Question 1

If the interest rate is 15 percent, what is the future value of $10,000 two years from now?

Accepted Answer

A)  $13,225
B)  $225
C)  $13,000
D)  $7,576E) All of the above
F) C) and D)

Question 2

David Ricardo, a nineteenth-century economist, wrote "The price of corn is not high because a rent is paid, but a rent is paid because the price of corn is high." Explain this statement in the context of supply and demand.

Accepted Answer

The demand for land is a derived demand,...

Question 3

The XYZ Corporation determines it can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the

Accepted Answer

A)  investment will be profitable.
B)  investment will be unprofitable.
C)  real rate of interest is 4 percent.
D)  real rate of interest is 2 percent.E) C) and D)
F) A) and D)

Question 4

Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be

Accepted Answer

A)  8 percent and $140 billion.
B)  10 percent and $140 billion.
C)  12 percent and $180 billion.
D)  14 percent and $240 billion.E) A) and B)
F) A) and C)

Question 5

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) A) and D)

Question 6

Interest rates are the payments needed to entice individuals to

Accepted Answer

A)  accept insurable risk.
B)  accept uninsurable risk.
C)  sacrifice their present consumption.
D)  sacrifice their future consumption.E) A) and B)
F) A) and C)

Question 7

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) A) and B)
F) A) and D)

Question 8

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

Accepted Answer

A)  $200 per acre.
B)  $0 per acre.
C)  $300 per acre.
D)  $100 per acre.E) A) and B)
F) None of the above

Question 9

Refer to the table, in which the values for columns (2) through (5) are in acres. Positive land rent will occur if the relevant columns are

Accepted Answer

A)  (1) , (2) , and (3) only.
B)  (1) , (2) , and (3) and (1) , (2) , and (5) .
C)  (1) , (2) , and (4) and (1) , (2) , and (5) .
D)  (1) , (2) , and (3) and (1) , (2) , and (4) .E) A) and B)
F) B) and D)

Question 10

The table gives investment-demand in an economy. If the interest rate is 15 percent,

Accepted Answer

A)  $400 billion of investment will be undertaken.
B)  $460 billion of investment will be undertaken.
C)  $530 billion of investment will be undertaken.
D)  $600 billion of investment will be undertaken.E) A) and D)
F) A) and B)

Question 11

Economic profit is most closely associated with

Accepted Answer

A)  the process of saving and investing.
B)  monopoly, innovation, and uninsurable risks.
C)  long-run competitive equilibrium.
D)  a static economy.E) C) and D)
F) None of the above

Question 12

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is

Accepted Answer

A)  $400.
B)  $1,600.
C)  $160.
D)  $85.E) B) and D)
F) A) and B)

Question 13

Different rents on land reflect differences in the marginal revenue product of land.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the demand for this land is given in the table. What will be the equilibrium economic rent per acre?

Accepted Answer

A)  $100
B)  $200
C)  $300
D)  $400E) All of the above
F) C) and D)

Question 15

Which of the following is incorrect?

Accepted Answer

A)  The nominal interest rate is the rate of interest expressed in terms of current dollars.
B)  The real interest rate is the rate of interest expressed in terms of dollars of constant, or inflation-adjusted, value.
C)  The nominal interest rate is the real interest rate less the rate of inflation.
D)  During periods of inflation, the nominal interest rate will exceed the real interest rate.E) A) and B)
F) A) and C)

Question 16

The prices paid to a productive resource usually perform an incentive function except with what resource?

Accepted Answer

A)  land
B)  labor
C)  capital
D)  entrepreneurial abilityE) None of the above
F) A) and D)

Question 17

Usury laws

Accepted Answer

A)  allocate funds from low-productivity to high-productivity investments.
B)  establish a legal ceiling on interest rates.
C)  make more funds available to low-income borrowers.
D)  create a surplus of loanable funds.E) C) and D)
F) All of the above

Question 18

What are three nonroutine decisions of entrepreneurs that involve substantial financial risk?

Accepted Answer

Entrepreneurs make nonroutine decisions ...

Question 19

Refer to the diagram. If demand is D ₂, a tax of $ X per acre will

Accepted Answer

A)  encourage the substitution of land for other productive resources.
B)  lower the cost of land to individual farmers.
C)  reduce the demand for land to, say, D₃ or D₄.
D)  not affect the quantity of land available to society.E) A) and B)
F) A) and D)

Question 20

Why is land rent a "surplus payment" from the perspective of economists?

Accepted Answer

Rent for land serves no incentive functi...

Exam 18: Rent, Interest, and Profit

Refer to the diagram. If demand is D ₂, a tax of $ X per acre will

Correct AnswerverifiedShow Answer

Refer to the table, in which the values for columns (2) through (5) are in acres. Positive land rent will occur if the relevant columns are

Correct AnswerverifiedShow Answer

The table gives investment-demand in an economy. If the interest rate is 15 percent,

Correct AnswerverifiedShow Answer

Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be

Correct AnswerverifiedShow Answer

Which of the following is incorrect?

Correct AnswerverifiedShow Answer

David Ricardo, a nineteenth-century economist, wrote "The price of corn is not high because a rent is paid, but a rent is paid because the price of corn is high." Explain this statement in the context of supply and demand.

Correct AnswerverifiedThe demand for land is a derived demand,...View AnswerShow Answer

Economic profit is most closely associated with

Correct AnswerverifiedShow Answer

Interest rates are the payments needed to entice individuals to

Correct AnswerverifiedShow Answer

The prices paid to a productive resource usually perform an incentive function except with what resource?

Correct AnswerverifiedShow Answer

Usury laws

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 (5) , land rent will be

Correct AnswerverifiedShow Answer

What are three nonroutine decisions of entrepreneurs that involve substantial financial risk?

Correct AnswerverifiedEntrepreneurs make nonroutine decisions ...View AnswerShow Answer

Different rents on land reflect differences in the marginal revenue product of land.

Correct AnswerverifiedShow Answer

If the interest rate is 15 percent, what is the future value of $10,000 two years from now?

Correct AnswerverifiedShow Answer

Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the demand for this land is given in the table. What will be the equilibrium economic rent per acre?

Correct AnswerverifiedShow Answer

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why is land rent a "surplus payment" from the perspective of economists?

Correct AnswerverifiedRent for land serves no incentive functi...View AnswerShow Answer

The incentive function of prices

Correct AnswerverifiedShow Answer

The XYZ Corporation determines it can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the

Correct AnswerverifiedShow Answer

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The demand for land is a derived demand,...
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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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Entrepreneurs make nonroutine decisions ...
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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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Rent for land serves no incentive functi...
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Correct Answer
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Correct Answer
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