Chapter 12 Preliminary Quiz
How Markets Determine Incomes

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. The flow of wages, interest payments, and dividends is called: a. wealth b. income c. assets d. liabilities
	2. If we sum all of the incomes of all individuals in the country we get: a. market income b. wealth c. national income d. none of the above.
	3. Payments from government to citizens that are not made in exchange for current goods or services are called: a. taxes b. transfer payments c. welfare d. none of the above.
	4. The net value of assets owned at a given point in time is called: a. wealth b. income c. national income d. liabilities
	5. The firm's demand for inputs is: a. inelastic. b. backward bending. c. a derived demand. d. upward sloping.
	6. Which of the following is the fundamental point about distribution theory: a. the demands for the inputs to production are derived from the supply of the final good in the market. b. the supply of goods will be equal to the level of wealth in the country. c. the demands for the inputs to production are derived from the revenues that each input yields on its marginal product. d. none of the above.
	7. The marginal revenue product of labor is: a. the additional revenue produced by an additional unit of labor. b. MR x MPL c. a and b d. none of the above.
	8. Under conditions of perfect competition, which of the following is correct? a. MRP = P x MP b. MRP = MR x MP c. MRP = AC x MR d. a and b
	9. To maximize profits, a. firms should produce where MR=MC. b. firms should add inputs up to the point where the marginal revenue product of the input equals the marginal cost or price of the input. c. neither a nor b. d. both a and b.
	10. Which of the following states that if the price of one factor rises while other factor prices remain fixed, the firm will profit from substituting more of the other inputs for the more expensive factor? a. profit maximization rule b. least cost rule c. marginal product rule d. substitution rule
	11. The equilibrium price of the input in a competitive market will be where: a. quantity supplied and quantity demanded are equal. b. MR=MC. c. MRP=MR. d. none of the above.
	12. The huge skill required to be a surgeon and the open entry and low skill requirements of fast-food workers results in: a. a relatively inelastic supply of surgeons and higher wages for surgeons than for burger flippers. b. a relatively elastic supply of surgeons and lower wages for surgeons than for burger flippers. c. a relatively elastic supply of surgeons and higher wages for surgeons than for burger flippers. d. a relatively inelastic supply of burger flippers and higher wages for burger flippers than for surgeons.