1) For a firm that is a price taker in the product market, all of the following

ID: 1227523 • Letter: 1

Question

For a firm that is a price taker in the product market, all of the following are true except one. Which one is the exception?

Marginal revenue product can be found by multiplying price by marginal product.

Marginal revenue product is the change in total revenue that results from increasing the use of a resource by one unit, other things constant.

Marginal revenue product is constant at the prevailing price.

Increased output by the firm has no impact on the price of the product.

The marginal revenue product curve declines because of diminishing marginal returns.

2) A $100 annuity is

$100 received in a single year

$100 received each year forever

more or less than $100, dependent on the interest rate, received for a certain number of years

$100 received each year for a certain number of years

more or less than $100, dependent on the interest rate, received until an upper limit is reached

3) Which of the following is the best description of the risks of corporate bonds?

the firm declines to pay dividends

both bankruptcy and higher market interest rates

only bankruptcy

lower market interest rates

both the firm declines to pay dividends and higher market interest rates

4) The supply of loanable funds curve is

upward sloping because fewer people are persuaded to forgo current consumption as the interest rate rises

downward sloping, showing that more investment will be undertaken as inflation decreases

upward sloping because the opportunity cost of goods and services that must be forgone increases

downward sloping, showing that as more funds are made available,

the risk cost of loaning funds decreases usually horizontal

1. OPTION C

2. OPTION A

3. OPTION D

4. OPTION A

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