Question 1

Economic profit is most closely associated with

Accepted Answer

A) the process of saving and investing. 
B) monopoly, innovation, and uninsurable risks. 
C) long-run competitive equilibrium. 
D) a static economy. 
A) the process of saving and investing. 
B) monopoly, innovation, and uninsurable risks. 
C) long-run competitive equilibrium. 
D) a static economy.

Question 2

The XYZ Corporation determines it can make a real (inflation-adjusted)return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the

Accepted Answer

A) investment will be profitable. 
B) investment will be unprofitable. 
C) real rate of interest is 4 percent. 
D) real rate of interest is 2 percent. 
A) investment will be profitable. 
B) investment will be unprofitable. 
C) real rate of interest is 4 percent. 
D) real rate of interest is 2 percent.

Question 3

Interest rates are the payments needed to entice individuals to

Accepted Answer

A) accept insurable risk. 
B) accept uninsurable risk. 
C) sacrifice their present consumption. 
D) sacrifice their future consumption. 
A) accept insurable risk. 
B) accept uninsurable risk. 
C) sacrifice their present consumption. 
D) sacrifice their future consumption.

Question 4

If the interest rate is 15 percent, what is the future value of $10,000 two years from now?

Accepted Answer

A) $13,225 
B) $225 
C) $13,000 
D) $7,576 
A) $13,225 
B) $225 
C) $13,000 
D) $7,576

Question 5

What are three nonroutine decisions of entrepreneurs that involve substantial financial risk?

Accepted Answer

Entrepreneurs make nonroutine decisions

Question 6

Why is land rent a "surplus payment" from the perspective of economists?

Accepted Answer

Rent for land serves no incentive functi

Question 7

David Ricardo, a nineteenth-century economist, wrote "The price of corn is not high because a rent is paid, but a rent is paid because the price of corn is high." Explain this statement in the context of supply and demand.

Accepted Answer

The demand for land is a derived demand,

Question 8

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 9

The table gives investment-demand in an economy. If the interest rate is 15 percent,

Accepted Answer

A) $400 billion of investment will be undertaken. 
B) $460 billion of investment will be undertaken. 
C) $530 billion of investment will be undertaken. 
D) $600 billion of investment will be undertaken. 
A) $400 billion of investment will be undertaken. 
B) $460 billion of investment will be undertaken. 
C) $530 billion of investment will be undertaken. 
D) $600 billion of investment will be undertaken.

Question 10

Refer to the table, in which the values for columns (2)through (5)are in acres. If the relevant columns are (1), (2), and (5), land rent will be

Accepted Answer

A) $200 per acre. 
B) $0 per acre. 
C) $300 per acre. 
D) $100 per acre. 
A) $200 per acre. 
B) $0 per acre. 
C) $300 per acre. 
D) $100 per acre.

Question 11

The prices paid to a productive resource usually perform an incentive function except with what resource?

Accepted Answer

A) land 
B) labor 
C) capital 
D) entrepreneurial ability 
A) land 
B) labor 
C) capital 
D) entrepreneurial ability

Question 12

The fact that people prefer present consumption to future consumption results in

Accepted Answer

A) an upsloping supply of loanable funds curve. 
B) a downsloping demand for loanable funds curve. 
C) a downsloping supply of loanable funds curve. 
D) an upsloping demand for loanable funds curve. 
A) an upsloping supply of loanable funds curve. 
B) a downsloping demand for loanable funds curve. 
C) a downsloping supply of loanable funds curve. 
D) an upsloping demand for loanable funds curve.

Question 13

The incentive function of prices

Accepted Answer

A) indicates that price increases bring forth more of that resource. 
B) is the idea that competitive markets will always clear. 
C) applies to all resources. 
D) only applies to land. 
A) indicates that price increases bring forth more of that resource. 
B) is the idea that competitive markets will always clear. 
C) applies to all resources. 
D) only applies to land.

Question 14

Refer to the table, in which the values for columns (2)through (5)are in acres. Positive land rent will occur if the relevant columns are

Accepted Answer

A) (1), (2), and (3)only. 
B) (1), (2), and (3)and (1), (2), and (5). 
C) (1), (2), and (4)and (1), (2), and (5). 
D) (1), (2), and (3)and (1), (2), and (4). 
A) (1), (2), and (3)only. 
B) (1), (2), and (3)and (1), (2), and (5). 
C) (1), (2), and (4)and (1), (2), and (5). 
D) (1), (2), and (3)and (1), (2), and (4).

Question 15

Refer to the diagram. If demand is D ₂, a tax of $ X per acre will

Accepted Answer

A) encourage the substitution of land for other productive resources. 
B) lower the cost of land to individual farmers. 
C) reduce the demand for land to, say, D₃ or D₄. 
D) not affect the quantity of land available to society. 
A) encourage the substitution of land for other productive resources. 
B) lower the cost of land to individual farmers. 
C) reduce the demand for land to, say, D₃ or D₄. 
D) not affect the quantity of land available to society.

Question 16

Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the demand for this land is given in the table. What will be the equilibrium economic rent per acre?

Accepted Answer

A) $100 
B) $200 
C) $300 
D) $400 
A) $100 
B) $200 
C) $300 
D) $400

Question 17

Usury laws

Accepted Answer

A) allocate funds from low-productivity to high-productivity investments. 
B) establish a legal ceiling on interest rates. 
C) make more funds available to low-income borrowers. 
D) create a surplus of loanable funds. 
A) allocate funds from low-productivity to high-productivity investments. 
B) establish a legal ceiling on interest rates. 
C) make more funds available to low-income borrowers. 
D) create a surplus of loanable funds.

Question 18

Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be

Accepted Answer

A) 8 percent and $140 billion. 
B) 10 percent and $140 billion. 
C) 12 percent and $180 billion. 
D) 14 percent and $240 billion. 
A) 8 percent and $140 billion. 
B) 10 percent and $140 billion. 
C) 12 percent and $180 billion. 
D) 14 percent and $240 billion.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is incorrect?

Accepted Answer

A) The nominal interest rate is the rate of interest expressed in terms of current dollars. 
B) The real interest rate is the rate of interest expressed in terms of dollars of constant, or inflation-adjusted, value. 
C) The nominal interest rate is the real interest rate less the rate of inflation. 
D) During periods of inflation, the nominal interest rate will exceed the real interest rate. 
A) The nominal interest rate is the rate of interest expressed in terms of current dollars. 
B) The real interest rate is the rate of interest expressed in terms of dollars of constant, or inflation-adjusted, value. 
C) The nominal interest rate is the real interest rate less the rate of inflation. 
D) During periods of inflation, the nominal interest rate will exceed the real interest rate.

Exam 18: Rent, Interest, and Profit

Economic profit is most closely associated with

The XYZ Corporation determines it can make a real (inflation-adjusted)return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the

Interest rates are the payments needed to entice individuals to

If the interest rate is 15 percent, what is the future value of $10,000 two years from now?

What are three nonroutine decisions of entrepreneurs that involve substantial financial risk?

Why is land rent a "surplus payment" from the perspective of economists?

David Ricardo, a nineteenth-century economist, wrote "The price of corn is not high because a rent is paid, but a rent is paid because the price of corn is high." Explain this statement in the context of supply and demand.

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

The table gives investment-demand in an economy. If the interest rate is 15 percent,

Refer to the table, in which the values for columns (2)through (5)are in acres. If the relevant columns are (1), (2), and (5), land rent will be

The prices paid to a productive resource usually perform an incentive function except with what resource?

The fact that people prefer present consumption to future consumption results in

The incentive function of prices

Refer to the table, in which the values for columns (2)through (5)are in acres. Positive land rent will occur if the relevant columns are

Refer to the diagram. If demand is D ₂, a tax of $ X per acre will

Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the demand for this land is given in the table. What will be the equilibrium economic rent per acre?

Usury laws

Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be

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

Which of the following is incorrect?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters