Question 1

A sum of money received at a future date is worth less than the same sum of money received today. Why? Explain this with an example.

Accepted Answer

A dollar obtainable sooner is worth more

Question 2

Investments

Accepted Answer

A) are more profitable when interest rates rise. 
B) are less profitable when interest rates rise. 
C) are more profitable when economic rents rise. 
D) are less profitable when economic rents rise. 
A) are more profitable when interest rates rise. 
B) are less profitable when interest rates rise. 
C) are more profitable when economic rents rise. 
D) are less profitable when economic rents rise.

Question 3

On January 1, 2010, a homeowner borrowed $5,000 for a term of six months to complete some home improvements, paying an annual interest rate of 8 percent. How much principal and interest will the homeowner pay back on July 1, 2010?

Accepted Answer

A) $2,500 
B) $2,900 
C) $5,200 
D) $5,400 
A) $2,500 
B) $2,900 
C) $5,200 
D) $5,400

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

When the interest rate is higher, the difference between the value of money today and tomorrow is smaller.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

The distribution of income in a market economy is determined by the minimum wage laws.

Accepted Answer

A) True 
 B)False

Question 9

A worker can always build a chair in four hours. If a chair sells for $40 in a perfectly competitive market, then the equilibrium wage per hour in a perfectly competitive labor market is

Accepted Answer

A) $4. 
B) $10. 
C) $40. 
D) $160. 
A) $4. 
B) $10. 
C) $40. 
D) $160.

Question 10

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 11

An increase in interest rates decreases the marginal revenue product of investment.

Accepted Answer

A) True 
 B)False

Question 12

The functioning of a market economy is very dependent upon investment for provision of capital and future growth. Describe the process of investment and employment of the created capital in production.

Accepted Answer

The text lists five steps: (1)decision o

Question 13

Use the concept of economic rent to explain how rent controls could have an effect quite opposite to the intention.

Accepted Answer

Only economic rent can be taxed away wit

Question 14

When determination of rent is left to the market,

Accepted Answer

A) that rent price is almost entirely determined by the supply side. 
B) that price can settle at politically unpopular levels. 
C) land is fairly distributed among the members of society. 
D) the supply of land will be perfectly elastic. 
A) that rent price is almost entirely determined by the supply side. 
B) that price can settle at politically unpopular levels. 
C) land is fairly distributed among the members of society. 
D) the supply of land will be perfectly elastic.

Question 15

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 16

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

Accepted Answer

A usury law sets a maximum interest rate

Question 17

The windfall profits tax on oil will curtail oil production if

Accepted Answer

A) oil executives decide to be spiteful. 
B) the demand for oil is inelastic. 
C) the supply curve for oil is upward sloping. 
D) the supply curve for oil is vertical. 
A) oil executives decide to be spiteful. 
B) the demand for oil is inelastic. 
C) the supply curve for oil is upward sloping. 
D) the supply curve for oil is vertical.

Question 18

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 19

Capital is to investment as

Accepted Answer

A) a flow is to a rate. 
B) a flow is to a stock. 
C) a stock is to a flow. 
D) a stock is to a bond. 
A) a flow is to a rate. 
B) a flow is to a stock. 
C) a stock is to a flow. 
D) a stock is to a bond.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 18: Pricing the Factors of Production

A sum of money received at a future date is worth less than the same sum of money received today. Why? Explain this with an example.

Investments

On January 1, 2010, a homeowner borrowed $5,000 for a term of six months to complete some home improvements, paying an annual interest rate of 8 percent. How much principal and interest will the homeowner pay back on July 1, 2010?

A usury ceiling will be effective depending on

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

When the interest rate is higher, the difference between the value of money today and tomorrow is smaller.

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

The distribution of income in a market economy is determined by the minimum wage laws.

A worker can always build a chair in four hours. If a chair sells for $40 in a perfectly competitive market, then the equilibrium wage per hour in a perfectly competitive labor market is

Which of the following is not true of derived demand?

An increase in interest rates decreases the marginal revenue product of investment.

The functioning of a market economy is very dependent upon investment for provision of capital and future growth. Describe the process of investment and employment of the created capital in production.

Use the concept of economic rent to explain how rent controls could have an effect quite opposite to the intention.

When determination of rent is left to the market,

A ceiling on interest rates is likely to lead to

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

The windfall profits tax on oil will curtail oil production if

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

Capital is to investment as

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

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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