Question 1

The demand curve for a factor is that part of the MRP where marginal product is

Accepted Answer

The demand curve for a factor is the part of the marginal revenue product (MRP) curve where marginal product is falling. This is because as more of the factor is used, the marginal product of the factor decreases due to the law of diminishing marginal returns. So, firms are willing to pay a higher price for the factor up to the point where the marginal product starts to decrease.

Question 2

Mr.Paque is a bear hunter for timber companies that want to diminish damage to trees done by bears in the spring.Due to a reduction in the bear population between 1995 and 2005, Mr.Paque finds fewer bears each year and additional hours spent hunting produce fewer additional bears.This means that Mr.Paque's (i) overall productivity has fallen; (ii) marginal product has fallen.

Accepted Answer

The information provided clearly states that Mr. Paque's overall productivity has fallen due to the reduction in the bear population and that additional hours spent hunting produce fewer additional bears, indicating a decrease in his marginal product as well. Therefore, both (i) and (ii) are correct.

Question 3

Figure 19-2 
-Capital is the

Accepted Answer

Capital refers to the stock of plant, equipment, and other productive resources held by a firm.

Question 4

The derived demand for an input decreases when

Accepted Answer

The answer of The derived demand for an input decreases...

Question 5

Which of the following is an example of a change in derived demand?

Accepted Answer

Derived demand occurs when the demand for one good or service happens as a result of the demand for another. In this case, the increase in demand for food truck hot dogs leads to an increased demand for buns, which are a complementary good necessary for serving hot dogs.

Question 6

Marginal physical product is

Accepted Answer

Marginal physical product refers to the additional output that is produced as a result of using one more unit of input. Therefore, the correct choice is D.

Question 7

If the demand for softballs increases, one could expect the demand for leather to increase.This is attributable to the

Accepted Answer

The increase in demand for softballs would lead to an increase in the demand for leather as leather is an input in the production of softballs. This is known as derived demand for an input.

Question 8

Mr.Calhoun owned a worn-out piece of farmland for growing cotton, which he had been unable to rent for years.Suddenly he was getting offers from cotton farmers to lease his land.What is the most likely explanation of this?

Accepted Answer

The most likely explanation for the sudden interest in leasing Mr. Calhoun's farmland is that the price of cotton went up. Higher cotton prices would make farming cotton more profitable, thus increasing the demand for cotton farmland.

Question 9

An employer would never operate on the upward-sloping part of an MRP curve because

Accepted Answer

Operating on the upward-sloping part of an MRP (Marginal Revenue Product) curve means the employer would be adding workers whose contribution to revenue is less than the cost of hiring them, thus not maximizing profits.

Question 10

Under the marginal productivity principle,

Accepted Answer

The marginal productivity principle suggests that at the optimal levels of input use, the marginal economic profit of all inputs is zero. This is because, at the optimal point, the cost of adding one more unit of input (marginal cost) equals the additional revenue generated by that unit (marginal revenue), leading to zero marginal economic profit for the last unit added.

Question 11

Demand for labor is

Accepted Answer

Labor is a derived demand because it is only demanded as a means to produce a good or service. In other words, businesses hire workers to produce goods or provide services to meet the demand of consumers.

Question 12

Which of the following is not true of derived demand?

Accepted Answer

The answer of Which of the following is not true...

Question 13

Which of the following is not held constant along a demand curve for labor by a firm?

Accepted Answer

The demand curve for labor by a firm holds constant factors such as the firm's technology of production, the price of the firm's output, and the price of substitutes for the firm's output. However, the marginal product of labor for the firm is not held constant along the demand curve for labor; it typically changes as more labor is hired, reflecting diminishing marginal returns.

Question 14

A recent decline in interest rates made home construction more affordable for many families.The consequent increase in construction produced a rightward shift in the demand curves for construction materials.Economists would say that the change in demand for materials is due to

Accepted Answer

The increase in demand for construction materials is due to derived demand, which is the demand for one good or service that arises as a result of the demand for another good or service. In this case, the demand for construction materials is derived from the demand for home construction.

Question 15

A ptomaine poisoning scare causes a decrease in the demand for canned tuna fish.Everything else equal, the demand curve for aluminum cans will

Accepted Answer

A decrease in the demand for canned tuna fish would lead to a decrease in the demand for aluminum cans, as they are a complementary good used in packaging the tuna. This would shift the demand curve for aluminum cans to the left, indicating a fall in demand.

Question 16

Suppose the marginal physical product of labor at a shoe string factory is 1,500 shoestrings per hour at 80 hours, 1,200 per hour shoestrings at 90 hours, 800 shoestrings per at 100 hours, and 300 shoestrings per hour at 110 hours.If a shoestring maker's wages are $60 per hour and each string sells for $0.05.What is the optimal use of labor for making shoestrings?

Accepted Answer

To determine the optimal use of labor, we need to find the point where the marginal revenue product (MRP) equals the wage rate. 
MRP = marginal physical product x price 
At 80 hours, MRP = 1,500 x 0.05 = $75 per hour 
At 90 hours, MRP = 1,200 x 0.05 = $60 per hour 
At 100 hours, MRP = 800 x 0.05 = $40 per hour 
At 110 hours, MRP = 300 x 0.05 = $15 per hour 
Therefore, the shoestring factory should hire labor for 90 hours since the marginal revenue product equals the wage rate at this point. Beyond this point, it becomes less profitable for the factory to hire additional labor as the marginal revenue product falls below the wage rate.

Question 17

Demand for inputs is a derived demand because

Accepted Answer

Demand for inputs is derived from the demand for the finished products that these inputs help produce. Producers demand the inputs because they want to produce the finished goods. This makes it a derived demand.

Question 18

Figure 19-2 
-In Figure 19-2, the derived demand curve is the line

Accepted Answer

The derived demand curve shows the quantity demanded of an input in response to the quantity demanded of the output it helps to produce. In this figure, the derived demand curve is represented by the line CDEF, which shows the quantity of labor demanded at different wage rates in response to changes in the quantity of output demanded. The line ABCD represents the relationship between the quantity of output demanded and the price of that output. Therefore, choice B is the correct answer.

Question 19

The derived demand curve for loans slopes downward because as interest rates

Accepted Answer

When interest rates fall, future income becomes more valuable, thereby making borrowers more willing to take loans to finance their investments. This leads to an increase in the quantity demanded of loans, resulting in a downward sloping demand curve for loans.

Question 20

It is true of the demand side of the market for input pricing that

Accepted Answer

The same marginal productivity principle serves as the foundation for the demand schedule for each type of input. Each input is demanded based on its contribution to the production process, and the demand schedule is determined by the marginal productivity of that input. While the demand for one input may be affected by the demand for other inputs, the demand schedule for each input can be determined independently. The demand curve only represents a portion of the MRP curve, and an inward shift in demand for a commodity may or may not result in outward shifts in the demand curves for the inputs used to produce the commodity depending on the substitutability of the inputs.

Quiz 18: Pricing the Factors of Production