Question 1

(Consider This) Entrepreneurs' focus on profit encourages efficiency

Accepted Answer

A)  at the expense of employees. 
B)  except in a market system. 
C)  when properly regulated by the government. 
D)  by encouraging the entrepreneur to use the MB = MC rule for every aspect of the business. 
A)  at the expense of employees. 
B)  except in a market system. 
C)  when properly regulated by the government. 
D)  by encouraging the entrepreneur to use the MB = MC rule for every aspect of the business.

Question 2

Which expression is used to calculate the future value of an amount of money?

Accepted Answer

A)   Present Value × (1 + interest rate)time 
B)  Present Value/(1 + interest rate)time 
C)  Present Value × (1 + time)interest rate 
D)  (1 + interest rate)time/Present Value 
A)   Present Value × (1 + interest rate)time 
B)  Present Value/(1 + interest rate)time 
C)  Present Value × (1 + time)interest rate 
D)  (1 + interest rate)time/Present Value

Question 3

Which of the following does not explain differences in rent for different parcels of land?

Accepted Answer

A)  productivity differences 
B)  demand differences 
C)  supply-elasticity differences 
D)  marginal-revenue-product differences 
A)  productivity differences 
B)  demand differences 
C)  supply-elasticity differences 
D)  marginal-revenue-product differences

Question 4

Reducing the payment of rent to landowners will decrease the quantity of land supplied.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following interest rates is usually the highest?

Accepted Answer

A)  30-year mortgage rate 
B)  20-year Treasury bond rate 
C)  consumer credit-card rate 
D)  prime rate of banks 
A)  30-year mortgage rate 
B)  20-year Treasury bond rate 
C)  consumer credit-card rate 
D)  prime rate of banks

Question 6

Critics of a single tax on land oppose the idea because

Accepted Answer

A)  it would overtax the population. 
B)  changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents. 
C)  it would disproportionately tax the richest members of society. 
D)  it would cause too much land to be brought out of production. 
A)  it would overtax the population. 
B)  changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents. 
C)  it would disproportionately tax the richest members of society. 
D)  it would cause too much land to be brought out of production.

Question 7

Present value is the amount to which some current amount of money will grow as interest compounds over time.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is correct?

Accepted Answer

A)  Rent performs an incentive function, but not a rationing function. 
B)  Wage rate does not perform an incentive function in the supply of labor. 
C)  Profits are payments to capital resource owners. 
D)  Demand is the "active," and supply the "passive," determinant of land rent. 
A)  Rent performs an incentive function, but not a rationing function. 
B)  Wage rate does not perform an incentive function in the supply of labor. 
C)  Profits are payments to capital resource owners. 
D)  Demand is the "active," and supply the "passive," determinant of land rent.

Question 9

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Accepted Answer

A) True 
 B)False

Question 10

There will be pressure on the interest rate for loanable funds to increase when

Accepted Answer

A)  supply increases. 
B)  demand decreases. 
C)  quantity supplied exceeds quantity demanded. 
D)  quantity demanded exceeds the quantity supplied. 
A)  supply increases. 
B)  demand decreases. 
C)  quantity supplied exceeds quantity demanded. 
D)  quantity demanded exceeds the quantity supplied.

Question 11

Opponents of land nationalization argue that private ownership

Accepted Answer

A)  allows rent to function as an efficient allocation mechanism. 
B)  is fair in terms of equalizing income distribution. 
C)  follows the natural order of things in society. 
D)  is consistent with detailed government planning for land use. 
A)  allows rent to function as an efficient allocation mechanism. 
B)  is fair in terms of equalizing income distribution. 
C)  follows the natural order of things in society. 
D)  is consistent with detailed government planning for land use.

Question 12

In the market for loanable funds,

Accepted Answer

A)  an increase in available bank lending will increase the interest rate. 
B)  a decrease in saving will reduce the interest rate. 
C)  an increase in borrowing for investment will increase the interest rate. 
D)  a decrease in government borrowing will increase the interest rate. 
A)  an increase in available bank lending will increase the interest rate. 
B)  a decrease in saving will reduce the interest rate. 
C)  an increase in borrowing for investment will increase the interest rate. 
D)  a decrease in government borrowing will increase the interest rate.

Question 13

Entrepreneurs normally do all of the following except

Accepted Answer

A)  taking the initiative in combining other resources to produce goods or services. 
B)  making the basic, nonroutine policy decisions for their organization. 
C)  bearing the risks involved in introducing new products or production innovations. 
D)  getting hired as a top executive in established corporations. 
A)  taking the initiative in combining other resources to produce goods or services. 
B)  making the basic, nonroutine policy decisions for their organization. 
C)  bearing the risks involved in introducing new products or production innovations. 
D)  getting hired as a top executive in established corporations.

Question 14

Usury laws are a special case of "price floors" applied to the loanable funds market.

Accepted Answer

A) True 
 B)False

Question 15

If the interest rate is 10 percent, what is the present value of $25,000 received two years from now?

Accepted Answer

A)  $20,000 
B)  $20,661 
C)  $30,250 
D)  $30,000 
A)  $20,000 
B)  $20,661 
C)  $30,250 
D)  $30,000

Question 16

It is most likely that a firm would borrow funds to expand its capital facilities when the

Accepted Answer

A)  pure rate of interest is greater than the real rate of interest. 
B)  expected rate of return is greater than the interest rate. 
C)  demand for money is greater than the supply of money. 
D)  real rate of interest is greater than the nominal rate of interest. 
A)  pure rate of interest is greater than the real rate of interest. 
B)  expected rate of return is greater than the interest rate. 
C)  demand for money is greater than the supply of money. 
D)  real rate of interest is greater than the nominal rate of interest.

Question 17

The economist who advocated a single tax on land was

Accepted Answer

A)  Adam Smith. 
B)  John Maynard Keynes. 
C)  Henry George. 
D)  Milton Friedman. 
A)  Adam Smith. 
B)  John Maynard Keynes. 
C)  Henry George. 
D)  Milton Friedman.

Question 18

Which of the following is not a major criticism of the single-tax movement?

Accepted Answer

A)  It is impractical because most income payments are a mixture of interest, rent, wages, and profits. 
B)  It is inefficient because the land-rent tax will distort the use of land resources, thereby preventing allocative efficiency. 
C)  It is unfair because there are other "unearned" incomes besides land rent, such as capital-gains income. 
D)  It is inadequate because current levels of government spending are too big to be sufficiently funded by rent tax alone. 
A)  It is impractical because most income payments are a mixture of interest, rent, wages, and profits. 
B)  It is inefficient because the land-rent tax will distort the use of land resources, thereby preventing allocative efficiency. 
C)  It is unfair because there are other "unearned" incomes besides land rent, such as capital-gains income. 
D)  It is inadequate because current levels of government spending are too big to be sufficiently funded by rent tax alone.

Question 19

The demand curve for loanable funds represents the behavior of

Accepted Answer

A)  lenders. 
B)  savers. 
C)  borrowers. 
D)  bankers. 
A)  lenders. 
B)  savers. 
C)  borrowers. 
D)  bankers.

Question 20

Since 1900, the relative share of "wages & salaries, plus proprietors' income" in the total income earned by Americans in a typical year has been about

Accepted Answer

A)  20 percent. 
B)  50 percent. 
C)  80 percent. 
D)  95 percent. 
A)  20 percent. 
B)  50 percent. 
C)  80 percent. 
D)  95 percent.

Exam 18: Rent, Interest, and Profit

(Consider This) Entrepreneurs' focus on profit encourages efficiency

Which expression is used to calculate the future value of an amount of money?

Which of the following does not explain differences in rent for different parcels of land?

Reducing the payment of rent to landowners will decrease the quantity of land supplied.

Which of the following interest rates is usually the highest?

Critics of a single tax on land oppose the idea because

Present value is the amount to which some current amount of money will grow as interest compounds over time.

Which of the following statements is correct?

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

There will be pressure on the interest rate for loanable funds to increase when

Opponents of land nationalization argue that private ownership

In the market for loanable funds,

Entrepreneurs normally do all of the following except

Usury laws are a special case of "price floors" applied to the loanable funds market.

If the interest rate is 10 percent, what is the present value of $25,000 received two years from now?

It is most likely that a firm would borrow funds to expand its capital facilities when the

The economist who advocated a single tax on land was

Which of the following is not a major criticism of the single-tax movement?

The demand curve for loanable funds represents the behavior of

Since 1900, the relative share of "wages & salaries, plus proprietors' income" in the total income earned by Americans in a typical year has been about

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role 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

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