Question 1

Which of the following best describes 'derived demand' in input markets?

Accepted Answer

The demand for a resource that depends on the demand for the output produced by that resource.

Question 2

A firm will continue to hire additional units of labor as long as:

Accepted Answer

$$MRP_L \u003e w$$

Question 3

Suppose a sandwich shop can sell each sandwich for $5. The marginal product of the 4th worker is 8 sandwiches per hour. What is the marginal revenue product (MRP) of the 4th worker?

Accepted Answer

$$MRP = 40$$

Question 4

Which of the following would cause a rightward shift in the labor demand curve for nurses?

Accepted Answer

An increase in the price of healthcare services.

Question 5

In a perfectly competitive labor market, the equilibrium wage is determined by:

Accepted Answer

The intersection of the market labor supply and demand curves.

Question 6

If technological change increases the productivity of labor, what happens to the marginal revenue product (MRP) curve?

Accepted Answer

It shifts to the right.

Question 7

Land is considered to have a 'demand-determined price' because:

Accepted Answer

Its supply is fixed and cannot be increased.

Question 8

A firm’s profit-maximizing condition in input markets can be expressed as:

Accepted Answer

$$\frac{MRP_L}{w} = \frac{MRP_K}{r} = \frac{MRP_A}{t} = 1$$

Question 9

If the price of a substitute input (e.g., robots) falls, what is likely to happen to the demand for labor?

Accepted Answer

The demand for labor will decrease.

Question 10

Which of the following best describes 'pure rent'?

Accepted Answer

The return to any factor of production that is in fixed supply.

Question 11

A city introduces a new high-speed train line, making suburban land more accessible. What is the likely effect on the price of land in those suburbs?

Accepted Answer

The price of land will increase due to higher demand.

Question 12

If a firm’s marginal revenue product of labor is $$MRP_L = 15$$ and the wage rate is $$w = 12$$, what should the firm do to maximize profit?

Accepted Answer

Hire more workers.

Question 13

Which of the following is NOT a factor that can shift the labor demand curve?

Accepted Answer

A change in the minimum wage law.

Question 14

Suppose a firm can hire land at a fixed price per acre. The firm will continue to rent more land as long as:

Accepted Answer

The marginal revenue from the output produced on the last acre equals the price of land.

Question 15

If a technological innovation increases the productivity of both labor and capital, what is the likely effect on the demand for these inputs?

Accepted Answer

The demand for both labor and capital will increase.

Question 16

Which of the following equations correctly represents the marginal revenue product of labor?

Accepted Answer

$$MRP_L = P 	imes MPL$$

Question 17

A firm faces the following input prices: wage rate $$w = 10$$, rental rate of capital $$r = 20$$, and price of land $$t = 5. If$$ $$MRP_L = 20$$, $$MRP_K = 40$$, and $$MRP_A = 10$$, is the firm maximizing profit?

Accepted Answer

Yes, because $$MRP_L/w = MRP_K/r = MRP_A/t = 2$$

Question 18

If a firm substitutes capital for labor due to a rise in wages, this is an example of:

Accepted Answer

The substitution effect.

Question 19

Which of the following statements about the market labor supply curve is correct?

Accepted Answer

It is the horizontal sum of individual labor supply curves.

Question 20

A firm is considering two alternative technologies: one that is labor-intensive and one that is capital-intensive. If the wage rate rises relative to the rental rate of capital, the firm will:

Accepted Answer

Switch to the capital-intensive technology.

Input Demand: The Labor and Land Markets – Microeconomics Study Guide

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