Question 1

The current value of the marginal product of land influences

Accepted Answer

The answer of The current value of the marginal product...

Question 2

Consider the market for capital equipment.Suppose the value of the marginal product of capital equipment increases.Holding all else constant,what will happen to the equilibrium quantity of capital equipment?

Accepted Answer

An increase in the value of the marginal product of capital equipment means that each unit of capital equipment is now producing more output. This in turn increases the profitability of investing in capital equipment. As a result, the demand for capital equipment increases, and the equilibrium price of capital equipment goes up. This leads to an increase in the quantity of capital equipment supplied, as firms seek to take advantage of the higher prices. Therefore, the equilibrium quantity of capital equipment increases.

Question 3

The determination of the demand for land is essentially the same as the determination of the

Accepted Answer

The demand for land, like the demand for labor and capital, is derived from the demand for the goods and services that these factors help produce.

Question 4

As a result of severe flooding,a farmer loses half of his productive farmland.He should expect to see the marginal productivity of his remaining land

Accepted Answer

The answer of As a result of severe flooding,a farmer...

Question 5

The equilibrium rental income paid to landowners at any point in time equals the

Accepted Answer

The equilibrium rental income paid to landowners is determined by the value of the marginal product of land. This is because land is a factor of production and the rental income is based on the marginal product of that factor. Therefore, choice B is the correct answer. Choices A, C, and D are not correct as they are not directly related to the rental income paid to landowners.

Question 6

The rental price of capital is

Accepted Answer

The rental price of capital refers to the price paid to use capital for a limited time period, such as the cost of leasing machinery or equipment for a specified period of time. It is not determined outside the realm of factor markets or related to ownership of the capital, and it may or may not be more than the purchase price depending on factors such as market demand and depreciation.

Question 7

The rental price of land is

Accepted Answer

The rental price of land refers to the price paid for the flow of services from the land over a specified time period, usually in the form of rent. This is different from the purchase price, which refers to the price paid for ownership of the land. It is not always more than the purchase price, as the rental price may vary depending on factors such as location and demand, and may be lower than the purchase price in some cases.

Question 8

The rental price of capital is determined by

Accepted Answer

The rental price of capital, also known as the interest rate, is determined by the forces of supply and demand in capital markets. This rate reflects the cost of borrowing or using capital and serves to allocate capital to its most efficient uses. Equity and bond financing, as well as dividends paid out to stockholders, may influence the supply and demand for capital, but ultimately it is market forces that determine the rental price of capital.

Question 9

Rent,interest,and profit are all forms of income paid to the owners of

Accepted Answer

Rent, interest, and profit are all forms of income that are paid to the owners of land and capital. They are considered to be the factors of production, and the income they generate is a return on the investments made by their owners.

Question 10

Who receives income from capital in the United States?

Accepted Answer

All of the above receive income from capital in the United States. Bank depositors earn interest on their deposits, bondholders earn interest on their bonds, and stockholders earn dividends and capital gains on their stocks.

Question 11

Suppose the government designates certain areas within a community to be "wetlands," making it illegal to build on the land.What happens to land not classified as "wetlands" within the community? (i)	The price of non-wetland land will rise.
(ii)	The marginal product of non-wetland land will fall.
(iii)	The marginal product of non-wetland land will rise.

Accepted Answer

When certain areas are designated as "wetlands" and building is restricted, the supply of buildable land decreases, leading to an increase in the price of the remaining non-wetland land. Additionally, as the non-wetland land becomes more scarce and valuable, its marginal product is likely to rise.

Question 12

Consider the market for capital equipment.Suppose the value of the marginal product of capital equipment increases.Holding all else constant,what will happen to the equilibrium rental price of capital equipment?

Accepted Answer

When the value of the marginal product of capital equipment increases, the demand for capital equipment increases, leading to an increase in the equilibrium rental price of capital equipment. This is because firms are willing to pay more for capital equipment as its value increases.

Question 13

Which of the following qualify as part of our economy's capital income?

Accepted Answer

Capital income includes any earnings derived from investments in capital assets, such as interest paid to the owners of corporate bonds. Wages paid to workers and salaries paid to CEOs are considered labor income.

Question 14

As a result of a fire,a small business owner loses some of her computers and other equipment.If the property of diminishing returns applies to all factors of production,she should expect to see

Accepted Answer

The property of diminishing returns states that as more units of one factor of production (e.g. capital) are added to a fixed amount of other factors of production (e.g. labor), eventually the marginal productivity of that factor will decrease. In this case, the small business owner has lost some of her capital equipment due to the fire, so the remaining capital will have to work alongside the same amount of labor as before. Therefore, we would expect to see a decrease in the marginal productivity of the remaining capital and a decrease in the overall productivity of the business. However, since the total amount of labor has not changed, the marginal productivity of labor should not be affected and could potentially even increase due to the decreased amount of capital equipment for workers to use. This would result in an overall increase in the marginal productivity of the remaining capital and a decrease in the marginal productivity of labor, which is answer choice B.

Question 15

Suppose that due to flooding in Louisiana,100,000 farmers relocate from Louisiana to Texas.Assuming that land and labor are complements in a farming production function,what would happen to the wages earned by workers and the rents earned by landowners in Texas?

Accepted Answer

The answer of Suppose that due to flooding in Louisiana,100,000...

Question 16

As a result of severe flooding,a farmer loses half of his productive farmland.If the property of diminishing returns applies to all factors of production,he should expect to see

Accepted Answer

The answer of As a result of severe flooding,a farmer...

Question 17

Suppose that a rare virus,transmitted by mosquitoes,infects all the people who live in Minnesota.The virus is fatal to all blondes,but everyone else is unaffected.Assuming that land and labor are complements in a farming production function,what would happen to the wages earned by workers and the rents earned by landowners?

Accepted Answer

With the virus only affecting blondes, there would be a decrease in the supply of labor, specifically blonde labor. However, the demand for labor would remain the same, causing wages to increase. On the other hand, since the demand for land is derived from the production of the crops, which require labor, the decrease in supply of labor would also decrease the demand for land. As a result, rents earned by landowners would decrease. Therefore, the correct answer is C.

Question 18

Suppose that a large lake in the middle of Minnesota evaporates,leaving fertile farm land for growing corn.Assuming that land and labor are complements in a farming production function,what would happen to the wages earned by workers and rents earned by landowners?

Accepted Answer

With the disappearance of the lake, there will be an increase in the supply of land available for farming. This will lead to an increase in the productivity of labor, thereby increasing the demand for labor. As a result, wages earned by workers will increase. However, since land and labor are complements, the increase in the productivity of labor will also lead to a decrease in the demand for land, causing rents earned by landowners to decrease. Therefore, wages would increase, and rents would decrease.

Question 19

Owners of land are compensated according to the

Accepted Answer

The value of the marginal product of land is the additional value produced by using one more unit of land, and it reflects the demand for the land. Therefore, owners of land are compensated according to the value of their land based on its marginal product, rather than the absolute level of production or the number of laborers it can support or the purchase price of the land stock.

Question 20

Suppose that a toxic waste spill renders half of the land in New Jersey uninhabitable.Assuming that land and labor are complements in the production function,what would happen to the wages earned by workers and rents earned by landowners?

Accepted Answer

With half of the land in New Jersey rendered uninhabitable, the production function would be negatively impacted. As land and labor are complements in the production function, the decrease in available land would decrease the marginal productivity of labor, leading to a decrease in wages earned by workers. However, as there is now less land available, the remaining landowners would be able to charge higher rents, leading to an increase in rents earned by landowners. Therefore, wages would decrease, and rents would increase.

Quiz 18: The Markets for the Factors of Production

The current value of the marginal product of land influences

Consider the market for capital equipment.Suppose the value of the marginal product of capital equipment increases.Holding all else constant,what will happen to the equilibrium quantity of capital equipment?

The determination of the demand for land is essentially the same as the determination of the

As a result of severe flooding,a farmer loses half of his productive farmland.He should expect to see the marginal productivity of his remaining land

The equilibrium rental income paid to landowners at any point in time equals the

The rental price of capital is

The rental price of land is

The rental price of capital is determined by

Rent,interest,and profit are all forms of income paid to the owners of

Who receives income from capital in the United States?

Consider the market for capital equipment.Suppose the value of the marginal product of capital equipment increases.Holding all else constant,what will happen to the equilibrium rental price of capital equipment?

Which of the following qualify as part of our economy's capital income?

As a result of a fire,a small business owner loses some of her computers and other equipment.If the property of diminishing returns applies to all factors of production,she should expect to see

Suppose that due to flooding in Louisiana,100,000 farmers relocate from Louisiana to Texas.Assuming that land and labor are complements in a farming production function,what would happen to the wages earned by workers and the rents earned by landowners in Texas?

As a result of severe flooding,a farmer loses half of his productive farmland.If the property of diminishing returns applies to all factors of production,he should expect to see

Suppose that a large lake in the middle of Minnesota evaporates,leaving fertile farm land for growing corn.Assuming that land and labor are complements in a farming production function,what would happen to the wages earned by workers and rents earned by landowners?

Owners of land are compensated according to the

Suppose that a toxic waste spill renders half of the land in New Jersey uninhabitable.Assuming that land and labor are complements in the production function,what would happen to the wages earned by workers and rents earned by landowners?