Question 1

Goods produced by the economic system that are used as inputs in the production of future goods and services are

Accepted Answer

A)  consumable goods. 
B)  capital goods. 
C)  tangible goods. 
D)  depreciation goods. 
A)  consumable goods. 
B)  capital goods. 
C)  tangible goods. 
D)  depreciation goods.

Question 2

The ________ of R dollars to be paid in t years is the amount you have to put aside now if you want to ensure that you end up with R dollars t years from now.

Accepted Answer

A)  future discounted value 
B)  present actual value 
C)  present discounted value 
D)  investment value 
A)  future discounted value 
B)  present actual value 
C)  present discounted value 
D)  investment value

Question 3

The measure of a firm's capital stock is the ________ its plant, equipment, inventories, and intangible assets.

Accepted Answer

A)  value it paid for 
B)  depreciable value of 
C)  current market value of 
D)  quantity of 
A)  value it paid for 
B)  depreciable value of 
C)  current market value of 
D)  quantity of

Question 4

You lend a friend $20,000 for a year. At the end of the year your friend agrees to pay you $21,100. The interest rate on this loan is

Accepted Answer

A)  4.50% 
B)  5.00%. 
C)  5.50%. 
D)  indeterminate from this information. 
A)  4.50% 
B)  5.00%. 
C)  5.50%. 
D)  indeterminate from this information.

Question 5

Savers and investors interact through intermediaries in financial capital markets.

Accepted Answer

A) True 
 B)False

Question 6

As interest rates ________, a firm would have to pay more now to purchase the same number of future dollars.

Accepted Answer

A)  fall 
B)  rise 
C)  remain unchanged 
D)  Interest rates have no bearing on the payment for future dollars. 
A)  fall 
B)  rise 
C)  remain unchanged 
D)  Interest rates have no bearing on the payment for future dollars.

Question 7

When a household lends money directly to a firm, the firm gives the household a

Accepted Answer

A)  share of stock. 
B)  certificate of investment. 
C)  bond. 
D)  dividend. 
A)  share of stock. 
B)  certificate of investment. 
C)  bond. 
D)  dividend.

Question 8

Refer to the data provided in Table 11.1 below to answer the following question(s).
Table 11.1 $$\begin{array}{l}
\begin{array} { l c c } 
&\text { Total Investment }&\text {Expected Rate of Return }\
 { \text { Project } } & \text { (dollars) } & \text { (percentage) } \
\hline \text { New tablet computer for sales staff } & \$ 500,000 & 22 \
\text { Remodel for distribution center } & \$ 400,000 & 18 \
\text { On-site day care center } & \$ 200,000 & 10 \
\text { Employee fitness center } & \$ 100,000 & 8
\end{array}
\end{array}$$
-Refer to Table 11.1. If the interest rate is 25%, Nashbar Bicycle's total investment would be

Accepted Answer

A)  $0. 
B)  $100,000. 
C)  $500,000. 
D)  $1,100,000. 
A)  $0. 
B)  $100,000. 
C)  $500,000. 
D)  $1,100,000.

Question 9

A fund that takes household savings and puts them into ________ projects in exchange for a share of the profits if the new business succeeds is a venture capital fund.

Accepted Answer

A)  government 
B)  zero-risk 
C)  low-risk 
D)  high-risk 
A)  government 
B)  zero-risk 
C)  low-risk 
D)  high-risk

Question 10

ABC Corp. is considering an investment project that costs $500 today. It expects the project will yield income of $200 at the end of years 1, 2, and 3. The interest rate must be ________ for the firm to undertake the project.

Accepted Answer

A)  at least 11% 
B)  no more than 9% 
C)  exactly equal to 10% 
D)  It is indeterminate from the given information. 
A)  at least 11% 
B)  no more than 9% 
C)  exactly equal to 10% 
D)  It is indeterminate from the given information.

Question 11

Firms that offer to pay for college tuition for their employees are investing in ________ capital.

Accepted Answer

A)  tangible 
B)  productive 
C)  social 
D)  human 
A)  tangible 
B)  productive 
C)  social 
D)  human

Question 12

Payments made to shareholders of a corporation are called

Accepted Answer

A)  retained earnings. 
B)  dividends. 
C)  common stock. 
D)  corporate bonds. 
A)  retained earnings. 
B)  dividends. 
C)  common stock. 
D)  corporate bonds.

Question 13

ABC Corp. is considering an investment project that costs $500 today. It expects the project will yield income of $200 at the end of years 1, 2, and 3. If the interest rate is 10%, the firm

Accepted Answer

A)  should undertake the investment. 
B)  should forgo the investment. 
C)  is just indifferent between undertaking the investment and not. 
D)  indeterminate from the given information 
A)  should undertake the investment. 
B)  should forgo the investment. 
C)  is just indifferent between undertaking the investment and not. 
D)  indeterminate from the given information

Question 14

A manufacturing company designs and produces an incredibly efficient solar heating system for large buildings and earns very large profits on it. Which of the following is true?

Accepted Answer

A)  The profits this firm earns are a return for an innovation. 
B)  The profits this firm earns aren't deserved, as the firm did not take any risks. 
C)  This firm must not be in a competitive market if it was able to earn a profit. 
D)  both A and C 
A)  The profits this firm earns are a return for an innovation. 
B)  The profits this firm earns aren't deserved, as the firm did not take any risks. 
C)  This firm must not be in a competitive market if it was able to earn a profit. 
D)  both A and C

Question 15

We would not consider ________ an act of capital investment.

Accepted Answer

A)  a son paying for his mother to go back to college 
B)  a company purchasing solar panels for its headquarters 
C)  a city government building a new fire station 
D)  a florist delivering roses on Valentine's Day 
A)  a son paying for his mother to go back to college 
B)  a company purchasing solar panels for its headquarters 
C)  a city government building a new fire station 
D)  a florist delivering roses on Valentine's Day

Question 16

Residential structures and inventories are examples of tangible capital.

Accepted Answer

A) True 
 B)False

Question 17

Assume the current interest rate is 20%. The present value of $900 in one year would be

Accepted Answer

A)  $180. 
B)  $450. 
C)  $750. 
D)  $1,080. 
A)  $180. 
B)  $450. 
C)  $750. 
D)  $1,080.

Question 18

An investment should be undertaken if the present value of an expected stream of earnings from the investment exceeds the cost of the investment necessary to undertake it.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would constitute an act of investment by a household, as economists use the term?

Accepted Answer

A)  building a new construction vacation home 
B)  purchasing 100 shares of Microsoft stock 
C)  buying a corporate bond 
D)  borrowing money from the bank to pay for a vacation cruise 
A)  building a new construction vacation home 
B)  purchasing 100 shares of Microsoft stock 
C)  buying a corporate bond 
D)  borrowing money from the bank to pay for a vacation cruise

Question 20

As interest rates ________, a firm would have to pay less now to purchase the same number of future dollars.

Accepted Answer

A)  fall 
B)  rise 
C)  remain unchanged 
D)  Interest rates have no bearing on the payment for future dollars. 
A)  fall 
B)  rise 
C)  remain unchanged 
D)  Interest rates have no bearing on the payment for future dollars.

Exam 11: Input Demand: the Capital Market and the Investment Decision

Goods produced by the economic system that are used as inputs in the production of future goods and services are

The ________ of R dollars to be paid in t years is the amount you have to put aside now if you want to ensure that you end up with R dollars t years from now.

The measure of a firm's capital stock is the ________ its plant, equipment, inventories, and intangible assets.

You lend a friend $20,000 for a year. At the end of the year your friend agrees to pay you $21,100. The interest rate on this loan is

Savers and investors interact through intermediaries in financial capital markets.

As interest rates ________, a firm would have to pay more now to purchase the same number of future dollars.

When a household lends money directly to a firm, the firm gives the household a

A fund that takes household savings and puts them into ________ projects in exchange for a share of the profits if the new business succeeds is a venture capital fund.

ABC Corp. is considering an investment project that costs $500 today. It expects the project will yield income of $200 at the end of years 1, 2, and 3. The interest rate must be ________ for the firm to undertake the project.

Firms that offer to pay for college tuition for their employees are investing in ________ capital.

Payments made to shareholders of a corporation are called

ABC Corp. is considering an investment project that costs $500 today. It expects the project will yield income of $200 at the end of years 1, 2, and 3. If the interest rate is 10%, the firm

A manufacturing company designs and produces an incredibly efficient solar heating system for large buildings and earns very large profits on it. Which of the following is true?

We would not consider ________ an act of capital investment.

Residential structures and inventories are examples of tangible capital.

Assume the current interest rate is 20%. The present value of $900 in one year would be

An investment should be undertaken if the present value of an expected stream of earnings from the investment exceeds the cost of the investment necessary to undertake it.

Which of the following would constitute an act of investment by a household, as economists use the term?

As interest rates ________, a firm would have to pay less now to purchase the same number of future dollars.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

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