Question 1

Almost all of the rent that tenants pay to landlords of apartments buildings is economic rent.

Accepted Answer

A) True 
 B)False

Question 2

The equilibrium rent for marginal land

Accepted Answer

A) equals zero. 
B) depends on the supply and demand of land. 
C) exceeds the opportunity cost of the land. 
D) is always greater than the equilibrium rent for nonmarginal land. 
A) equals zero. 
B) depends on the supply and demand of land. 
C) exceeds the opportunity cost of the land. 
D) is always greater than the equilibrium rent for nonmarginal land.

Question 3

Marginal land is land that is not worth anything under any circumstances.

Accepted Answer

A) True 
 B)False

Question 4

Figure 19-2  
-Capital is the

Accepted Answer

A) flow of new equipment that a firm acquires over the course of a year. 
B) amount of increase in a firm's equipment over a year. 
C) amount of money that a firm has on hand at a given time. 
D) stock of plant, equipment, and other productive resources held by a firm. 
A) flow of new equipment that a firm acquires over the course of a year. 
B) amount of increase in a firm's equipment over a year. 
C) amount of money that a firm has on hand at a given time. 
D) stock of plant, equipment, and other productive resources held by a firm.

Question 5

Discounting or computing present value is a way of comparing dollar values that will appear at different points in time.

Accepted Answer

A) True 
 B)False

Question 6

The interest rate is the

Accepted Answer

A) rate of investment. 
B) price of credit. 
C) rate of return on investment in capital goods. 
D) expected rate of inflation. 
A) rate of investment. 
B) price of credit. 
C) rate of return on investment in capital goods. 
D) expected rate of inflation.

Question 7

Innovation is

Accepted Answer

A) the same thing as invention. 
B) the desired result of invention. 
C) the necessary precondition of invention. 
D) unrelated to invention. 
A) the same thing as invention. 
B) the desired result of invention. 
C) the necessary precondition of invention. 
D) unrelated to invention.

Question 8

Economic rents are earned whenever

Accepted Answer

A) demand for a factor is perfectly inelastic. 
B) a factor receives a reward that exceeds its cost. 
C) a factor earns a reward that is greater than the amount needed to keep the factor in its present employment. 
D) a factor's supply curve intersects its demand curve at a point where demand is inelastic. 
A) demand for a factor is perfectly inelastic. 
B) a factor receives a reward that exceeds its cost. 
C) a factor earns a reward that is greater than the amount needed to keep the factor in its present employment. 
D) a factor's supply curve intersects its demand curve at a point where demand is inelastic.

Question 9

Investments

Accepted Answer

A) are more profitable when interest rates rise. 
B) are less profitable when interest rates rise. 
C) are more profitable when economic rents rise. 
D) are less profitable when economic rents rise. 
A) are more profitable when interest rates rise. 
B) are less profitable when interest rates rise. 
C) are more profitable when economic rents rise. 
D) are less profitable when economic rents rise.

Question 10

The derived demand curve for loans slopes downward because as interest rates

Accepted Answer

A) fall, future income becomes less valuable. 
B) fall, investors develop pessimistic expectations. 
C) fall, future income becomes more valuable. 
D) rise, investors become pessimistic. 
A) fall, future income becomes less valuable. 
B) fall, investors develop pessimistic expectations. 
C) fall, future income becomes more valuable. 
D) rise, investors become pessimistic.

Question 11

Discounting allows comparisons of

Accepted Answer

A) money values and physical values. 
B) interest payments on borrowed funds and interest payments on loaned funds. 
C) money values received at different times. 
D) the quantities of outputs produced by different types of capital goods. 
A) money values and physical values. 
B) interest payments on borrowed funds and interest payments on loaned funds. 
C) money values received at different times. 
D) the quantities of outputs produced by different types of capital goods.

Question 12

What is the distribution of national income currently among the owners of the factors of production-land, labor, capital, and entrepreneurship?

Accepted Answer

According to the text, in 2013, rent was

Question 13

What is the present value of an infinite stream of annual payments of $10,000 per year if the first payment is received one year from today? Assume the interest rate is 10 percent.

Accepted Answer

A) $100,000 
B) $1,000,000 
C) $10,000,000 
D) $1,000,000,000 
A) $100,000 
B) $1,000,000 
C) $10,000,000 
D) $1,000,000,000

Question 14

Changes in the economic rent paid to land

Accepted Answer

A) only affect marginal land. 
B) equal the difference in production costs between the old marginal land and new marginal land. 
C) reduce the use of land because the cost of using land is now higher. 
D) equal the difference in production costs between productive land and nonproductive land. 
A) only affect marginal land. 
B) equal the difference in production costs between the old marginal land and new marginal land. 
C) reduce the use of land because the cost of using land is now higher. 
D) equal the difference in production costs between productive land and nonproductive land.

Question 15

Capital is defined as

Accepted Answer

A) a flow of money into a business to buy various inputs. 
B) automated production processes that require little or no labor. 
C) interest payments to owners of companies. 
D) an inventory of plant, equipment, and other productive resources held by a firm. 
A) a flow of money into a business to buy various inputs. 
B) automated production processes that require little or no labor. 
C) interest payments to owners of companies. 
D) an inventory of plant, equipment, and other productive resources held by a firm.

Question 16

If the demand for land shifts upward, rents will be

Accepted Answer

A) earned by some land that was formerly unprofitable. 
B) lost to many landowners. 
C) diminished for society as a whole. 
D) taxed away to help pay the costs of government. 
A) earned by some land that was formerly unprofitable. 
B) lost to many landowners. 
C) diminished for society as a whole. 
D) taxed away to help pay the costs of government.

Question 17

If the rate of interest increases, firms will most likely respond by

Accepted Answer

A) increasing investment. 
B) decreasing investment. 
C) not changing investment. 
D) increasing capital stock. 
A) increasing investment. 
B) decreasing investment. 
C) not changing investment. 
D) increasing capital stock.

Question 18

If the credit market is close to being a competitive market, an interest rate ceiling imposed by usury laws will bring misallocations of resources.

Accepted Answer

A) True 
 B)False

Question 19

Figure 19-2  
-In Figure 19-2, the derived demand curve is the line

Accepted Answer

A) ABCD. 
B) CDEF. 
C) DEF. 
D) ABCDEF. 
A) ABCD. 
B) CDEF. 
C) DEF. 
D) ABCDEF.

Question 20

Economic rent is the minimum payment necessary to induce any of the factor to be supplied.

Accepted Answer

A) True 
 B)False

Exam 18: Pricing the Factors of Production

Almost all of the rent that tenants pay to landlords of apartments buildings is economic rent.

The equilibrium rent for marginal land

Marginal land is land that is not worth anything under any circumstances.

Figure 19-2 -Capital is the

Discounting or computing present value is a way of comparing dollar values that will appear at different points in time.

The interest rate is the

Innovation is

Economic rents are earned whenever

Investments

The derived demand curve for loans slopes downward because as interest rates

Discounting allows comparisons of

What is the distribution of national income currently among the owners of the factors of production-land, labor, capital, and entrepreneurship?

What is the present value of an infinite stream of annual payments of $10,000 per year if the first payment is received one year from today? Assume the interest rate is 10 percent.

Changes in the economic rent paid to land

Capital is defined as

If the demand for land shifts upward, rents will be

If the rate of interest increases, firms will most likely respond by

If the credit market is close to being a competitive market, an interest rate ceiling imposed by usury laws will bring misallocations of resources.

Figure 19-2 -In Figure 19-2, the derived demand curve is the line

Economic rent is the minimum payment necessary to induce any of the factor to be supplied.

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

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