Answer all the questions

4. Diminishing returns to labor start with the ________ worker

a. Second

b. Third

c. Fourth

d. Fifth

5. Marginal revenue product of the ________ worker is $1,000

a. Second

b. Third

c. Fourth

d. Fifth

6. If workers are paid $600 per day, then the firm is profit maximizing when it hires ________ workers.

a. Two

b. Three

c. Four

d. Five

7. A firm's ________ is measured as a stock while ________ is measured as a flow.

a. investment in new capital; capital

b. capital; investment in new capital

c. current labor force; current inventory

d. planned inventory; current inventory

8. The expected cost of an investment

a. is zero if a firm uses its own funds

b. equals the market rate of interest plus the normal rate of return on an investment

c. depends on the market interest rate

d. equals the market rate of interest plus the inflation rate

9. Ceteris paribus, when market interest rates ________, firms undertake ________ investment projects.

a. decrease; no

b. increase; more

c. decrease; less

d. increase; fewer

10. All of the following questions are answered by general equilibrium analysis EXCEPT

a. Are equilibriums in different markets compatible with one another?

b. Can all markets simultaneously be in equilibrium?

c. How will a change in one market affect another market?

d. What market outcome is most desirable for the whole society?

11. Two criteria used to judge the performance of any economic system are

a. efficiency and equity

b. profit opportunities and technological progress

c. efficiency and profit opportunities.

d. technological progress and achieving general equilibrium

12. Pareto optimality occurs when

a. the distribution of income is equal.

b. it is not possible to make some members of society better off without making at least one other member of society worse off

c. firms are forced to internalize the effects of all externalities

d. it is possible to make one person better off without making someone else worse off.

13. Under perfect competition, firms produce the ________ level of output because price equals marginal cost.

a. Greatest

b. most costly

c. equitable

d. efficient

14. Price reflects the ________ household willingness to pay, and marginal cost reflects the ________ of the resources needed to produce a good.

a. minimum; quantity

b. minimum; opportunity cost

c. maximum; productivity

d. maximum; availability

15. If society will gain by producing less X, then it must be the case that currently

a. PX = MCX

b. PX > MCX

c. PX < MCX.

d. either PX > MCX or PX < MCX.

16. An example of a public good is

a. an orange grove

b. a grocery store.

c. a hardwood forest in a national park.

d. a ticket to a baseball game

17. All of the following are sources of market inefficiency except

a. Public goods

b. Externalities

c. Imperfect information

d. Lack of control by individual firms over price

18. Which of the following is not an act of investment?

a. Paying for courses at a technical college

b. Construction of a bridge by the state government

c. The purchase of new solar technology by a business

d. Buying a government bond

19. An increase in the market interest rate will cause

a. A rightward shift in the investment demand curve

b. A leftward shift in the investment demand curve

c. A movement up the investment demand curve

d. A movement down the investment demand curve

20. Sheila uses labor and capital to produce soccer balls. She finds that as price of capital rises, she hires more workers and cuts back on the use of capital. This behavior is consistent with

a. Labor and capital being complementary goods

b. The factor substitution effect

c. The increasing marginal productivity of labor

d. The dominance of the factor substitution effect over the output effect for capital