Question 1

An example of ________ is an internship program.

Accepted Answer

A)  tangible capital 
B)  social capital 
C)  infrastructure 
D)  intangible capital 
A)  tangible capital 
B)  social capital 
C)  infrastructure 
D)  intangible capital

Question 2

A firm's net income is its revenue minus its costs of production.

Accepted Answer

A) True 
 B)False

Question 3

The present value of $100 in one year is $86.96 when the interest rate is 15%.

Accepted Answer

A) True 
 B)False

Question 4

The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.

Accepted Answer

A)  money 
B)  savings 
C)  investment 
D)  capital 
A)  money 
B)  savings 
C)  investment 
D)  capital

Question 5

If the interest rate is 5%, the current market value of $1 to be delivered in one year is

Accepted Answer

A)  $0.91. 
B)  $0.95. 
C)  $1.00. 
D)  $1.10. 
A)  $0.91. 
B)  $0.95. 
C)  $1.00. 
D)  $1.10.

Question 6

The term investment as it is used by an economist refers to

Accepted Answer

A)  the creation of new capital. 
B)  the act of buying a share of stock or a bond. 
C)  a household's savings. 
D)  the net worth of a company's financial assets. 
A)  the creation of new capital. 
B)  the act of buying a share of stock or a bond. 
C)  a household's savings. 
D)  the net worth of a company's financial assets.

Question 7

You borrow $75,000 at an interest rate of 3% to open Spinners, a bicycle shop. You will earn an economic profit if the return on your investment is

Accepted Answer

A)  greater than 3%. 
B)  3%. 
C)  between 0 and 3%. 
D)  6% or less. 
A)  greater than 3%. 
B)  3%. 
C)  between 0 and 3%. 
D)  6% or less.

Question 8

China has invested heavily in turbine manufacturing and in 2009 had become the world's largest wind power market. The investment in turbine manufacturing is an example of ________ investment.

Accepted Answer

A)  intangible capital 
B)  human capital 
C)  tangible capital 
D)  social capital 
A)  intangible capital 
B)  human capital 
C)  tangible capital 
D)  social capital

Question 9

The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets.

Accepted Answer

A)  investment 
B)  depreciation 
C)  capital stock 
D)  capital flow 
A)  investment 
B)  depreciation 
C)  capital stock 
D)  capital flow

Question 10

When a Democrat is elected as president, business leaders expect that the corporate profits tax will be increased. Most likely, this will cause business firms, ceteris paribus, to

Accepted Answer

A)  plan to increase investment in the future to compensate for the higher tax rate. 
B)  decrease investment because they would expect lower benefits from investment. 
C)  not change their investment plans because higher corporate profit taxes will not change the demand for their product. 
D)  increase investment because the higher corporate profits tax will increase the return on any investment. 
A)  plan to increase investment in the future to compensate for the higher tax rate. 
B)  decrease investment because they would expect lower benefits from investment. 
C)  not change their investment plans because higher corporate profit taxes will not change the demand for their product. 
D)  increase investment because the higher corporate profits tax will increase the return on any investment.

Question 11

Refer to the data provided in Table 11.3 below to answer the following question(s).
Table 11.3
Project Total Investment Expected Rate of Return
(dollars) (percentage)
 $$\begin{array} { l l r } 
\text { New computer for sales staff } & \$ 250,000 & 11 \
\text { Remodel for distribution center } & \$ 200,000 & 9 \
\text { On-site day care center } & \$ 100,000 & 5 \
\text { Employee fitness center } & \$ 50,000 & 4
\end{array}$$
-Refer to Table 11.3. If the interest rate is 10%, Blackstar Drone Manufacturing's total investment would be

Accepted Answer

A)  $0. 
B)  $50,000. 
C)  $250,000. 
D)  $350,000. 
A)  $0. 
B)  $50,000. 
C)  $250,000. 
D)  $350,000.

Question 12

You use $5,000 of your own money to start a dog-walking business. During the first year you earn a 6% return on your investment. If the current interest rate is 8%, you earn an economic profit of

Accepted Answer

A)  -$60. 
B)  -$100. 
C)  $200. 
D)  $300. 
A)  -$60. 
B)  -$100. 
C)  $200. 
D)  $300.

Question 13

Capital stock is the current market value of all of the shares of stock a company has.

Accepted Answer

A) True 
 B)False

Question 14

All else equal, less investment takes place at

Accepted Answer

A)  higher market interest rates. 
B)  lower market interest rates. 
C)  lower expected rates of return. 
D)  lower real interest rates. 
A)  higher market interest rates. 
B)  lower market interest rates. 
C)  lower expected rates of return. 
D)  lower real interest rates.

Question 15

Refer to the data provided in Table 11.2 below to answer the following question(s).
Table 11.2 $$\begin{array}{l}
\begin{array} { l c c } 
&\text { Total Investment }&\text {Expected Rate of Return }\
 { \text { Project } } & \text { (dollars) } & \text { (percentage) } \
\hline \text { New bookkeeping software } & \$ 150,000 & 5 \
\text { New tractor } & \$ 200,000 & 12 \
\text { New grain storage tanks } & \$ 250,000 & 10 \
\text { Irrigation system } & \$ 500,000 & 15 \
\hline
\end{array}
\end{array}$$
-Refer to Table 11.2. When the interest rate ________, the farmer will investment in all four projects.

Accepted Answer

A)  is greater than 15% 
B)  is less than 5% 
C)  is less than 15% 
D)  is greater than 5% 
A)  is greater than 15% 
B)  is less than 5% 
C)  is less than 15% 
D)  is greater than 5%

Question 16

Refer to the data provided in Table 11.3 below to answer the following question(s).
Table 11.3
Project Total Investment Expected Rate of Return
(dollars) (percentage)
 $$\begin{array} { l l r } 
\text { New computer for sales staff } & \$ 250,000 & 11 \
\text { Remodel for distribution center } & \$ 200,000 & 9 \
\text { On-site day care center } & \$ 100,000 & 5 \
\text { Employee fitness center } & \$ 50,000 & 4
\end{array}$$
-Refer to Table 11.3. If the interest rate is 4.5%, Blackstar Drone Manufacturing's total investment would be

Accepted Answer

A)  $100,000. 
B)  $150,000. 
C)  $450,000. 
D)  $550,000. 
A)  $100,000. 
B)  $150,000. 
C)  $450,000. 
D)  $550,000.

Question 17

A firm can invest in one of two projects: the purchase of new manufacturing equipment or the training of its factory workers in the better use of time management. Both projects cost the same amount of money. The purchase of new manufacturing equipment is expected to reduce costs by $10,000 each year for 5 years. The training of the factory workers in the better use of time management is expected to increase revenues by $10,000 each year for 10 years. Which of the following is true?

Accepted Answer

A)  Each of these projects would have the same expected rate of return, as they both cost the same. 
B)  The purchase of new manufacturing equipment would have the higher expected rate of return, as it reduces costs whereas the training of factory workers in the better use of time management only increases revenues. 
C)  The training of factory workers would have the higher expected rate of return, as it will increase revenues for a longer time period than the purchase of new manufacturing equipment will reduce costs. 
D)  The expected rates of return for these two projects cannot be compared, as one project reduces costs and the other increases revenues. 
A)  Each of these projects would have the same expected rate of return, as they both cost the same. 
B)  The purchase of new manufacturing equipment would have the higher expected rate of return, as it reduces costs whereas the training of factory workers in the better use of time management only increases revenues. 
C)  The training of factory workers would have the higher expected rate of return, as it will increase revenues for a longer time period than the purchase of new manufacturing equipment will reduce costs. 
D)  The expected rates of return for these two projects cannot be compared, as one project reduces costs and the other increases revenues.

Question 18

Existing firms in the rental car industry will stay in the industry but will not want to undertake any investment projects other than to replace depreciating capital stock if the normal rate of return in the industry is ________ and the return that firms earn in this industry equals exactly ________.

Accepted Answer

A)  6%; 6% 
B)  4%; 7% 
C)  12%; 9% 
D)  1%; 2% 
A)  6%; 6% 
B)  4%; 7% 
C)  12%; 9% 
D)  1%; 2%

Question 19

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 20%, Nashbar Bicycle should

Accepted Answer

A)  fund only the purchase of new tablet computers for its sales staff. 
B)  fund all of the projects except for the purchase of new tablet computers for its sales staff. 
C)  fund all of the projects. 
D)  not fund any of the projects. 
A)  fund only the purchase of new tablet computers for its sales staff. 
B)  fund all of the projects except for the purchase of new tablet computers for its sales staff. 
C)  fund all of the projects. 
D)  not fund any of the projects.

Question 20

Nonresidential structures, durable equipment, residential structures, and inventories are the major categories of

Accepted Answer

A)  intangible capital. 
B)  human capital. 
C)  tangible capital. 
D)  social capital. 
A)  intangible capital. 
B)  human capital. 
C)  tangible capital. 
D)  social capital.

An example of ________ is an internship program.

A firm's net income is its revenue minus its costs of production.

The present value of $100 in one year is $86.96 when the interest rate is 15%.

The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.

If the interest rate is 5%, the current market value of $1 to be delivered in one year is

The term investment as it is used by an economist refers to

You borrow $75,000 at an interest rate of 3% to open Spinners, a bicycle shop. You will earn an economic profit if the return on your investment is

China has invested heavily in turbine manufacturing and in 2009 had become the world's largest wind power market. The investment in turbine manufacturing is an example of ________ investment.

The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets.

When a Democrat is elected as president, business leaders expect that the corporate profits tax will be increased. Most likely, this will cause business firms, ceteris paribus, to

You use $5,000 of your own money to start a dog-walking business. During the first year you earn a 6% return on your investment. If the current interest rate is 8%, you earn an economic profit of

Capital stock is the current market value of all of the shares of stock a company has.

All else equal, less investment takes place at

Existing firms in the rental car industry will stay in the industry but will not want to undertake any investment projects other than to replace depreciating capital stock if the normal rate of return in the industry is and the return that firms earn in this industry equals exactly .

Nonresidential structures, durable equipment, residential structures, and inventories are the major categories of

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

An example of ________ is an internship program.

A firm's net income is its revenue minus its costs of production.

The present value of $100 in one year is $86.96 when the interest rate is 15%.

The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.

If the interest rate is 5%, the current market value of $1 to be delivered in one year is

The term investment as it is used by an economist refers to

You borrow $75,000 at an interest rate of 3% to open Spinners, a bicycle shop. You will earn an economic profit if the return on your investment is

China has invested heavily in turbine manufacturing and in 2009 had become the world's largest wind power market. The investment in turbine manufacturing is an example of ________ investment.

The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets.

When a Democrat is elected as president, business leaders expect that the corporate profits tax will be increased. Most likely, this will cause business firms, ceteris paribus, to

You use $5,000 of your own money to start a dog-walking business. During the first year you earn a 6% return on your investment. If the current interest rate is 8%, you earn an economic profit of

Capital stock is the current market value of all of the shares of stock a company has.

All else equal, less investment takes place at

Nonresidential structures, durable equipment, residential structures, and inventories are the major categories of

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

Filters