Question 1

Pure economic rent is

Accepted Answer

A)  the payment to factors owned by entrepreneurs. 
B)  economic profits. 
C)  the payment to factors whose supply is perfectly elastic. 
D)  a payment made to land. 
E)  the payment to factors whose supply is perfectly inelastic. 
A)  the payment to factors owned by entrepreneurs. 
B)  economic profits. 
C)  the payment to factors whose supply is perfectly elastic. 
D)  a payment made to land. 
E)  the payment to factors whose supply is perfectly inelastic.

Question 2

As interest rates decrease,present values __________,and firms will buy __________ capital goods.

Accepted Answer

A)  increase; fewer 
B)  decrease; fewer 
C)  increase; more 
D)  decrease; more 
A)  increase; fewer 
B)  decrease; fewer 
C)  increase; more 
D)  decrease; more

Question 3

Entrepreneurs

Accepted Answer

A)  operate within markets. 
B)  increase trade by satisfying an unmet demand for a good or service. 
C)  increase trade by increasing the transaction costs of making trades. 
D)  a and b 
E)  a, b and c 
A)  operate within markets. 
B)  increase trade by satisfying an unmet demand for a good or service. 
C)  increase trade by increasing the transaction costs of making trades. 
D)  a and b 
E)  a, b and c

Question 4

Which of the following statements is false?

Accepted Answer

A)  Interest would not exist in a barter (moneyless) economy because there is no money in a barter economy. 
B)  The real interest rate is equal to the nominal interest rate minus the expected inflation rate. 
C)  The source of monopoly profits is often high barriers to entry. 
D)  The nominal interest rate will equal the real interest rate only when the expected inflation rate is zero. 
A)  Interest would not exist in a barter (moneyless) economy because there is no money in a barter economy. 
B)  The real interest rate is equal to the nominal interest rate minus the expected inflation rate. 
C)  The source of monopoly profits is often high barriers to entry. 
D)  The nominal interest rate will equal the real interest rate only when the expected inflation rate is zero.

Question 5

The terms interest and interest rate are synonyms.

Accepted Answer

A) True 
 B)False

Question 6

If there is an increase in the expected inflation rate,then,

Accepted Answer

A)  the supply and demand for loanable funds will decrease. 
B)  the supply and demand for loanable funds will increase. 
C)  the supply of loanable funds will decrease, and the demand for loanable funds will increase. 
D)  the supply of loanable funds will increase, and the demand for loanable funds will decrease. 
A)  the supply and demand for loanable funds will decrease. 
B)  the supply and demand for loanable funds will increase. 
C)  the supply of loanable funds will decrease, and the demand for loanable funds will increase. 
D)  the supply of loanable funds will increase, and the demand for loanable funds will decrease.

Question 7

The supply of loanable funds depends most directly on

Accepted Answer

A)  investment expenditures. 
B)  people's saving and newly created money. 
C)  bond and stock activity. 
D)  the profits of firms. 
A)  investment expenditures. 
B)  people's saving and newly created money. 
C)  bond and stock activity. 
D)  the profits of firms.

Question 8

The supply curve for land is __________ when the total supply is in question and __________ when subparcels are in question.

Accepted Answer

A)  upward sloping; vertical 
B)  upward sloping; upward sloping 
C)  vertical; vertical 
D)  vertical; upward sloping 
A)  upward sloping; vertical 
B)  upward sloping; upward sloping 
C)  vertical; vertical 
D)  vertical; upward sloping

Question 9

Exhibit 30-3
  
-Refer to Exhibit 30-3.The real interest rate in year 2 is

Accepted Answer

A)  25 percent. 
B)  5 percent. 
C)  15 percent. 
D)  -25 percent. 
E)  -15 percent. 
A)  25 percent. 
B)  5 percent. 
C)  15 percent. 
D)  -25 percent. 
E)  -15 percent.

Question 10

The quantity demanded of loanable funds is inversely related to the rate of interest.

Accepted Answer

A) True 
 B)False

Question 11

The longer the term of a loan,the __________ the interest rate charged for the loan; the more risk associated with a loan (from the lender's point of view),the __________ the interest rate charged for the loan.

Accepted Answer

A)  higher; lower 
B)  lower; higher 
C)  higher; higher 
D)  lower; lower 
A)  higher; lower 
B)  lower; higher 
C)  higher; higher 
D)  lower; lower

Question 12

Pure economic rent can exist only when the factor under consideration

Accepted Answer

A)  is something other than land. 
B)  has a supply curve that is perfectly elastic. 
C)  has a demand curve that is perfectly elastic. 
D)  has a supply curve that is perfectly inelastic. 
E)  a and d 
A)  is something other than land. 
B)  has a supply curve that is perfectly elastic. 
C)  has a demand curve that is perfectly elastic. 
D)  has a supply curve that is perfectly inelastic. 
E)  a and d

Question 13

The demand for loanable funds curve is

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  upward sloping. 
B)  downward sloping. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 14

The higher the cost of processing a loan,the __________ the interest rate charged for the loan; the lower the expected inflation rate,the __________ the nominal interest rate.

Accepted Answer

A)  higher; lower 
B)  lower; higher 
C)  higher; higher 
D)  lower; lower 
A)  higher; lower 
B)  lower; higher 
C)  higher; higher 
D)  lower; lower

Question 15

Exhibit 30-4
  
-Refer to Exhibit 30-4.Assume a per acre tax,T,is imposed on land use.The rent (per acre)of land services will

Accepted Answer

A)  rise from R1 to R1 + T. 
B)  fall from R1 to R1 - T. 
C)  remain unchanged at R1. 
D)  fall to 0. 
A)  rise from R1 to R1 + T. 
B)  fall from R1 to R1 - T. 
C)  remain unchanged at R1. 
D)  fall to 0.

Question 16

Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England.How did his perspective differ from that of the prevailing view on this situation?

Accepted Answer

Ricardo contended that land rents were h

Question 17

There are two societies,A and B,that are alike in every way but one.In society A,people have a high rate of time preference,and in society B,people have a low rate of time preference.It follows that

Accepted Answer

A)  the demand for consumption loans will probably be lower in A than B. 
B)  interest rates will be lower in B than A. 
C)  there will be more saving in A than B. 
D)  b and c 
E)  none of the above 
A)  the demand for consumption loans will probably be lower in A than B. 
B)  interest rates will be lower in B than A. 
C)  there will be more saving in A than B. 
D)  b and c 
E)  none of the above

Question 18

Which of the following statements is false?

Accepted Answer

A)  Competing for artificial rents is socially unproductive; competing for real rents is not. 
B)  If the production of good X generates real rents, then in the process of competing for these real rents, it would not be unusual for the supply of good X to rise. 
C)  Individuals and firms will compete for real rents, but not for artificial rents. 
D)  An artificial rent is an economic rent that would not exist without government. 
A)  Competing for artificial rents is socially unproductive; competing for real rents is not. 
B)  If the production of good X generates real rents, then in the process of competing for these real rents, it would not be unusual for the supply of good X to rise. 
C)  Individuals and firms will compete for real rents, but not for artificial rents. 
D)  An artificial rent is an economic rent that would not exist without government.

Question 19

Which of the following statements is true?

Accepted Answer

A)  Nominal interest rate = real interest rate - expected inflation rate. 
B)  Nominal interest rate = real interest rate + expected inflation rate. 
C)  Real interest rate = nominal interest rate + expected inflation rate. 
D)  Expected inflation rate = nominal interest rate + real interest rate. 
A)  Nominal interest rate = real interest rate - expected inflation rate. 
B)  Nominal interest rate = real interest rate + expected inflation rate. 
C)  Real interest rate = nominal interest rate + expected inflation rate. 
D)  Expected inflation rate = nominal interest rate + real interest rate.

Question 20

A person says,"Prices (for meals at restaurants,clothes,taxis,etc.)are high in Paris,France because land rents are so high in Paris." This person

Accepted Answer

A)  confuses economic rent and pure economic rent. 
B)  confuses cause and effect. 
C)  believes that land rents are price determining, when in fact land rents are price determined. 
D)  b and c 
E)  a and c 
A)  confuses economic rent and pure economic rent. 
B)  confuses cause and effect. 
C)  believes that land rents are price determining, when in fact land rents are price determined. 
D)  b and c 
E)  a and c

Exam 30: Interest, Rent, and Profit

Pure economic rent is

As interest rates decrease,present values __________,and firms will buy __________ capital goods.

Entrepreneurs

Which of the following statements is false?

The terms interest and interest rate are synonyms.

If there is an increase in the expected inflation rate,then,

The supply of loanable funds depends most directly on

The supply curve for land is __________ when the total supply is in question and __________ when subparcels are in question.

Exhibit 30-3 -Refer to Exhibit 30-3.The real interest rate in year 2 is

The quantity demanded of loanable funds is inversely related to the rate of interest.

The longer the term of a loan,the __________ the interest rate charged for the loan; the more risk associated with a loan (from the lender's point of view),the __________ the interest rate charged for the loan.

Pure economic rent can exist only when the factor under consideration

The demand for loanable funds curve is

The higher the cost of processing a loan,the __________ the interest rate charged for the loan; the lower the expected inflation rate,the __________ the nominal interest rate.

Exhibit 30-4 -Refer to Exhibit 30-4.Assume a per acre tax,T,is imposed on land use.The rent (per acre)of land services will

Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England.How did his perspective differ from that of the prevailing view on this situation?

There are two societies,A and B,that are alike in every way but one.In society A,people have a high rate of time preference,and in society B,people have a low rate of time preference.It follows that

Which of the following statements is false?

Which of the following statements is true?

A person says,"Prices (for meals at restaurants,clothes,taxis,etc.)are high in Paris,France because land rents are so high in Paris." This person

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

As interest rates decrease,present values ,and firms will buy capital goods.

The supply curve for land is when the total supply is in question and when subparcels are in question.

The longer the term of a loan,the the interest rate charged for the loan; the more risk associated with a loan (from the lender's point of view),the the interest rate charged for the loan.

The higher the cost of processing a loan,the the interest rate charged for the loan; the lower the expected inflation rate,the the nominal interest rate.