Question 1

In equilibrium,what determines the price of capital and what determines the price of natural resources?

Accepted Answer

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Question 2

If you put $100 into a bank account that earns five per cent interest per year,what is the formula you should use to determine the account's future value in one year?

Accepted Answer

The formula for calculating future value with compound interest is "Future value equals the present value multiplied by one plus the rate of interest in decimals." So, to calculate the future value of $100 at 5% interest, we would use the formula: Future value = $100 x (1 + 0.05) = $105.

Question 3

The value you give today to money you will receive in the future is called the future payment's

Accepted Answer

The value you give today to money you will receive in the future is called the present value. This is because you are determining the worth of the future payment in today's dollars. The future value is the amount the payment will be worth in the future after earning interest. Time-sensitive value may refer to the concept of the time value of money which takes into consideration the potential earning power of money over time, but it is not the specific term for the value of future payments. Historical value refers to the worth of something in the past, which is not relevant to the value of future payments.

Question 4

A monopsony restricts the quantity of a factor demanded to force down the price of the factor and increase profits.

Accepted Answer

In a monopsony, there is only one buyer of a particular factor of production in a market. This gives the monopsonist some degree of market power and they can use this to restrict the quantity demanded and force down the price of the factor. By doing so, the monopsonist can increase their profits. Therefore, the statement is true.

Question 5

A monopsony is a term used to refer to a firm that is the sole seller of a good or service.

Accepted Answer

A monopsony is actually a firm that is the sole buyer of a good or service in a market, not the sole seller.

Question 6

How will a government-imposed minimum wage affect the equilibrium level of employment in a competitive labour market and in a monopsony labour market?

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Question 7

Table 12-5
 
-Refer to Table 12-5.Dante owns a pencil factory and faces the situation shown in the table,and the cost of renting a machine is $240 per week.
a.Fill in the blanks in the table and determine the profit-maximising number of machines for Dante to rent.Explain why renting this number of machines is profit maximising.
b.Draw Dante's demand curve for capital.

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The answer of Table 12-5
 
-Refer to Table 12-5.Dante owns...

Question 8

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Accepted Answer

The present value formula is PV = FV / (1+r)^t, where PV is present value, FV is future value, r is the interest rate, and t is the number of years. Plugging in the given values, we get PV = 300 / (1.05)^5, which simplifies to PV = 221.02. Therefore, the correct choice is B.

Question 9

What is the present value of $575 in a one year if the current rate of interest is 4 per cent?

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Question 10

Which of the following is operating income?

Accepted Answer

Operating income is the profit earned from a company's main business operations, which is calculated as revenue minus operating expenses. Therefore, option C is the correct choice. Option A is incorrect because explicit and implicit costs are not necessarily related to operating income. Option B is incorrect because stockholders' equity relates to the company's ownership structure, not operating income. Option D is incorrect because net profit includes all revenues and expenses, not just those related to operations.

Question 11

If a stock's dividend is expected to grow at a constant rate of 6 per cent in the future and it has just paid a dividend of $3.00 per share,and you have an alternative investment of equal risk that will earn a 9 per cent rate of return,what would you be willing to pay per share for this stock?

Accepted Answer

According to the constant growth dividend model:

P = D/(r-g)

Where: 
P = price per share 
D = last paid dividend ($3.00) 
r = required rate of return (9%) 
g = dividend growth rate (6%)

Plugging in the values:

P = 3/(0.09-0.06)

P = $106.67

Therefore, you would be willing to pay $106.67 per share for this stock. The correct option is D.

Question 12

How much is a bond that pays $50 in coupon payments for 3 years and $1000 at the end of the third year worth if the interest rate is 10%?

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Question 13

What is the marginal productivity theory of income distribution?

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Question 14

Economic rent refers to the price of a factor of production which is fixed in supply.

Accepted Answer

Economic rent refers to the price of a factor of production that is fixed in supply, such as land or certain types of specialized labor. The price of such factors is determined by scarcity and demand, rather than by cost of production like other factors of production.

Question 15

If you want to know the present value of $10 000 received in one year,and the interest rate is 4 per cent,what formula can you use?

Accepted Answer

The formula for calculating present value is PV = FV / (1 + r)^n. In this case, FV (future value) is $10 000, r (interest rate) is 4%, and n (number of years) is 1. Plugging these values into the formula gives PV = $10 000 / (1 + 0.04)^1, which simplifies to PV = $9 615.38. Therefore, choice B, Present value equals $10 000 divided by 1.04, is the correct answer.

Question 16

The market price of a factor of production that is in fixed supply is determined only by demand.

Accepted Answer

When a factor of production is in fixed supply, the quantity supplied cannot be increased even if the price increases. Therefore, the market price of the factor of production is solely determined by demand. If demand increases, the price of the factor will increase as well. If demand decreases, the price of the factor will decrease as well.

Question 17

What is a monopsony?

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Question 18

The total amount of copper in the earth is not increasing.Does this mean that in the market for copper,the supply curve is perfectly inelastic? Explain.

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Question 19

If you own a $1000 face value bond with one year remaining to maturity and a five per cent coupon rate,and new bonds are paying 12 per cent,what is the most you can get for your old bond?

Accepted Answer

The most you can get for your old bond can be calculated using the formula for bond valuation: 
Bond Value = (Coupon Payment / (1 + Interest Rate) ^ Time) + (Face Value / (1 + Interest Rate) ^ Time)
Plugging in the numbers: 
Coupon Payment = $1000 x 5% = $50
Interest Rate = 12%
Time = 1 year
Bond Value = ($50 / (1 + 12%) ^ 1) + ($1000 / (1 + 12%) ^ 1) = $887.50 + $50 = $937.50
Therefore, the most you can get for your old bond is $937.50. Option A is incorrect because it is above the current market rate of 12%, which means no investor would pay that much for your bond. Option B is incorrect because it is simply the face value of your bond. Option D is incorrect because all the necessary information is provided to determine the bond value.

Question 20

If a dollar a year from now will likely have less purchasing power because of inflation,then a dollar today ________ a dollar a year from now.

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Quiz 12: The Markets for Labour and Other Factors of Production