Question 1

Because the supply of a fixed factor is vertical,

Accepted Answer

A) the owners of the factor will accept all prices above zero. 
B) only the supply of the factor matters for setting price 
C) only the demand for the factor matters in setting the price. 
D) the price will be set where the quantity supplied of the factor equals the quantity demanded. 
A) the owners of the factor will accept all prices above zero. 
B) only the supply of the factor matters for setting price 
C) only the demand for the factor matters in setting the price. 
D) the price will be set where the quantity supplied of the factor equals the quantity demanded.

Question 2

The theory of factor pricing uses supply-demand analysis.

Accepted Answer

A) True 
 B)False

Question 3

If savers do not have fixed savings goals, the supply curve of loanable funds will generally be

Accepted Answer

A) horizontal. 
B) downward sloping. 
C) vertical. 
D) upward sloping. 
A) horizontal. 
B) downward sloping. 
C) vertical. 
D) upward sloping.

Question 4

Investment is a flow of resources into the production of new capital.

Accepted Answer

A) True 
 B)False

Question 5

The difference in values between money today and money in the future is lower when the rate of interest is higher.

Accepted Answer

A) True 
 B)False

Question 6

The derived demand curve for an input is the MPP curve.

Accepted Answer

A) True 
 B)False

Question 7

High profits in some risky industries attract additional entrepreneurs to those industries.

Accepted Answer

A) True 
 B)False

Question 8

A ceiling on interest rates is likely to lead to

Accepted Answer

A) an increase in lending activity. 
B) more rapid capital formation by business. 
C) increases in hiring of labor. 
D) a shortage of loanable funds. 
A) an increase in lending activity. 
B) more rapid capital formation by business. 
C) increases in hiring of labor. 
D) a shortage of loanable funds.

Question 9

An increase in land rents

Accepted Answer

A) will bring some previously zero-rent land into productive use. 
B) will lead to land to be used less intensively as its marginal revenue product has decreased. 
C) will lead to an increase in the marginal revenue product of all inputs used in production on the land. 
D) will lead to an increase in the marginal revenue product of all inputs used in production except for the land. 
A) will bring some previously zero-rent land into productive use. 
B) will lead to land to be used less intensively as its marginal revenue product has decreased. 
C) will lead to an increase in the marginal revenue product of all inputs used in production on the land. 
D) will lead to an increase in the marginal revenue product of all inputs used in production except for the land.

Question 10

The price for loanable funds is the interest rate.

Accepted Answer

A) True 
 B)False

Question 11

If the interest rate is r (expressed as a decimal number), the present value today of $1 to be received n years from today equals ____.

Accepted Answer

A) $1rn 
B) $1(1 + r)n 
C) $1/(1 + r)n 
D) $1/(1 + n)r 
A) $1rn 
B) $1(1 + r)n 
C) $1/(1 + r)n 
D) $1/(1 + n)r

Question 12

It is not true of profits that they

Accepted Answer

A) are what remains from the selling price after factors have been paid. 
B) accrue to entrepreneurs. 
C) account for a relatively small portion of national income. 
D) account for about as much national income as wages and salaries. 
A) are what remains from the selling price after factors have been paid. 
B) accrue to entrepreneurs. 
C) account for a relatively small portion of national income. 
D) account for about as much national income as wages and salaries.

Question 13

Explain how to derive the demand for an input.

Accepted Answer

Input demand is the downward-sloping por

Question 14

An increase in price for an output good decreases the quantity demanded for input factors.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not true of Usury laws that set maximum interest rates?

Accepted Answer

A) They are designed to protect the consumer. 
B) They interfere with the market allocation process. 
C) They have an effect only if the market rate is higher than the legal maximum. 
D) They are analogous to a price floor. 
A) They are designed to protect the consumer. 
B) They interfere with the market allocation process. 
C) They have an effect only if the market rate is higher than the legal maximum. 
D) They are analogous to a price floor.

Question 16

In a free market for rental housing, effective rent control would have which effect?

Accepted Answer

A) It would cause a reduction in the number of available apartments. 
B) It would cause an increase in the number of available apartments, since landlords would try to increase their profits through larger scale. 
C) It would have no effect on the number of available apartments offered in the market. 
D) The results are impossible to predict. 
A) It would cause a reduction in the number of available apartments. 
B) It would cause an increase in the number of available apartments, since landlords would try to increase their profits through larger scale. 
C) It would have no effect on the number of available apartments offered in the market. 
D) The results are impossible to predict.

Question 17

Why is the supply of loanable funds often relatively inelastic with respect to interest rates?

Accepted Answer

The supply is often interest inelastic b

Question 18

Demand for an input is derived from the demand for the final product.

Accepted Answer

A) True 
 B)False

Question 19

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 20

In 2017, corporate profits were about ____ percent of national income.

Accepted Answer

A) 7.2 
B) 12.6 
C) 25.3 
D) 44.1 
A) 7.2 
B) 12.6 
C) 25.3 
D) 44.1

Exam 18: Pricing the Factors of Production

Because the supply of a fixed factor is vertical,

The theory of factor pricing uses supply-demand analysis.

If savers do not have fixed savings goals, the supply curve of loanable funds will generally be

Investment is a flow of resources into the production of new capital.

The difference in values between money today and money in the future is lower when the rate of interest is higher.

The derived demand curve for an input is the MPP curve.

High profits in some risky industries attract additional entrepreneurs to those industries.

A ceiling on interest rates is likely to lead to

An increase in land rents

The price for loanable funds is the interest rate.

If the interest rate is r (expressed as a decimal number), the present value today of $1 to be received n years from today equals ____.

It is not true of profits that they

Explain how to derive the demand for an input.

An increase in price for an output good decreases the quantity demanded for input factors.

Which of the following is not true of Usury laws that set maximum interest rates?

In a free market for rental housing, effective rent control would have which effect?

Why is the supply of loanable funds often relatively inelastic with respect to interest rates?

Demand for an input is derived from the demand for the final product.

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

In 2017, corporate profits were about ____ percent of national income.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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