econ hw 5

Chapter 11- Assume that the current interest rate is 6%. You invest $10,000 of your own money in a pizza shop that you own and operate. The normal return on this investment is

c- $600, as that is the interest forgone by not lending the money to someone else at a 6% interest rate.

Chapter 11- You are asked to lend a friend $30,000 for a year. At the end of the year your friend agrees to pay you $31,500. The interest rate on this loan is

c- 5.00%.

Chapter 10 - You have been hired by a data processing firm to provide economic advice. The owner of the firm tells you that the firm's only variable input is the number of data-entry operators. The hourly wage for data-entry operators is $15.00. The marginal revenue product curve for data-entry operators reaches its maximum at three workers with a marginal revenue product of $19.00. What advice would you give this firm?

c- Hire data-entry operators until the marginal revenue product is equal to the wage—which will occur when more than three operators are employed.

Chapter 10 - The number of seats available in a concert hall is fixed at 3,000. The equilibrium price for a ticket to a rock concert in the hall is $75. The equilibrium price for a ticket to a symphony orchestra performance in the hall is $50. Which of the following is true?

c- The demand for each rock concerts must be more than the demand for each symphony orchestra performances.

Chapter 11- You borrow $50,000 at an interest rate of 6% to open a Middle Eastern food truck on a local college campus. You will earn an economic profit if the return on your investment is

c- greater than 6%.

Chapter 10 - If capital and labor are complementary inputs and the firm increases the amount of capital employed in production, the marginal revenue product of labor will

c- increase.

Chapter 11 - All else equal, more investment takes place at

c- lower market interest rates.

Chapter 11 - Delta Corporation is considering an investment project that costs $5,000 today. It expects the project will yield income of $2,000 at the end of each year for years 1, 2, and 3. After year 3 the project will end. If the interest rate is 10%, the firm

c- should forgo the investment.

Chapter 10 - The marginal revenue product of labor is

c- the additional revenue a firm earns by employing one additional unit of labor.

Chapter 11 - Natural Nectars, a company that delivers bottled fruit juices, is considering three investment opportunities. The expected returns for each of the projects are as follows - buying a new delivery truck, 20%; new software for the office operations, 15%; and defensive driving training for its drivers, 8%. If the current interest rate is 10%, the firm should invest in

c- the purchase of a new delivery van and the new software for the office operations.

Chapter 10 - Refer to Table 10.2. Marginal revenue product of the ________ worker is $250.

c- third

Chapter 11 - If the interest rate is 10%, the current market value of $1 to be delivered in one year is

x- $1.10.

Chapter 10 -You operate an automobile manufacturing company and decide to adopt a new technology that, ceteris paribus, increases the productivity of capital. At the same time, your workers unionize and demand higher wages. Assume that for your firm capital and labor are substitutable. Which of the following is most likely to occur?

x- Labor will be substituted for capital.

Chapter 10 - A soybean farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 10 bushels. What would you advise this farmer to do?

x- Reduce employment because the wage paid is less than the marginal revenue product.

Chapter 11 - Capital goods yield benefits

x- as soon as the investment decision is made.

Chapter 10 - Refer to Figure 10.4. Firms will

x- hire 100 units of labor at a market wage of $15 and have a surplus of $5 per unit of labor.

Chapter 10 - Refer to Table 10.2. The firm currently employs 4 workers at the market wage of $120 per worker per day. If the firm wants to maximize its profits, it should

x- hire fewer workers

Chapter 11 - An investment should be undertaken

x- if the present value of the costs of the investment project exceed the present value of the expected returns from the investment project.

Chapter 11 - Businesses that offer to pay for college tuition for their employees are investing in ________ capital.

x- productive

Chapter 10 - If land becomes more valuable in residential use than in commercial use,

x- the supply of land for commercial use will become perfectly elastic, and the supply of land for residential use will become perfectly inelastic.