Question 1

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.

Question 2

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.

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.

Question 4

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.

Question 5

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 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

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.

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.

Question 9

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.

Question 10

The demand for borrowed funds is a derived demand.

Accepted Answer

A) True 
 B)False

Question 11

The theory of factor pricing uses supply-demand analysis.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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.

Question 14

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 15

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

Accepted Answer

United States - OH - Default City - Mark...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 18: Pricing the Factors of Production

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

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The marginal productivity principle implies that

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The three major sources of economic profit are

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

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Discounting allows comparisons of

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

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The windfall profits tax on oil will curtail oil production if

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

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

Correct AnswerverifiedUnited States - OH - Default City - Mark...View AnswerShow Answer

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

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Interest is the payment for the use of

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

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Economic rents are earned whenever

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

Correct AnswerverifiedShow Answer

The theory of factor pricing uses supply-demand analysis.

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct Answerverifieda.The marginal productivity principle st...View AnswerShow Answer

The demand for borrowed funds is a derived demand.

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United States - OH - Default City - Mark...
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a.The marginal productivity principle st...
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