Question 1

The theory of economic rent can be used to explain high incomes received by movie stars and athletes.

Accepted Answer

A) True 
 B)False

Question 2

Demand for inputs is a derived demand because

Accepted Answer

A)  it is derived from the need for income. 
B)  it corresponds to the derived supply of the inputs. 
C)  producers want the input to produce the finished good. 
D)  it is downward sloping. 
A)  it is derived from the need for income. 
B)  it corresponds to the derived supply of the inputs. 
C)  producers want the input to produce the finished good. 
D)  it is downward sloping.

Question 3

Which of the following have been suggested as sources of economic profit?

Accepted Answer

A)  exercise of monopoly power by firms 
B)  accepting a large degree of risk 
C)  successful innovation 
D)  All of the above are correct. 
A)  exercise of monopoly power by firms 
B)  accepting a large degree of risk 
C)  successful innovation 
D)  All of the above are correct.

Question 4

The demand curve for any input is the downward-sloping portion of its marginal revenue product curve.

Accepted Answer

A) True 
 B)False

Question 5

The income of Lebron James above the minimum payment needed to acquire the type of service he performs is

Accepted Answer

A)  pure profit. 
B)  economic rent. 
C)  marginal rent. 
D)  competitive rent. 
A)  pure profit. 
B)  economic rent. 
C)  marginal rent. 
D)  competitive rent.

Question 6

Marginal land is land

Accepted Answer

A)  that is unprofitable under any circumstances. 
B)  that is the most productive in the area. 
C)  that is on the borderline of profitability. 
D)  of average productivity. 
A)  that is unprofitable under any circumstances. 
B)  that is the most productive in the area. 
C)  that is on the borderline of profitability. 
D)  of average productivity.

Question 7

Owners of buildings can expect to collect ____ economic rent in the long run.

Accepted Answer

A)  much 
B)  marginal 
C)  a competitive 
D)  little or no 
A)  much 
B)  marginal 
C)  a competitive 
D)  little or no

Question 8

Economic profit can be viewed as

Accepted Answer

A)  a reward for bearing risks. 
B)  an undeserved "reward" for exercising monopoly power. 
C)  a reward for innovation. 
D)  All of the above are correct. 
A)  a reward for bearing risks. 
B)  an undeserved "reward" for exercising monopoly power. 
C)  a reward for innovation. 
D)  All of the above are correct.

Question 9

The distribution of income in a market economy is determined by

Accepted Answer

A)  the level of employment and prices of the factors of production. 
B)  the prices of factors of production. 
C)  largely unknown forces which economists seek to discover. 
D)  decisions of government offices related to distribution. 
A)  the level of employment and prices of the factors of production. 
B)  the prices of factors of production. 
C)  largely unknown forces which economists seek to discover. 
D)  decisions of government offices related to distribution.

Question 10

The marginal productivity principle says that a profit-maximizing firm should

Accepted Answer

A)  hire capital until its marginal product is zero. 
B)  hire labor until another worker costs more to hire than she can earn for the firm. 
C)  hire the quantities of capital and of labor at which their marginal products are equal. 
D)  hire capital until its marginal product is negative. 
A)  hire capital until its marginal product is zero. 
B)  hire labor until another worker costs more to hire than she can earn for the firm. 
C)  hire the quantities of capital and of labor at which their marginal products are equal. 
D)  hire capital until its marginal product is negative.

Question 11

On January 1, 2006, a consumer borrowed $10,000 for a term of one year at an interest rate of 12 percent.How much principal and interest will the consumer pay back on January 1, 2007?

Accepted Answer

A)  $10,000 
B)  $1,200 
C)  $8,929 
D)  $11,200 
A)  $10,000 
B)  $1,200 
C)  $8,929 
D)  $11,200

Question 12

"Rent seeking" describes the search and battle for opportunities to collect economic rents.

Accepted Answer

A) True 
 B)False

Question 13

Marginal productivity analysis shows that a drop in the price of the product will cause input use to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  The information is insufficient to provide an answer. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  The information is insufficient to provide an answer.

Question 14

Suppose that the rate of interest increases.What will happen to the discounted present value of an investment?

Accepted Answer

A)  It will increase. 
B)  It will decrease. 
C)  It will remain unchanged. 
D)  It depends on the magnitude of the change. 
A)  It will increase. 
B)  It will decrease. 
C)  It will remain unchanged. 
D)  It depends on the magnitude of the change.

Question 15

The marginal productivity principle implies that

Accepted Answer

A)  quantity demanded of an input normally declines as the input price falls. 
B)  at equilibrium, profit from the last unit of input will be zero. 
C)  for maximizing profit, marginal revenue product should be greater than price. 
D)  marginal productivity of inputs increase when price of inputs increase. 
A)  quantity demanded of an input normally declines as the input price falls. 
B)  at equilibrium, profit from the last unit of input will be zero. 
C)  for maximizing profit, marginal revenue product should be greater than price. 
D)  marginal productivity of inputs increase when price of inputs increase.

Question 16

Economists consider rent seeking activity to be highly productive.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a loan of funds?

Accepted Answer

A)  home mortgage 
B)  government bond 
C)  corporate stock 
D)  corporate bond 
A)  home mortgage 
B)  government bond 
C)  corporate stock 
D)  corporate bond

Question 18

The cost of production on the "bottom forty" is $100,000 for a given size crop.On the "north forty," due to erosion of the soil, the cost is $150,000.If both are being farmed by tenants, we would expect the rent on the "bottom forty" to be

Accepted Answer

A)  $50,000 below the rent on the north forty. 
B)  $50,000 above the rent on the north forty. 
C)  different from that on the north forty by an indeterminable amount. 
D)  $50,000, and the rent on the north forty is $50,000. 
A)  $50,000 below the rent on the north forty. 
B)  $50,000 above the rent on the north forty. 
C)  different from that on the north forty by an indeterminable amount. 
D)  $50,000, and the rent on the north forty is $50,000.

Question 19

In 2009 ____ of national factor income consisted of employee compensation.

Accepted Answer

A)  90 percent 
B)  50 percent 
C)  60 percent 
D)  70 percent 
A)  90 percent 
B)  50 percent 
C)  60 percent 
D)  70 percent

Question 20

A recent decline in interest rates made home construction more affordable for many families.The consequent increase in construction produced a rightward shift in the demand curves for construction materials.Economists would say that the change in demand for materials is due to

Accepted Answer

A)  the principle of marginal productivity. 
B)  rent seeking. 
C)  diminishing marginal returns. 
D)  derived demand. 
A)  the principle of marginal productivity. 
B)  rent seeking. 
C)  diminishing marginal returns. 
D)  derived demand.

Exam 19: Pricing the Factors of Production

The theory of economic rent can be used to explain high incomes received by movie stars and athletes.

Demand for inputs is a derived demand because

Which of the following have been suggested as sources of economic profit?

The demand curve for any input is the downward-sloping portion of its marginal revenue product curve.

The income of Lebron James above the minimum payment needed to acquire the type of service he performs is

Marginal land is land

Owners of buildings can expect to collect ____ economic rent in the long run.

Economic profit can be viewed as

The distribution of income in a market economy is determined by

The marginal productivity principle says that a profit-maximizing firm should

On January 1, 2006, a consumer borrowed $10,000 for a term of one year at an interest rate of 12 percent.How much principal and interest will the consumer pay back on January 1, 2007?

"Rent seeking" describes the search and battle for opportunities to collect economic rents.

Marginal productivity analysis shows that a drop in the price of the product will cause input use to

Suppose that the rate of interest increases.What will happen to the discounted present value of an investment?

The marginal productivity principle implies that

Economists consider rent seeking activity to be highly productive.

Which of the following is not a loan of funds?

The cost of production on the "bottom forty" is $100,000 for a given size crop.On the "north forty," due to erosion of the soil, the cost is $150,000.If both are being farmed by tenants, we would expect the rent on the "bottom forty" to be

In 2009 ____ of national factor income consisted of employee compensation.

A recent decline in interest rates made home construction more affordable for many families.The consequent increase in construction produced a rightward shift in the demand curves for construction materials.Economists would say that the change in demand for materials is due to

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters