ECO 201 – Homework 4 – A market in which resources

ECO 201 – Homework 4 – A market in which resources

ECO 201 – Homework #4Topics 20 through 23: 50 PointsThis is a printable version of Homework 4. Answers must be submitted through Blackboard (theSubmittable Homework button) by 11:59PM on Tuesday, May 6.1. A market in which resources are traded is known as a(n):a. factor marketb. perfectly competitive marketc. open marketd. closed markete. equilibrium market2. In factor markets, firms __________ and households __________.a. demand resources; supply resourcesb. supply resources; demand resourcesc. demand resources; demand goodsd. supply resources; demand goodse. supply resources; supply goods3. The demand for labor by a particular firm is ultimately derived from:a. the productivity of the firm’s other inputsb. demand for the firm’s outputc. the market supply of labord. the equilibrium wage rate4. Firms have an incentive to substitute labor for capital as the:a. price of labor decreases.b. marginal product of labor decreases.c. price of labor increases.d. price of capital decreases.5. The additional output produced when one additional unit of labor is hired is referred to as the__________ of labor.a. marginal revenue productb. marginal revenuec. supplyd. marginal producte. total revenue product6. The marginal revenue product of labor is:a. how much a firm’s total profits change as a result of producing one more unit of output.b. how much a firm’s total profits change as a result of hiring one more unit of labor.c. how much a firm’s total costs change as a result of hiring one more unit of labor.d. how much a firm’s total revenues change as a result of hiring one more unit of labor.e. the same as marginal product.7. As more labor is hired, marginal revenue product of a competitive firm:a. declines because output price declines.b. declines because marginal product of labor declines.c. increases because total revenue increases.d. does not change because marginal revenue is constant.8. A profit-seeking firm will hire more labor up to the point where the:a. marginal product of labor equals the wage rate.b. last worker hired adds equally to total revenue and total cost.c. marginal product of labor is at its maximum value.d. value of additional output most greatly exceeds labor’s marginal factor cost.9. The wage rate in a competitive labor market is determined by:a. the skills of workers.b. union contracts.c. the interaction of supply and demand.d. firm’s demand for workers.10. A firm can maximize profit by hiring labor up to the point where:a. the marginal revenue product equals the wage rateb. the marginal product equals marginal costc. total revenue equals total costd. the marginal revenue product equals marginal producte. the marginal revenue product is zero11. Suppose a competitive firm that is profit maximizing pays a wage of $750 per week and the price ofits output is $15. Based on this information, you may surmise that the firm’s marginal product is:a. 50 units.b. $50.c. 15 units.d. $15.e. $750.12. If labor is the only variable input in production, a firm’s labor demand curve is thea. marginal revenue product of labor curveb. downward-sloping portion of its marginal product of labor curvec. demand curve for the product produced by labord. downward-sloping portion of the firm’s marginal revenue curve13. An increase in the firm’s marginal revenue causes:a. an increase in the quantity of labor demanded by the firm.b. a decrease in the quantity of labor demanded by the firm.c. an increase in the demand for labor by the firm.d. a decrease in the demand for labor by the firm.14. A firm’s supply curve for labor is represented by the:a. marginal product of laborb. MRP of laborc. wage rated. productivity of labor15. As demand for a firm’s good increases, MRP ____, and the firm will ____.a. increases; fire workersb. increases; hire workersc. decreases;fire workersd. decreases; hire workers16. As applied to labor demand, the marginal approach to profit:a. is irrelevantb. requires setting marginal cost equal to the wage r atec. requires setting marginal revenue equal to the wage rated. says that a firm should increase employment if doing so adds more to revenue than it adds tocoste. says that a firm should decrease employment if doing so adds more to cost than it adds t orevenue17. If ten bicycles are sold for $100 each, and the marginal product of the last worker hired is one bicycle,then the firm’s total revenue is:a. $50b. $200c. $100d. $300e. $1,000Use the following for questions 18 through 22.You have the following production schedule for a firm. Thefirm is in a perfectly competitive market with a price of $15.L12345678910q36679411713515016117017417618. The MPL for the sixth worker is:a.0b.10c.15d.36e. 15019. The MRP for the sixth worker is:a.$11b.$15c.$50d. $100e. $22520. Assume that the firm’s wage rate is $125. How many workers will it hire to maximize profits?a. 5b. 6c. 7d. 8e. 921. Assume that the firm’s wage rate is $150. How many work ers will it hire to maximize profits?a. 5b. 6c. 7d. 8e. 922. If the firm were to hire 4 workers, what is the maximum wage rate it would be willing to pay?a.$15b.$25c.$100d. $225e. $34523. As the wage rate per hour increases, the opportunit y cost of leisure:a. remains constant.b. increases since the cost of forgoing one hour of work increases.c. may increase or decrease depending on the individual’s preferences.d. decreases since the consumer now has more income to spend.24. Anita’s wage rate just increased. Therefore,a. the opportunity cost of her leisure has increased and she may either increase or decrease herlabor supply.b. the opportunity cost of her leisure has increased and she will decrease her labor supply.c. the opportunity cost of her leisure has decreased and her labor supply will increase.d. the opportunity cost of her leisure has increased and she will increase her labor supply.25. Assuming leisure is a normal good, if the substitution effect is greater than the inc ome effect, a wagerate increase:a. will increase labor supply.b. could cause either an increase or a decrease in labor supply.c. will have no effect on labor supply.d. will decrease labor supply.26. Assuming leisure is a normal good, if the income effect is greater than the substitution effect, a wagerate increase:a. will have no effect on labor supply.b. could cause either an increase or a decrease in labor supply.c. will increase labor supply.d. will decrease labor supply.Use the following graph for questions 27 and 28.27. Over the segment BC of the curve:a. the substitution effect is stronger than the income effect.b. the income effect is stronger than the substitution effect.c. the income and substitution effects are evenly matched.d. income is so high that work is unnecessary.e. irrational behavior has set in.28. If the current wage rate is between A and B, and the wage rate is increased, the quantity of laborsupplied will:a. increaseb. decreasec. remain constantd. unable to determine from the information given29. As baby boomers move into their retirement years, the incomes of geriatricians (doctors for the age d)will most likely:a. fall due to a fall in the demand for geriatriciansb. rise due to a fall in the price of complementary inputsc. rise due to a rise in the demand for geriatriciansd. fall due to a drop in the number of medical providerse. rise due to a rise in the supply of geriatricians30. The market labor supply curve shows the relationship between the :a. wage rate and the total quantity of labor demanded by firmsb. wage rate and the total quantity of labor supplied by individualsc. wage rate and the total quantity of labor supplied by firmsd. wage rate and the total quantity of labor demanded by individualse. marginal revenue product of labor and the marginal physical product of labor31. In a perfectly competitive labor market, the supply of labor curve facing a firm will be :a. horizontalb. verticalc. upward slopingd. downward slopinge. equal to its marginal revenue product curve32. In a perfectly competitive labor market, the market labor supply curve:a. will be horizontalb. will be verticalc. will be upward slopingd. will be downward slopinge. could be downward sloping if firms produce inferior goods33. The labor supply curve is typically upward sloping because as the wage rate rises :a. it will exceed the value assigned to their time for more individualsb. the opportunity cost of leisure fallsc. the demand for the good produced by labor increasesd. the marginal revenue product of labor fallse. the marginal revenue product of labor rises34. You have a bond that you can redeem for $10,000 one year from now. The interest rate is 10%. Howmuch is the bond worth today?a. $9,091b. $10,000c. $8,264d. $9,524e. $9,00035. Assume that you deposit $6,500 today in a savings account which earns 10%. How much money willbe in the account at the end of 15 years?a. $20,150b. $23,782c. $25,947d. $27,152e. $29,45336. The amount of money that someone would pay today for the right to receive a future payment iscalled:a. the present value of the future paymentb. the determinate value of the future paymentc. the interest rated. the principale. the time discount37. How much money would have to be invested now at an interest rate of 12% to accumulate to $24,000at the end of seven years?a. $7,846b. $8,414c. $10,856d. $12,466e. $13,60838. Beginning one year from today, you wish to withdraw $1,500 every year for six years. How much doyou need to deposit today at 5% to be able to do so?a. $5,973b. $6,752c. $7,614d. $8,415e. $9,00039. You deposit $8,000 in an account today. In 10 years, you will have $15,737 in the account. Yourannualized rate of return is:a. 4%b. 5%c. 6%d. 7%e. 8%40. According to time value theory, the value of any asset is equal to:a. the sum of all the future benefits it generatesb. the revenue it generates during its first yearc. the sum of the present values of all the future benefits it generatesd. the ratio of its final year’s benefits to its pricee. the sum of all future benefits it generates minus its price41. You are considering the purchase of a perpetuity paying $40 annually. If the market interest rate is8%, the maximum price that you would pay for this perpetuity is:a. $40b. $80c. $160d. $200e. $50042. The marginal revenue product of capital is:a. the increase in output that results from employing one more unit of capitalb. the increase in profit that results from em ploying one more unit of capitalc. the increase in revenue that results from employing one more unit of labord. the increase in revenue that results from employing one more unit of capitale. the increase in profits that results from employing one less unit of labor43. Investment measures:a. the change in the amount of labor used per year.b. the purchases of new physical capital per year.c. depreciation.d. machine hours per year.44. The ultimate suppliers of financial resources necessary for firms to obtain physical capital are:a. households.b. banks.c. state and local governments.d. banks which have federal deposit insurance.45. The real interest rate is:a. greater than the nominal interest rate.b. the opportunity cost of future consumption.c. the opportunity cost of current consumption.d. varies positively with the risk premium.46. Financial intermediaries include:a. banksb. insurance companiesc. pension fundsd. all of the abovee. a and b only47. The major purpose of financial intermediaries is to:a. channel savings to borrowers.b. channel savings to the government.c. generate monopoly profits for Wall Street.d. provide checking and savings accountse. collect taxes to support government spending.48. In the U.S. economy, net borrowers are ____.a. firmsb. householdsc. governmentd. both a and be. both a and c49. The supply of funds in the capital (loanable funds) market varies positively with the:a. interest rate.b. profitability and productivity of new capital investments.c. price of the output that new capital will produce.d. future income from newly purchased capital.50. A household will earn income of $40,000 in each of the next two years; the interest rate is 8%. If thehousehold has consumption of $48,000 in Year 1, what is their maximum possible consumption inYear 2? Assume that all loans must be repaid in Year 2 and no additional borrowing is available.a. $31,360b. $32,000c. $40,000d. $46,480e. $48,64051. A household will earn income of $40,000 in each of the next two years; the interest rate is 8%. If thehousehold has consumption of $34,000 in Year 1, what is their maximum possible consumption inYear 2?a. $31,640b. $32,000c. $40,000d. $46,480e. $48,64052. The marginal revenue product of capital:a. is independent of the number of investments made in a particular year.b. is independent of the marginal product of capital used in production.c. tends to decline as more investments are made in a given year.d. is not an important influence on the demand for loanable funds.53. A profit maximizing firm will add capital (invest) up to the point at which the _______ equals the_______.a. marginal revenue product of capital, average input cost of capitalb. present value of a capital asset, future costc. marginal revenue product of capital, future costd. marginal revenue product of capital, interest rate54. A delivery company is considering three investment opportunities. The expected returns for eachproject are:Expected RateInvestmentof ReturnNew delivery van20%Computer training15%Defensive driving training8%If the interest rate is 7%, the firm will invest in:a. all of the projects.b. the new delivery van and the computer training.c. only the new delivery van.d. none of the projects.55. Other things equal, an increase in the real interest rate will:a. decrease firms’ investment expendituresb. increase the standard of living in the economyc. increase of the present value of capital goodd. increase firms’ investment expendituresQuestions 56 through 60 refer to the following table.InflationTreasury BillsCompany A BondCompany B BondRate(%)4.07.09.012.056. W hat is the real interest rate?a. 2%b. 3%c. 4%d. 5%e. 11%57. W hat is the risk free rate?a. 3%b. 4%c. 5%d. 7%e. 11%58. W hat is the risk premium on the treasury bill?a. 0%b. 1%c. 2%d. 3%e. 4%59. W hat is the risk premium on Company A Bonds?a. 1%b. 2%c. 3%d. 4%e. 5%60. W hat is the risk premium on Company B bonds?a. 1%b. 2%c. 3%d. 4%e. 5%61. Assume that treasury bills are earning 6% and the inflation rate is 4%. The real rate of interest is:a. 2.0%b. 4.0%c. 6.0%d. 10.0%62. If the rate of return on an asset exceeds the interest rate:a. NPV > 0.b. NPV = 0.c. NPV < 0.d. unable to determine from the information givenQuestions 63 through 66 pertain to a machine which will create the following cash inflows by year:Year12345Cash Inflow$5,0005,0004,0004,0003,00063. Assume that the firm’s interest rate is 8%. The present value of these cash flows is:a. $14,373b. $16,782c. $17,074d. $18,135e. $21,00064. If the price of the machine is $18,000, it has a net present value of:a. -$926b. -$573c. -0d. $127e. $3,00065. If the price of the machine is $18,000, the rate of return on the machine will be:a. greater than 8%.b. equal to 8%.c. less than 8%.d. unable to determine from the available information.66. The maximum price that the firm would be willing to pay for this machine is:a. $14,373b. $16,782c. $17,074d. $18,135e. $21,00067. Assume that a firm has an interest rate of 10%. It computes the net present value of cash inflowsfrom a project costing $12,000 to be $112. The rate of return earned by the machine is:a. less than 10%b. equal to 10%c. more than 10%d. not determinable from information given68. As interest rates rise, asset prices will:a. rise.b. be unchanged.c. fall.d. asset prices are not related to interest rates.69. If NPV > 0, then:a. economic profit > 0b. economic profit = 0c. economic profit < 0d. unable to determine from the information given70. If economic profit = 0, then,a. ROR > rb. ROR < rc. ROR = rd. unable to determine from the information given71. Assume that a firm has the following capital structure. What is the firm’s weighted average cost ofcapital?AmountCostDebt$75,0006%Preferred equity15,0009%Common equity85,00012%a.b.c.d.e.1.6%7.8%9.2%12.4%16.1%72. Seeking to own different kinds of investment assets is referred to as:a. risk aversion.b. risk neutrality.c. portfolio rearrangement.d. diversification.e. investment confusion.73. W hich of the following is an example of indirect ownership?a. common stocksb. corporate bondsc. treasury billsd. money market fundse. certificates of deposit74. You buy shares in an entity. In turn, the entity buys common stocks of many other firms. The entity(or investment) is most likely a:a. corporate bondb. money market fundc. the federal governmentd. mutual funde. certificate of deposit75. The relationship between a bond’s yield and its price is that:a. they both rise and fall together.b. the yield is constant while the bond price may vary.c. when one rises, the other falls.d. the bond price is constant while the yield varies.e. both vary negatively with the face value.76. An increase in the price of a stock is called:a. a capital gain.b. a rate of return.c. a dividend yield.d. corporate earnings.e. basic income.77. You paid $75 for a share of stock in the Ziggy Corporation, received a dividend payment of $2.25,and sold the stock for $71 after one year. You would have earned current income of ____ and acapital ____.a. $2.25; gain of $4b. $2.25; gain of $0c. $2.25; loss of $4d. $4; gain of $2.25e. $4; loss of $2.2578. On the common stock from the previous question, your rate of return would be:a. -5 1/3%b. -2 1/3%c. 2.25%d. 3%e. 5 1/3%79. You estimate that a share of stock will pay a dividend of $5 for each of the next fo ur years, and thatyou can sell the share for $100 at the end of the fourth year. If the interest rate is 12%, what is themaximum amount you would be willing to pay for the share today?a. $79b. $84c. $93d. $105e. $12080. A firm issues a five year, 8% bond with a face value of $1,000. If the market interest rate is 8%, whatis the maximum amount you would be willing to pay for the bond?a. $856b. $923c. $975d. $1,000e. $1,40081. If the market interest rate is 12%, what would be the maximum am ount you would be willing to pay forthe bond in the prior question?a. $856b. $923c. $975d. $1,000e. $1,400


Price: £ 79

100% Plagiarism Free & Custom Written, Tailored to your instructions

Leave your Comments


Can't read the image? click here to refresh