Exam 18: Pricing the Factors of Production

Ms.Dunlap has just won the big bingo prize.She has two options for receiving her prize.She can either take a $1,050 now or two installments of $550, one now and one next year.At what interest rate would the two payments be equivalent?

According to the principle of marginal productivity, if

A certain machine will last one year, will produce $120 in income (received one year later), and will cost $100.The lowest interest rate at which this investment will be unprofitable is

The marginal productivity principle has relevance only in a capitalist economy, and not in a socialist system.

Suppose maple syrup is illegal in the country of Pancake.If there are two ways to smuggle maple syrup into Pancake: one through overland and one by sea.If the proud Pancakian coast guard is able to arrest all who attempt to smuggle syrup by sea, what would the theory of rent predict?

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

It is true of the demand side of the market for input pricing that

An inward shift of the demand curve for a product causes outward shifts in the demand curves for all the factors used to produce the product.

If mining companies are indifferent between operating and not operating a quarry, that quarry is

Marginal land is land

Land rents account for nearly

Explain the effect of a usury law.

If the equilibrium rate of interest would be 10 percent, but the usury law sets 8 percent,

Rock Crushers Limited produces smaller rocks from larger rocks.As part of the production process, Rock Crusher Limited takes the below listed actions.Which is a capital investment?

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

When determination of rent is left to the market,

The demand curve for loanable funds is downward sloping because

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

Economic rent is a payment for a factor of production that elicits an increase in the quantity supplied.

Explain how usury laws can distort the market for funds.What is the most likely result if a usury law is passed and enforced?