Question 1

The quantity demanded of an input normally rises as its price rises.

Accepted Answer

A) True 
 B)False

Question 2

The income of Lebron James above the minimum payment needed to acquire the type of service he performs is

Accepted Answer

A) pure profit. 
B) economic rent. 
C) marginal rent. 
D) competitive rent. 
A) pure profit. 
B) economic rent. 
C) marginal rent. 
D) competitive rent.

Question 3

A recent decline in interest rates made home construction more affordable for many families.The consequent increase in construction produced a rightward shift in the demand curves for construction materials.Economists would say that the change in demand for materials is due to

Accepted Answer

A) the principle of marginal productivity. 
B) rent seeking. 
C) diminishing marginal returns. 
D) derived demand. 
A) the principle of marginal productivity. 
B) rent seeking. 
C) diminishing marginal returns. 
D) derived demand.

Question 4

One major fault with factor pricing analysis is that marginal productivity theory merely attempts to justify the income distribution that the capitalist system yields.

Accepted Answer

A) True 
 B)False

Question 5

The market level of rent

Accepted Answer

A) is entirely determined by the demand side. 
B) is determined by its elastic supply. 
C) is difficult to determine because of shifts on the supply side. 
D) generally settles at levels below any rent controls favored politically. 
A) is entirely determined by the demand side. 
B) is determined by its elastic supply. 
C) is difficult to determine because of shifts on the supply side. 
D) generally settles at levels below any rent controls favored politically.

Question 6

Contrast the shapes of the supply curves for financial capital and land.

Accepted Answer

The usual supply curve for capital shows

Question 7

If the supply curve remains constant, an outward shift in the demand curve for a commodity causes the price of factors used in its production to decline.

Accepted Answer

A) True 
 B)False

Question 8

Marginal land is land that is not worth anything under any circumstances.

Accepted Answer

A) True 
 B)False

Question 9

The marginal productivity principle says that a profit-maximizing firm should

Accepted Answer

A) hire capital until its marginal product is zero. 
B) hire labor until another worker costs more to hire than she can earn for the firm. 
C) hire the quantities of capital and of labor at which their marginal products are equal. 
D) hire capital until its marginal product is negative. 
A) hire capital until its marginal product is zero. 
B) hire labor until another worker costs more to hire than she can earn for the firm. 
C) hire the quantities of capital and of labor at which their marginal products are equal. 
D) hire capital until its marginal product is negative.

Question 10

Which of the following activities is most likely to be considered rent seeking?

Accepted Answer

A) buying an apartment building 
B) hiring a lobbyist 
C) voting for a politician who supports government spending 
D) buying common stock 
A) buying an apartment building 
B) hiring a lobbyist 
C) voting for a politician who supports government spending 
D) buying common stock

Question 11

If the rate of interest increases, firms will most likely respond by

Accepted Answer

A) increasing investment. 
B) decreasing investment. 
C) not changing investment. 
D) increasing capital stock. 
A) increasing investment. 
B) decreasing investment. 
C) not changing investment. 
D) increasing capital stock.

Question 12

The interest rate is determined by

Accepted Answer

A) government pronouncements. 
B) market forces of supply and demand. 
C) banks and lenders. 
D) managers of large corporations. 
A) government pronouncements. 
B) market forces of supply and demand. 
C) banks and lenders. 
D) managers of large corporations.

Question 13

Figure 19-1
  
-Mr.Paque is a bear hunter for timber companies that want to diminish damage to trees done by bears in the spring.Due to a reduction in the bear population between 1995 and 2005, Mr.Paque finds fewer bears each year and additional hours spent hunting produce fewer additional bears.The change in Mr.Paque's MPP curve between 1995 and 2005 is best illustrated by which panel in Figure 19-1?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 14

Equilibrium in the market for funds occurs when the

Accepted Answer

A) lenders and borrowers are mutually satisfied at some interest rate. 
B) marginal revenue product of investment using the funds equals the interest rate. 
C) demand curve for funds and the supply curve for funds intersect. 
D) All of the above are correct. 
A) lenders and borrowers are mutually satisfied at some interest rate. 
B) marginal revenue product of investment using the funds equals the interest rate. 
C) demand curve for funds and the supply curve for funds intersect. 
D) All of the above are correct.

Question 15

Which of the following is an example of an investment?

Accepted Answer

A) A company placing cash reserves in a bank. 
B) A company buying Yahoo shares. 
C) A company augmenting its production capacity. 
D) A company issuing bonus shares. 
A) A company placing cash reserves in a bank. 
B) A company buying Yahoo shares. 
C) A company augmenting its production capacity. 
D) A company issuing bonus shares.

Question 16

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 17

Owners of buildings can expect to collect ____ economic rent in the long run.

Accepted Answer

A) much 
B) marginal 
C) a competitive 
D) little or no 
A) much 
B) marginal 
C) a competitive 
D) little or no

Question 18

Usury laws are often politically popular because

Accepted Answer

A) few people sympathize with banks and other lenders who are suspected of price gouging. 
B) consumers are in favor of the lower lending rates. 
C) those concerned with affordable housing for the poor favor ceilings on mortgage rates. 
D) All of the above are correct. 
A) few people sympathize with banks and other lenders who are suspected of price gouging. 
B) consumers are in favor of the lower lending rates. 
C) those concerned with affordable housing for the poor favor ceilings on mortgage rates. 
D) All of the above are correct.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 18: Pricing the Factors of Production

The quantity demanded of an input normally rises as its price rises.

The income of Lebron James above the minimum payment needed to acquire the type of service he performs is

A recent decline in interest rates made home construction more affordable for many families.The consequent increase in construction produced a rightward shift in the demand curves for construction materials.Economists would say that the change in demand for materials is due to

One major fault with factor pricing analysis is that marginal productivity theory merely attempts to justify the income distribution that the capitalist system yields.

The market level of rent

Contrast the shapes of the supply curves for financial capital and land.

If the supply curve remains constant, an outward shift in the demand curve for a commodity causes the price of factors used in its production to decline.

Marginal land is land that is not worth anything under any circumstances.

The marginal productivity principle says that a profit-maximizing firm should

Which of the following activities is most likely to be considered rent seeking?

If the rate of interest increases, firms will most likely respond by

The interest rate is determined by

Equilibrium in the market for funds occurs when the

Which of the following is an example of an investment?

A ceiling on interest rates is likely to lead to

Owners of buildings can expect to collect ____ economic rent in the long run.

Usury laws are often politically popular because

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

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?

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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

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