Question 1

Refer to the diagram. If the supply of loanable funds is S ₀ and the demand for loanable funds is D ₀ , the equilibrium interest rate and quantity of funds borrowed will be

Accepted Answer

A)  G and A.
B)  F and A.
C)  F and C.
D)  E and A.E) B) and C)
F) B) and D)

Question 2

Which of the following is correct?

Accepted Answer

A)  Although land has no production cost from society's viewpoint, rental payments are costs to individual producers.
B)  Land rent is not a cost to either society or individual producers.
C)  Although land rent is a cost from society's viewpoint, it is not a cost to individual producers.
D)  Land rent is a cost to both society and individual producers.E) C) and D)
F) A) and C)

Question 3

The equilibrium interest rate

Accepted Answer

A)  allocates the available supply of loanable funds to investment projects that have high enough rates of return to justify the borrowing.
B)  rises when the supply of loanable funds increases.
C)  is the price paid for the use of any resource.
D)  affects the size of total output but not the composition of that output.E) B) and D)
F) All of the above

Question 4

Refer to the market for loanable funds, as shown in the graph. A decline in the interest rate is likely to

Accepted Answer

A)  lower capital investment.
B)  increase the quantity of loanable funds demanded.
C)  come about when there is a shortage of loanable funds.
D)  result from an increase in the desire of firms to borrow funds.E) A) and B)
F) C) and D)

Question 5

To an individual firm or landowner, land rents do not appear to be a surplus because

Accepted Answer

A)  land is a productive resource, like the other resources.
B)  a given parcel of land has alternative uses, and rent represents a real cost of production.
C)  they do not understand that the supply of land, in total, is perfectly inelastic.
D)  landowners are, politically and economically, a powerful and well-organized group.E) A) and B)
F) A) and C)

Question 6

Economic profits are the salaries received by the hired managers of business corporations.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the diagram. Suppose that the demand for loanable funds is D₀ and the supply of loanable funds initially is S₀ . If the supply of loanable funds declines to S₁, the equilibrium interest rate will

Accepted Answer

A)  decrease from G to F.
B)  increase from E to F.
C)  increase from B to C.
D)  increase from F to G.E) A) and C)
F) A) and D)

Question 8

Answer the question using the table. Figures are in billions of dollars. A usury law that sets the interest rate 4 percent below the market rate of interest will result in a shortage of loanable funds of

Accepted Answer

A)  $10 billion.
B)  $14 billion.
C)  $20 billion.
D)  $30 billion.E) All of the above
F) A) and C)

Question 9

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (3) , land rent will be

Accepted Answer

A)  $100 per acre.
B)  $400 per acre.
C)  $200 per acre.
D)  $300 per acre.E) B) and C)
F) A) and C)

Question 10

Profit-maximizing businesses will buy more new machinery only if

Accepted Answer

A)  the interest rate increases.
B)  labor costs are low and expected to fall.
C)  the expected rate of return of the new machinery is greater than the interest rate.
D)  the present value of the new machinery is lower than its purchase price.E) A) and B)
F) All of the above

Question 11

Why does an entrepreneur deserve to be compensated with profit?

Accepted Answer

Economists consider entrepreneurship as ...

Question 12

Suppose you deposit $3,000 in a bank that pays 5 percent interest compounded twice a year. The actual annual interest rate you receive is

Accepted Answer

A)  5 percent.
B)  5.06 percent.
C)  5.18 percent.
D)  6 percent.E) B) and D)
F) None of the above

Question 13

In his book Progress and Poverty, Henry George argued that

Accepted Answer

A)  poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs.
B)  economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy.
C)  rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth.
D)  taxes on rents are undesirable because they have a severe disincentive effect on landlords.E) A) and B)
F) All of the above

Question 14

The table applies to a loan with an interest rate of 5 percent per period. What value goes in the cell labeled Z?

Accepted Answer

A)  $2,200
B)  $2,315.25
C)  $2,210
D)  $2,205E) B) and D)
F) B) and C)

Question 15

Entrepreneurs' singular focus on profit

Accepted Answer

A)  often comes at the expense of efficiency.
B)  encourages efficiency.
C)  causes them to neglect other aspects of the business.
D)  discourages use of the MB = MC rule.E) A) and B)
F) All of the above

Question 16

Other things equal, an increase in the productivity of capital goods will

Accepted Answer

A)  increase the demand for loanable funds and decrease the equilibrium interest rate.
B)  increase the demand for loanable funds and increase the equilibrium interest rate.
C)  increase the supply of loanable funds and decrease the equilibrium interest rate.
D)  increase the supply of loanable funds and increase the equilibrium interest rate.E) A) and B)
F) A) and D)

Question 17

The pure rate of interest in economic models is best approximated by the

Accepted Answer

A)  1-month Treasury bills.
B)  prime interest rate.
C)  federal funds rate.
D)  20-year Treasury bond rate.E) A) and B)
F) B) and C)

Question 18

Economic rent is the payment made to a resource that has a perfectly inelastic demand curve.

Accepted Answer

A) True 
 B)False

Question 19

The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. If changes in tax laws made households save more by $140 billion at each interest rate, then the new equilibrium interest rate would be

Accepted Answer

A)  2 percent.
B)  4 percent.
C)  8 percent.
D)  10 percent.E) A) and B)
F) A) and C)

Question 20

A usury law is a law that sets the

Accepted Answer

A)  federal funds rate.
B)  maximum interest rate at which loans can be made.
C)  spread between the prime rate of interest and credit card rates.
D)  interest paid on 90-day Treasury bills and 30-year bonds of the U.S. government.E) B) and C)
F) A) and B)

Exam 18: Rent, Interest, and Profit

Economic profits are the salaries received by the hired managers of business corporations.

Correct Answer
verified

A usury law is a law that sets the

Correct Answer
verified

Economic rent is the payment made to a resource that has a perfectly inelastic demand curve.

Correct Answer
verified

Suppose you deposit $3,000 in a bank that pays 5 percent interest compounded twice a year. The actual annual interest rate you receive is

Correct Answer
verified

The equilibrium interest rate

Correct Answer
verified

Profit-maximizing businesses will buy more new machinery only if

Correct Answer
verified

Other things equal, an increase in the productivity of capital goods will

Correct Answer
verified

Refer to the diagram. If the supply of loanable funds is S ₀ and the demand for loanable funds is D ₀ , the equilibrium interest rate and quantity of funds borrowed will be

Correct Answer
verified

Answer the question using the table. Figures are in billions of dollars. A usury law that sets the interest rate 4 percent below the market rate of interest will result in a shortage of loanable funds of

Correct Answer
verified

Correct Answer
verified

The pure rate of interest in economic models is best approximated by the

Correct Answer
verified

Refer to the diagram. Suppose that the demand for loanable funds is D₀ and the supply of loanable funds initially is S₀ . If the supply of loanable funds declines to S₁, the equilibrium interest rate will

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Entrepreneurs' singular focus on profit

Correct Answer
verified

To an individual firm or landowner, land rents do not appear to be a surplus because

Correct Answer
verified

In his book Progress and Poverty, Henry George argued that

Correct Answer
verified

Why does an entrepreneur deserve to be compensated with profit?

Correct Answer
verified
Economists consider entrepreneurship as ...
View Answer

Refer to the market for loanable funds, as shown in the graph. A decline in the interest rate is likely to

Correct Answer
verified

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (3) , land rent will be

Correct Answer
verified

The table applies to a loan with an interest rate of 5 percent per period. What value goes in the cell labeled Z?

Correct Answer
verified

Exam 18: Rent, Interest, and Profit

Economic profits are the salaries received by the hired managers of business corporations.

Correct AnswerverifiedShow Answer

A usury law is a law that sets the

Correct AnswerverifiedShow Answer

Economic rent is the payment made to a resource that has a perfectly inelastic demand curve.

Correct AnswerverifiedShow Answer

Suppose you deposit $3,000 in a bank that pays 5 percent interest compounded twice a year. The actual annual interest rate you receive is

Correct AnswerverifiedShow Answer

The equilibrium interest rate

Correct AnswerverifiedShow Answer

Profit-maximizing businesses will buy more new machinery only if

Correct AnswerverifiedShow Answer

Other things equal, an increase in the productivity of capital goods will

Correct AnswerverifiedShow Answer

Refer to the diagram. If the supply of loanable funds is S ₀ and the demand for loanable funds is D ₀ , the equilibrium interest rate and quantity of funds borrowed will be

Correct AnswerverifiedShow Answer

Answer the question using the table. Figures are in billions of dollars. A usury law that sets the interest rate 4 percent below the market rate of interest will result in a shortage of loanable funds of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The pure rate of interest in economic models is best approximated by the

Correct AnswerverifiedShow Answer

Refer to the diagram. Suppose that the demand for loanable funds is D₀ and the supply of loanable funds initially is S₀ . If the supply of loanable funds declines to S₁, the equilibrium interest rate will

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Entrepreneurs' singular focus on profit

Correct AnswerverifiedShow Answer

To an individual firm or landowner, land rents do not appear to be a surplus because

Correct AnswerverifiedShow Answer

In his book Progress and Poverty, Henry George argued that

Correct AnswerverifiedShow Answer

Why does an entrepreneur deserve to be compensated with profit?

Correct AnswerverifiedEconomists consider entrepreneurship as ...View AnswerShow Answer

Refer to the market for loanable funds, as shown in the graph. A decline in the interest rate is likely to

Correct AnswerverifiedShow Answer

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (3) , land rent will be

Correct AnswerverifiedShow Answer

The table applies to a loan with an interest rate of 5 percent per period. What value goes in the cell labeled Z?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
Economists consider entrepreneurship as ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified