Question 1

If a non-renewable resource is scarce,has constant marginal cost of production,and is sold in a competitive market,

Accepted Answer

A) its price will increase over time. 
B) its price will exceed marginal cost. 
C) its price will increase by the rate of interest. 
D) All of the above. 
A) its price will increase over time. 
B) its price will exceed marginal cost. 
C) its price will increase by the rate of interest. 
D) All of the above.

Question 2

If an exhaustible resource is scarce,has constant marginal cost over time,and is sold in a competitive market,then

Accepted Answer

A) its price increases over time. 
B) its price will not be a function of the interest rate. 
C) its price moves independently of past prices. 
D) its price equals marginal cost. 
A) its price increases over time. 
B) its price will not be a function of the interest rate. 
C) its price moves independently of past prices. 
D) its price equals marginal cost.

Question 3

A state lottery has a Million Dollar Lottery game that pays $1,000 a week for life.Assuming a 6% nominal rate of interest and generously assuming an infinite lifetime,can this game be called a "Million Dollar Lottery"?

Accepted Answer

Assuming that the payments las

Question 4

At age 40,Joe is considering quitting his job and going back for a college degree.He needs two more years full-time.Tuition is $10,000 per year.He earns $30,000 per year.A college degree would raise his annual income by $10,000 per year.He will retire at age 70.His benefit of a degree would be

Accepted Answer

A) 10,000 ×   
B) 10,000 ×   
C) 10,000/r. 
D) 10,000 ×   
A) 10,000 ×   
B) 10,000 ×   
C) 10,000/r. 
D) 10,000 ×

Question 5

Suppose coal sells for $50 per ton and can be mined at a constant marginal cost of $20 per ton.Forecasters predict that the price of coal next year will be $55.If your marginal cost next year will still be $20 and the interest rate is 10%,do you sell coal today?

Accepted Answer

You are indifferent if coal pr

Question 6

If the interest rate is 10%,then $1 today is worth how much one year from now?

Accepted Answer

A) $1.10 
B) $1 
C) 91¢ 
D) 90¢ 
A) $1.10 
B) $1 
C) 91¢ 
D) 90¢

Question 7

If you place $100 in a bank account that pays 6% at the end of each year,and you leave your $100 and all your interest in the bank,how much will you have in the bank at the end of seven years with annual compounding?

Accepted Answer

A) (106)7. 
B) 7 ∗ (106). 
C) 100 ∗ (1.60)7. 
D) 100 ∗ (1.06)7. 
A) (106)7. 
B) 7 ∗ (106). 
C) 100 ∗ (1.60)7. 
D) 100 ∗ (1.06)7.

Question 8

Interest rates are positive mainly because

Accepted Answer

A) of inflation. 
B) people tend to prefer the present to the future. 
C) people tend to prefer the future to the present. 
D) bankers are greedy. 
A) of inflation. 
B) people tend to prefer the present to the future. 
C) people tend to prefer the future to the present. 
D) bankers are greedy.

Question 9

At age 40,Joe is considering quitting his job and going back for a college degree.He needs two more years full-time.Tuition is $10,000 per year.He earns $30,000 per year.A college degree would raise his annual income by $10,000 per year.He will retire at age 70.From an investment standpoint,Joe will go back full-time if

Accepted Answer

A) 10,000 ×  
= 40,000 ×   
B) 10,000/r > 10,000 ×   
C) 10,000 ×  
> 40,000 ×   
D) 10,000 ×  
> 40,000 ×   
A) 10,000 ×  
= 40,000 ×   
B) 10,000/r > 10,000 ×   
C) 10,000 ×  
> 40,000 ×   
D) 10,000 ×  
> 40,000 ×

Question 10

Suppose a person has a discount rate of zero.This implies she

Accepted Answer

A) places no value on the future. 
B) places no value on the present. 
C) values the present and the future equally. 
D) would not lend money at any positive interest rate. 
A) places no value on the future. 
B) places no value on the present. 
C) values the present and the future equally. 
D) would not lend money at any positive interest rate.

Question 11

The Net Present Value approach to investment results in an investment being undertaken only if

Accepted Answer

A) its net present value is positive. 
B) its net present value is zero. 
C) it has positive cash flow. 
D) its internal rate of return equals the rate of interest. 
A) its net present value is positive. 
B) its net present value is zero. 
C) it has positive cash flow. 
D) its internal rate of return equals the rate of interest.

Question 12

In the short run,the competitive firm will hire more labor if

Accepted Answer

A) the wage rate increases. 
B) the price the firm receives for the output increases. 
C) the price the firm receives for the output decreases. 
D) a specific tax is imposed on the output. 
A) the wage rate increases. 
B) the price the firm receives for the output increases. 
C) the price the firm receives for the output decreases. 
D) a specific tax is imposed on the output.

Question 13

A financial services company offers to pay you $1,000 a year for life in exchange for $20,000 today.What factors affect your decision to take this offer?

Accepted Answer

This policy has an internal ra

Question 14

If the competitive firm maximizes profit by selecting labor rather than output,it will earn greater economic profit.

Accepted Answer

A) True 
 B)False

Question 15

If the interest rate is positive,the future value of an interest bearing investment is always larger than the present value.

Accepted Answer

A) True 
 B)False

Question 16

The long-run labor demand curve is relatively flatter than the short-run labor demand curve because,in the short run,

Accepted Answer

A) the wage rate is fixed. 
B) the firm cannot vary the amount of capital used. 
C) the firm is a price taker. 
D) All of the above. 
A) the wage rate is fixed. 
B) the firm cannot vary the amount of capital used. 
C) the firm is a price taker. 
D) All of the above.

Question 17

Explain why a firm may rationally make an investment when its cash flow from the investment is not positive each year.

Accepted Answer

A firm will examine the net present valu

Question 18

Technological improvements in coal mining will

Accepted Answer

A) increase the price of coal. 
B) decrease the price of coal. 
C) increase the interest rate. 
D) decrease the interest rate. 
A) increase the price of coal. 
B) decrease the price of coal. 
C) increase the interest rate. 
D) decrease the interest rate.

Question 19

-The above figure shows a competitive firm's demand for labor assuming that the firm's output sells for $1 per unit.If the wage is $5 per hour,a 2 percent cut in all the workers' income tax will cause the firm to

Accepted Answer

A) demand less labor. 
B) demand more labor. 
C) raise the wage paid to the worker. 
D) None of above. 
A) demand less labor. 
B) demand more labor. 
C) raise the wage paid to the worker. 
D) None of above.

Question 20

Why is the price of a scarce exhaustible resource in a competitive market above the marginal cost of providing a unit of the resource?

Accepted Answer

Because the resource is scarce

If a non-renewable resource is scarce,has constant marginal cost of production,and is sold in a competitive market,

If an exhaustible resource is scarce,has constant marginal cost over time,and is sold in a competitive market,then

A state lottery has a Million Dollar Lottery game that pays $1,000 a week for life.Assuming a 6% nominal rate of interest and generously assuming an infinite lifetime,can this game be called a "Million Dollar Lottery"?

At age 40,Joe is considering quitting his job and going back for a college degree.He needs two more years full-time.Tuition is $10,000 per year.He earns $30,000 per year.A college degree would raise his annual income by $10,000 per year.He will retire at age 70.His benefit of a degree would be

Suppose coal sells for $50 per ton and can be mined at a constant marginal cost of $20 per ton.Forecasters predict that the price of coal next year will be $55.If your marginal cost next year will still be $20 and the interest rate is 10%,do you sell coal today?

If the interest rate is 10%,then $1 today is worth how much one year from now?

If you place $100 in a bank account that pays 6% at the end of each year,and you leave your $100 and all your interest in the bank,how much will you have in the bank at the end of seven years with annual compounding?

Interest rates are positive mainly because

Suppose a person has a discount rate of zero.This implies she

The Net Present Value approach to investment results in an investment being undertaken only if

In the short run,the competitive firm will hire more labor if

A financial services company offers to pay you $1,000 a year for life in exchange for $20,000 today.What factors affect your decision to take this offer?

If the competitive firm maximizes profit by selecting labor rather than output,it will earn greater economic profit.

If the interest rate is positive,the future value of an interest bearing investment is always larger than the present value.

The long-run labor demand curve is relatively flatter than the short-run labor demand curve because,in the short run,

Explain why a firm may rationally make an investment when its cash flow from the investment is not positive each year.

Technological improvements in coal mining will

-The above figure shows a competitive firm's demand for labor assuming that the firm's output sells for $1 per unit.If the wage is $5 per hour,a 2 percent cut in all the workers' income tax will cause the firm to

Why is the price of a scarce exhaustible resource in a competitive market above the marginal cost of providing a unit of the resource?

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 15: Factor Markets

If a non-renewable resource is scarce,has constant marginal cost of production,and is sold in a competitive market,

If an exhaustible resource is scarce,has constant marginal cost over time,and is sold in a competitive market,then

A state lottery has a Million Dollar Lottery game that pays $1,000 a week for life.Assuming a 6% nominal rate of interest and generously assuming an infinite lifetime,can this game be called a "Million Dollar Lottery"?

At age 40,Joe is considering quitting his job and going back for a college degree.He needs two more years full-time.Tuition is $10,000 per year.He earns $30,000 per year.A college degree would raise his annual income by $10,000 per year.He will retire at age 70.His benefit of a degree would be

Suppose coal sells for $50 per ton and can be mined at a constant marginal cost of $20 per ton.Forecasters predict that the price of coal next year will be $55.If your marginal cost next year will still be $20 and the interest rate is 10%,do you sell coal today?

If the interest rate is 10%,then $1 today is worth how much one year from now?

If you place $100 in a bank account that pays 6% at the end of each year,and you leave your $100 and all your interest in the bank,how much will you have in the bank at the end of seven years with annual compounding?

Interest rates are positive mainly because

Suppose a person has a discount rate of zero.This implies she

The Net Present Value approach to investment results in an investment being undertaken only if

In the short run,the competitive firm will hire more labor if

A financial services company offers to pay you $1,000 a year for life in exchange for $20,000 today.What factors affect your decision to take this offer?

If the competitive firm maximizes profit by selecting labor rather than output,it will earn greater economic profit.

If the interest rate is positive,the future value of an interest bearing investment is always larger than the present value.

The long-run labor demand curve is relatively flatter than the short-run labor demand curve because,in the short run,

Explain why a firm may rationally make an investment when its cash flow from the investment is not positive each year.

Technological improvements in coal mining will

-The above figure shows a competitive firm's demand for labor assuming that the firm's output sells for $1 per unit.If the wage is $5 per hour,a 2 percent cut in all the workers' income tax will cause the firm to

Why is the price of a scarce exhaustible resource in a competitive market above the marginal cost of providing a unit of the resource?

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters