Question 1

If factor markets are competitive, a profit maximizing firm should buy inputs where MRP is

Accepted Answer

A) inelastic. 
B) elastic. 
C) equal to the output price. 
D) equal to the input price. 
A) inelastic. 
B) elastic. 
C) equal to the output price. 
D) equal to the input price.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of a change in derived demand?

Accepted Answer

A) The demand for ice cream increases during a heat wave. 
B) The demand for large pickup trucks falls when the price of gasoline increases. 
C) The demand for buns increases when the price of food truck hot dogs increases. 
D) The demand for sunscreen falls when the local swimming pool increases prices. 
A) The demand for ice cream increases during a heat wave. 
B) The demand for large pickup trucks falls when the price of gasoline increases. 
C) The demand for buns increases when the price of food truck hot dogs increases. 
D) The demand for sunscreen falls when the local swimming pool increases prices.

Question 4

The demand curve for any input is the downward-sloping portion of its marginal revenue product curve.

Accepted Answer

A) True 
 B)False

Question 5

A profit-maximizing firm will hire inputs until MRP = P of the input.

Accepted Answer

A) True 
 B)False

Question 6

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 7

As the rate of interest on borrowed funds increases, the quantity of investment funds demanded diminishes.

Accepted Answer

A) True 
 B)False

Question 8

In general, the quantity of savings supplied to be used for lending increases with the rate of interest.

Accepted Answer

A) True 
 B)False

Question 9

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 10

"Rent seeking" describes the search and battle for opportunities to collect economic rents.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Marginal land is land

Accepted Answer

A) that is unprofitable under any circumstances. 
B) that is the most productive in the area. 
C) that is on the borderline of profitability. 
D) of average productivity. 
A) that is unprofitable under any circumstances. 
B) that is the most productive in the area. 
C) that is on the borderline of profitability. 
D) of average productivity.

Question 13

An example of an investment is

Accepted Answer

A) a restaurant placing otherwise idle money in an interest-bearing savings account. 
B) a sock company repurchasing its own shares. 
C) a delivery company adding more vehicles its fleet. 
D) a pencil factory that can produce consumer and business goods. 
A) a restaurant placing otherwise idle money in an interest-bearing savings account. 
B) a sock company repurchasing its own shares. 
C) a delivery company adding more vehicles its fleet. 
D) a pencil factory that can produce consumer and business goods.

Question 14

Capital refers to an inventory or a stock of productive equipment and machines.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) the same marginal productivity principle serves as the foundation for the demand schedule for each type of input. 
B) the demand schedule for one input cannot be determined independently of demand schedules for other inputs. 
C) the demand curve is the complete MRP curve. 
D) any inward shift in demand for a commodity will result in outward shifts in the demand curves for the inputs used to produce the commodity. 
A) the same marginal productivity principle serves as the foundation for the demand schedule for each type of input. 
B) the demand schedule for one input cannot be determined independently of demand schedules for other inputs. 
C) the demand curve is the complete MRP curve. 
D) any inward shift in demand for a commodity will result in outward shifts in the demand curves for the inputs used to produce the commodity.

Question 16

What is the distribution of national income currently among the owners of the factors of production-land, labor, capital, and entrepreneurship?

Accepted Answer

According to the text, in 2013, rent was

Question 17

Critics of the huge net returns on, for example, oil production will claim that the returns are

Accepted Answer

A) interest on the capital investment. 
B) rents on a natural resource. 
C) profits on entrepreneurial activity. 
D) exorbitant and should be taxed away. 
A) interest on the capital investment. 
B) rents on a natural resource. 
C) profits on entrepreneurial activity. 
D) exorbitant and should be taxed away.

Question 18

An employer would never operate on the upward-sloping part of an MRP curve because

Accepted Answer

A) he or she would not be maximizing profits. 
B) he or she would be hiring workers at wages above MRP. 
C) the number of workers is too large to get economies of scale. 
D) he or she would then have too little capital per worker. 
A) he or she would not be maximizing profits. 
B) he or she would be hiring workers at wages above MRP. 
C) the number of workers is too large to get economies of scale. 
D) he or she would then have too little capital per worker.

Question 19

Interest payments account for about ___ percent of U.S. national income.

Accepted Answer

A) 1 
B) 3 
C) 9 
D) 12 
A) 1 
B) 3 
C) 9 
D) 12

Question 20

Each firm's capital stock is fixed in the short run. Therefore, if the price of capital increases, then in the short run the market demand curve for labor in a perfectly competitive market will

Accepted Answer

A) shift inward. 
B) be unaffected. 
C) shift outward. 
D) change slope. 
A) shift inward. 
B) be unaffected. 
C) shift outward. 
D) change slope.

Exam 18: Pricing the Factors of Production

If factor markets are competitive, a profit maximizing firm should buy inputs where MRP is

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

Which of the following is an example of a change in derived demand?

The demand curve for any input is the downward-sloping portion of its marginal revenue product curve.

A profit-maximizing firm will hire inputs until MRP = P of the input.

Under the marginal productivity principle,

As the rate of interest on borrowed funds increases, the quantity of investment funds demanded diminishes.

In general, the quantity of savings supplied to be used for lending increases with the rate of interest.

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

"Rent seeking" describes the search and battle for opportunities to collect economic rents.

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

Marginal land is land

An example of an investment is

Capital refers to an inventory or a stock of productive equipment and machines.

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

What is the distribution of national income currently among the owners of the factors of production-land, labor, capital, and entrepreneurship?

Critics of the huge net returns on, for example, oil production will claim that the returns are

An employer would never operate on the upward-sloping part of an MRP curve because

Interest payments account for about ___ percent of U.S. national income.

Each firm's capital stock is fixed in the short run. Therefore, if the price of capital increases, then in the short run the market demand curve for labor in a perfectly competitive market will

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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