Download Unit 4 5. Which of the following would determine the marginal

Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
5. Which of the following would determine the marginal revenue
product of an input used in a perfectly competitive output market?
I. Dividing the change in total revenue by the change in the
input.
II. Dividing the change in marginal revenue by the change
in the
output.
III. Multiplying the marginal revenue product by the
marginal
revenue of the output.
IV. Multiplying marginal revenue by the price of the output.
A. I only
C. III only
E. II and IV only
B. II only
D. I and III only
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
5. Which of the following would determine the marginal revenue product
of an input used in a perfectly competitive output market?
I. Dividing the change in total revenue by the change in the input.
II. Dividing the change in marginal revenue by the change in the
output.
III. Multiplying the marginal revenue product by the marginal
revenue of the output.
IV. Multiplying marginal revenue by the price of the output.
A. I only
C. III only
E. II and IV only
B. II only
D. I and III only
MARGINAL REVENUE PRODUCT: The
change in total revenue resulting from
a unit change in a variable input,
keeping all other inputs unchanged.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
6. Which of the following explains why the marginal revenue product
of an input in a perfectly competitive market decreases as a firm
increases the quantity of an input used?
A. The law of diminishing marginal returns.
B. The law of diminishing marginal utility.
C. The homogeneity of the product.
D. The free mobility of resources.
E. The total immobility of resources.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
6. Which of the following explains why the marginal revenue product of an
input in a perfectly competitive market decreases as a firm increases the
quantity of an input used?
A. The law of diminishing marginal returns.
B. The law of diminishing marginal utility.
C. The homogeneity of the product.
D. The free mobility of resources.
E. The total immobility of resources.
LAW OF DIMINISHING MARGINAL
RETURNS: A principle stating that as
more and more of a variable input is
combined with a fixed input in short-run
production, the marginal product of the
variable input eventually declines.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
15. A firm requires labor & capital to produce a given output. Labor costs $8 per
hour, & capital costs $12 per hour. At the current output level, the marginal
physical product of labor is 40 units, & the marginal physical product of capital
is 60 units. To minimize its production costs at the current level of output, in
which of the following ways should the firm change the amount of labor &
capital?
Labor
Capital
A. Increase
Increase
B. Increase
Decrease
C. Decrease
Increase
D. Decrease
No Change
E. No Change
No Change
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
15. A firm requires labor & capital to produce a given output. Labor costs $8 per
hour, & capital costs $12 per hour. At the current output level, the marginal
physical product of labor is 40 units, & the marginal physical product of capital
is 60 units. To minimize its production costs at the current level of output, in
which of the following ways should the firm change the amount of labor &
capital?
Labor
Capital
Labor – 40/$8 = $5
A. Increase
Increase
B. Increase
Decrease
C. Decrease
Increase
D. Decrease
No Change
E. No Change
No Change
Capital – 60/$12 = $5
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
16. In a competitive industry, suppose the marginal revenue product of the
last donut baker hired is $35 and the marginal revenue product of the last
bagel maker hired is $15. A bakery must pay donut bakers $40 a day and
bagel makers $10 a day. Which of the following should the bakery hire to
maximize profits?
A. More donut bakers and fewer bagel makers.
B. Fewer donut bakers and more bagel makers.
C. Fewer of both donut bakers and bagel makers.
D. More of both donut bakers and bagel makers.
E. Neither more nor fewer donut bakers or bagel makers.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
16. In a competitive industry, suppose the marginal revenue product of the
last donut baker hired is $35 and the marginal revenue product of the last
bagel maker hired is $15. A bakery must pay donut bakers $40 a day and
bagel makers $10 a day. Which of the following should the bakery hire to
maximize profits?
A. More donut bakers and fewer bagel makers.
Donut: 35 – 40 = -5
B. Fewer donut bakers and more bagel makers.
Bagel: 15 – 5 = 5
C. Fewer of both donut bakers and bagel makers.
D. More of both donut bakers and bagel makers.
E. Neither more nor fewer donut bakers or bagel makers.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
Short
1. What determines the demand for a resource (factor of
production)? Why is the demand for a resource downward
sloping? What determines the elasticity of demand for a resource
(factor of production)?
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
1. What determines the demand for a resource (factor of production)?
Why is the demand for a resource downward sloping? What
determines the elasticity of demand for a resource (factor of
production)?
The demand for a resource is derived from the demand for a good or
service that is produced with the resource. The demand for resources
is affected by the price of the good or service and the marginal
productivity of labor. Because marginal productivity decreases as out
put increases, marginal revenue product decreases. MRP is the
demand for the resource. In addition, if the firm is operating in an
imperfect product market, the price of the product will decrease as out
decreases. This also decreases MRP. The elasticity of demand for the
factor depends on the rate of decline of MRP, the elasticity of the
demand for the product, ease of resource substitutability and
proportion of total costs that the factor represents.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
2. List three factors that would increase the demand for a resource,
and explain why the factors would increase demand.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
2. List three factors that would increase the demand for a resource,
and explain why the factors would increase demand.
Several examples:
A. The demand for, and therefore the price of, the product produced
by the resource increases
B. The productivity of the resource increases
C. The price of a substitute resource decreases, as long as the
output effect is greater than the substitution effect
D. The price of a substitute resource increases, as long as the
substitution effect is greater than the output effect
E. The price of a complementary resource decreases
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
3. In the United States, textiles are sold in two separate and perfectly Long
competitive markets. The textiles produced in the United States are sold
in Market A, and imported textiles are sold in Market B.
A. Explain how the supply curve for textiles produced in the U.S. will be
affected by each of the following:
i. A decrease in the number of firms in the U.S. producing textiles
ii. An increase in the price of textiles
Assume textiles produced in Market A & Market B are close substitutes.
B. Using one graph for Market A and another for Market B, show and
explain how a substantial increase in the tariff on textiles imported into
the United States will affect each of the following:
i. equilibrium price & quantity of textiles sold in Market B (imported
textiles)
ii. Equilibrium price & quantity of textiles sold in Market A (textiles
produced in the U.S.)
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
3. In the United States, textiles are sold in two separate and perfectly competitive
markets. The textiles produced in the United States are sold in Market A, and
imported textiles are sold in Market B.
A. Explain how the supply curve for textiles produced in the U.S. will be affected
by each of the following:
i. A decrease in the number of firms in the U.S. producing textiles
ii. An increase in the price of textiles
With few firms producing textiles, the supply of textiles is reduced; the
supply curve shifts to the left (inward). With a high price for textiles,
the quantity supplied increased along an unchanged supply curve.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
3. In the United States, textiles are sold in two separate and perfectly competitive markets. The
textiles produced in the United States are sold in Market A, and imported textiles are sold in Market
B.
Assume textiles produced in Market A & Market B are close substitutes.
B. Using one graph for Market A and another for Market B, show and explain how a substantial
increase in the tariff on textiles imported into the United States will affect each of the following:
i. equilibrium price & quantity of textiles sold in Market B (imported textiles)
ii. Equilibrium price & quantity of textiles sold in Market A (textiles produced in the U.S.)
The tariff raises the per unit supply price of all units of imported textiles;
the supply curve in Market B shifts to the left (inward), leading to a
higher equilibrium price and a lower equilibrium quantity of imported
textiles. Since imported and domestically produced textiles are close
substitutes, the increase in the price of imported textiles leads to an
increase in the demand for domestically produced textiles (Market A).
The Market A demand curve shifts outward. Both the equilibrium price
and quantity increase in Market A.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 4