Question 1

Other things equal, the interest rate on a loan will be larger,

Accepted Answer

A) the less the risk involved. 
B) the larger the amount of the loan. 
C) the longer the length of the loan. 
D) if loan interest is exempt from taxation. 
A) the less the risk involved. 
B) the larger the amount of the loan. 
C) the longer the length of the loan. 
D) if loan interest is exempt from taxation.

Question 2

Landowners will not receive any rent so long as

Accepted Answer

A) there is any tax on land. 
B) the supply and demand curves for land intersect. 
C) the supply curve of land is perfectly inelastic. 
D) the supply curve lies entirely to the right of the demand curve. 
A) there is any tax on land. 
B) the supply and demand curves for land intersect. 
C) the supply curve of land is perfectly inelastic. 
D) the supply curve lies entirely to the right of the demand curve.

Question 3

A normal profit is

Accepted Answer

A) the average profitability of a firm over one complete business cycle. 
B) calculated by subtracting explicit costs from total revenue. 
C) the "price" required to retain entrepreneurial talent in some particular line of production. 
D) the amount by which total revenue exceeds total operating costs. 
A) the average profitability of a firm over one complete business cycle. 
B) calculated by subtracting explicit costs from total revenue. 
C) the "price" required to retain entrepreneurial talent in some particular line of production. 
D) the amount by which total revenue exceeds total operating costs.

Question 4

Investment and R&D decisions by firms are based on nominal interest rates, not real interest.

Accepted Answer

A) True 
 B)False

Question 5

Profits account for a smaller share of total U.S.income than interest income.

Accepted Answer

A) True 
 B)False

Question 6

Interest rates of various loans vary over a wide range due to differences in all of the following, except

Accepted Answer

A) borrower characteristics. 
B) maturity of the loan. 
C) loan size. 
D) lender characteristics. 
A) borrower characteristics. 
B) maturity of the loan. 
C) loan size. 
D) lender characteristics.

Question 7

(Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425).The interest rate on this loan is about

Accepted Answer

A) 12.5 percent. 
B) 14.5 percent. 
C) 17.6 percent. 
D) 10 percent. 
A) 12.5 percent. 
B) 14.5 percent. 
C) 17.6 percent. 
D) 10 percent.

Question 8

The minimum rate of return or payment necessary to keep an entrepreneur in some specific enterprise is referred to as

Accepted Answer

A) the pure rate of interest. 
B) the real interest rate. 
C) economic profit. 
D) normal profit. 
A) the pure rate of interest. 
B) the real interest rate. 
C) economic profit. 
D) normal profit.

Question 9

Different rents on land reflect differences in the marginal revenue product of land.

Accepted Answer

A) True 
 B)False

Question 10

One effect of a usury law is that it will

Accepted Answer

A) benefit lenders. 
B) penalize borrowers. 
C) increase the efficiency of investment. 
D) subsidize borrowers with high incomes. 
A) benefit lenders. 
B) penalize borrowers. 
C) increase the efficiency of investment. 
D) subsidize borrowers with high incomes.

Question 11

Economic profits are the salaries received by the hired managers of business corporations.

Accepted Answer

A) True 
 B)False

Question 12

Which type of income contributes the smallest share to total income in the U.S.?

Accepted Answer

A) wages 
B) interest 
C) rent 
D) profits 
A) wages 
B) interest 
C) rent 
D) profits

Question 13

In the market for loanable funds,

Accepted Answer

A) an increase in available bank lending will increase the interest rate. 
B) a decrease in saving will reduce the interest rate. 
C) an increase in borrowing for investment will increase the interest rate. 
D) a decrease in government borrowing will increase the interest rate. 
A) an increase in available bank lending will increase the interest rate. 
B) a decrease in saving will reduce the interest rate. 
C) an increase in borrowing for investment will increase the interest rate. 
D) a decrease in government borrowing will increase the interest rate.

Question 14

Which of the following is correct?

Accepted Answer

A) Money is a resource, but real capital is not. 
B) Real capital is a resource, but money is not. 
C) Neither money nor real capital is a resource. 
D) Both money and real capital are resources. 
A) Money is a resource, but real capital is not. 
B) Real capital is a resource, but money is not. 
C) Neither money nor real capital is a resource. 
D) Both money and real capital are resources.

Question 15

Economic profit affects

Accepted Answer

A) the allocation of resources but not the level of resource use. 
B) the level of resource use but not the allocation of resources. 
C) the allocation of resources and the level of resource use. 
D) neither the allocation of resources nor the level of resource use. 
A) the allocation of resources but not the level of resource use. 
B) the level of resource use but not the allocation of resources. 
C) the allocation of resources and the level of resource use. 
D) neither the allocation of resources nor the level of resource use.

Question 16

(Consider This) Entrepreneurs' singular focus on profit

Accepted Answer

A) often comes at the expense of efficiency. 
B) encourages efficiency. 
C) causes them to neglect other aspects of the business. 
D) discourages use of the MB = MC rule. 
A) often comes at the expense of efficiency. 
B) encourages efficiency. 
C) causes them to neglect other aspects of the business. 
D) discourages use of the MB = MC rule.

Question 17

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate.The loan amount is

Accepted Answer

A) $400. 
B) $1,600. 
C) $160. 
D) $85. 
A) $400. 
B) $1,600. 
C) $160. 
D) $85.

Question 18

Other things equal, an increase in the productivity of capital goods will

Accepted Answer

A) increase the demand for loanable funds and decrease the equilibrium interest rate. 
B) increase the demand for loanable funds and increase the equilibrium interest rate. 
C) increase the supply of loanable funds and decrease the equilibrium interest rate. 
D) increase the supply of loanable funds and increase the equilibrium interest rate. 
A) increase the demand for loanable funds and decrease the equilibrium interest rate. 
B) increase the demand for loanable funds and increase the equilibrium interest rate. 
C) increase the supply of loanable funds and decrease the equilibrium interest rate. 
D) increase the supply of loanable funds and increase the equilibrium interest rate.

Question 19

The reason why socialists favor the nationalization of land is that

Accepted Answer

A) land is a scarce resource. 
B) the rent received by landowners does not represent anything they produced. 
C) there is a fixed total supply of land. 
D) land is not a productive resource. 
A) land is a scarce resource. 
B) the rent received by landowners does not represent anything they produced. 
C) there is a fixed total supply of land. 
D) land is not a productive resource.

Question 20

Some countries have negative nominal interest rates.Which of the following statements about this situation is not true?

Accepted Answer

A) A saver or lender will get back less than the amount she invested. 
B) This is mostly a result of deliberate central bank policies. 
C) Consumers are expected to save more and consume less. 
D) Consumers are expected to borrow more and spend more. 
A) A saver or lender will get back less than the amount she invested. 
B) This is mostly a result of deliberate central bank policies. 
C) Consumers are expected to save more and consume less. 
D) Consumers are expected to borrow more and spend more.

Exam 18: Rent, Interest, and Profit

Other things equal, the interest rate on a loan will be larger,

Landowners will not receive any rent so long as

A normal profit is

Investment and R&D decisions by firms are based on nominal interest rates, not real interest.

Profits account for a smaller share of total U.S.income than interest income.

Interest rates of various loans vary over a wide range due to differences in all of the following, except

(Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425).The interest rate on this loan is about

The minimum rate of return or payment necessary to keep an entrepreneur in some specific enterprise is referred to as

Different rents on land reflect differences in the marginal revenue product of land.

One effect of a usury law is that it will

Economic profits are the salaries received by the hired managers of business corporations.

Which type of income contributes the smallest share to total income in the U.S.?

In the market for loanable funds,

Which of the following is correct?

Economic profit affects

(Consider This) Entrepreneurs' singular focus on profit

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate.The loan amount is

Other things equal, an increase in the productivity of capital goods will

The reason why socialists favor the nationalization of land is that

Some countries have negative nominal interest rates.Which of the following statements about this situation is not true?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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