC increases as more labor is hired.
b. Workers that are added are steadily inferior in terms of ability.
c. Of the law of diminishing marginal product.
d. Of all of the preceding.