Question 1

Profit is the return to entrepreneurship.

Accepted Answer

A) True 
 B)False  True

Question 2

The theory of land rent holds that

Accepted Answer

A) capital invested on any plot of land must yield the same return as capital invested on any other plot of land. 
B) the difference between the costs of producing on any two pieces of land must equal the difference between their rents. 
C) marginal land earns no rent. 
D) All of the above are correct. 
A) capital invested on any plot of land must yield the same return as capital invested on any other plot of land. 
B) the difference between the costs of producing on any two pieces of land must equal the difference between their rents. 
C) marginal land earns no rent. 
D) All of the above are correct. D

Question 3

The process of building up capital includes

Accepted Answer

A) acquiring funds from banks and other sources. 
B) use of borrowed funds to hire inputs to build factories, warehouses, etc. 
C) completion of the investment process by adding machinery and inventory. 
D) All of the above are correct. 
A) acquiring funds from banks and other sources. 
B) use of borrowed funds to hire inputs to build factories, warehouses, etc. 
C) completion of the investment process by adding machinery and inventory. 
D) All of the above are correct. D

Question 4

Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor to be supplied at its present employment.

Accepted Answer

A) True 
 B)False

Question 5

Marginal land is land on the borderline of

Accepted Answer

A) producing revenue. 
B) being used profitably. 
C) producing economic rent. 
D) a facility that produces output. 
A) producing revenue. 
B) being used profitably. 
C) producing economic rent. 
D) a facility that produces output.

Question 6

Explain the distinction between investment and capital.

Accepted Answer

Investment is the flow of resources into

Question 7

The income of Lebron James, for example, is determined by

Accepted Answer

A) the position of the demand curve. 
B) the number of athletes in the NBA. 
C) his supply curve for labor services. 
D) marginal rent. 
A) the position of the demand curve. 
B) the number of athletes in the NBA. 
C) his supply curve for labor services. 
D) marginal rent.

Question 8

If investment is zero, the capital stock

Accepted Answer

A) continues to flow. 
B) falls to zero. 
C) remains constant. 
D) grows steadily. 
A) continues to flow. 
B) falls to zero. 
C) remains constant. 
D) grows steadily.

Question 9

In 2013, corporate profits were about ____ percent of national income.

Accepted Answer

A) 7.2 
B) 14.0 
C) 25.3 
D) 44.1 
A) 7.2 
B) 14.0 
C) 25.3 
D) 44.1

Question 10

Economic profit can be viewed as

Accepted Answer

A) a reward for bearing risks. 
B) an undeserved "reward" for exercising monopoly power. 
C) a reward for innovation. 
D) All of the above are correct. 
A) a reward for bearing risks. 
B) an undeserved "reward" for exercising monopoly power. 
C) a reward for innovation. 
D) All of the above are correct.

Question 11

If the interest rate is r (expressed as a decimal number), the present value today of $1 to be received n years from today equals ____.

Accepted Answer

A) $1rn 
B) $1(1 + r)n 
C) $1/(1 + r)n 
D) $1/(1 + n)r 
A) $1rn 
B) $1(1 + r)n 
C) $1/(1 + r)n 
D) $1/(1 + n)r

Question 12

An inward shift of the demand curve for a product causes outward shifts in the demand curves for all the factors used to produce the product.

Accepted Answer

A) True 
 B)False

Question 13

At higher interest rates, fewer people or firms will want to borrow.At lower interest rates, fewer people or firms will want to save.

Accepted Answer

A) True 
 B)False

Question 14

Figure 19-4
  
-The panels in Figure 19-4 represent the supply and demand conditions for a factor of production.In which case is the factor not earning any rent?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 15

Explain how to derive the demand for an input.

Accepted Answer

Input demand is the downward-sloping por

Question 16

The only circumstance under which a factor will earn no rent is when the factor's supply curve is

Accepted Answer

A) vertical. 
B) upward sloping. 
C) perfectly horizontal. 
D) kinked. 
A) vertical. 
B) upward sloping. 
C) perfectly horizontal. 
D) kinked.

Question 17

The distinguishing feature of the land market is that the

Accepted Answer

A) supply is highly inelastic. 
B) supply is highly elastic. 
C) demand is highly inelastic. 
D) demand is highly elastic. 
A) supply is highly inelastic. 
B) supply is highly elastic. 
C) demand is highly inelastic. 
D) demand is highly elastic.

Question 18

If the equilibrium rate of interest would be 10 percent, but the usury law sets 8 percent,

Accepted Answer

A) the quantity of funds supplied would be greater than the quantity demanded. 
B) economic efficiency would be promoted. 
C) some applicants for loans would likely be turned down. 
D) lenders would be able to fund fully all requests for loans. 
A) the quantity of funds supplied would be greater than the quantity demanded. 
B) economic efficiency would be promoted. 
C) some applicants for loans would likely be turned down. 
D) lenders would be able to fund fully all requests for loans.

Question 19

In 2013, corporate profits in the U.S.economy were about 14 percent of national income.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) $50,000 below the rent on the north forty. 
B) $50,000 above the rent on the north forty. 
C) different from that on the north forty by an indeterminable amount. 
D) $50,000, and the rent on the north forty is $50,000. 
A) $50,000 below the rent on the north forty. 
B) $50,000 above the rent on the north forty. 
C) different from that on the north forty by an indeterminable amount. 
D) $50,000, and the rent on the north forty is $50,000.

Exam 18: Pricing the Factors of Production

Profit is the return to entrepreneurship.

The theory of land rent holds that

The process of building up capital includes

Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor to be supplied at its present employment.

Marginal land is land on the borderline of

Explain the distinction between investment and capital.

The income of Lebron James, for example, is determined by

If investment is zero, the capital stock

In 2013, corporate profits were about ____ percent of national income.

Economic profit can be viewed as

If the interest rate is r (expressed as a decimal number), the present value today of $1 to be received n years from today equals ____.

An inward shift of the demand curve for a product causes outward shifts in the demand curves for all the factors used to produce the product.

At higher interest rates, fewer people or firms will want to borrow.At lower interest rates, fewer people or firms will want to save.

Figure 19-4 -The panels in Figure 19-4 represent the supply and demand conditions for a factor of production.In which case is the factor not earning any rent?

Explain how to derive the demand for an input.

The only circumstance under which a factor will earn no rent is when the factor's supply curve is

The distinguishing feature of the land market is that the

If the equilibrium rate of interest would be 10 percent, but the usury law sets 8 percent,

In 2013, corporate profits in the U.S.economy were about 14 percent of national income.

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

What Is Economics

The Economy: 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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

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