Question 1

If a nonrenewable natural resource's price is expected to increase at a rate faster than the interest rate, then the supply today will

Accepted Answer

If the price of a nonrenewable resource is expected to increase faster than the interest rate, suppliers will hold back supply today to sell at higher prices in the future, decreasing today's supply.

Question 2

Other things being equal, a technological change that raises the value of marginal product of capital raises the rental rate of capital because the

Accepted Answer

A technological change that increases the value of the marginal product of capital makes capital more productive, thus increasing the demand for capital. This shifts the demand curve for capital to the right, leading to a higher rental rate for capital.

Question 3

The supply of land is

Accepted Answer

The supply of land is perfectly inelastic because the total quantity of land is fixed and cannot be increased or decreased in response to changes in price.

Question 4

-In the above figure, which curve depicts the supply of land for Chicago's "Magnificent Mile"?

Accepted Answer

The answer of 
-In the above figure, which curve depicts...

Question 5

Next year's expected price of oil is $90 per barrel. If the interest rate climbs from 5 percent to 20 percent per year and nothing else changes, then according to the Hotelling Principle the price of oil this year

Accepted Answer

According to the Hotelling Principle, the price of a non-renewable resource like oil should rise at the rate of interest. If the interest rate increases, the current price should decrease to ensure that the expected future price aligns with the higher rate of return.

Question 6

According to the Hotelling Principle, the price of an nonrenewable resource

Accepted Answer

The Hotelling Principle states that the price of a nonrenewable resource should rise at a rate equal to the interest rate, reflecting the opportunity cost of depleting the resource now rather than in the future.

Question 7

In order to hire an additional worker, a monopsony must pay

Accepted Answer

A monopsony is a market situation where there is only one buyer for a type of labor. To hire an additional worker, a monopsony must increase the wage rate for all workers, as it faces an upward-sloping labor supply curve.

Question 8

Which of the following is a nonrenewable resource?

Accepted Answer

Oil is a nonrenewable resource because it takes millions of years to form and cannot be replenished on a human timescale.

Question 9

The proposition that the price of a resource is expected to rise at a rate equal to the interest rate is called the

Accepted Answer

The Hotelling Principle states that the price of a non-renewable resource should increase at the rate of interest over time, reflecting the opportunity cost of depleting the resource.

Question 10

The price of an nonrenewable resource is expected to rise at a rate equal to the

Accepted Answer

The price of a nonrenewable resource is expected to rise at a rate equal to the interest rate, according to the Hotelling rule, which states that the price of a nonrenewable resource should increase at the rate of interest to reflect its increasing scarcity over time.

Question 11

Next year's expected price of oil is $88 per barrel and the interest rate is 10 percent per year. According to the Hotelling Principle the price of oil this year is

Accepted Answer

According to the Hotelling Principle, the price of a non-renewable resource like oil should increase at the rate of interest. Therefore, the current price should be the future price discounted by the interest rate. $88 / (1 + 0.10) = $80.

Question 12

If the supply of a factor is perfectly inelastic, then

Accepted Answer

When the supply of a factor is perfectly inelastic, it means that the quantity supplied is fixed and cannot change, regardless of the price level.

Question 13

A technological change that raises the value of marginal product of capital ________ the rental rate of capital because the ________.

Accepted Answer

A technological change that raises the value of the marginal product of capital increases the demand for capital, shifting the demand curve for capital to the right, which raises the rental rate of capital.

Question 14

According to the Hotelling Principle, the price of a nonrenewable resource is expected to

Accepted Answer

The Hotelling Principle states that the price of a nonrenewable resource should rise at a rate equal to the interest rate, reflecting the opportunity cost of depleting the resource.

Question 15

Changes in which of the following change the demand for capital and shifts the demand curve for capital?

Accepted Answer

The marginal product of capital is the additional output produced by an additional unit of capital. An increase in the marginal product of capital will increase the demand for capital, as firms will be willing to pay more for capital in order to increase their output.

Question 16

________ natural resources are natural resources that can be used repeatedly, and ________ natural resources are natural resources that can be used only once.

Accepted Answer

Renewable natural resources can be replenished and used repeatedly, such as solar or wind energy. Nonrenewable natural resources, like fossil fuels, are finite and can be used only once.

Question 17

Starbucks sells coffee in both New York City and in rural upstate New York. The price of coffee is higher in New York City. This fact means that the value of marginal product of land is ________ in New York City and so Starbucks is willing to pay a ________ rent in New York City.

Accepted Answer

The value of the marginal product of land is higher in New York City due to higher demand and sales potential, leading Starbucks to be willing to pay a higher rent.

Question 18

For a monopsony, the labor supply curve

Accepted Answer

In a monopsony, the labor supply curve lies below the marginal cost of labor (MCL) curve because the firm must pay a higher wage to attract additional workers, increasing the cost of hiring each additional worker.

Question 19

The land market is in equilibrium. If the demand for land decreases, the rental rate of land

Accepted Answer

When the demand for land decreases, the rental rate of land falls as there is less competition for the available land, leading to lower prices.

Question 20

Which of the following would unions be most likely to support?

Accepted Answer

Unions may support restricting immigration to reduce labor supply competition, potentially leading to higher wages and better job security for their members.

Quiz 18: Markets for Factors of Production