Ch 16, 18 Econ.

The supply of loanable funds is determined by all of the following except -Risk. -Time preferences. -Demand for loanable funds. -Interest rates.

Demand for loanable funds.

Ceteris paribus, the price of a stock will definitely increase when the -Demand for the stock increases. -Prevailing interest rate increases. -Demand for the stock and supply of the stock both decrease. -Supply of the stock increases

Demand for the stock increases.

Higher wage rates allow a person to reduce the hours worked without losing income. This is known as the -Substitution effect. -Income effect. -Law of diminishing marginal utility. -Law of diminishing marginal leisure.

Income effect

As more hours are worked, the marginal utility of leisure time tends to -Increase. -Decrease. -Stay the same. -Decrease initially, but then increase.

Increase.

The present discounted value of a future payment will increase when the -Risk of nonpayment increases. -Opportunity cost of money increases. -Interest rate decreases. -Future payment is moved further into the future.

Interest rate decreases.

If payroll taxes are increased, there will be a - Leftward shift of the labor supply curve. - Rightward shift of the labor supply curve. - Movement up the labor supply curve to the right. - Movement down the labor supply curve to the left.

Leftward shift of the labor supply curve.

A firm should hire an additional worker as long as the wage rate is - Greater than the MRP. - Greater than the MPP. - Less than the MRP. - Less than the MPP.

Less than the MRP.

The law of diminishing returns states that, ceteris paribus, the - MPP of labor declines as additional land, raw materials, and other factors of production are employed. - MPP of labor declines as the wage rate falls. - MPP of labor declines as product price declines. - MPP of labor declines as more labor is employed.

MPP of labor declines as more labor is employed.

Retained earnings are -Direct increases to shareholder wealth. -The amount of corporate profit not paid out in dividends. -The only motive for purchasing stock. -Equal to corporate profits.

The amount of corporate profit not paid out in dividends.

If a corporation issues bonds that it cannot sell, this is an indication that -The coupon rate is too low. -The opportunity cost of the bonds is too low. -Dividends are too low. You Answered -Expectations of future sales are low.

The coupon rate is too low.

Which of the following is true if investors expect greater future profits from a company? -The price of the company's bonds decreases. -The current yield on the company's bonds decreases. -The demand for the company's bonds decreases. -The par value of the company's bonds decreases.

The current yield on the company's bonds decreases.

The price of a stock will decrease, ceteris paribus, when -The supply of the stock decreases. -There is a shortage of the stock at the current price. -Future earnings expectations increase. -The interest rate increases.

The interest rate increases.

A decreasing marginal utility of income contributes to the upward slope of an individual's supply curve. True False

True

Despite the probable decrease in jobs and higher prices, President Obama wanted to increase the federal minimum wage. True False

True

The present discounted value of a future payment can be calculated using which of the following formulas? -(Future payment) ÷ [(1 + Interest rate) N]. -(Current payment) ÷ [(1 + Interest rate) N]. -[(1 + Interest rate) N] ÷ (Current payment). -[(1 + Interest rate) N] ÷ (Future payment).

(Future payment) ÷ [(1 + Interest rate) N].

If the elasticity of labor is 0.60, a 15 percent increase in the wage rate will induce a -9.0 percent decrease in the quantity of labor supplied. -9.0 percent increase in the quantity of labor supplied. -4.0 percent decrease in the quantity of labor supplied. -4.0 percent increase in the quantity of labor supplied.

9.0 percent increase in the quantity of labor supplied.

When a corporation issues a bond, it is -Issuing dividends to shareholders. -Making an initial public offering. -Borrowing funds from the initial buyer of the bond. You Answered -Lending money to the owners of the corporation.

Borrowing funds from the initial buyer of the bond. You Answered

Dividends are equal to - Corporate profits plus retained earnings. - Corporate profits. - Capital gains minus retained earnings. - Corporate profits minus retained earnings.

Corporate profits minus retained earnings.

There is an inverse relationship between the price of an existing bond and its - Par value. - Current yield. - Risk yield. - Liquidity yield.

Current yield.

The demand for labor is downward-sloping because of -Rising MPP. -Falling MC. -Diminishing returns to labor. -Rising P.

Diminishing returns to labor.

An effective minimum wage will increase the quantity demanded of labor. True False

False

The marginal physical product of a factor is equal to the additional revenue generated from employing one additional unit of the factor. True False

False

The present discounted value of a future payment will decrease when the -Future payment is closer to the present. -Interest rate increases. -Opportunity cost of money decreases. -Risk of nonpayment increases.

Interest rate increases.

The quantity of loanable funds available to a corporation depends on the -Price of its stock. -Present worth of the company's dividends. -Dividends the company is willing to pay. -Interest rate the company is willing to offer.

Interest rate the company is willing to offer.

The elasticity of labor supply measures the -Opportunity cost of labor. -Magnitude of the substitution effect of labor. You Answered -Responsiveness of the wage rate to changes in the labor supplied. -Responsiveness of labor supplied to changes in the wage rate.

Responsiveness of labor supplied to changes in the wage rate.

The efficiency decision involves choosing the input combination or process that -Produces the greatest output. -Results in the lowest output per dollar of input. -Results in the least cost for a given output. -Has the lowest ratio of MPP to input.

Results in the least cost for a given output.

The amount of corporate profits not paid out in dividends is known as - Retained earnings. - Corporate stock. - The par value. - The price/earnings ratio.

Retained earnings.

The function of financial intermediaries is to transfer purchasing power from -Dissavers to consumers. -Consumers to savers. -Savers to dissavers. -Dissavers to savers.

Savers to dissavers.

Changes in expectations or opportunity costs -Shift the bond supply and demand curves. -Do not shift the bond supply and demand curves. -Shift the bond demand curve but not the bond supply curve. -Shift the bond supply curve but not the bond demand curve.

Shift the bond supply and demand curves

Financial intermediaries make the allocation of resources more efficient by -Spreading risk out over many individuals. -Reducing search and information costs for savers and investors. -Transferring purchasing power from savers to dissavers. -Lending or investing the savings they hold.

Reducing search and information costs for savers and investors.

An individual's labor supply curve - Slopes upward initially, and then may bend backward. - Slopes downward initially, and then may bend upward. - Always slopes downward. - Always slopes upward.

Slopes upward initially, and then may bend backward

The willingness to work a certain amount of time at a given wage rate is known as -Labor supply. -Labor demand. -Derived supply. -Derived demand.

Labor supply.

The marginal revenue product establishes - An upper limit to the wage rate an employer is willing and able to pay. - A lower limit to profit on the sale of a unit of output. - A lower limit to the productivity of a worker. - A lower limit to the wage rate demands of laborers.

An upper limit to the wage rate an employer is willing and able to pay.

In competitive markets, the marginal revenue product curve and marginal physical product curve have similar shapes because -The demand curve for the product slopes downward in accordance with the law of diminishing returns. -MRP = P × MPP. -The law of diminishing marginal utility and the law of diminishing returns imply a downward-sloping demand curve in the product market. -The demand curve for labor is the same for both the individual firm and the market as a whole.

MRP = P × MPP.

If Reagan's substitution effects outweigh her income effects, her labor supply curve will -Appear horizontal. -Slope upward. -Bend backward. -Appear vertical.

Slope upward

Which of the following is an example of a financial intermediary? Gun shows. Stock markets. Flea markets. Real estate markets.

Stock markets.

A production process is defined as - The manufacturing of goods and services. - The mix of resources used to produce output. - A means by which labor generates revenue. - A means by which jobs are created for workers

The mix of resources used to produce output.

Present discounted value refers to the -Future value of today's dollars. -Value today of future payments adjusted for interest accrual. -Value today of future payments adjusted for inflation. -Value today of future payments adjusted for risk.

Value today of future payments adjusted for interest accrual.

When the MPP of labor is zero, ceteris paribus, - Employment can be increased only by offering a higher wage rate. - No further increases in output can be achieved by using additional units of labor. - MRP is at a maximum. - Additional units of labor must be employed because other factors of production are being wasted.

No further increases in output can be achieved by using additional units of labor.

As the price of an existing bond increases, - The par value decreases. - The coupon rate decreases. - There is increased risk that the U.S. Treasury will default on the bond. - The current yield decreases.

The current yield decreases.