Chapter 14 Economics

The firm is a price taker or wage taker in the competitive resource market because it:

Purchase a negligible fraction of the total supply of the resource, that its buying or hiring decisions do not influence the resource price.

Which of the following plays the main role in determining the quantities of land, labor, capital and entrepreneurship that will be combined in producing each good or service?

Resource prices

= change in total revenue/ unit change in resource quantity

marginal revenue product

which of the following exemplify the output effect of subtitute resources?

- a greater amount of output due to lower costs increases the demand ffor all resources, including labor. -if in a firm, the price of machinery has fallen, the costs of producing various outputs must also decline. -because of lower costs associated with a decline in the price of machinery, a firms finds it profitable to produce and sell a greater output.

For which of the following reasons is study of resource pricing important?

- money-income determination Resource allocation Understanding policy issues Cost minimization

which of the following are reasons why the distribution of income may be highly unequal.

-little or no access to educcation -physical and or mental disabilities - land and capital resources inherited rather than earned.

Because resource demand is derived from product demand, the strength of the demand for any resource will depend on:

-the demand for the good or service it helps produce -the productivity of the resource in helping to create a good or service -the market value or price of the good or service it helps produce

which of the following infers the relationship between the productivity of a resource and the demand for that resource

-unproductive resources that turn out minimally valued products will have little demand -highly productive resources that turn out highly valued products will be in great demand.

Resource

As cited in McConnell, many policy issues surround the _______ market.

According to McConell, the demand for service workers in the US is rapidly out pacing which type of workers?

Construction workers Manufacturing Workers Mining Workers

Just as product prices allocate finished goods and services to _____, resource price allocate resources among industries and ______.

Consumers Firms

IN producing any good or service, the resource prices of each input used to produce a product play the main role in determining the quantities that will be combined from the following:

Entrepreneurial ability capital labor land

the expenditures that firms incur in acquiring economic resources flow as wages, rents, interest and profit to be incomes of _______ that supply those resources.

Households

A firm in a competitive product market exerts no influence on product price because it:

Supplies a negligible fraction of total output.

A major competitor in a competitive market just made a purchase at the market of a needed resource input to expand its product output. Which of the following describes the effect on resource prices for this competitive market.

The price of the resource remains the same making the major competitor a price/wage taker.

When a product is in high demand with customers based on its value (quality) or price, the demand for the resources to produce that product will be very high.

True

the level of derived demand for a good or service used in the production of other goods and services is based upon the input's level of productivity in helping reduce the cost of producing the finished product.

True

when product price is constant and the downward slope of the demand curve is due solely to the decline in the resource's marginal product, then the situation describes:

a market in pure competition

IN a purely competitive market for labor, a firm cannot influence the wage rate because each firm hires:

a small fraction of the market supply.

the rule that guides profit-seeking firms when deciding to hire more labor or use more of a specific resource is

add additional units of the resource when each sucessive unit adds more to a firm's total revenue than it adds to its total cost.

recall that technological

advances increase the quality of other resources.

which of the following identifies how the productivity of any resource may be altered over the long run ?

by the quantities of other resources -through the quality of variable resources - through technological advance.

the marginal productiviy theory of income distribution rests on the assumptions of _____ markets, although not all labor markets are

competitive

when an increase in the quantity used of one resource leads to the increase of the use of another resource in the same production process and vice versa, the resources used are called ________ resources

complementary

the total or market demand curve for a specific resource shows the various total amounts of the resource that firms will purchase or hire at various resource prices.

demand prices

the total, or market demand curve for a specific resource shows the varous total amounts of the resource that firms will purchase or hire at various resource prices.

demand prices

because the demand for labor is derived demand, the elasticity of the demand for the output (product) that the labor is producing will influence the elasticity of the demand for labor.

derived demand

Match the following conditions regarding the elasticity of resource demand.

e>1 resource demand is elastic e<1 resource demand is inelastic e=1 resource demand is unit-elastic.

The determinants of elasticity of resource demand are:

ease of resource subsitutability ratio of resource cost to total cost elasticity of product demand

the percent change in resource quantity (divided) by the percent change in resource price measures:

elasticity of resource demand

lack of equal opportunies, different physical and mental atributies to achieve needed education and opportunities due to inheritance rather than personal effort are critiscms of the marginal productivity theory of income distribution.

equal education inheritence

the ability to produce a GREATER output at a specific total cost is the same as being able to produce a specific out with a LOWER total cost

greater lower

when the total- resource cost can remain the same but result in ___ total output, the cost per unit and therefore the total cost of any specific level of output can be reduced.

greater reduced

When the productivity of a product resource increases and makes a firm's product more efficient and or effective, it will _____ the demand for the resource, and should be the productivity of a resource decline, it will ______ the demand for the resource.

increase decrease

other things equal, an increase in the demand for a product will

increse decrease

other things equal, an increase in the demand for a product will ____ the demand for a resource used in its production, whereas a decrease in product demand will ____ the demand for that resource.

increse decrease

a firm is producing a specific output with the least-cost combination of resources when the ____ dollar spent on each resource yields the ____ marginal product.

last same

when marginal product decreases when one more unit of labor is added, this reminds us of the

law of diminishing returns

According to mcConell, the demand for service workers in the US is rapidly out pacing wich type of workers?

manufacturing workers minining workers construction workers

a firm's demand schedule for labor or any output to produce a good service can also be know as its::

marginal revuene product schedule

other things equal, the demand for a resource shows an inverse relationship between ______ of the resource and the quantity of the resource ____________ .

price demanded

when a product's input resource is extremely ____ in turning out a highly valued commodity, it will be in great

productive demand

the marginal productivity of any resources will vary with the quantities of other resources used with it.

productivity quantities

The expenditures that incur in acquiring economic resources flow to households in the form of:

rent interest wages profit

derived demand a(n) ________ depends on the ________ a firm receives for the product it produces.

resource price

price changes in other input product _____ may change the ____ for a specific resource.

resources demand

to maximize profit, a firm should add additional units of a specific resource as long as each successive unit adds more to the firm's total ___ than it adds to the firm's total ____.

revenue cost

IN a purely competitive market for labor, because each firm hires a ________ fraction of market supply, it cannot influence the market _______.

small wage

The extra or additional output that is produces as a result of adding one more unit of labor or variable input is called:

the marginal product