Question 1

The demand for borrowed funds is a derived demand.

Accepted Answer

A) True 
 B)False

Question 2

Economic rent is the minimum payment necessary to induce any of the factor to be supplied.

Accepted Answer

A) True 
 B)False

Question 3

Interest is the payment for the use of

Accepted Answer

A) borrowed funds. 
B) natural resources. 
C) labor. 
D) any factor of production. 
A) borrowed funds. 
B) natural resources. 
C) labor. 
D) any factor of production.

Question 4

The theory of factor pricing uses supply-demand analysis.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Define the following terms and explain their importance to the study of economics.
a.principle of marginal productivity
b.marginal physical product
c.marginal revenue product
d.derived demand
e.economic rent

Accepted Answer

a.The marginal productivity principle st

Question 7

The marginal revenue product of an input is the marginal physical product times the price per unit of output under perfect competition.

Accepted Answer

A) True 
 B)False

Question 8

Discounting allows comparisons of

Accepted Answer

A) money values and physical values. 
B) interest payments on borrowed funds and interest payments on loaned funds. 
C) money values received at different times. 
D) the quantities of outputs produced by different types of capital goods. 
A) money values and physical values. 
B) interest payments on borrowed funds and interest payments on loaned funds. 
C) money values received at different times. 
D) the quantities of outputs produced by different types of capital goods.

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

List three primary ways in which profits above "normal" interest rate levels can be earned.

Accepted Answer

United States - OH - Default City - Mark

Question 12

The three major sources of economic profit are

Accepted Answer

A) risk-bearing, innovation, and exercise of monopoly power. 
B) risk-bearing, rent seeking, and discounting. 
C) innovation, invention, and speculation. 
D) exercise of market power, marginalization, and speculation. 
A) risk-bearing, innovation, and exercise of monopoly power. 
B) risk-bearing, rent seeking, and discounting. 
C) innovation, invention, and speculation. 
D) exercise of market power, marginalization, and speculation.

Question 13

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 14

The basic principle that explains the demand for a factor of production is the

Accepted Answer

A) principle of marginal productivity. 
B) Hotelling principle. 
C) principle of opportunity cost. 
D) Ramsey pricing principle. 
A) principle of marginal productivity. 
B) Hotelling principle. 
C) principle of opportunity cost. 
D) Ramsey pricing principle.

Question 15

If the interest rate is positive, the present value of $10 to be received in the future is

Accepted Answer

A) less than $10. 
B) equal to $10. 
C) more than $10. 
D) Any of the above is possible, depending on the interest rate and when the payment is to be received. 
A) less than $10. 
B) equal to $10. 
C) more than $10. 
D) Any of the above is possible, depending on the interest rate and when the payment is to be received.

Question 16

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 17

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 18

The marginal productivity principle implies that

Accepted Answer

A) quantity demanded of an input normally declines as the input price falls. 
B) at equilibrium, profit from the last unit of input will be zero. 
C) for maximizing profit, marginal revenue product should be greater than price. 
D) marginal productivity of inputs increase when price of inputs increase. 
A) quantity demanded of an input normally declines as the input price falls. 
B) at equilibrium, profit from the last unit of input will be zero. 
C) for maximizing profit, marginal revenue product should be greater than price. 
D) marginal productivity of inputs increase when price of inputs increase.

Question 19

Economic rents are earned whenever

Accepted Answer

A) demand for a factor is perfectly inelastic. 
B) a factor receives a reward that exceeds its cost. 
C) a factor earns a reward that is greater than the amount needed to keep the factor in its present employment. 
D) a factor's supply curve intersects its demand curve at a point where demand is inelastic. 
A) demand for a factor is perfectly inelastic. 
B) a factor receives a reward that exceeds its cost. 
C) a factor earns a reward that is greater than the amount needed to keep the factor in its present employment. 
D) a factor's supply curve intersects its demand curve at a point where demand is inelastic.

Question 20

Suppose that a community seeks to preserve air quality, and zones a "green belt" around the city which prevents property development within the belt.What is the most likely result of this law?

Accepted Answer

A) Interest rates will increase. 
B) Labor income will increase. 
C) Economic rent will increase. 
D) Profits will increase. 
A) Interest rates will increase. 
B) Labor income will increase. 
C) Economic rent will increase. 
D) Profits will increase.

Exam 18: Pricing the Factors of Production

The demand for borrowed funds is a derived demand.

Economic rent is the minimum payment necessary to induce any of the factor to be supplied.

Interest is the payment for the use of

The theory of factor pricing uses supply-demand analysis.

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

Define the following terms and explain their importance to the study of economics. a.principle of marginal productivity b.marginal physical product c.marginal revenue product d.derived demand e.economic rent

The marginal revenue product of an input is the marginal physical product times the price per unit of output under perfect competition.

Discounting allows comparisons of

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

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

List three primary ways in which profits above "normal" interest rate levels can be earned.

The three major sources of economic profit are

The windfall profits tax on oil will curtail oil production if

The basic principle that explains the demand for a factor of production is the

If the interest rate is positive, the present value of $10 to be received in the future is

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

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

The marginal productivity principle implies that

Economic rents are earned whenever

Suppose that a community seeks to preserve air quality, and zones a "green belt" around the city which prevents property development within the belt.What is the most likely result of this law?

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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