True / False
1. MRP represents what the marginal physical product is worth.
a.
True
b.
False
True
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Principle of Marginal Productivity
2. MPP is the additional output that results from a one-unit increase in use of the input.
a.
True
b.
False
True
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Principle of Marginal Productivity
3. A profit-maximizing firm will hire inputs until MRP = P of the input.
a.
True
b.
False
True
Easy
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
The Principle of Marginal Productivity
4. The marginal revenue product of an input is the marginal physical product times the price per unit of output under
perfect competition.
a.
True
b.
False
True
Easy
5. If marginal revenue product is less than price of the input, the firm should use more of the input.
a.
True
b.
False
False
Moderate
6. The distribution of income in a market economy is determined by the minimum wage laws.
a.
True
b.
False
False
Easy
7. The quantity demanded of an input normally rises as its price rises.
a.
True
b.
False
False
Easy
8. Demand for an input is derived from the demand for the final product.
a.
True
b.
False
True
Easy
9. The demand curve for any input is the MP curve.
a.
True
b.
False
False
Moderate
10. The demand curve for any input is the downward-sloping portion of its marginal revenue product curve.
a.
True
b.
False
True
Moderate
11. If the supply curve remains constant, an outward shift in the demand curve for a commodity causes the price of factors
used in its production to decline.
a.
True
b.
False
False
Difficult
12. An inward shift of the demand curve for a product causes outward shifts in the demand curves for all the factors used
to produce the product.
a.
True
b.
False
False
Moderate
13. The demand for borrowed funds is a derived demand.
a.
True
b.
False
True
Moderate
14. Investment is a flow of resources into the production of new capital.
a.
True
b.
False
True
Moderate
15. Capital refers to an inventory or a stock of productive equipment and machines.
a.
True
b.
False
True
Moderate
16. Capital is a flow of resources into the production of investment goods.
a.
True
b.
False
False
Moderate
17. The nation’s stock of capital can increase only when net new investment takes place.
a.
True
b.
False
True
Moderate
18. Interest is the payment for the use of funds.
a.
True
b.
False
True
Easy
19. The rate of interest is the price at which money is borrowed and loaned.
a.
True
b.
False
True
Moderate
20. Interest is the payment for the use of funds used to produce capital.
a.
True
b.
False
True
Moderate
21. The difference in values between money today and money in the future is lower when the rate of interest is higher.
a.
True
b.
False
False
Easy
22. At higher interest rates, fewer people or firms will want to borrow. At lower interest rates, fewer people or firms will
want to save.
a.
True
b.
False
True
Moderate
23. As the rate of interest on borrowed funds increases, the quantity of investment funds demanded diminishes.
a.
True
b.
False
True
Moderate
24. The derived demand for borrowed funds has the characteristic negative slope of any demand curve.
a.
True
b.
False
True
Moderate
25. A sum of money to be received in the future is worth more than a sum of money today.
a.
True
b.
False
False
Moderate
26. An increase in the interest rate causes the MRP of a resource to fall.
a.
True
b.
False
True
Difficult
27. As interest rates rise, more and more investments become profitable for a firm.
a.
True
b.
False
False
Moderate
28. In general, the quantity of savings supplied to be used for lending increases with the rate of interest.
a.
True
b.
False
True
Moderate
29. On the surface, usury laws are designed to protect consumers from exorbitant interest rates.
a.
True
b.
False
True
Easy
30. Usury laws interfere with the automatic workings of the market mechanism.
a.
True
b.
False
True
Moderate
31. If the credit market is close to being a competitive market, an interest rate ceiling imposed by usury laws will bring
misallocations of resources.
a.
True
b.
False
True
Moderate
32. Usury laws are designed to ensure that interest rates in the market do not exceed acceptable norms.
a.
True
b.
False
True
Moderate
33. A usury rate is like a price ceiling.
a.
True
b.
False
True
Easy
34. The supply curve for land is perfectly elastic.
a.
True
b.
False
False
Moderate
35. Marginal land is on the borderline of being used in production.
a.
True
b.
False
True
Moderate
36. Marginal land can be defined as land that earns neither profits nor losses.
a.
True
b.
False
True
Moderate
37. Marginal land is land that is not worth anything under any circumstances.
a.
True
b.
False
False
Easy
38. Economic rent is a payment for a factor of production that elicits an increase in the quantity supplied.
a.
True
b.
False
False
Moderate
economics, and definitions of economics
39. Economic rent refers to profit derived from owning an apartment complex.
a.
True
b.
False
False
Easy
40. Economic rent is the minimum payment necessary to induce any of the factor to be supplied.
a.
True
b.
False
False
Moderate
economics
41. Economic rent is the amount of money above and beyond that necessary to keep the factor of production employed
where it is.
a.
True
b.
False
True
Moderate
42. Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor
to be supplied at its present employment.
a.
True
b.
False
True
Moderate
43. “Rent seeking” describes the search and battle for opportunities to collect economic rents.
a.
True
b.
False
True
Moderate
economics
44. Economists consider rent seeking activity to be highly productive.
a.
True
b.
False
False
Easy
45. Economic rent is paid only to land, and not to other resources.
a.
True
b.
False
False
Moderate
46. The theory of economic rent can be used to explain high incomes received by movie stars and athletes.
a.
True
b.
False
True
Moderate
47. Almost all of the rent that tenants pay to landlords of apartments buildings is economic rent.
a.
True
b.
False
False
Difficult
economics
48. In 2013, corporate profits in the U.S. economy were about 14 percent of national income.
a.
True
b.
False
True
Moderate
49. High profits in some risky industries attract additional entrepreneurs to those industries.
a.
True
b.
False
True
Moderate
50. Entrepreneurship is the act of starting new firms and taking the risks that are necessary in business opportunities.
a.
True
b.
False
True
Easy
51. Profit is the return to entrepreneurship.
a.
True
b.
False
True
Easy
52. Invention is the act of generating a new idea.
a.
True
b.
False
True
Easy
53. Innovation is the act of putting an invention to practical use.
a.
True
b.
False
True
Easy
54. Innovation is the act of generating an idea for a new product.
a.
True
b.
False
False
Difficult
55. The marginal productivity principle has some relevance to organizing production in a socialist society.
a.
True
b.
False
True
Moderate
56. The marginal productivity principle has relevance only in a capitalist economy, and not in a socialist system.
a.
True
b.
False
False
Moderate
57. The marginal productivity principle demonstrates that distribution under a capitalist system is ethically valid.
a.
True
b.
False
False
Moderate
58. Discounting or computing present value is a way of comparing dollar values that will appear at different points in
time.
a.
True
b.
False
True
Easy
59. Although it is possible to determine the present value of a payment to be received in one year, it is not possible to
determine the present value of a stream of payments over several years.
a.
True
b.
False
False
Moderate
60. When the interest rate is higher, the difference between the value of money today and tomorrow is smaller.
a.
True
b.
False
False
Moderate
61. The theory of factor pricing uses supply-demand analysis.
a.
True
b.
False
True
Easy
62. One major fault with factor pricing analysis is that marginal productivity theory merely attempts to justify the income
distribution that the capitalist system yields.
a.
True
b.
False
False
Moderate
63. The marginal productivity theory is irrelevant to organizing production in a socialist society.
a.
True
b.
False
False
Difficult
Criticisms of Marginal Productivity Theory
Multiple Choice
64. What involves taking the risks that are necessary to seek out business opportunities?
a.
Invention
b.
Benchmarking
c.
Averaging
d.
Entrepreneurship
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Principle of Marginal Productivity
65. Which factor of production receives the greatest share of the U.S. national income?
a.
land
b.
labor
c.
capital
d.
entrepreneurship
Easy
DISC: Measuring the Economy
United States – BPROG: Analytic
United States – OH – Default City – Measuring the Economy
Measuring the Economy
The Principle of Marginal Productivity
66. Of all the payments made to factors of production in the United States in 2013, ____ received the lowest share.
a.
land rents
b.
labor
c.
interest payments
d.
corporate profits
c
Easy
DISC: Measuring the Economy