Question 1

Explain what is meant by "derived demand" as it relates to factors of production.

Accepted Answer

The demand for a factor of production is

Question 2

Which of the following is usually a durable good?

Accepted Answer

A)  a unit of labor 
B)  the interest rate 
C)  a depletable resource 
D)  a capital good 
A)  a unit of labor 
B)  the interest rate 
C)  a depletable resource 
D)  a capital good

Question 3

The nation's stock of capital can increase only when net new investment takes place.

Accepted Answer

A) True 
 B)False

Question 4

Define the following terms and explain their importance to the study of economics.
a.principle of marginal productivity
b.marginal physical product
c.marginal revenue product
d.derived demand
e.economic rent

Accepted Answer

a.The marginal productivity principle st

Question 5

The one feature of capital that makes it unlike most inputs is that it is

Accepted Answer

A)  durable. 
B)  productive. 
C)  an economic good. 
D)  used to produce only consumer goods. 
A)  durable. 
B)  productive. 
C)  an economic good. 
D)  used to produce only consumer goods.

Question 6

The demand curve for loanable funds is downward sloping because

Accepted Answer

A)  people save more at higher interest rates. 
B)  more investments are profitable at low interest rates than at high interest rates. 
C)  future income is more valuable now at higher interest rates than at low interest rates. 
D)  usury laws increase the quantity of funds demanded at low interest rates but do not affect the quantity of funds demanded at high interest rates. 
A)  people save more at higher interest rates. 
B)  more investments are profitable at low interest rates than at high interest rates. 
C)  future income is more valuable now at higher interest rates than at low interest rates. 
D)  usury laws increase the quantity of funds demanded at low interest rates but do not affect the quantity of funds demanded at high interest rates.

Question 7

If the supply curve remains constant, an outward shift in the demand curve for a commodity causes the price of factors used in its production to decline.

Accepted Answer

A) True 
 B)False

Question 8

The derived demand curve for loans slopes downward because as interest rates

Accepted Answer

A)  fall, future income becomes less valuable. 
B)  fall, investors develop pessimistic expectations. 
C)  fall, future income becomes more valuable. 
D)  rise, investors become pessimistic. 
A)  fall, future income becomes less valuable. 
B)  fall, investors develop pessimistic expectations. 
C)  fall, future income becomes more valuable. 
D)  rise, investors become pessimistic.

Question 9

Contrast the shapes of the supply curves for financial capital and land.

Accepted Answer

The usual supply curve for capital shows

Question 10

The marginal productivity theory of distribution has been criticized because

Accepted Answer

A)  it assumes that the existing distribution of ownership factors is fair and just when it may not be. 
B)  it does not tell us much about real policy matters. 
C)  a factor's MRP does not in any way correspond to productive effort. 
D)  All of the above are correct. 
A)  it assumes that the existing distribution of ownership factors is fair and just when it may not be. 
B)  it does not tell us much about real policy matters. 
C)  a factor's MRP does not in any way correspond to productive effort. 
D)  All of the above are correct.

Question 11

Entrepreneurs differ from managers because

Accepted Answer

A)  they use innovation to gain advantage over their competitors. 
B)  managers use established managing styles; entrepreneurs do not. 
C)  entrepreneurs tend to take more risk than managers. 
D)  All of the above are correct. 
A)  they use innovation to gain advantage over their competitors. 
B)  managers use established managing styles; entrepreneurs do not. 
C)  entrepreneurs tend to take more risk than managers. 
D)  All of the above are correct.

Question 12

The derived demand for borrowed funds has the characteristic negative slope of any demand curve.

Accepted Answer

A) True 
 B)False

Question 13

Usury laws typically regulate

Accepted Answer

A)  interest rates paid on savings. 
B)  interest rates charged on loans. 
C)  rents charged on land. 
D)  economic rent earned in all factor markets. 
A)  interest rates paid on savings. 
B)  interest rates charged on loans. 
C)  rents charged on land. 
D)  economic rent earned in all factor markets.

Question 14

Innovation is the act of generating an idea for a new product.

Accepted Answer

A) True 
 B)False

Question 15

Figure 19-4
  
-The panels in Figure 19-4 represent the supply and demand conditions for a factor of production.In which case is the factor not earning any rent?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 16

Critics of the huge net returns on, for example, oil production will claim that the returns are

Accepted Answer

A)  interest on the capital investment. 
B)  rents on a natural resource. 
C)  profits on entrepreneurial activity. 
D)  exorbitant and should be taxed away. 
A)  interest on the capital investment. 
B)  rents on a natural resource. 
C)  profits on entrepreneurial activity. 
D)  exorbitant and should be taxed away.

Question 17

Discounting allows comparisons of

Accepted Answer

A)  money values and physical values. 
B)  interest payments on borrowed funds and interest payments on loaned funds. 
C)  money values received at different times. 
D)  the quantities of outputs produced by different types of capital goods. 
A)  money values and physical values. 
B)  interest payments on borrowed funds and interest payments on loaned funds. 
C)  money values received at different times. 
D)  the quantities of outputs produced by different types of capital goods.

Question 18

Explain the distinction between investment and capital.

Accepted Answer

Investment is the flow of resources into

Question 19

In sophisticated analysis of rent differences

Accepted Answer

A)  quality of land is assumed away. 
B)  quality of land is recognized and considered. 
C)  rates of return are assumed away. 
D)  returns on land and capital are assumed to be similar. 
A)  quality of land is assumed away. 
B)  quality of land is recognized and considered. 
C)  rates of return are assumed away. 
D)  returns on land and capital are assumed to be similar.

Question 20

The interest rate is determined by

Accepted Answer

A)  the supply and demand of loanable funds. 
B)  the supply and demand of land. 
C)  the supply and demand of marginal land. 
D)  None of the above is correct. 
A)  the supply and demand of loanable funds. 
B)  the supply and demand of land. 
C)  the supply and demand of marginal land. 
D)  None of the above is correct.

Exam 19: Pricing the Factors of Production

Explain what is meant by "derived demand" as it relates to factors of production.

Which of the following is usually a durable good?

The nation's stock of capital can increase only when net new investment takes place.

Define the following terms and explain their importance to the study of economics. a.principle of marginal productivity b.marginal physical product c.marginal revenue product d.derived demand e.economic rent

The one feature of capital that makes it unlike most inputs is that it is

The demand curve for loanable funds is downward sloping because

If the supply curve remains constant, an outward shift in the demand curve for a commodity causes the price of factors used in its production to decline.

The derived demand curve for loans slopes downward because as interest rates

Contrast the shapes of the supply curves for financial capital and land.

The marginal productivity theory of distribution has been criticized because

Entrepreneurs differ from managers because

The derived demand for borrowed funds has the characteristic negative slope of any demand curve.

Usury laws typically regulate

Innovation is the act of generating an idea for a new product.

Figure 19-4 -The panels in Figure 19-4 represent the supply and demand conditions for a factor of production.In which case is the factor not earning any rent?

Critics of the huge net returns on, for example, oil production will claim that the returns are

Discounting allows comparisons of

Explain the distinction between investment and capital.

In sophisticated analysis of rent differences

The interest rate is determined by

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

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