Exam 18: Pricing the Factors of Production

Between 1988 and 1989, the price of retail space in Ginza, Tokyo's premier commercial and entertainment center, rose from $400 to $625 per square foot. This was the result of an increase in demand in the face of a perfectly inelastic supply curve for retail space. Economists call this

Which is not true of the interest rate?

An increase in rent will ordinarily lead to

The loan supply curve has a positive slope

The cost of production on the "bottom forty" is $100,000 for a given size crop. On the "north forty," due to erosion of the soil, the cost is $150,000. If both are being farmed by tenants, we would expect the rent on the "bottom forty" to be

A "single tax" on land was proposed in the nineteenth century by

Invention is the discovery of a new process or idea. Innovation is

Rent seeking

If a manager has determined that a particular piece of capital is likely to increase the cash flow of a business by $10,000 for the next five years, what is the present value of the capital at an interest rate of 10 percent? (Assume that the cash flow first increases one year from today.)

Changes in market rents are mainly determined by changes in

The change in the capital stock is the return on investment.

How can bonuses to exceptional employees be considered economic rents?

Economists consider rent seeking activity to be highly productive.

Because the supply of a fixed factor is vertical,

If a ton of steel sells for $15,000 and a car made from a ton of steel sells for $30,000, then if all markets are perfectly competitive, how many cars can be made from the last ton of steel used by a profit-maximizing firm?

Land rents account for nearly

Which is not an example of rent seeking?

The rate of interest is the price at which money is borrowed and loaned.

In the United States, the money for loans to businesses comes mainly from

A certain machine will last one year, will produce $120 in income (received one year later), and will cost $100. The lowest interest rate at which this investment will be unprofitable is