Question 1

Explain how to derive the demand for an input.

Accepted Answer

Input demand is the downward-sloping por

Question 2

Marginal land can be defined as land that earns neither profits nor losses.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not held constant along a demand curve for labor by a firm?

Accepted Answer

A)  the firm's technology of production 
B)  the price of the firm's output 
C)  the marginal product of labor for the firm 
D)  the price of substitutes for the firm's output 
A)  the firm's technology of production 
B)  the price of the firm's output 
C)  the marginal product of labor for the firm 
D)  the price of substitutes for the firm's output

Question 4

The interest rate is determined by

Accepted Answer

A)  government pronouncements. 
B)  market forces of supply and demand. 
C)  banks and lenders. 
D)  managers of large corporations. 
A)  government pronouncements. 
B)  market forces of supply and demand. 
C)  banks and lenders. 
D)  managers of large corporations.

Question 5

Why is the supply of loanable funds often interest inelastic?

Accepted Answer

The supply is often interest inelastic b

Question 6

In a free market for rental housing, the average rental rate

Accepted Answer

A)  includes a large amount of economic rent. 
B)  includes zero economic rent. 
C)  is entirely economic rent, since rental housing is fixed in supply. 
D)  is about 10 percent economic rent. 
A)  includes a large amount of economic rent. 
B)  includes zero economic rent. 
C)  is entirely economic rent, since rental housing is fixed in supply. 
D)  is about 10 percent economic rent.

Question 7

Capital is appropriately classified as a

Accepted Answer

A)  flow. 
B)  process. 
C)  stock. 
D)  growth rate. 
A)  flow. 
B)  process. 
C)  stock. 
D)  growth rate.

Question 8

The distinguishing feature of the land market is that the

Accepted Answer

A)  supply is highly inelastic. 
B)  supply is highly elastic. 
C)  demand is highly inelastic. 
D)  demand is highly elastic. 
A)  supply is highly inelastic. 
B)  supply is highly elastic. 
C)  demand is highly inelastic. 
D)  demand is highly elastic.

Question 9

If the interest rate is positive, the present value of $10 to be received in the future is

Accepted Answer

A) less than $10. 
B) equal to $10. 
C) more than $10. 
D) Any of the above is possible, depending on the interest rate and when the payment is to be received. 
A) less than $10. 
B) equal to $10. 
C) more than $10. 
D) Any of the above is possible, depending on the interest rate and when the payment is to be received.

Question 10

The market level of rent

Accepted Answer

A)  is entirely determined by the demand side. 
B)  is determined by its elastic supply. 
C)  is difficult to determine because of shifts on the supply side. 
D)  generally settles at levels below any rent controls favored politically. 
A)  is entirely determined by the demand side. 
B)  is determined by its elastic supply. 
C)  is difficult to determine because of shifts on the supply side. 
D)  generally settles at levels below any rent controls favored politically.

Question 11

Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor to be supplied at its present employment.

Accepted Answer

A) True 
 B)False

Question 12

In 2009, interest payments were about ____ percent of national income.

Accepted Answer

A)  0.51/2 
B)  1.29 
C)  4.0 
D)  6.4 
A)  0.51/2 
B)  1.29 
C)  4.0 
D)  6.4

Question 13

What involves taking the risks that are necessary to seek out business opportunities?

Accepted Answer

A)  Invention 
B)  Benchmarking 
C)  Averaging 
D)  Entrepreneurship 
A)  Invention 
B)  Benchmarking 
C)  Averaging 
D)  Entrepreneurship

Question 14

According to the principle of marginal productivity, if

Accepted Answer

A)  the product price is less than MRP, the firm is using too little of the input. 
B)  the price of an input rises, the quantity demanded of the input will increase. 
C)  MRP is greater than product price, the firm should reduce the use of the input. 
D)  price of the input equals MRP, the firm is maximizing profit. 
A)  the product price is less than MRP, the firm is using too little of the input. 
B)  the price of an input rises, the quantity demanded of the input will increase. 
C)  MRP is greater than product price, the firm should reduce the use of the input. 
D)  price of the input equals MRP, the firm is maximizing profit.

Question 15

The demand for borrowed funds is a derived demand.

Accepted Answer

A) True 
 B)False

Question 16

If a manager has determined that a particular piece of capital is likely to increase the cash flow of a business by $10,000 for the next five years, what is the present value of the capital at an interest rate of 10 percent? (Assume that the cash flow first increases one year from today.)

Accepted Answer

PV = ($10,000)/(1.1) + ($10,00

Question 17

Suppose that one could determine the amount of income that is pure economic rent.If a law were passed which taxed 50 percent of that rent, what would happen to the amount of work that people perform?

Accepted Answer

A)  It would increase as people seek higher income. 
B)  It would be unchanged. 
C)  It would decrease as people suffer a loss of income. 
D)  It would increase for some and decrease for others. 
A)  It would increase as people seek higher income. 
B)  It would be unchanged. 
C)  It would decrease as people suffer a loss of income. 
D)  It would increase for some and decrease for others.

Question 18

Which of the following best describes the concept of "derived demand?"

Accepted Answer

A)  The price of corn land determines the price of corn. 
B)  The price of corn land has nothing to do with the price of corn. 
C)  The price of corn determines the price of the land on which corn is grown. 
D)  Cheap labor means cheap corn. 
A)  The price of corn land determines the price of corn. 
B)  The price of corn land has nothing to do with the price of corn. 
C)  The price of corn determines the price of the land on which corn is grown. 
D)  Cheap labor means cheap corn.

Question 19

Explain the effect of a usury law.

Accepted Answer

A usury law puts a ceiling on the intere

Question 20

Innovation is the act of putting an invention to practical use.

Accepted Answer

A) True 
 B)False

Exam 19: Pricing the Factors of Production

Explain how to derive the demand for an input.

Marginal land can be defined as land that earns neither profits nor losses.

Which of the following is not held constant along a demand curve for labor by a firm?

The interest rate is determined by

Why is the supply of loanable funds often interest inelastic?

In a free market for rental housing, the average rental rate

Capital is appropriately classified as a

The distinguishing feature of the land market is that the

If the interest rate is positive, the present value of $10 to be received in the future is

The market level of rent

Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor to be supplied at its present employment.

In 2009, interest payments were about ____ percent of national income.

What involves taking the risks that are necessary to seek out business opportunities?

According to the principle of marginal productivity, if

The demand for borrowed funds is a derived demand.

If a manager has determined that a particular piece of capital is likely to increase the cash flow of a business by $10,000 for the next five years, what is the present value of the capital at an interest rate of 10 percent? (Assume that the cash flow first increases one year from today.)

Suppose that one could determine the amount of income that is pure economic rent.If a law were passed which taxed 50 percent of that rent, what would happen to the amount of work that people perform?

Which of the following best describes the concept of "derived demand?"

Explain the effect of a usury law.

Innovation is the act of putting an invention to practical use.

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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