[Solved] When Is the Marginal Revenue Product of a Factor at a Maximum

What do most economists think is the socially optimum extraction rate of a natural resource such as oil? A)One that equals the MRP of the resource. B)A rate that ensures that the price of oil increases at the same rate as the interest rate. C)One that is less than the rate of discovery of new sources. D)One that is less than 2 percent of known reserves so as to guarantee at least 50 years' supply at all times.

If the MPK/PK is greater than the MPL/PL,which of the following is correct? A)The firm should substitute labour for capital. B)The firm should substitute capital for labour. C)The firm should raise the wage rate of its labour. D)The firm should decrease its output.

Which of the following would cause,graphically,a shift to the right in the demand curve for a factor? A)A decrease in the price of that factor. B)An increase in the price of a substitute factor. C)A decrease in the price of the product produced by the factor. D)An increase in the marginal product of a substitute factor.

If most people's desire for leisure increases,which one of the following statements is correct? A)The wage rate would fall,and the quantity of products produced would rise. B)Both the wage rate and the quantity of products produced would fall. C)The wage rate would fall,and the demand for labour would increase. D)The wage rate would rise,and the quantity of products produced would fall. E)Both the wage rate and the quantity of products produced would rise.

All of the following statements,except one,concerning the concept of economic rent are correct.Which is the exception? A)The more inelastic the supply of a factor,the more economic rent that factor earns. B)A factor that has a perfectly inelastic supply will earn no transfer earnings. C)It is possible for a factor to receive both economic rent and transfer earnings. D)If we assume that land has only one use,such as agriculture,then all of its return is economic rent. E)The higher the transfer earnings of a factor,the higher its economic rent will be.

If a firm is operating in a monopsony market,which of the following statements is correct? A)The firm can hire additional labour at the same wage rate it is currently paying. B)The firm would hire more labour in the monopsony situation than in the competitive situation. C)The firm faces an upward-sloping supply of labour curve. D)The MPRL declines faster in the case of the monopsony situation than in the competitive one. E)The firm's demand for labour curve is downward-sloping in the situation of the monopsony market and horizontal in the case of the competitive one.

All of the following statements,except one,are correct when a trade union successfully imposes a wage rate above equilibrium.Which is the exception? A)There will be more workers willing to work than are hired. B)The firm's total wage bill will definitely be higher. C)The average firm is not operating in a competitive factor market. D)The quantity of workers hired will be less after the imposition of the higher wage than it was before. E)Neither the demand for nor the supply of labour has changed.

Although supply and demand analysis can be used to analyze the product market,it cannot be used to analyze the factor market.

Marginal revenue product is the increase in a firm's total revenue that results from the use of one more unit of input.

An employer operating under conditions of a perfectly competitive labour market will hire labour up to the point where the marginal product of labour equals the wage rate.