Managerial Econ Problems

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Micro Chapter 25 Practice Questions Key

1. Derived demand is the demand:
A)that arises because of monopoly control of resources in a market.
B)for a product based on the tastes and preferences of consumers.
C)derived from consumer satisfaction with a product.
D)for a resource to produce a product.
Answer: D

2. Marginal revenue product is the increase in:
A)total revenue from a decrease in the price of the product.
B)marginal revenue from a decrease in the price of the product.
C)marginal revenue from the use of an additional unit of a resource.
D)total revenue from the use of an additional unit of a resource. Answer: D

The following is a total-product schedule for a resource. Assume that the quantities of other resources the firm employs remain constant.

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3. Refer to the above table. If the product the firm produces sells for a constant $2 per unit, the marginal revenue product of the third unit of the resource is:
A)$12. B) $20. C) $24. D) $36.
Answer: C

4. Refer to the above table. If the firm's product sells for a constant $2 and the price of a resource is $16, the firm will employ how many units of the resource?
A)2 B) 3 C) 4 D) 5
Answer: D

5. If the marginal revenue product (MRP) of labor is less than the wage rate:
A)the firm is making profits.C)more labor should be employed.
B)the firm is incurring losses.D)less labor should be employed. Answer: D

6. A competitive employer will hire inputs up to the point where the:
A)marginal product of the input reaches a maximum.
B)price of the input equals the price of the output.
C)price of the input equals the marginal product of the input.
D)price of the input equals the marginal revenue product of the input. Answer: D

The following table is for a purely competitive market for resources.

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7. Refer to the above table. At a wage rate of $11, the firm will choose to employ:
A)2 workers. B) 3 workers. C) 4 workers. D) 5 workers. Answer: D

8. Refer to the above table. At a wage rate of $23, the firm will choose to employ:
A)2 workers. B) 3 workers. C) 4 workers. D) 5 workers. Answer: B

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9. Refer to the above table. If the firm's product sells for a constant $2 per unit, what is the marginal revenue product of the third unit of the resource?
A)$8 B) $10 C) $12 D) $14
Answer: C

10. If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will:
A)decrease the demand for the other input.
B)increase the demand for the other input.
C)increase the quantity demanded for the other input.
D)have no effect on the demand for the other input.
Answer: A

11. A firm is both hiring labor and selling output in purely competitive markets and is maximizing profits. It is currently operating in the elastic range of its MRP curve. If the wage rate increases, its total spending on wages at the new equilibrium will:

A)be larger. B) be smaller. C) be unchanged. D) change in an undetermined direction. Answer: B

12. What will the elasticity of resource demand be if unit wages rise by 8 percent and the number of employed workers falls by 5 percent?
A)0.63 B) 1.61 C) 2.90 D) 4.00
Answer: A

13. An example of derived demand is the demand for:
A)new automobiles.C)labor used to produce autos. B)used automobiles.D)foreign instead of domestic autos. Answer: C

14. A competitive employer will hire inputs up to the point where the: A)marginal product of the input reaches a maximum. B)price of the input equals the price of the output. C)price of the input equals the marginal product of the input. D)price of the input equals the marginal revenue product of the input. Answer: D

15. Under pure competition the market price of an output is $3. The output...
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