Question 1

If marginal revenue product is less than price of the input, the firm should use more of the input.

Accepted Answer

A) True 
 B)False

Question 2

The difference between the cost of production on a piece of land less the cost of production on marginal land is called

Accepted Answer

A) usury. 
B) profit. 
C) rent. 
D) interest. 
A) usury. 
B) profit. 
C) rent. 
D) interest.

Question 3

The theory of land rent holds that

Accepted Answer

A) all plots of land are identical. 
B) all land yields a positive rent return. 
C) rent on any piece of land will equal the difference between the cost of producing the output on that land and the cost of producing it on marginal land. 
D) competition for superior plots of land will force the rent on those lands to a marginal return of zero. 
A) all plots of land are identical. 
B) all land yields a positive rent return. 
C) rent on any piece of land will equal the difference between the cost of producing the output on that land and the cost of producing it on marginal land. 
D) competition for superior plots of land will force the rent on those lands to a marginal return of zero.

Question 4

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 5

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?

Accepted Answer

A) 4.75 percent. 
B) 8.25 percent. 
C) 10 percent. 
D) 15 percent. 
A) 4.75 percent. 
B) 8.25 percent. 
C) 10 percent. 
D) 15 percent.

Question 6

Usury laws interfere with the automatic workings of the market mechanism.

Accepted Answer

A) True 
 B)False

Question 7

Economic rent is the amount of money above and beyond that necessary to keep the factor of production employed where it is.

Accepted Answer

A) True 
 B)False

Question 8

On the surface, Usury laws are designed to protect consumers from exorbitant interest rates.

Accepted Answer

A) True 
 B)False

Question 9

The distribution of income in a market economy is determined by

Accepted Answer

A) the level of employment and prices of the factors of production. 
B) the prices of factors of production. 
C) largely unknown forces, which economists seek to discover. 
D) decisions of government offices related to distribution. 
A) the level of employment and prices of the factors of production. 
B) the prices of factors of production. 
C) largely unknown forces, which economists seek to discover. 
D) decisions of government offices related to distribution.

Question 10

If the demand for land shifts upward, rents will be

Accepted Answer

A) earned by some land that was formerly unprofitable. 
B) lost to many landowners. 
C) diminished for society as a whole. 
D) taxed away to help pay the costs of government. 
A) earned by some land that was formerly unprofitable. 
B) lost to many landowners. 
C) diminished for society as a whole. 
D) taxed away to help pay the costs of government.

Question 11

Capital is defined as

Accepted Answer

A) a flow of money into a business to buy various inputs. 
B) automated production processes that require little or no labor. 
C) interest payments to owners of companies. 
D) an inventory of plant, equipment, and other productive resources held by a firm. 
A) a flow of money into a business to buy various inputs. 
B) automated production processes that require little or no labor. 
C) interest payments to owners of companies. 
D) an inventory of plant, equipment, and other productive resources held by a firm.

Question 12

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 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 refers to profit derived from owning real estate.

Accepted Answer

A) True 
 B)False

Question 15

Changes in the economic rent paid to land

Accepted Answer

A) only affect marginal land. 
B) equal the difference in production costs between the old marginal land and new marginal land. 
C) reduce the use of land because the cost of using land is now higher. 
D) equal the difference in production costs between productive land and nonproductive land. 
A) only affect marginal land. 
B) equal the difference in production costs between the old marginal land and new marginal land. 
C) reduce the use of land because the cost of using land is now higher. 
D) equal the difference in production costs between productive land and nonproductive land.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

On January 1, 2006, a consumer borrowed $10,000 for a term of one year at an interest rate of 12 percent. How much principal and interest will the consumer pay back on January 1, 2007?

Accepted Answer

A) $10,000 
B) $1,200 
C) $8,929 
D) $11,200 
A) $10,000 
B) $1,200 
C) $8,929 
D) $11,200

Question 18

Consider four parcels of peanut growing land. The nonland peanut production costs are $1,000 for Parcel A, $1,200 for Parcel B, $1,600 for Parcel C, and $1,700 for Parcel D. If, before rents are charged, farmers are indifferent between planting on Parcel, then which of the following is true?

Accepted Answer

A) Parcel A's rent is $200 and Parcel C's rent $0. 
B) Parcel A's rent is $200 and Parcel B's rent $400. 
C) Parcel A's rent is $600 and Parcel B's rent $300. 
D) Parcel A's rent is $600 and Parcel D's rent $0. 
A) Parcel A's rent is $200 and Parcel C's rent $0. 
B) Parcel A's rent is $200 and Parcel B's rent $400. 
C) Parcel A's rent is $600 and Parcel B's rent $300. 
D) Parcel A's rent is $600 and Parcel D's rent $0.

Question 19

Explain how to derive the demand for an input.

Accepted Answer

Input demand is the downward-sloping por

Question 20

Putting new ideas to work is called

Accepted Answer

A) invention. 
B) innovation. 
C) management. 
D) MPP. 
A) invention. 
B) innovation. 
C) management. 
D) MPP.

Exam 18: Pricing the Factors of Production

If marginal revenue product is less than price of the input, the firm should use more of the input.

The difference between the cost of production on a piece of land less the cost of production on marginal land is called

The theory of land rent holds that

Investment is the amount by which ____ grows.

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?

Usury laws interfere with the automatic workings of the market mechanism.

Economic rent is the amount of money above and beyond that necessary to keep the factor of production employed where it is.

On the surface, Usury laws are designed to protect consumers from exorbitant interest rates.

The distribution of income in a market economy is determined by

If the demand for land shifts upward, rents will be

Capital is defined as

Usury laws carry the potential of hurting

If interest rates fall,

Economic rent refers to profit derived from owning real estate.

Changes in the economic rent paid to land

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

On January 1, 2006, a consumer borrowed $10,000 for a term of one year at an interest rate of 12 percent. How much principal and interest will the consumer pay back on January 1, 2007?

Consider four parcels of peanut growing land. The nonland peanut production costs are $1,000 for Parcel A, $1,200 for Parcel B, $1,600 for Parcel C, and $1,700 for Parcel D. If, before rents are charged, farmers are indifferent between planting on Parcel, then which of the following is true?

Explain how to derive the demand for an input.

Putting new ideas to work is called

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

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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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