Question 1

The annual rental rate for a machine is

Accepted Answer

A)  the yearly depreciation and maintenance costs for the machine. 
B)  the yearly interest costs associated with owning the machine. 
C)  the initial purchase price of the machine divided by the number of years the machine is expected to last. 
D)  the sum of the yearly depreciation, maintenance, and interest costs associated with owning the machine. 
A)  the yearly depreciation and maintenance costs for the machine. 
B)  the yearly interest costs associated with owning the machine. 
C)  the initial purchase price of the machine divided by the number of years the machine is expected to last. 
D)  the sum of the yearly depreciation, maintenance, and interest costs associated with owning the machine.

Question 2

Draw a two period budget line where the borrowing/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C1 and C2,given their anticipated income on two periods,Y1 and Y2.The horizontal (C1)intercept is

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 3

Suppose you know a piece of land will be worth $1 million (real)in 2040,and the real interest rate is 5%.How much should you be willing to pay for the land today (2010)? (Assume no taxes).

Accepted Answer

A)  $610,000 
B)  $1 million 
C)  $1.89 million 
D)  $230,000 
A)  $610,000 
B)  $1 million 
C)  $1.89 million 
D)  $230,000

Question 4

Suppose Johnny Stroller sells 12,25,and 75 year-old scotch in under black,red,and blue labels.Also suppose the storage costs are zero and the initial production costs are the same.What is the implied (approximate)interest rate if black sells for $12,red for $16 and blue for $44.

Accepted Answer

A)  2 
B)  5 
C)  8 
D)  10 
A)  2 
B)  5 
C)  8 
D)  10

Question 5

An increase in the corporate profits tax will most likely lead to

Accepted Answer

A)  a decrease in the rental rate of capital in the corporate sector. 
B)  no change in the rental rate of capital in the corporate sector. 
C)  no change in the rental rate of capital in the non-corporate sector. 
D)  an increase in the rental rate of capital in the corporate sector. 
A)  a decrease in the rental rate of capital in the corporate sector. 
B)  no change in the rental rate of capital in the corporate sector. 
C)  no change in the rental rate of capital in the non-corporate sector. 
D)  an increase in the rental rate of capital in the corporate sector.

Question 6

For a given interest rate,r,which of the following expressions is smallest?

Accepted Answer

A)  1 + r. 
B)  (1 + r/2)2. 
C)  (1 + r/12)12. 
D)  (1 + r/365)365. 
A)  1 + r. 
B)  (1 + r/2)2. 
C)  (1 + r/12)12. 
D)  (1 + r/365)365.

Question 7

A firm that wished to calculate the present value of its future nominal profits should use the ____ to do so.

Accepted Answer

A)  real interest rate 
B)  nominal interest rate 
C)  nominal interest rate minus the expected inflation rate 
D)  real interest rate minus the expected inflation rate 
A)  real interest rate 
B)  nominal interest rate 
C)  nominal interest rate minus the expected inflation rate 
D)  real interest rate minus the expected inflation rate

Question 8

Draw a two period budget line where the borrow/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C1 and C2 given their anticipated income on two periods,Y1 and Y2.The one point on the budget line not affected by the interest rate is

Accepted Answer

A)    
B)  the horizontal intercept. 
C)  the vertical intercept. 
D)  Y2 
A)    
B)  the horizontal intercept. 
C)  the vertical intercept. 
D)  Y2

Question 9

Suppose a person's preferences are to "consumption smooth," which means they wish to get   for all incomes and interest rates.For any interest rate and   ,the person will ____ in the first period.

Accepted Answer

A)  borrow 
B)  save 
C)  neither borrow nor save 
D)  both borrow and save 
A)  borrow 
B)  save 
C)  neither borrow nor save 
D)  both borrow and save

Question 10

A monopolist who owned the entire supply of a scarce resource would set a price

Accepted Answer

A)  at about the competitive level. 
B)  lower than the competitive level. 
C)  higher than the competitive level but lower than what a monopoly producer of a nonscarce good would. 
D)  above that which would be chosen by a monopoly producer of a nonscarce good. 
A)  at about the competitive level. 
B)  lower than the competitive level. 
C)  higher than the competitive level but lower than what a monopoly producer of a nonscarce good would. 
D)  above that which would be chosen by a monopoly producer of a nonscarce good.

The annual rental rate for a machine is

Draw a two period budget line where the borrowing/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C₁ and C₂,given their anticipated income on two periods,Y₁ and Y_2.The horizontal (C₁)intercept is

Suppose you know a piece of land will be worth $1 million (real)in 2040,and the real interest rate is 5%.How much should you be willing to pay for the land today (2010)? (Assume no taxes).

Suppose Johnny Stroller sells 12,25,and 75 year-old scotch in under black,red,and blue labels.Also suppose the storage costs are zero and the initial production costs are the same.What is the implied (approximate)interest rate if black sells for $12,red for $16 and blue for $44.

An increase in the corporate profits tax will most likely lead to

For a given interest rate,r,which of the following expressions is smallest?

A firm that wished to calculate the present value of its future nominal profits should use the ____ to do so.

Draw a two period budget line where the borrow/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C₁ and C₂ given their anticipated income on two periods,Y₁ and Y_2.The one point on the budget line not affected by the interest rate is

Suppose a person's preferences are to "consumption smooth," which means they wish to get for all incomes and interest rates.For any interest rate and ,the person will ____ in the first period.

A monopolist who owned the entire supply of a scarce resource would set a price

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 14: Capital and Time

The annual rental rate for a machine is

Draw a two period budget line where the borrowing/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C1 and C2,given their anticipated income on two periods,Y1 and Y2.The horizontal (C1)intercept is

Suppose you know a piece of land will be worth $1 million (real)in 2040,and the real interest rate is 5%.How much should you be willing to pay for the land today (2010)? (Assume no taxes).

Suppose Johnny Stroller sells 12,25,and 75 year-old scotch in under black,red,and blue labels.Also suppose the storage costs are zero and the initial production costs are the same.What is the implied (approximate)interest rate if black sells for $12,red for $16 and blue for $44.

An increase in the corporate profits tax will most likely lead to

For a given interest rate,r,which of the following expressions is smallest?

A firm that wished to calculate the present value of its future nominal profits should use the ____ to do so.

Draw a two period budget line where the borrow/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C1 and C2 given their anticipated income on two periods,Y1 and Y2.The one point on the budget line not affected by the interest rate is

Suppose a person's preferences are to "consumption smooth," which means they wish to get for all incomes and interest rates.For any interest rate and ,the person will ____ in the first period.

A monopolist who owned the entire supply of a scarce resource would set a price

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Draw a two period budget line where the borrowing/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C₁ and C₂,given their anticipated income on two periods,Y₁ and Y_2.The horizontal (C₁)intercept is

Draw a two period budget line where the borrow/lending rate of interest,r,allows consumers to choose consumption in each of the two periods,C₁ and C₂ given their anticipated income on two periods,Y₁ and Y_2.The one point on the budget line not affected by the interest rate is