Capital depreciates, so its value today is not the same as tomorrow
For today's investment, only present cash flows are relevant, but not future ones
Cash to be invested has alternative applications that may yield some payoff
Nominal and real interest rates usually differ
None of the above
The answer is C.
47. Assume that all land in a country is used for either agriculture or industries. If technological progress induces higher productivity of land in the industries, which of the following would you expect to happen in the long run?
Higher rental rates for land in the industrial sector only
Lower rental rates for land in the industrial sector only
Higher rental rates for land in both sectors
Lower rental rates for land in both sectors
Higher rental rates for land in agriculture only
The answer is C, due to higher demand for land in the industrial sector and tougher competition for land between sectors.
48. Assume that rental rates for capital suddenly rise for a competitive firm using it in production. Then in the short run:
Optimal output will decrease
Optimal labour employment will decrease
Output price of this firm will increase
More than one of the above
None of the above
The answer is E, as capital is fixed in the short run, and the firm is a price-taker.
49. Assume that a new tool is invented that allows labour to produce what very expensive capital equipment should have been used for before. Then:
Wage rates should rise in the long run
Rental rates for capital equipment should rise in the long run
Short-run supply of the specific capital equipment should decrease
Short-run demand for labour should decrease
None of the above
The answer is A, due to increasing demand for labour.
50. Marginal revenue product of a factor is measured in:
Units of output
Units of output per unit of the factor
Units of money per unit of output
Units of money
Units of money per unit of the factor
The answer is E, by definition.
51. A firm that is a monopolist in its output market, but a perfect competitor in the input markets, will determine labour employment according to:
w=MVPL
MCL=MVPL
MCL=w
MRPL=w
MRPL=MVPL
The answer is D.
52. In which of the following cases there will be NO deadweight loss?
Minimum wage is set at the level of reservation wage for the equilibrium employment
Minimum wage is set above equilibrium, with absolutely inelastic labour supply
A trade union is created to overcome miserable wages prevailing in the market
Both A and B apply
Both B and C apply
The answer is A.
53. The point of tangency of an isocost and an isoquant shows (provided a concave production function and perfectly competitive input markets):
The least-cost combination of inputs necessary to produce given output level
The profit-maximizing level of output
The maximum output attainable at the given cost
All of the above are correct
Only A and C are correct
The answer is E.
54. Suppose that a small industry creates an innovation that makes capital more productive, but only in this industry. Then (Note: Assume that in the short run the supply of capital services is perfectly inelastic):
Short run rental prices of capital rise
Short run employment of capital rises
Long run rental prices of capital rise
More than one of the above is correct
None of the above is correct
The answer is A, due to an increase in demand and horizontal long-run supply.