Question 1. What does it mean to say that the demand for resources is a derived demand? Is the demand for all goods and services a derived demand?
Question 2. Using the information in the following table, calculate the marginal revenue product (MRP = MPP X MR).
Units of Resource
Resources Total Output Price Price
1 10 $5 $10
2 25 $5 $10
3 35 $5 $10
4 40 $5 $10
5 40 $5 $10
Question 3. Using the data in exercise 2, determine how many units of resources the firm will want to acquire.
Question 4. Suppose the output price falls from $5 to $4 to $3 to $1 in question 2. How would that change your answers to questions 2 and 3?
Question 5. Using the data in question 2, calculate the marginal factor cost.
Question 6. Suppose the resource price rises from $10 to $12 to $14 to $18 to $20 as resource units go from 1 to 5. How would that change your answer to question 5? How would it change your answer to question 3?