Chapter 12

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The demand for Resources

Resource pricing is important because:

1. resource prices are a major determinant of money incomes
2. resources prices allocate scarce resources among alternative uses
3. resources prices, along with resource productivity, are important to firms in minimizing their costs

A decline in the demand for shoes will cause the demand for leather to decline

Which of the following statements best illustrates the concept of derived demand?

Consumers have a greater demand for football games than for soccer games

In the United States professional football players earn much higher incomes than professional soccer players. This occurs because:

slope downward because of diminishing marginal productivity

The labor demand curve of a purely competitive seller:

The MRP exceeds the wage rate

A competitive employer should hire additional labor as long as:

marginal resource cost is equal to their MRP

A firm will find it profitable to hire workers up to the point at which their:

MRP = MRC

A profit-maximizing firm employs resources to the point where:

profits will be increased by hiring fewer workers

Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information we can say that:

both because of diminishing returns and the necessity to lower price to sell more output

The labor demand curve of an imperfectly competitive seller is downsloping:

slopes downward because the marginal product of successive workers declines

The labor demand curve of a purely competitive seller:

Should hire more labor because this will increase profits

A competitive employer is using labor in such an amount that labor's MRP is $10 and its wag rate is $8. This firm:

a decline in the price of resource X

Which of the following will not cause a shift in the demand for resource X?

increase the demand for complementary resource B

A decline in the price of resource A will:

the output effect is greater than the substitution effect

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore:

a change in the wage rate

Which of the following will not shift the demand curve for labor?

productivity of the resource increases

Employers will hire more units of a resource if the:

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