Question 1

The one feature of capital that makes it unlike most inputs is that it is

Accepted Answer

A) durable. 
B) productive. 
C) an economic good. 
D) used to produce only consumer goods. 
A) durable. 
B) productive. 
C) an economic good. 
D) used to produce only consumer goods.

Question 2

The derived demand curve for loans slopes downward because as interest rates

Accepted Answer

A) fall, future income becomes less valuable. 
B) fall, investors develop pessimistic expectations. 
C) fall, future income becomes more valuable. 
D) rise, investors become pessimistic. 
A) fall, future income becomes less valuable. 
B) fall, investors develop pessimistic expectations. 
C) fall, future income becomes more valuable. 
D) rise, investors become pessimistic.

Question 3

Economists consider rent seeking activity to be highly productive.

Accepted Answer

A) True 
 B)False

Question 4

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.This means that Mr.Paque's (i) overall productivity has fallen; (ii) marginal product has fallen.

Accepted Answer

A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii 
A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii

Question 5

The derived demand for borrowed funds has the characteristic negative slope of any demand curve.

Accepted Answer

A) True 
 B)False

Question 6

Economic rent is paid only to land, and not to other resources.

Accepted Answer

A) True 
 B)False

Question 7

What involves taking the risks that are necessary to seek out business opportunities?

Accepted Answer

A) Invention 
B) Benchmarking 
C) Averaging 
D) Entrepreneurship 
A) Invention 
B) Benchmarking 
C) Averaging 
D) Entrepreneurship

Question 8

An example of rent seeking is

Accepted Answer

A) lobbying by industrial groups. 
B) lawsuits between rival firms. 
C) battles over exclusive licenses. 
D) All of the above are correct. 
A) lobbying by industrial groups. 
B) lawsuits between rival firms. 
C) battles over exclusive licenses. 
D) All of the above are correct.

Question 9

The nation's stock of capital can increase only when net new investment takes place.

Accepted Answer

A) True 
 B)False

Question 10

The economic rent analysis does not apply to any factor

Accepted Answer

A) except land. 
B) whose supply curve is vertical. 
C) whose supply curve is horizontal. 
D) whose quantity supplied is fixed. 
A) except land. 
B) whose supply curve is vertical. 
C) whose supply curve is horizontal. 
D) whose quantity supplied is fixed.

Question 11

The interest rate is the

Accepted Answer

A) rate of investment. 
B) price of credit. 
C) rate of return on investment in capital goods. 
D) expected rate of inflation. 
A) rate of investment. 
B) price of credit. 
C) rate of return on investment in capital goods. 
D) expected rate of inflation.

Question 12

Firms should stop borrowing funds

Accepted Answer

A) as soon as the bank raises the interest rate. 
B) when the MRP of borrowed funds is equal to the cost of borrowing. 
C) whenever the future of the firm looks gloomy. 
D) if their debts are more than 25 percent of the value of the firm. 
A) as soon as the bank raises the interest rate. 
B) when the MRP of borrowed funds is equal to the cost of borrowing. 
C) whenever the future of the firm looks gloomy. 
D) if their debts are more than 25 percent of the value of the firm.

Question 13

Explain how usury laws 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 14

Which of the following is not held constant along a demand curve for labor by a firm?

Accepted Answer

A) the firm's technology of production 
B) the price of the firm's output 
C) the marginal product of labor for the firm 
D) the price of substitutes for the firm's output 
A) the firm's technology of production 
B) the price of the firm's output 
C) the marginal product of labor for the firm 
D) the price of substitutes for the firm's output

Question 15

According to the principle of marginal productivity, if

Accepted Answer

A) the product price is less than MRP, the firm is using too little of the input. 
B) the price of an input rises, the quantity demanded of the input will increase. 
C) MRP is greater than product price, the firm should reduce the use of the input. 
D) price of the input equals MRP, the firm is maximizing profit. 
A) the product price is less than MRP, the firm is using too little of the input. 
B) the price of an input rises, the quantity demanded of the input will increase. 
C) MRP is greater than product price, the firm should reduce the use of the input. 
D) price of the input equals MRP, the firm is maximizing profit.

Question 16

In a free market for rental housing, the average rental rate

Accepted Answer

A) includes a large amount of economic rent. 
B) includes zero economic rent. 
C) is entirely economic rent, since rental housing is fixed in supply. 
D) is about 10 percent economic rent. 
A) includes a large amount of economic rent. 
B) includes zero economic rent. 
C) is entirely economic rent, since rental housing is fixed in supply. 
D) is about 10 percent economic rent.

Question 17

In a free market for rental housing, effective rent control would have which effect?

Accepted Answer

A) It would cause a reduction in the number of apartments. 
B) It would cause an increase in the number of apartments, since landlords would try to increase their profits through larger scale. 
C) It would have no effect on the number of apartments offered in the market. 
D) The results are impossible to predict. 
A) It would cause a reduction in the number of apartments. 
B) It would cause an increase in the number of apartments, since landlords would try to increase their profits through larger scale. 
C) It would have no effect on the number of apartments offered in the market. 
D) The results are impossible to predict.

Question 18

According to the principle of marginal productivity, the quantity of an input demanded depends on the

Accepted Answer

A) price of the input. 
B) price of outputs in which the input is used. 
C) technology of production. 
D) All of the above are correct. 
A) price of the input. 
B) price of outputs in which the input is used. 
C) technology of production. 
D) All of the above are correct.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Suppose that one could determine the amount of income that is pure economic rent.If a law were passed which taxed 50 percent of that rent, what would happen to the amount of work that people perform?

Accepted Answer

A) It would increase as people seek higher income. 
B) It would be unchanged. 
C) It would decrease as people suffer a loss of income. 
D) It would increase for some and decrease for others. 
A) It would increase as people seek higher income. 
B) It would be unchanged. 
C) It would decrease as people suffer a loss of income. 
D) It would increase for some and decrease for others.

Exam 18: Pricing the Factors of Production

The one feature of capital that makes it unlike most inputs is that it is

The derived demand curve for loans slopes downward because as interest rates

Economists consider rent seeking activity to be highly productive.

The derived demand for borrowed funds has the characteristic negative slope of any demand curve.

Economic rent is paid only to land, and not to other resources.

What involves taking the risks that are necessary to seek out business opportunities?

An example of rent seeking is

The nation's stock of capital can increase only when net new investment takes place.

The economic rent analysis does not apply to any factor

The interest rate is the

Firms should stop borrowing funds

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

Which of the following is not held constant along a demand curve for labor by a firm?

According to the principle of marginal productivity, if

In a free market for rental housing, the average rental rate

In a free market for rental housing, effective rent control would have which effect?

According to the principle of marginal productivity, the quantity of an input demanded depends on the

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

Suppose that one could determine the amount of income that is pure economic rent.If a law were passed which taxed 50 percent of that rent, what would happen to the amount of work that people perform?

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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