2010 FRQ #2- Resource Market and Firm

The video tutorial covers the concept of resource markets, focusing on a company called John Lamb that operates in a perfectly competitive market. It explains the equilibrium in the market where MRP equals MRC, and how changes in demand for widgets affect the marginal revenue product. The tutorial also discusses the least cost rule, providing examples to illustrate how to achieve cost efficiency in production.

What is the relationship between MRP and MRC in a perfectly competitive resource market?

• MRP is always greater than MRC

• MRP equals MRC

• MRP is less than MRC

• MRP and MRC are unrelated

How does a decrease in the demand for widgets affect the marginal revenue product of machines?

• It doubles the marginal revenue product

• It has no effect on the marginal revenue product

• It decreases the marginal revenue product

• It increases the marginal revenue product

What remains unchanged when there is a decrease in the demand for widgets?

• The price of widgets

• The quantity of machines hired

• The marginal revenue product

• The marginal product of machines

What is the least cost rule used for in resource allocation?

• Maximizing total output with the lowest cost

• Minimizing the marginal product

• Minimizing the total output

• Maximizing the total cost of resources

If the marginal product of labor is 28 and its price is 14, what should be the price of machines if their marginal product is 60, according to the least cost rule?

• 40

• 50

• 30

• 20