Question 1

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

Accepted Answer

A) it is durable. 
B) it generates economic rents. 
C) it is nondepletable. 
D) it requires comparing cash flows across different periods. 
A) it is durable. 
B) it generates economic rents. 
C) it is nondepletable. 
D) it requires comparing cash flows across different periods.

Question 2

MRP represents what the marginal physical product is worth.

Accepted Answer

A) True 
 B)False

Question 3

Usury laws carry the potential of hurting

Accepted Answer

A) borrowers. 
B) lenders. 
C) borrowers and lenders. 
D) government. 
A) borrowers. 
B) lenders. 
C) borrowers and lenders. 
D) government.

Question 4

A tax on accounting profits in an industry

Accepted Answer

A) will lead to more inefficiency if economic profits are high. 
B) will lead to more inefficiency if economic profits are low 
C) will increase the MRP curve of nonfixed factors. 
D) will increase the MRP curve of fixed factors. 
A) will lead to more inefficiency if economic profits are high. 
B) will lead to more inefficiency if economic profits are low 
C) will increase the MRP curve of nonfixed factors. 
D) will increase the MRP curve of fixed factors.

Question 5

Discounting is the process of

Accepted Answer

A) cutting prices to get rid of surplus stocks. 
B) finding the present value of future dollars. 
C) finding the future value of present dollars. 
D) giving special concessions to special customers. 
A) cutting prices to get rid of surplus stocks. 
B) finding the present value of future dollars. 
C) finding the future value of present dollars. 
D) giving special concessions to special customers.

Question 6

Which of the following is not true of derived demand?

Accepted Answer

A) It derives from the price of output goods. 
B) It is a function of marginal physical productivity. 
C) It is the marginal revenue product curve. 
D) It is not affected by prices of the input factors. 
A) It derives from the price of output goods. 
B) It is a function of marginal physical productivity. 
C) It is the marginal revenue product curve. 
D) It is not affected by prices of the input factors.

Question 7

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 8

Distinguish between invention and innovation.

Accepted Answer

Invention is the creation of new product

Question 9

All the land in a California valley is owned by one person.The supply of land is fixed and is rented each year to farmers who bid for it in an open auction.Given the rents they must pay, the farmers barely earn subsistence.Sympathy for the poor farmers leads the state to bring in irrigation facilities to raise the productivity of the farms and raise the farmers' income.The most likely outcome is

Accepted Answer

A) the farmers will be better off. 
B) the farmers and the landlord will share the new prosperity. 
C) only the landlord will be better off. 
D) no one will prosper. 
A) the farmers will be better off. 
B) the farmers and the landlord will share the new prosperity. 
C) only the landlord will be better off. 
D) no one will prosper.

Question 10

Which of the following statements is correct?

Accepted Answer

A) The demand for capital is derived from the demands for outputs. 
B) The demands for output are derived from the demand for capital. 
C) The demand for capital is derived from the demand for rent. 
D) The demand for rent is derived from the demand for capital. 
A) The demand for capital is derived from the demands for outputs. 
B) The demands for output are derived from the demand for capital. 
C) The demand for capital is derived from the demand for rent. 
D) The demand for rent is derived from the demand for capital.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

How does the market mechanism distribute income?

Accepted Answer

The market mechanism distributes income

Question 13

If interest rates fall,

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) the supply curve for loanable funds will shift in. 
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) the supply curve for loanable funds will shift in.

Question 14

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 15

Under the marginal productivity principle,

Accepted Answer

A) the marginal economic profit of all inputs is zero at their optimal levels. 
B) the marginal physical product of each input is equal at their optimal levels. 
C) the marginal revenue product of each input is equal at their optimal levels. 
D) the slope of the marginal revenue product curve for each input is zero at the optimal level. 
A) the marginal economic profit of all inputs is zero at their optimal levels. 
B) the marginal physical product of each input is equal at their optimal levels. 
C) the marginal revenue product of each input is equal at their optimal levels. 
D) the slope of the marginal revenue product curve for each input is zero at the optimal level.

Question 16

The theory of economic rent can be used to explain high incomes received by movie stars and athletes.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Suppose the marginal physical product of labor at a shoe string factory is 1,500 shoestrings per hour at 80 hours, 1,200 per hour shoestrings at 90 hours, 800 shoestrings per at 100 hours, and 300 shoestrings per hour at 110 hours.If a shoestring maker's wages are $60 per hour and each string sells for $0.05.What is the optimal use of labor for making shoestrings?

Accepted Answer

A) 80 hours 
B) 90 hours 
C) 100 hours 
D) 110 hours 
A) 80 hours 
B) 90 hours 
C) 100 hours 
D) 110 hours

Question 19

California passed a law called "Proposition 2 ½" that limited property taxes to 2.5 percent of property value.Naturally this reduced taxes on many properties, and apartment landlords had more money at the end of the year at given rents.This windfall could be called an economic rent only if

Accepted Answer

A) we push the definition of economic rent too far. 
B) the supply of rental units can be expanded. 
C) the supply of rental units is fixed. 
D) competitors can build housing at costs that yield the return that was earned before the tax cut. 
A) we push the definition of economic rent too far. 
B) the supply of rental units can be expanded. 
C) the supply of rental units is fixed. 
D) competitors can build housing at costs that yield the return that was earned before the tax cut.

Question 20

At high levels of interest, borrowers will borrow ____ and suppliers will supply ____.

Accepted Answer

A) more; less 
B) less; more 
C) less; less 
D) more; more 
A) more; less 
B) less; more 
C) less; less 
D) more; more

Exam 18: Pricing the Factors of Production

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

MRP represents what the marginal physical product is worth.

Usury laws carry the potential of hurting

A tax on accounting profits in an industry

Discounting is the process of

Which of the following is not true of derived demand?

A usury ceiling will be effective depending on

Distinguish between invention and innovation.

Which of the following statements is correct?

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

How does the market mechanism distribute income?

If interest rates fall,

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.

Under the marginal productivity principle,

The theory of economic rent can be used to explain high incomes received by movie stars and athletes.

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

California passed a law called "Proposition 2 ½" that limited property taxes to 2.5 percent of property value.Naturally this reduced taxes on many properties, and apartment landlords had more money at the end of the year at given rents.This windfall could be called an economic rent only if

At high levels of interest, borrowers will borrow ____ and suppliers will supply ____.

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

Filters

At high levels of interest, borrowers will borrow and suppliers will supply .