Question 1

In which field would economic rents likely be greatest for the best in their field?

Accepted Answer

A)  farming 
B)  teaching 
C)  hockey 
D)  car repairing 
A)  farming 
B)  teaching 
C)  hockey 
D)  car repairing

Question 2

The greater is the risk of non-repayment of a loan, the

Accepted Answer

A)  higher is the expected rate of interest. 
B)  longer is the expected time to repay the loan. 
C)  lower is the handling charges for the loan. 
D)  lower is the expected rate of interest. 
A)  higher is the expected rate of interest. 
B)  longer is the expected time to repay the loan. 
C)  lower is the handling charges for the loan. 
D)  lower is the expected rate of interest.

Question 3

How can one "beat the market"?

Accepted Answer

Most economists feel the only

Question 4

The real rate of interest will approximately be equal to

Accepted Answer

A)  the nominal interest rate plus the expected rate of inflation. 
B)  the stated rate of interest in a high-inflation economy. 
C)  the nominal interest rate minus the expected rate of change in the price level. 
D)  the stated rate minus the opportunity cost of capital. 
A)  the nominal interest rate plus the expected rate of inflation. 
B)  the stated rate of interest in a high-inflation economy. 
C)  the nominal interest rate minus the expected rate of change in the price level. 
D)  the stated rate minus the opportunity cost of capital.

Question 5

Monitoring the performance of the people managing the firm is easiest in the case of

Accepted Answer

A)  proprietorships. 
B)  partnerships. 
C)  corporations. 
D)  S corporations. 
A)  proprietorships. 
B)  partnerships. 
C)  corporations. 
D)  S corporations.

Question 6

The three basic legal forms of business enterprise in the United States are

Accepted Answer

A)  monopolies, enterprises, and competitors. 
B)  vertical, horizontal, and conglomerate corporations. 
C)  national, global, and multinational corporations. 
D)  proprietorships, partnerships, and corporations. 
A)  monopolies, enterprises, and competitors. 
B)  vertical, horizontal, and conglomerate corporations. 
C)  national, global, and multinational corporations. 
D)  proprietorships, partnerships, and corporations.

Question 7

The payment for the use of a resource in an amount higher than the resource's opportunity cost is

Accepted Answer

A)  a proprietorship. 
B)  an irrational economic concept. 
C)  economic rent. 
D)  reinvestment. 
A)  a proprietorship. 
B)  an irrational economic concept. 
C)  economic rent. 
D)  reinvestment.

Question 8

A singer would willingly perform in a concert for $10,000. If she is paid $25,000 for the concert, she is

Accepted Answer

A)  receiving $25,000 to cover her opportunity cost. 
B)  not being paid her full opportunity cost. 
C)  receiving $15,000 of economic rent. 
D)  certainly being paid more than warranted by the level of demand. 
A)  receiving $25,000 to cover her opportunity cost. 
B)  not being paid her full opportunity cost. 
C)  receiving $15,000 of economic rent. 
D)  certainly being paid more than warranted by the level of demand.

Question 9

A normal rate of return on investment is equal to

Accepted Answer

A)  accounting profit minus economic profit. 
B)  the opportunity cost of capital plus any other implicit costs. 
C)  accounting profit plus economic profit. 
D)  total revenue plus total accounting profit 
A)  accounting profit minus economic profit. 
B)  the opportunity cost of capital plus any other implicit costs. 
C)  accounting profit plus economic profit. 
D)  total revenue plus total accounting profit

Question 10

Suppose a firm wanted to go out of business. The firm sells all its assets and pays off everything it owes to creditors. The stockholders would receive

Accepted Answer

A)  nothing. 
B)  their annual dividend payment. 
C)  one half of the funds; the other half of the funds goes to bondholders. 
D)  the rest of the funds, after everyone who has a claim against the firm is paid. 
A)  nothing. 
B)  their annual dividend payment. 
C)  one half of the funds; the other half of the funds goes to bondholders. 
D)  the rest of the funds, after everyone who has a claim against the firm is paid.

Question 11

The concept of economic rent can be applied to

Accepted Answer

A)  land only. 
B)  land and natural resources only. 
C)  land, natural resources, and paintings by dead masters only. 
D)  any resource that cannot be replicated exactly. 
A)  land only. 
B)  land and natural resources only. 
C)  land, natural resources, and paintings by dead masters only. 
D)  any resource that cannot be replicated exactly.

Question 12

In comparing accounting profit with economic profit, we generally find that

Accepted Answer

A)  accounting profit is less than economic profit. 
B)  economic profit and accounting profit are the same in the short run. 
C)  accounting profit is greater than economic profit. 
D)  economic profit exceeds accounting profit by the amount of opportunity costs. 
A)  accounting profit is less than economic profit. 
B)  economic profit and accounting profit are the same in the short run. 
C)  accounting profit is greater than economic profit. 
D)  economic profit exceeds accounting profit by the amount of opportunity costs.

Question 13

Under which one of the following situations would you be better off?

Accepted Answer

A)  You have $10,000 in your savings account paying 5 percent per year and unanticipated inflation is 8 percent per year. 
B)  You have paid $500 for a $1,000 U.S. savings bond that matures in 10 years and unanticipated inflation is 10 percent per year. 
C)  You lend a friend $1,000 at 6 percent to be repaid in one year and unanticipated inflation is 7 percent during the year. 
D)  You borrowed $2,500 at 7 percent to pay for this year's college expenses and unanticipated inflation is 12 percent during the year. 
A)  You have $10,000 in your savings account paying 5 percent per year and unanticipated inflation is 8 percent per year. 
B)  You have paid $500 for a $1,000 U.S. savings bond that matures in 10 years and unanticipated inflation is 10 percent per year. 
C)  You lend a friend $1,000 at 6 percent to be repaid in one year and unanticipated inflation is 7 percent during the year. 
D)  You borrowed $2,500 at 7 percent to pay for this year's college expenses and unanticipated inflation is 12 percent during the year.

Question 14

-Refer to the above figure. Suppose demand is D2 and then increases to D3. Economic rent after the change is

Accepted Answer

A)  zero. 
B)  area CIHF. 
C)  area CIGO. 
D)  area BJC. 
A)  zero. 
B)  area CIHF. 
C)  area CIGO. 
D)  area BJC.

Question 15

In most cases, the higher is the quality of the collateral for a loan is

Accepted Answer

A)  the higher is the interest rate. 
B)  the lower is the interest rate. 
C)  the riskier is the loan. 
D)  the greater is the handling charge for the loan. 
A)  the higher is the interest rate. 
B)  the lower is the interest rate. 
C)  the riskier is the loan. 
D)  the greater is the handling charge for the loan.

Question 16

A basic tenet of the theory of the firm is that the firm's primary objective is to

Accepted Answer

A)  stay out of debt. 
B)  produce a given level of output at a specified cost. 
C)  maximize economic profits. 
D)  operate for the benefit of society. 
A)  stay out of debt. 
B)  produce a given level of output at a specified cost. 
C)  maximize economic profits. 
D)  operate for the benefit of society.

Question 17

In analyzing the operation of a firm, an economist assumes the firm wants to

Accepted Answer

A)  maximize total sales. 
B)  maximize total revenue. 
C)  maximize total production. 
D)  maximize total profits. 
A)  maximize total sales. 
B)  maximize total revenue. 
C)  maximize total production. 
D)  maximize total profits.

Question 18

Economic rent directs resources to

Accepted Answer

A)  the people who can use them most efficiently. 
B)  people only. 
C)  large corporations. 
D)  labor-intensive industries only. 
A)  the people who can use them most efficiently. 
B)  people only. 
C)  large corporations. 
D)  labor-intensive industries only.

Question 19

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in four years?

Accepted Answer

A)  $175,000 
B)  $125,000 
C)  $146,000 
D)  $190,000 
A)  $175,000 
B)  $125,000 
C)  $146,000 
D)  $190,000

Question 20

Economic rent applies to

Accepted Answer

A)  land only and nothing else. 
B)  real property only. 
C)  all resources. 
D)  any resource in fixed supply. 
A)  land only and nothing else. 
B)  real property only. 
C)  all resources. 
D)  any resource in fixed supply.

Exam 21: Rents, Profits, and the Financial Environment of Business

In which field would economic rents likely be greatest for the best in their field?

The greater is the risk of non-repayment of a loan, the

How can one "beat the market"?

The real rate of interest will approximately be equal to

Monitoring the performance of the people managing the firm is easiest in the case of

The three basic legal forms of business enterprise in the United States are

The payment for the use of a resource in an amount higher than the resource's opportunity cost is

A singer would willingly perform in a concert for $10,000. If she is paid $25,000 for the concert, she is

A normal rate of return on investment is equal to

Suppose a firm wanted to go out of business. The firm sells all its assets and pays off everything it owes to creditors. The stockholders would receive

The concept of economic rent can be applied to

In comparing accounting profit with economic profit, we generally find that

Under which one of the following situations would you be better off?

-Refer to the above figure. Suppose demand is D2 and then increases to D3. Economic rent after the change is

In most cases, the higher is the quality of the collateral for a loan is

A basic tenet of the theory of the firm is that the firm's primary objective is to

In analyzing the operation of a firm, an economist assumes the firm wants to

Economic rent directs resources to

If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in four years?

Economic rent applies to

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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