Exam 29: Interest Rent and Profit

Describe what the term positive rate of time preference means. Explain the difference between having a high rate of time preference and a low rate of time preference. State who would be more likely to save money and who would be more likely to borrow money based upon their degree of time preference.

Prices of goods and services are high in cities such as Tokyo and New York City as a result of high land rents in those cities.

The English economist who said that grain prices weren't high because rents were high, but rents were high because grain prices were high was

Exhibit 29-3 -Refer to Exhibit 29-3. The real interest rate in year 1 is

If firms in an industry are earning accounting profits, it follows that

If the nominal interest rate is 4 percent and expected inflation rate is 1.6 percent, the real interest rate equals

The two ways in which the word "interest" is used in economics are as the price for

A firm is considering the purchase of a capital good that will generate an additional $400 income each year for 4 years (after which time the capital good is useless and has no scrap value). The capital good will cost $1,600. If the interest rate is 3 percent, it follows that the firm should

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.

Exhibit 29-2 -Refer to Exhibit 29-2. The interest and interest rate for loan 3 are, respectively,

George earns $500,000 playing baseball for team X. His next best alternative to playing baseball is to own a fast-food restaurant, for which he would earn $100,000 a year. His next best alternative to playing baseball for team X is playing baseball for team Y, for which he would earn $400,000 a year. This example best illustrates the economic principle that

Pure economic rent can exist only when the factor under consideration

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

Describe the three theories of where profit comes from.

Firm X competes for the monopoly right to produce and sell widgets by expending resources to lobby politicians. The government decides to award the monopoly right to the firm. Which of the following is false?

The upward-sloping supply of loanable funds curve assumes that

A person buys X in one market and combines it with Y purchased in another market. The combination of X and Y gives Z, which the person sells in a third market for a higher price than the sum of the prices of X and Y. Which theory of profit is most consistent with this example?

John is willing to give up 2 apples tomorrow to get one apple today, whereas Bill is willing to give up only 1.5 apples tomorrow to get one apple today. It follows that

Exhibit 29-2 -Refer to Exhibit 29-2. The interest and interest rate for loan 5 are, respectively,

According to Henry George, in his book Progress and Poverty, all land rents are pure economic rents and should therefore be heavily taxed.