B) interest-rate cost of funds exceeds the expected rate of return.
C) expected returns are in the distant future.
D) the expected returns, though potentially very large, are uncertain.
12.We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the:
A) MU/P of the new product exceeds the MU/P of the existing product.
B) price of the new product is less than the price of the existing product.
C) MU of the new product is more than the MU of the existing product.
D) law of diminishing marginal utility applies to the existing product.
13.Which of the following statements best illustrates the concept of derived demand?
A) As income goes up the demand for farm products will increase by a smaller relative amount.
B) A decline in the price of margarine will reduce the demand for butter.
C) A decline in the demand for shoes will cause the demand for leather to decline.
D) When the price of gasoline goes up, the demand for motor oil will decline.
14.When economists say that the demand for labor is a derived demand, they mean that it is:
A) dependent on government expenditures for public goods and services.
B) related to the demand for the product or service labor is producing.
C) based on the desire of businesses to exploit labor by paying below equilibrium wage rates.
D) based on the assumption that workers are trying to maximize their money incomes.
15.In the United States professional football players earn much higher incomes than professional soccer players. This occurs because:
A) most football players are good soccer players while the reverse is not true.
B) consumers have a greater demand for football games than for soccer games.
C) football and soccer games are highly substitutable products for most consumers.
D) the marginal productivity of soccer players exceeds that of football players.
16.Marginal revenue product measures the:
A) amount by which the extra production of one more worker increases a firm's total revenue.
B) decline in product price that a firm must accept to sell the extra output of one more worker.
C) increase in total resource cost resulting from the hire of one extra unit of a resource.
D) increase in total revenue resulting from the production of one more unit of a product.
17.The MRP curve for labor:
A) intersects the firm's labor demand curve from above.
B) is the firm's labor demand curve.
C) lies below the firm's labor demand curve.
D) lies above the firm's labor demand curve.
18.The labor demand curve of a purely competitive seller:
A) slopes downward because the elasticity of demand is always less than unity.
B) slopes downward because of diminishing marginal productivity.
C) is perfectly elastic at the going wage rate.
D) slopes downward because of diminishing marginal utility.
19.A competitive employer should hire additional labor as long as:
A) the MRP exceeds the wage rate. C) average product exceeds MP.
B) the wage rate is less than MP. D) MC exceeds MR.
20.A profit-maximizing firm employs resources to the point where:
A) MRC = MP. C) MRP = MRC.
B) Resource price equals product price. D) MP = product price.
21.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:
A) profits will be increased by hiring additional workers.
B) profits will be increased by hiring fewer workers.