The Demand for resources

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

A MRP schedule (table) is also a firm's __________ for labor because each point on the schedule or curve indicates the number of workers the firm would have to hire at each possible ________ rate

- demand - wage

As one more additional variable input such as labor is applied to fixed capital such as plant and equipment, the marginal product or additional output, will fall. This describes the law of ________. A. demand B. diminishing returns C. supply D. increasing returns

- diminishing returns

The rule that guides profit-seeking firms when deciding to use more of a specific resource is to add additional units of a specific resource when each successive unit adds more to a firm's total _________ than it adds to the firm's total _________.

- revenue - cost

A firm in a competitive labor market is a wage __________, meaning that for each additional unit of labor hired, total resource costs ____________ by exactly the amount of the constant market wage rate.

- taker - increases

Because resource demand is derived from product demand, the strength of the demand for any resource will depend on _______________. A. the demand for the good or service it helps produce. B. the productivity of the resource in helping to create a good or service C. the supply for the good or service it helps produce D. the availability of the resource in helping to create a good or service. E. the market value or price of the good or service it helps produce.

- the market value or price of the good or service it helps produce - the productivity of the resource in helping create a good or service - the demand for 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? A. unproductive resources that turn out minimally valued products will be in high demand. B. highly productive resources that turn out highly valued products will be in great demand. C. highly productive resources that turn out highly valued products will be in little demand. D. unproductive resources that turn out minimally valued products will have little demand

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

Which of the following exemplifies the substitution effect in regards to substitute resources? A. A decline in the price of machinery prompts a firm to substitute machinery for labor allowing it to produce its output at the lower cost of machinery. B. A decline in the price of machinery prompts a firm to substitute labor for machinery allowing it to produce its output at the lower cost of machinery. C. An increase in the price of machinery prompts a firm to substitute machinery for labor allowing it to produce its output at the lower cost of machinery.

A. A decline in the price of machinery prompts a firm to substitute machinery for labor allowing it to produce its output at the lower cost of machinery.

Which of the following summarises the effects of the resource demand market as a result of an increase or decrease in product demand? A. A decrease in the demand for a product will decrease the demand for a resource used in its production. B. An increase in the demand for a product will decrease the demand for a resource used in its production. C. An increase in the demand for a product will increase the demand for a resource used in its production. D. A decrease in the demand for a product will increase the demand for a resource used in its production.

A. A decrease in the demand for a product will decrease the demand for a resource used in its production. C. An increase in the demand for a product will increase the demand for a resource used in its production.

A manager knows she has minimised the cost of producing a product using only two inputs, labor and machines, when which of the following cost equations holds true? A. Cost of labor = cost of machines B. Cost of machines > cost of labor C. Cost of labor > cost of machines

A. Cost of labor = cost of machines

Which of the following increases marginal productivity and therefore its demand? A. Improvements in the quality of a variable resource B. Improvements in the supply of a variable resource C. Improvements in the quantities of a variable resource D. Improvements in the demand of a variable resource

A. Improvements in the quality of a variable resource

The 4th of July weekend has arrived. Millions of people go the beach for the long holiday weekend. Which of the following scenarios illustrates demand derived from this holiday? A. Local communities hire extra life guards B. Hotels renovate their rooms C. Grocery stores renovate their stores D. Restaurants double their meat and produce orders

A. Local communities hire extra life guards D. Restaurants double their meat and produce orders

Which of the following best describes the ease of resource substitutability as a determinant of the elasticity of resource demand? A. The greater the substitutability of other resources, the more elastic is the demand for a particular resource. B. The greater the substitutability of other resources, the less elastic is the demand for a particular resource. C. The greater the substitutability of other resources, the more elastic is the supply for a particular resource. D. The lesser the substitutability of other resources, the more elastic is the demand for a particular resource.

A. The greater the substitutability of other resources, the more elastic is the demand for a particular resource.

When product price is constant and the downward slope of the demand curve is due solely to the decline on the resource's marginal product, then the situation describes: A. a market in pure competition B. an oligopoly C. a monopoly D. a monopolistic competition market

A. a market in pure competition

In a purely competitive market for labor, a firm cannot influence the wage rate because each firm hires: A. a small fraction of the market supply B. an equal fraction of the market supply C. a large fraction of the market supply D. as much of the market supply as it wishes

A. 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: A. add additional units of the resource when each successive unit adds more to a firm's total revenue than it adds to its total cost. B. add additional units of the resource when the sum of additional units adds more to a firm's total revenue than it adds to its total cost. C. add additional units of the resource when each successive unit subtracts more to a firm's total revenue than it adds to its total cost. D. add additional units of the resource when every other successive unit subtracts more to a firm's total revenue than it adds to its total cost.

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

The change in direction for labor demand will be reliant upon whether labor and capital are production: A. complements B. methods C. substitutes D. multipliers

A. complements C. substitutes

When the demand for a resource is based upon the demand for the products that are produced by the resource, what is this called? A. derived demand B. kinked demand C. competitive demand D. product demand

A. derived demand

The derived demand for an input will rise when: A. it is highly productive in reducing the costs to produce a product. B. it is highly productive in producing a highly valued commodity. C. it is highly productive in increasing the costs to produce a product. D. it is highly productive in producing a minimally valued commodity.

A. it is highly productive in reducing the costs to produce a product. B. it is highly productive in producing a highly valued commodity.

Facts and debates relating to resource market policy issues are often centered on the following: A. redistribution of income through taxes and transfer payments. B. what goods and services should be produced. C. excessive pay to corporate executives. D. what goods and services should be consumed. E. should the minimum wage be increased. F. the encouragement of restriction of labor unions.

A. redistribution of income through taxes and transfer payments. C. excessive pay to corporate executives. E. should the minimum wage be increased. F. the encouragement of restriction of labor unions.

The figure illustrates that the imperfectly competitive seller's downward slope is greater than that of a purely competitive seller's because: A. the imperfectly competitive seller sells added output at lower prices making the resource demand curve less elastic. B. the imperfectly competitive seller sells added output at higher prices making the resource demand curve more elastic. C. the pure competitor can sell added output at a lower price making the resource demand curve less elastic. D. the pure competitor can sell added output at a constant price making the resource demand curve more elastic.

A. the imperfectly competitive seller sells added output at lower prices making the resource demand curve less elastic. D. the pure competitor can sell added output at a constant price making the resource demand curve more elastic.

In a purely competitive labor market, market supply and market demand establish: A. the wage rate B. the final price of goods and services C. the interest rate D. consumer surplus

A. the wage rate

Which of the following do not exemplify how government policy issues are grounded on resource pricing: A. what should be the level of quality for a good or service B. should the government increase the legal minimum wage C. what should be the price of the good or service D. how many units of a good service to produce

A. what should be the level of quality for a good or service C. what should be the price of the good or service D. how many units of a good service to produce

Which of the following exemplify the output effect of substitute resources? A. If in a firm, the price of machinery has fallen, the costs of producing various outputs must rise. B. A greater amount of output due to lower costs increases the demand for all resources, including labor. C. If in a firm, the price of machinery has fallen, the costs of producing various outputs must also decline. D. Because of lower costs associated with a decline in the price of machinery, a firm finds it profitable to produce and sell a greater output.

B. A greater amount of output due to lower costs increases the demand for all resources, including labor. C. If in a firm, the price of machinery has fallen, the costs of producing various outputs must also decline. D. Because of lower costs associated with a decline in the price of machinery, a firm finds it profitable to produce and sell a greater output.

Which of the following is true? A. A decrease in the demand for a product will increase the demand for a resource used in its production, and vice versa. B. An increase in the demand for a product will increase the demand for a resource used in its production, and vice versa. C. An increase in the demand for a product will decrease the demand for a resource used in its production, and vice versa.

B. An increase in the demand for a product will increase the demand for a resource used in its production, and vice versa.

Which of the following is true: A. An increase in the productivity of a resource will reduce the demand for the resource and vice versa. B. An increase in the productivity of the resource will increase the demand for the resource and vice versa. C. An decrease in the productivity of the resource will increase the demand for the resource and vice versa.

B. An increase in the productivity of the resource will increase the demand for the resource and vice versa.

Which of the following is true about the marginal productivity of any resource? A. It will increase with the quantities of other resources used with it. B. It will vary with the quantities of other resources used with it. C. It will stay constant with the quantities of other resources used with it. D. It will decrease with the quantities of other resources used with it.

B. It will vary with the quantities of other resources used with it.

The marginal revenue product (MRP) of the imperfectly competitive seller falls for two reasons, because: A. MP diminishes and product price rises as output increases. B. MP diminishes and product price falls as output increases. C. MP diminishes and product price falls as output decreases. D. MP rises and product price falls as output increases.

B. MP diminishes and product price falls as output increases.

Which of the following best describes derived demand? A. The millions of online orders to download music to an iPod. B. The orders for farm tractors by farmers to grow crops. C. The long lines standing outside a stadium to buy Super Bowl Tickets. D. The orders by hungry customers at a fast food restaurant.

B. The orders for farm tractors by farmers to grow crops.

The _____ competitive seller produces less of a product than a(n) ________ competitive seller and does it demanding fewer resources. A. perfect; imperfect B. imperfect; perfect C. perfect; monopolistic D. monopolistic; oligopolistic

B. imperfect; perfect

It wil be profitable for a firm to hire additional units of a resource up to the point at which that resource's ______ is equal to its __________. A. marginal revenue product; total resource cost B. marginal revenue product; marginal resource cost C. total revenue product; total resource cost D. marginal revenue product; marginal revenue cost

B. marginal revenue product; marginal resource cost

The firm is a price taker or wage taker in the competitive resource market because it: A. purchases a significant fraction of the total supply of the resource, that buying or hiring decisions do not influence the resource price. B. purchases a negligible fraction of the total supply of the resource, that buying or hiring decisions do not influence the resource price. C. sells a negligible fraction of the total supply of the resource, that buying or hiring decisions do not influence the resource price.

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

Price changes in other input product _______ may change the ______ for a specific resource. A. resources; utility B. resources; demand C. demand; supply D. demand; utility

B. resources; demand

If a firm is hiring workers who are not "paying their way", this would most likely mean that: A. the number of workers being hired is such that the marginal resource cost of the last worker is equal to his or her marginal revenue product. B. the number of workers being hired is such that the marginal resource cost of the last worker exceeds his or her marginal revenue product. C. the number of workers being hired is such that the marginal revenue product of the last worker exceeds his or her marginal resource cost.

B. the number of workers being hired is such that the marginalresource cost of the last worker exceeds his or her marginal revenue product.

Derived demand for a resource depends on: A. the total output of the product it produces. B. the productivity of the resource used to create the good or service C. the location of the product it produces D. the price or value from the product it produces

B. the productivity of the resource used to create the good or service. D. the price or value from the product it produces

A resource that is phenomenally efficient in producing something that no one wants to buy: A. exhibits decreasing marginal returns B. will exhibit no demand C. will exhibit no supply D. is characteristic

B. will exhibit no demand

The following statement is true about what type of market: the lower price accompanying each increase in output (total product) applies not only to the marginal product of each successive worker but also to all prior output units that otherwise could have been sold at a higher price. A. A free market B. A perfectly competitive market C. A imperfectly competitive market

C. A imperfectly competitive market

Which of the following states that the cost of any product output is minimised when the ratios for each of the used inputs' marginal product to price are equal for each resource? A. The marginal product of labor rule B. The marginal cost rule C. The least-cost rule D. The law of diminishing marginal returns rule

C. The least-cost rule

The MRP=MRC rule tells us that in pure competition: A. a firm will hire workers up to the point at which the market wage rate (its MRC) is equal to marginal revenue. B. a firm will hire workers beyond the point at which the market wage rate (its MRC) is equal to its MRP. C. a firm will hire workers up to the point at which the market wage rate (its MRC) is equal to its MRP. D. a firm will hire workers up to the point at which the market wage rate (its MRP) is equal to MRC.

C. a firm will hire workers up to the point at which the market wage rate (its MRC) is equal to its MRP.

Other things equal, the demand for a resource shows ___________ between the price of the resource and the quantity of the resource demanded. A. no relationship B. a direct relationship C. an inverse relationship

C. an inverse relationship

The percentage change in resource quantity (divided) by the percent change in resource price measures: A. the least-cost combination of resources B. marginal revenue product C. elasticity of resource demand D. marginal resource cost

C. elasticity of resource demand

Resource prices are a major factor in determining household's _________________. A. the marginal product of resources B. expenditures C. incomes D. marginal benefit

C. incomes

The figure illustrates the formula for the: (change in total revenue / unit change in resource quantity) A. total revenue B. marginal resource cost C. marginal revenue product D. marginal revenue E. marginal revenue resource

C. marginal revenue product

Which of the following describes the concept of elasticity of product demand? A. Other things equal, the lower the price elasticity of product demand, the greater the elasticity of resource demand. B. Other things equal, the lower the price elasticity of product demand, the lower the elasticity of resource supply. C. Other things equal, the lower the price elasticity of product demand, the lower the elasticity of resource demand. D. Other things equal, the greater the price elasticity of product demand, the lower the elasticity of resource demand.

C. other things equal, the lower the price elasticity of product demande, the lower the elasticity of resurce demand

The output effect means that a firm will: A. sell more of one input when the price of the another input falls and less of that particular input when the price of the other input rises. B. purchase more of one input when the price of the another input rises and less of that particular input when the price of the other input rises. C. purchase more of one input when the price of the another input falls and less of that particular input when the price of the other input rises. D. purchase less of one input when the price of the another input falls and less of that particular input when the price of the other input rises

C. purchase more of one input when the price of the another input falls and less of that particular input when the price of the other input rises.

The derived demand for resources by producers for a product will be low when: A. supply is low for the product B. consumer demand is high for the product C. the product is selling poorly D. supply is high for the product

C. the product is selling poorly

The elasticity of demand for a resource is high when the proportion of _______ accounted by the resource are large. A. total supply B. total output C. total production costs D. marginal costs E. total fixed costs

C. total production costs

Which of the following result in high wage rates in the industrially advanced nations? A. Strong demand and supply of labor B. Weak demand and weak supply of labor C. Weak demand and strong supply of labor D. Strong demand and scarce supply of labor

D. Strong demand and scarce supply of labor

When labor and capital are complementary: A. a decline in the price of capital increases the demand for labor through the substitution effect. B. a decline in the price of capital decreases the demand for labor through the output effect. C. an increase in the price of capital increases the demand for labor through the output effect. D. a decline in the price of capital increases the demand for labor through the output effect.

D. a decline in the price of capital increases the demand for labor through the output effect.

The imperfect competitor's relative reluctance to employ more resources and produce more output when resource prices fall reflects: A. its marginal revenue first thing rising and then falling B. its falling marginal costs C. its rising marginal costs D. its tendency to restrict output in the product market

D. its tendency to restrict output in the product market

The _______ _______ ________ measures how much each successive unit of a resource adds to total revenue. A. marginal resource cost B. marginal cost revenue C. marginal product cost D. marginal revenue product E. total revenue product

D. marginal revenue product

The extra or additional output that is produced as a result of adding one more unit of labor or variable input is called: A. the marginal labor B. the physical product C. the total product D. the marginal product

D. the marginal product

The MRP=MRC rule is similar to the MR=MC profit maximising rule. The basic premise of the two rules is the same; however the point of reference is now ________ of a resource, not __________ of a product.

Inputs Outputs

A firm operating at least-cost method may not be operating at the output that ___________ its profits.

Maximises

In order to ________ profit, a firm will purchase or hire a resource in an amount at which the resource's marginal revenue product equals its marginal resource cost (MRP=MRC).

Maximize

The __________ of any resource may be altered over the ___________ run in several ways.

Productivity Long

Recall that __________ advances increase the quality of other resources.

Technological

Which of the following are inversely related and are present when the cost of an input changes? A. The complement and output effects. B. The substitution and complement effects. C. The substitution and resource effects. D. The substitution and output effects.

The substitution and output effects

Marginal resource cost is the amount that each _______________ unit of a resource contributes to the firm's total resource cost.

additional

To firms, resource prices represent _____ and in order to obtain the greatest profit, the firm must produce the profit-maximising quantity with the most efficient (least costly) combination of resources.

costs

In the following table, data from columns 1 and 6 is the firm's marginal revenue product schedule for labor ___________________.

demand

The total, or market, ______________ curve for a specific resource shows the various total amounts of the resource that firms will purchase or hirer at various resource prices, other things equal.

demand

Because the demand for labor is a(n) _________ demand, the elasticity of the ________ for the output (product) that the labor is producing will influence the elasticity of the demand for labor.

derived; demand

The ________ of resource demand is the sensitivity of resource quantity to changes in resource prices.

elasticity

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 ________ of _______ ___________.

law of diminishing returns

If a firm is maximising profit according to the profit-maximising combination of resources equation, then it must use the __________ -cost combination of inputs to do so.

least

After calculating the needed ratios of labor and machines so that they were equal so as to produce and minimise the cost of a product, the manager explained to the trainee that they'd just used the _____________ - ___________________ rule

least-cost

In the ________ run, firms can vary the amounts of all the resources they use.

long

In a purely competitive resource market, a firm is a _________________ taker or wage taker.

price

When the sale of a firm's total output of a product in a __________ competitive product market has no effect on the market price, this makes the firm a __________ __________.

purely; price taker

Changes in demand for resources must be distinguished from changes in the __________ __________ caused by changes in the price of the specific resource under consideration.

quantity demanded

To maximise 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

The degree to which resources are ____________ is a fundamental determinant of elasticity.

substitutable

When the relative cost of a resource used to produce a product decreases, such as the cost of machinery, a decision must be made whether to increase the use of more machines and decrease the use of another resource input such as labor in order to produce the same amount of output at a lower cost. This is called the ____________ effect.

substitution

The ________ effect of resources indicates that a firm will purchase ____________ of an input whose relative price has declined, and conversely, use __________ of an input whose relative price has increased.

substitution; more; less

The market demand curve for a particular resource is derived by ____________ horizontally the individual demand or MRP curves for all firms hiring that resource.

summing

A firm in a competitive product market exerts no influence on product price because it: A. supplies a negligible fraction of total output B. supplies a large fraction of total output C. demands a negligible fraction of total output D. supplies a negligible fraction of total revenue

supplies a negligible fraction of total output