Question 1

An increase in the interest rate causes the MRP of a resource to fall.

Accepted Answer

A) True 
 B)False  True

Question 2

Figure 19-2
  
-The demand curve for the input in Figure 19-2 is

Accepted Answer

A)  ABCD. 
B)  CDEF. 
C)  BCDE. 
D)  EF. 
A)  ABCD. 
B)  CDEF. 
C)  BCDE. 
D)  EF. B

Question 3

The theory of land rent holds that

Accepted Answer

A)  all plots of land are identical. 
B)  all land yields a positive rent return. 
C)  rent on any piece of land will equal the difference between the cost of producing the output on that land and the cost of producing it on marginal land. 
D)  competition for superior plots of land will force the rent on those lands to a marginal return of zero. 
A)  all plots of land are identical. 
B)  all land yields a positive rent return. 
C)  rent on any piece of land will equal the difference between the cost of producing the output on that land and the cost of producing it on marginal land. 
D)  competition for superior plots of land will force the rent on those lands to a marginal return of zero. C

Question 4

The marginal productivity theory of distribution holds that

Accepted Answer

A)  each factor is paid what it deserves. 
B)  the owner of each factor is paid the amount that the factor contributes to earnings. 
C)  each factor's income depends on how hard it works. 
D)  each factor receives an equal share of the revenue from production. 
A)  each factor is paid what it deserves. 
B)  the owner of each factor is paid the amount that the factor contributes to earnings. 
C)  each factor's income depends on how hard it works. 
D)  each factor receives an equal share of the revenue from production.

Question 5

Profits

Accepted Answer

A)  are what remains from the selling price after factors have been paid. 
B)  accrue to entrepreneurs. 
C)  are lower than most people think. 
D)  All of the above are correct. 
A)  are what remains from the selling price after factors have been paid. 
B)  accrue to entrepreneurs. 
C)  are lower than most people think. 
D)  All of the above are correct.

Question 6

California passed a law called "Proposition 2 1/2" that limited property taxes to 2.5 percent of property value.Naturally this reduced taxes on many properties, and apartment landlords had more money at the end of the year at given rents.This windfall could be called an economic rent only if

Accepted Answer

A)  we push the definition of economic rent too far. 
B)  the supply of rental units can be expanded. 
C)  the supply of rental units is fixed. 
D)  competitors can build housing at costs that yield the return that was earned before the tax cut. 
A)  we push the definition of economic rent too far. 
B)  the supply of rental units can be expanded. 
C)  the supply of rental units is fixed. 
D)  competitors can build housing at costs that yield the return that was earned before the tax cut.

Question 7

Marginal physical product is

Accepted Answer

A)  the increase in input usage resulting from an increase in revenue. 
B)  the same as marginal revenue product. 
C)  equal to average physical product when a monopoly firm is in equilibrium. 
D)  the increase in output stemming from a one-unit increase in input. 
A)  the increase in input usage resulting from an increase in revenue. 
B)  the same as marginal revenue product. 
C)  equal to average physical product when a monopoly firm is in equilibrium. 
D)  the increase in output stemming from a one-unit increase in input.

Question 8

What is the present value of an infinite stream of annual payments of $10,000 per year if the first payment is received one year from today? Assume the interest rate is 10 percent.

Accepted Answer

A)  $100,000 
B)  $1,000,000 
C)  $10,000,000 
D)  $1,000,000,000 
A)  $100,000 
B)  $1,000,000 
C)  $10,000,000 
D)  $1,000,000,000

Question 9

At high levels of interest, borrowers will borrow ____ and suppliers will supply ____.

Accepted Answer

A)  more; less 
B)  less; more 
C)  less; less 
D)  more; more 
A)  more; less 
B)  less; more 
C)  less; less 
D)  more; more

Question 10

The demand curve for a factor is that part of the MRP where marginal product is

Accepted Answer

A)  rising. 
B)  falling. 
C)  positive. 
D)  negative. 
A)  rising. 
B)  falling. 
C)  positive. 
D)  negative.

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

If a ton of steel sells for $15,000 and a car made from a ton of steel sells for $30,000, then if all markets are perfectly competitive, how many cars can be made from the last ton of steel used by a profit-maximizing firm?

Accepted Answer

A)  1/3 car 
B)  1/2 car 
C)  1 car 
D)  1.5 cars 
A)  1/3 car 
B)  1/2 car 
C)  1 car 
D)  1.5 cars

Question 14

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 15

The difference in values between money today and money in the future is lower when the rate of interest is higher.

Accepted Answer

A) True 
 B)False

Question 16

Marginal land is land on the borderline of

Accepted Answer

A)  producing revenue. 
B)  being used profitably. 
C)  producing economic rent. 
D)  a facility that produces output. 
A)  producing revenue. 
B)  being used profitably. 
C)  producing economic rent. 
D)  a facility that produces output.

Question 17

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 18

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 19

Which factor of production receives the greatest share of the U.S.national income?

Accepted Answer

A)  land 
B)  labor 
C)  capital 
D)  entrepreneurship 
A)  land 
B)  labor 
C)  capital 
D)  entrepreneurship

Question 20

Interest is the payment for the use of funds used to produce capital.

Accepted Answer

A) True 
 B)False

Exam 19: Pricing the Factors of Production

An increase in the interest rate causes the MRP of a resource to fall.

Figure 19-2 -The demand curve for the input in Figure 19-2 is

The theory of land rent holds that

The marginal productivity theory of distribution holds that

Profits

California passed a law called "Proposition 2 1/2" that limited property taxes to 2.5 percent of property value.Naturally this reduced taxes on many properties, and apartment landlords had more money at the end of the year at given rents.This windfall could be called an economic rent only if

Marginal physical product is

What is the present value of an infinite stream of annual payments of $10,000 per year if the first payment is received one year from today? Assume the interest rate is 10 percent.

At high levels of interest, borrowers will borrow ____ and suppliers will supply ____.

The demand curve for a factor is that part of the MRP where marginal product is

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

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

If a ton of steel sells for $15,000 and a car made from a ton of steel sells for $30,000, then if all markets are perfectly competitive, how many cars can be made from the last ton of steel used by a profit-maximizing firm?

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

The difference in values between money today and money in the future is lower when the rate of interest is higher.

Marginal land is land on the borderline of

The three major sources of economic profit are

An example of rent seeking is

Which factor of production receives the greatest share of the U.S.national income?

Interest is the payment for the use of funds used to produce capital.

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 I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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

The 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

Filters

At high levels of interest, borrowers will borrow and suppliers will supply .