Question 1

A profit-maximizing firm will hire inputs until MRP = P of the input.

Accepted Answer

A) True 
 B)False

Question 2

Firms should stop borrowing funds

Accepted Answer

A)  as soon as the bank raises the interest rate. 
B)  when the MRP of borrowed funds is equal to the cost of borrowing. 
C)  whenever the future of the firm looks gloomy. 
D)  if their debts are more than 25 percent of the value of the firm. 
A)  as soon as the bank raises the interest rate. 
B)  when the MRP of borrowed funds is equal to the cost of borrowing. 
C)  whenever the future of the firm looks gloomy. 
D)  if their debts are more than 25 percent of the value of the firm.

Question 3

The functioning of a market economy is very dependent upon investment for provision of capital and future growth.Describe the process of investment and employment of the created capital in production.

Accepted Answer

The text lists five steps: (1) decision

Question 4

If the interest rate on borrowing falls,

Accepted Answer

A)  the demand curve for loans will shift out. 
B)  the discounted value now of money to be received in the future will fall. 
C)  some previously unprofitable prospective investments will become profitable. 
D)  All of the above are correct. 
A)  the demand curve for loans will shift out. 
B)  the discounted value now of money to be received in the future will fall. 
C)  some previously unprofitable prospective investments will become profitable. 
D)  All of the above are correct.

Question 5

In 1862, the Homestead Act made land available to farmers at zero cost.Yet many farmers preferred to purchase land along the rail line from the railroad.The farmers

Accepted Answer

A)  were duped by the railroads. 
B)  knew the soil was better near the railroads. 
C)  realized that crops would be less costly to grow and transport on land near the railroads. 
D)  were exploited by the railroads. 
A)  were duped by the railroads. 
B)  knew the soil was better near the railroads. 
C)  realized that crops would be less costly to grow and transport on land near the railroads. 
D)  were exploited by the railroads.

Question 6

Demand for labor is

Accepted Answer

A)  derived demand. 
B)  highly elastic. 
C)  dependant on its supply. 
D)  directly proportional to capital employed. 
A)  derived demand. 
B)  highly elastic. 
C)  dependant on its supply. 
D)  directly proportional to capital employed.

Question 7

In 2009, corporate profits were about ____ percent of national income.

Accepted Answer

A)  10.3 
B)  22.6 
C)  25.3 
D)  44.1 
A)  10.3 
B)  22.6 
C)  25.3 
D)  44.1

Question 8

Figure 19-1
  
-Mr.Paque is a bear hunter for timber companies that want to diminish damage to trees done by bears in the spring.Due to a reduction in the bear population between 1995 and 2005, Mr.Paque finds fewer bears each year and additional hours spent hunting produce fewer additional bears.This means that Mr.Paque's (i) overall productivity has fallen; (ii) marginal product has fallen.

Accepted Answer

A)  i and ii 
B)  i not ii 
C)  ii not i 
D)  neither i nor ii 
A)  i and ii 
B)  i not ii 
C)  ii not i 
D)  neither i nor ii

Question 9

The theory of land rent holds that

Accepted Answer

A)  capital invested on any plot of land must yield the same return as capital invested on any other plot of land. 
B)  the difference between the costs of producing on any two pieces of land must equal the difference between their rents. 
C)  marginal land earns no rent. 
D)  All of the above are correct. 
A)  capital invested on any plot of land must yield the same return as capital invested on any other plot of land. 
B)  the difference between the costs of producing on any two pieces of land must equal the difference between their rents. 
C)  marginal land earns no rent. 
D)  All of the above are correct.

Question 10

The marginal revenue product of an input is the marginal physical product times the price per unit of output under perfect competition.

Accepted Answer

A) True 
 B)False

Question 11

MPP is the additional output that results from a one-unit increase in use of the input.

Accepted Answer

A) True 
 B)False

Question 12

Capital refers to an inventory or a stock of productive equipment and machines.

Accepted Answer

A) True 
 B)False

Question 13

Discounting or computing present value is a way of comparing dollar values that will appear at different points in time.

Accepted Answer

A) True 
 B)False

Question 14

Investment is the amount by which ____ grows.

Accepted Answer

A)  portfolio 
B)  income 
C)  earnings 
D)  capital 
A)  portfolio 
B)  income 
C)  earnings 
D)  capital

Question 15

Suppose that a community seeks to preserve air quality, and zones a "green belt" around the city which prevents property development within the belt.What is the most likely result of this law?

Accepted Answer

A)  Interest rates will increase. 
B)  Labor income will increase. 
C)  Economic rent will increase. 
D)  Profits will increase. 
A)  Interest rates will increase. 
B)  Labor income will increase. 
C)  Economic rent will increase. 
D)  Profits will increase.

Question 16

The economic rent analysis does not apply to any factor

Accepted Answer

A)  except land. 
B)  whose supply curve is vertical. 
C)  whose supply curve is horizontal. 
D)  whose quantity supplied is fixed. 
A)  except land. 
B)  whose supply curve is vertical. 
C)  whose supply curve is horizontal. 
D)  whose quantity supplied is fixed.

Question 17

Usury laws tend to hurt whom?

Accepted Answer

A)  suppliers of loans 
B)  consumers who cannot get credit 
C)  bank stockholders 
D)  All of the above are correct. 
A)  suppliers of loans 
B)  consumers who cannot get credit 
C)  bank stockholders 
D)  All of the above are correct.

Question 18

Capital is the

Accepted Answer

A)  flow of new equipment that a firm acquires over the course of a year. 
B)  amount of increase in a firm's equipment over a year. 
C)  amount of money that a firm has on hand at a given time. 
D)  stock of plant, equipment, and other productive resources held by a firm. 
A)  flow of new equipment that a firm acquires over the course of a year. 
B)  amount of increase in a firm's equipment over a year. 
C)  amount of money that a firm has on hand at a given time. 
D)  stock of plant, equipment, and other productive resources held by a firm.

Question 19

A usury ceiling will be effective depending on

Accepted Answer

A)  whether the usury rate is above 10 percent. 
B)  whether the usury rate is above 8 percent. 
C)  whether that rate is below what the equilibrium rate of interest would have been in a free market. 
D)  how well organized the lending institutions are. 
A)  whether the usury rate is above 10 percent. 
B)  whether the usury rate is above 8 percent. 
C)  whether that rate is below what the equilibrium rate of interest would have been in a free market. 
D)  how well organized the lending institutions are.

Question 20

The basic principle that explains the demand for a factor of production is the

Accepted Answer

A)  principle of marginal productivity. 
B)  Hotelling principle. 
C)  principle of opportunity cost. 
D)  Ramsey pricing principle. 
A)  principle of marginal productivity. 
B)  Hotelling principle. 
C)  principle of opportunity cost. 
D)  Ramsey pricing principle.

Exam 19: Pricing the Factors of Production

A profit-maximizing firm will hire inputs until MRP = P of the input.

Firms should stop borrowing funds

The functioning of a market economy is very dependent upon investment for provision of capital and future growth.Describe the process of investment and employment of the created capital in production.

If the interest rate on borrowing falls,

In 1862, the Homestead Act made land available to farmers at zero cost.Yet many farmers preferred to purchase land along the rail line from the railroad.The farmers

Demand for labor is

In 2009, corporate profits were about ____ percent of national income.

The theory of land rent holds that

The marginal revenue product of an input is the marginal physical product times the price per unit of output under perfect competition.

MPP is the additional output that results from a one-unit increase in use of the input.

Capital refers to an inventory or a stock of productive equipment and machines.

Discounting or computing present value is a way of comparing dollar values that will appear at different points in time.

Investment is the amount by which ____ grows.

Suppose that a community seeks to preserve air quality, and zones a "green belt" around the city which prevents property development within the belt.What is the most likely result of this law?

The economic rent analysis does not apply to any factor

Usury laws tend to hurt whom?

Capital is the

A usury ceiling will be effective depending on

The basic principle that explains the demand for a factor of production is the

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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