Chapter 26

Question 1

The demand for goods and services is called ____ demand, while the demand for resources is called ____ demand.

Answer 1

final; derived

Question 2

Which statement is true?

Answer 2

A change in final demand brings about a change in derived demand

Question 3

The additional revenue obtained by selling the output produced by one more unit of a resource is its

Answer 3

marginal revenue product.

Question 4

In general, the MRP _____ as output increases.

Answer 4

declines

Question 5

Productivity is _________ per unit of ___________.

Answer 5

output; input

Question 6

The firm will rent more and more land until the rent and the ____ of the last unit of land hired are equal.

Answer 6

MRP

Question 7

Workers in one country are more productive than workers in another country because

Answer 7

they have more complementary factors to work with.

Question 8

The demand for resources is based on

Answer 8

both the demand for the final product and the productivity of the resource.

Question 9

The additional output that one additional input of labor is responsible for is its

Answer 9

marginal physical product.

Question 10

A rise in the wage rate would lead to a movement

Answer 10

up the MRP curve and a decline in the number of workers hired.

Question 11

The firm’s demand schedule for a resource is its _____ schedule.

Answer 11

MRP

Question 12

A firm will operate at that point where _____ is equal to 1.

Answer 12

the MRP of capital/price of capital

Question 13

A firm will keep hiring more and more of a resource up to the point where its MRP equals

Answer 13

its price

Question 14

If the MRP of the last worker hired is lower than the wage rate, the firm has

Answer 14

hired too many workers.

Question 15

The most effective way to increase the productivity of labor would be to

Answer 15

increase capital

Question 16

As output rises,

Answer 16

both marginal revenue product and marginal physical product fall.

Question 17

How much of a resource a firm will purchase depends on

Answer 17

All of the choices are correct.

the price of that resource.
the productivity of that resource.
the selling price of the final product that the resource helps to produce.
the selling prices of close substitutes of the final product.

Question 18

A fall in the demand for the final product brings about

Answer 18

a fall in derived demand.

Question 19

A firm will continue hiring labor as long as the MRP of labor _______ the market wage rate.

Answer 19

is greater than

Question 20

The maximum units of input you would possibly hire would be

Answer 20

5

Question 21

An increase in the price of crude oil, a basic input into the production of gasoline, is likely to

Answer 21

put upward pressure on the price of gasoline.

Question 22

A decline in the wage rate would

Answer 22

raise the quantity of labor demanded.

Question 23

An increase in the demand for steel occurs. As a result, firms in the steel industry will

Answer 23

increase their demand for capital.

Question 24

If the output per acre of land triples, then the productivity of an acre of land

Answer 24

has tripled

Question 25

Derived demand is a demand for

Answer 25

resources.