Markets for Factors of Production LOSE习题精选 2010, statements, following, physical

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LOS e: Differentiate between physical capital and financial capital and explain the relation between the demand for physical capital and the demand for financial capital.

With regard to demand and supply in factor markets, which of the following statements is least accurate?

A) All else being equal, the supply of financial capital will increase as incomes or interest rates increase.

B) Marginal revenue is the gain from the sale of an additional unit, whereas marginal revenue product is the revenue gain from employing one more unit of a productive resource.

C) The demand for financial capital and physical capital tends to be inversely related.

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The demand for financial capital and for physical capital tends to be positively related. As firms seek to invest in new projects (physical capital) they seek additional financial capital to pay for the projects.

 

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Which of the following choices most accurately states the relationship between the demand for physical capital and the demand for financial capital? Greater demand for:

A) physical capital causes greater demand for financial capital.

B) financial capital causes greater demand for physical capital.

C) financial capital implies less demand for physical capital.

Demand for financial capital depends on the demand for physical capital. The greater the demand for physical capital, the greater the demand for the financial capital needed to purchase the physical capital.

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A firm should continue adding to its capital until the marginal revenue product of capital is:

A) equal to the cost of capital.

B) equal to the marginal revenue product of labor.

C) greater than the cost of capital.

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A firm should continue to accept capital projects until the marginal revenue product of capital (the value added) is equal to the cost of capital. Prior to this point, the firm gains from each unit of capital added.

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Which of the following is least likely to be an example of a firm’s physical capital:

A) productive machinery that has been fully depreciated.

B) undeveloped land.

C) proceeds from a bond issued to construct a new plant.

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Physical capital includes a firm’s property, plant and equipment, and inventory of finished and unfinished goods. Money raised by issuing securities is a firm’s financial capital.

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Lynxville Manufacturing has just implemented a new logistics system that will allow it to operate with a 30% smaller inventory of goods in process. What effects will the new process most likely have on Lynxville’s demand for physical capital and on its demand for financial capital?

Demand for Physical Capital

Demand for Financial Capital

A) Decrease Decrease

B) Increase Increase

C) Decrease Increase

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Goods in process are part of a firm’s physical capital. If the firm finds a way to operate with a lower inventory of goods in process, its demand for physical capital decreases which will subsequently cause a decrease in the firm's demand for financial capital.

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thank you.