### resource prices are a major determinant of ______ _______. resource prices allocate scarce resources among _____ ________. resource prices, along with resource productivity, are important to firms in _____________.

money income, alternative uses, minimizing their costs

c

derived demand

### When economists say that the demand for labor is a derived demand, they mean that it is related to the demand for the

product or service labor is producing.

### We say that the demand for labor is a derived demand because

we demand the product that labor helps produce rather than labor service per se.

### The demand for a resource depends primarily on the demand for

the demand for the product or service that it helps produce.

### The demand for labor is derived from

consumer demand for the product or service it is helping to produce.

### Marginal revenue product measures the amount by which

the extra production of one more worker increases a firm's total revenue.

### The marginal revenue product schedule is the firm's

the firm's resource demand schedule.

### The purely competitive employer of resource A will maximize the profits from A by equating the

price of A with the MRP of A.

### The MRP curve for labor is the firm's

is the firm's labor demand curve

marginal product

### The labor demand curve of a purely competitive seller slopes

because of diminishing marginal productivity.

### A competitive employer should hire additional labor as long as

the MRP exceeds the wage rate.

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

marginal resource cost is equal to their MRP.

### The labor demand schedule is identical with the:

marginal revenue product schedule.

### The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the

firm is hiring labor under purely competitive conditions.

### the increase in total resource cost associated with the hire of one more unit of the resource.

Marginal resource cost is

### Other things equal, the resource demand curve of an imperfectly competitive seller will be less elastic then...

elastic than that of a purely competitive seller.

### The MRP curve is the resource demand curve for both

the purely competitive and imperfectly competitive seller.

### The labor demand curve of an imperfectly competitive seller is downward sloping:

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

### If a firm is selling in an imperfectly competitive product market, then the marginal products...

successive workers must be sold at lower prices.

### Other things equal, we would expect the labor demand curve of a monopolistic seller to deline..

decline more rapidly than that of a purely competitive seller

### The MRP curve for labor is downlopping and shows...

the relationship between wage rates and the quantity of labor demanded.

### a purely competitive and an imperfectly competitive producer will both hire less labor if

the wage rate increases

a

d

### For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by

multiplying marginal product by product price

d

### The labor demand curve of a firm will shift to the left if

the price of the product the labor is producing falls

c

### If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use less...

less labor as a consequence of the output effect

d

b

output effect

d

a

a

### The demand curve for labor would shift leftward as the result of:

a decrease in the productivity of labor.

c

### If the price of capital declines, the consequent output effect would be greater because

the more elastic the demand for the product

c

d

a

### A manufacturer using both capital and labor decides to use more labor and less capital because of an increase in the price of capital. This is likely the result of:

capital and labor being substitute inputs

will decrease

### Suppose that the price of capital increases relative to the wage rate and, as a result, the demand for labor increases. This means that the substitution effect is

greater than the output effect

b

inelastic

elastic

true

false

true

false

true

false

false

true

true

false

true

true

false

true

false

true

true

false

true

true

Example: