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Marginal resource cost is the amount that each additional unit of a resource adds to the firms total resource

cost Which of the following is true? An increase in the demand for a product will increase the demand for a resource used in its production, and vice versa. Derived demand for a resource depends on: the price or value received from the product it produces; the productivity contribution of the resource used to create a good or service When an increase in the quantity used of one resource leads to the increase of the use of another resource I the same production process and vice versa, the resources used are called complementary. The derived demand for resources by producers for a product will be low when: the product is selling poorly The derived demand for an input will rise when: it is highly productive in reducing the cost to produce a product; it is highly productive in producing a highly valued commodity The demand for service workers in the US is rapidly out pacing the demand for manufacturing, construction and mining workers. The strength of the demand for any resource will depend on the productivity of the resource and the market price of the good or service that the resource helps produce. Which of the following may change the demand for a specific resource? Changes in the prices of other resources When the sale of a firms total output of a product in a competitive product market has no effect on the market price, this makes the firm a price taker. A firm in a competitive product market exerts no influence on product price because it: supplies a negligible fraction of total output When the productivity of a product resource increases and makes a firms product more efficient and or effective, it will increase the demand for the resource, and should the productivity of a resource decline, it will decrease the demand for the resource. The expenditures that firms make in acquiring economic resources flow to households, which supply resources such as: wages; profit; rent; interest In a purely competitive labor market, market supply and market demand establish: the wage rate

The firm in a competitive product market is also a price taker or wage taker in the competitive resource market. True or false: The substitution and output effects are both present when the price of an input changes, and they work and change in the same direction. Recall that ownership of property resources is highly unequal. Because resource demand is derived from product demand, the strength of the demand for any resource will depend on: 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 True or false: The level of derived demand for a good or service used in the production of other goods and services is based upon that inputs level of productivity in helping reduce the cost of producing the finished product. The output effect means that the firm will purchase more of one particular input when the price of the other input falls and less of that particular input when the price of the other input rises. A firm in a competitive product market supplies a(n) small fraction of total output so that its decisions exert no influence on product price. True or false: The demand for a resource is a positive relationship between the price of the resource and the quantity of the resource demanded. The criticisms surrounding the theory of income distribution include: inequality; market imperfections True or false: In a purely competitive labor market, market supply and market demand establish the wage rate. A firm in a competitive labor market is a wage taker, meaning that for each additional unit of labor hired, total resource cost increases by exactly the amount of the constant market wage rate. True or false: Ownership of property resources is very fair and equitable. Which of the following are reason s why the distribution of income may be highly unequal. Physical and mental disabilities; Land and capital resources inherited rather than earned; Little or no access to education and training Resource prices are a major factor in determining: the income of households Just as product prices allocate finished goods and services to consumers, resource price allocate resources among industries and firms. When a product input resource is highly productive in turning out a highly valued

commodity, it will be in great demand. To firms, resource price represent input cost and in order to obtain the greatest profit, the firm must produce at the profit-maximizing output quantity with the most efficient (least costly) combination of resources.

Producers of automobiles must deal with several determinants when demanding resource inputs. If demand for their good or service increases or decreases or there are changes in the productivity of a resource and even if there are changes in the prices of other resources, these can all affect resources demand. Using the figure given, if the demand for automobiles declines, which direction if any will the MRP/D cure shift for auto assembly worker? To the left If a new inexpensive automated parts delivery system is being installed at the auto assembly plant and 15 workers are informed that their jobs have been eliminated, this is an example of the effect of substitute resources and how they affect resource demand. In an imperfectly competitive market, a 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(n) higher price. Which of the following summarizes the effects of the resource demand market as a result of an increase or decrease in product demand? An increase in the demand for a product will increase the demand for a resource used in its production. ; A decrease in the demand for a product will decrease the demand for a resource used in its production. Resource prices are a major factor in determining the income of households. True or false: Just as product prices allocate finished goods and services to producers, resource prices allocate resources among industries and consumers. 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: land; entrepreneurial ability; capital; labor The imperfectly competitive seller produces less of a product than a(n) purely competitive seller and it does it demanding fewer resources. When product price is constant and the downward slope of the demand curve is due solely to the decline in the resources marginal product, then the situation describes: a market in pure competition

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. Which of the following are inversely related and are present when the cost of an input changes? The substitution and output effects The marginal product is the additional output that results from using one more additional unit of a variable input (ex. Labor). In order to maximize profit, a firm will purchase or hire a resource in an amount at which the resources marginal revenue product equals its marginal resource cost (MRP=MRC). A firms demand schedule for labor or any input to produce a good or service can also be known as its: marginal revenue product schedule The rising demand for health care-related services is derived from: higher incomes so greater expenditures on health care; the presence of private and public health insurance; an aging U.S. population. For which of the following reasons is the study of resource pricing important? Resource allocation; Understanding policy issues; Money-income determination; Cost minimization Changes in labor demand have considerable significance because they: affect wage rates and employment in specific occupations When the relative price of one of the resources currently being used to produce a product increases, such as the cost of labor, then a new decision must be made whether to substitute and decrease the use of labor and increase the use of another resource input such as machines in order to produce the same amount of output at a lower cost. True or false: In the competitive resource market, the firms is price maker. The market demand curve for a particular resource is derived by summing horizontally the individual demand or MRP curves for all firms hiring that resource. The extra or additional output that is produced as a result of adding one more unit of labor or variable input is: the marginal product In the following table, data from columns 1 and 6 is the firms marginal revenue product schedule for labor demand. What curve show the various total amounts of the resource that firms will purchase or hire at various resource prices: the total, or market demand curve for a specific resource

In order to maximize profit, a firm will purchase or hire a resource in an amount at which: the resources marginal revenue product equals its marginal resource cost (MRP=MRC). The change in direction for labor demand will be reliant upon whether labor and capital are production: substitutes; compliments A major competitor in a competitive market just made a purchase at the market price 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 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 complementary 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, describes the law of: diminishing returns According to the marginal productivity theory of resource demand, the derived strength of a resource input (in this case labor) demanded to produce wheat and apple cider is due to the market value or price for the wheat and apple cider; the productivity of the resource to create the wheat and apple cider True or false: To maximize profit, a firm should hire additional units of a specific resource as long as each successive unit adds more to the firms cost than it adds to the firms total revenue. It will be profitable for a firm to hire additional units of a resource up to the point at which that resources marginal revenue product is equal to its marginal resource cost The marginal revenue product measures how much each successive unit of a resource adds to total revenue. producers must understand and take the price of resources into account before they commit to investing in a new cell phone for which of the following reasons: Resources may not be used to produce a product that a government prefers not to be produced; Insufficient monies received by households for resources supplied to produce a product may cause the resources needed to not be available; The resource cost to produce the product may make it unprofitable to produce. Several occupations owe their declines in labor demand to: labor-saving technological change

Which of the following identifies how the productivity of any resource may be altered over the long run? Through the quality of the variable resource; by the quantities of other resources; through technological advance The imperfect competitors relative reluctance to employ more resources and produce more output when resource prices fall reflects its tendency to restrict output in the product market. The figure illustrates the formula for the: marginal revenue product Criticisms of the marginal productivity theory of income distribution include inequality caused by physical and/ or mental challenges as well as inheritances; market imperfections caused by unfair power to negotiate salaries and wages. The marginal productivity theory of income distribution states that ones income is distributed according to contribution to societys output. True or false: Several occupations owe their decline mainly to free-trade agreements that sent those jobs to other countries. Which of the following exemplify the concept of labor-saving technological change that has caused declines in demand for several occupations? Automated or computerized equipment has greatly reduced the need for file clerks, model and pattern makers and telephone operators; digital photography explains the projected decline in the employment of people operating photographic processing equipment Which of the following explains the need for network systems and data communications analysts, the two fastest growing occupations directly related to computers? The rising marginal revenue productivity of these particular workers, given the vastly improved quality of the equipment they work with; The rapid rise in the demand for computers, computers services and internet use; Price declines on computer equipment have had stronger output effects than substitution effects, increasing the demand for this kind of labor. The substitution effect of resources indicates that a firm: will purchase more of an input whose relative price has declined, and conversely, use less of an input whose relative price has increased The change in total revenue resulting from the use of each additional unit of a resource is known as the: marginal revenue product Many policy issues surround the resource market. 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. An imperfectly competitive market True or false: In a competitive capitalist economy all economists believe that the outcomes of fairness and economic justice are at the cornerstone of resource pricing. The substitution effect of resources indicates that a firm will purchase more of an input whose relative price has declined, and conversely, use less of an input whose relative price has increased.

Which of the following exemplifies the substitution effect in regards to substitute resources? 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 Facts and debates relating to resource market policy issues are often centered on the following: excessive pay to corporate executives; should the minimum wage be increased; the encouragement or restriction of labor unions; redistribution of income through taxes and transfer payments In order for the farmer to demand more resources to increase output that will maximize his or her profits for each of the two products he or she produces, she he must discover where the MRP = MRC. Which of the following infers the relationship between the productivity of a resource and the demand for the resource? Highly productive resources that turn out highly values products will be in great demand; unproductive resources that turn out minimally valued products will have little demand In the following table, additional variable input applied to fixed capital such as plant and equipment, increases total output at every level. True or false: Two of the fastest-growing occupations are directly related to manufacturing. Increases in labor demand for certain occupational groups result in increases in their employment, while decreases in labor demand for the same group result in decreases in their employment. The imperfectly competitive seller produces less of a product than purely competitive seller and it does it demanding fewer resources. True or false: The marginal revenue product (MRP) of the imperfectly competitive

seller falls for two reasons, MP diminishes and product price falls as output decreases. Figure 12.2 illustrates that the imperfectly competitive sellers downward slope is greater than that of a purely competitive sellers because: the pure competitor can sell added output at a constant price making the resource demand curve more elastic; the imperfectly competitive seller sells added output at lower prices making the resource demand cure less elastic A resource that is phenomenally efficient in producing something that no one wants to buy: will exhibit no demand When a product input resource is extremely productive in turning out a highly values commodity, it will be in great demand. The significance to understanding resource pricing to produce the new cell phone is that it permits the producer to better understand if he or she can produce a good or service at a maximized profit as well as if it can be produced at all. Which of the following do not exemplify how government policy issues are grounded on resource pricing: how many units of a good or service to produce; what should be the level of quality for a good or service; what should be the price of the good or service In a purely competitive market for labor, because each firm hires a small fraction of market supply, it cannot influence the market wage. The marginal productivity theory of income distribution rest of the assumptions of competitive markets, but not all labor markets are highly competitive. Which of the following exemplify the output effect of substitute resource? A great amount of output due to lower costs increase the demand for all resources, including labor; If in a firm, the price of machinery has fallen, the cost of producing various outputs must also decline; Because of lower cost associated with a decline in the price of machinery, a firms finds it profitable to produce and sell a greater output The cost of laptop computers has dropped by 25% in the last year so that every sales person can now be issued a computer. Sales managers know that sales persons who use laptop computers can meet with 3 to 4 additional customers everyday because less time is wasted using cell phones to talk with company employees and gather needed information to make sale. The new lower price for laptop computers may change demand for new sales person. True or false: A competitive firms resource demand curve identifies a direct or positive relationship between the wage rate and the quantity of labor demanded.

Although the marginal productivity theory of income distribution states income is distributed according to ones contribution to societys output, which of the following may be true concerning the inequality of income distribution? Different physical and mental attributes reduce educational and training opportunities; some gain opportunities due to inheritance rather than personal effort; Lack of equal opportunities available to all in order to contribute to society If a firm is hiring workers who are not paying their way, this would most likely mean that: the number of workers being hired is such that the marginal resource cost of the last worker exceeds his or her marginal revenue product. When marginal product decreases when one more unit of labor is added, this reminds us of the law of diminishing returns. When labor and capital are complementary: a decline in the price of capital increases the demand for labor through the output effect The MRP = MRC rule tells us that, in pure competition, a firm will hire workers up to the point at which the market wage rate (its MRC) is equal to its MRP. An MRP schedule (table) is also a firms demand for labor because each point on the schedule or curve indicates the number of workers the firm would have to hire at each possible wage.

One worker can produce 7 units of output with a selling price of $2.60 each. Even though the firm competes in an imperfect market business is so good that the manager hires a second worker who produces 6 units. To sell these six additional units the firm must lower the price to $2.40 each. Calculate the MRP for the firm with two workers. $31.20 (By hiring the second worker the firm must also take a price cut of 20 cents each on the 7 units produced by the first worker. So the total sale of 13 units x $2.40 = $31.20) Which of the following result in high wage rates in the industrially advanced nations? Strong demand and scarce supply of labor According to the marginal productivity theory of income, income is distributed according to contribution to societys output. The existence of a good or service that no one wants to buy will have the following effect on the resources used to produce it: there will be no demand for the resources used which of the following are true about why the marginal resource cost of labor

exactly equals the market wage rate in a competitive labor market? Resource price (market wage rate) and resource cost (marginal resource cost) are equal for a firm that hires a resource in a competitive labor market; each firm hires a small fraction of market supply, therefore it is a wage taker because it cannot influence the market wage rate; for each additional unit of labor hired, total resource cost increases by exactly the amount of the constant market wage rate

True or false: Derived demand is demand for producer resource/ labor inputs to be used indirectly to satisfy consumer demand in the production of final goods and services. Recall that improvements in the quality of a variable resource increase its marginal productivity and therefore its demand.