Question 1

Economic profit might result from:

Accepted Answer

A)   easy entry into industries.
B)   dynamic change and uncertainty.
C)   X-inefficiency.
D)   a decline in entrepreneurship.E) C) and D)
F) All of the above

Question 2

The incentive function of prices:

Accepted Answer

A)   indicates that price increases bring forth more of that resource.
B)   is the idea that competitive markets will always clear.
C)   applies to all resources.
D)   only applies to land.E) None of the above
F) B) and D)

Question 3

The total supply of land is:

Accepted Answer

A)   upsloping.
B)   perfectly elastic.
C)   perfectly inelastic.
D)   greater in the short run than in the long run.E) B) and C)
F) A) and D)

Question 4

A unique characteristic of taxes on economic rents is that such taxes:

Accepted Answer

A)   stimulate aggregate production.
B)   do not lead to a reallocation of the resource.
C)   are paid by consumers.
D)   are always regressive.E) None of the above
F) A) and B)

Question 5

Broadly defined,labor's share of national income has been remarkably stable since 1900.

Accepted Answer

A) True 
 B)False

Question 6

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

Accepted Answer

A) True 
 B)False

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

Capitalist income (corporate profits,interest,and rent) has:

Accepted Answer

A)   declined sharply since 1900 because of the growing strength of labor unions.
B)   remained approximately constant since 1900.
C)   increased significantly because of rising rents.
D)   fallen since 1900 because of the declining importance of corporations.E) None of the above
F) B) and D)

Question 9

Effective usury laws:

Accepted Answer

A)   subsidize lenders.
B)   penalize those who borrow at the below-market interest rate.
C)   improve efficiency in investing.
D)   keep some low-income people from obtaining credit and loans.E) B) and C)
F) A) and D)

Question 10

A major purpose of usury laws is to make more funds available to low-income borrowers.Economic analysis suggests that usury laws:

Accepted Answer

A)   are effective in achieving this goal.
B)   allocate available funds to high-income borrowers.
C)   have no impact on the allocation of funds between high-income and low-income people.
D)   help low-income people only when the legal interest rate is above the market rate.E) None of the above
F) B) and C)

Question 11

The interest rate is the price paid for the use of money.

Accepted Answer

A) True 
 B)False

Question 12

The equilibrium interest rate equates:

Accepted Answer

A)   nominal and real interest rates.
B)   the quantities demanded and supplied of loanable funds.
C)   consumption and saving.
D)   taxes and government spending.E) None of the above
F) A) and B)

Question 13

The supply curve of loanable funds is upsloping because:

Accepted Answer

A)   businesses find more investments to be profitable at low interest rates than at high interest rates.
B)   government budget deficits vary inversely with the equilibrium interest rate.
C)   households are willing to save more at high interest rates than they are at low interest rates.
D)   banks lend more at low interest rates than they do at high interest rates.E) All of the above
F) A) and D)

Question 14

The marginal revenue product (MRP) of land declines as more land is brought into production because:

Accepted Answer

A)   land is a "free and nonreproducible gift of nature."
B)   of diminishing returns.
C)   land rent has no incentive function.
D)   the supply of land is fixed.E) C) and D)
F) B) and C)

Question 15

Changes in the equilibrium interest rate will:

Accepted Answer

A)   affect both the size of the domestic output and the allocation of capital goods among industries.
B)   affect the size of the domestic output,but not the allocation of capital goods among industries.
C)   affect the allocation of capital goods among industries,but not the size of the domestic output.
D)   have no perceptible effect on either the size of the domestic output or the allocation of capital goods among industries.E) A) and B)
F) B) and D)

Question 16

(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that:

Accepted Answer

A)   other things equal,interest rates are higher on smaller loans than on larger loans.
B)   interest is a payment required for someone to give up the present use of their money.
C)   other things equal,longer-term loans have lower interest rates than shorter-term loans.
D)   real interest rates differ from nominal interest rates.E) A) and D)
F) A) and C)

Question 17

The free-land era of U.S.history reflected a situation in which the quantity of land available at a zero price exceeded the quantity of land demanded.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is correct?

Accepted Answer

A)   Economic profits can properly be regarded as the salaries received by the hired managers of corporations.
B)   Economic rent is a price paid for productive land resources whose supply is perfectly inelastic.
C)   Economic profits would be nonexistent in a dynamic,purely competitive economy.
D)   Economic or pure profit is the minimum return that entrepreneurs must receive to continue in a particular line of production.E) None of the above
F) A) and B)

Question 19

The fact that people prefer present consumption to future consumption results in:

Accepted Answer

A)   an upsloping supply of loanable funds curve.
B)   a downsloping demand for loanable funds curve.
C)   a downsloping supply of loanable funds curve.
D)   an upsloping demand for loanable funds curve.E) B) and C)
F) None of the above

Question 20

"Present value" refers to the:

Accepted Answer

A)   value today of a specific amount of money to be received in the future.
B)   current value of money held in a bank account.
C)   amount to which some current amount of money will grow over time.
D)   interest rate specified when a loan contract is signed.E) A) and C)
F) A) and B)

Exam 17: Rent Interest and Profit

A major purpose of usury laws is to make more funds available to low-income borrowers.Economic analysis suggests that usury laws:

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The interest rate is the price paid for the use of money.

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The incentive function of prices:

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The total supply of land is:

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The marginal revenue product (MRP) of land declines as more land is brought into production because:

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

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"Present value" refers to the:

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The free-land era of U.S.history reflected a situation in which the quantity of land available at a zero price exceeded the quantity of land demanded.

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Economic profit might result from:

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(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that:

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Capitalist income (corporate profits,interest,and rent) has:

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Which of the following statements is correct?

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Changes in the equilibrium interest rate will:

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The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

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Effective usury laws:

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The fact that people prefer present consumption to future consumption results in:

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A unique characteristic of taxes on economic rents is that such taxes:

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Broadly defined,labor's share of national income has been remarkably stable since 1900.

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The supply curve of loanable funds is upsloping because:

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The equilibrium interest rate equates:

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