Chapter 12: The Supply of and Demand for Productive Resources

Which of the following most clearly illustrates the concept of "derived demand"?

An increase in the demand for new houses leads to an increase in the demand for construction workers

Assume that skilled labor costs twice as much as unskilled labor, a profit maximizing firm will

Hire until the marginal product of unskilled labor is one-half that of skilled labor

An increase in the price of a resource would cause

Producers to substitute other inputs for the resource

A profit-maximizing restaurant owner will hire more buspersons to keep more tables clean and quickly available to new customers, as long as

The marginal revenue product of buspersons exceed their wage rate

Which of the following is the best example of an investment in human capital? a. a summer internship at a law firm for someone going to law school b. an increase in the number of hours worked per week by a worker in an unskilled laboring job c. the purchase of company stock by a worker d. payments into a retirement pension plan by a skilled laborer

a. a summer internship at a law firm for someone going to law school

Which of the following is the best example of an investment in human capital? a. on-the-job training received by an apprentice electrician b. payments into a retirement pension plan by a skilled laborer c. an increase in the number of hours worked per week by a worker in an unskilled laboring job d. the purchase of company stock by a worker

a. on-the-job training received by an apprentice electrician

The market where firms purchase factors of production is referred to as the a. resource market. b. foreign exchange market. c. capital market. d. product market.

a. resource market.

Which of the following best describes the marginal revenue product of a resource? a. It equals the average product of the resource multiplied by the cost of hiring an additional (marginal) unit of the resource. b. It equals the extra output produced by an additional unit of the resource multiplied by the marginal revenue per unit of that output. c. It is defined as the marginal product of the resource multiplied by the resource price. d. It simply means that a firm should add to its capital stock as long as competition requires it.

b. It equals the extra output produced by an additional unit of the resource multiplied by the marginal revenue per unit of that output.

The marginal revenue product of a resource is best described as the a. marginal product of the resource divided by the unit price of the good produced. b. change in total revenue resulting from employing an additional unit of the resource. c. increment of total cost resulting from the use of an additional unit of the resource. d. selling price of the last unit of output produced.

b. change in total revenue resulting from employing an additional unit of the resource.

When a firm decides to hire more workers because local wage rates have decreased, this is an example of a. substitution in consumption. b. substitution in production. c. market failure. d. labor exploitation.

b. substitution in production.

Which of the following is one way to invest in human capital? a. Doing nothing; it is impossible to improve your human capital. Human capital is solely determined by the abilities that you are born with. b. Investing in physical capital. c. Increasing your education. d. Avoiding on-the-job training programs.

c. Increasing your education.

When the price of a resource goes up and firms seek other suitable resources, this is called the a. inelasticity effect. b. substitution in demand effect. c. substitution in production effect. d. elasticity effect.

c. substitution in production effect.

Since the demand for a resource depends on the demand for goods that the resource helps produce, the demand for each resource is a. an independent demand. b. inversely related to the marginal productivity of the resource. c. an elastic demand. d. a derived demand.

d. a derived demand.

Which of the following is the best definition of "physical capital"? a. the ownership of stock shares issued by a corporation b. the labor utilized in the production process c. natural resources in their original state d. man-made resources used to produce other goods

d. man-made resources used to produce other goods