Exam 18: Rent, Interest, and Profit

A) are identical to accounting profits.
B) must be earned by every firm that continues to produce in the long run.
C) serve no useful economic purpose and should never occur in a competitive economy.
D) serve in the short run as an incentive to guide production decisions, but indicate the existence of barriers to entry in the long run.

Correct Answer

verified

Show Answer

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

Correct Answer

verified

Show Answer

A) the allocation of resources but not the level of resource use.
B) the level of resource use but not the allocation of resources.
C) the allocation of resources and the level of resource use.
D) neither the allocation of resources nor the level of resource use.

Correct Answer

verified

Show Answer

A) a progressive income tax.
B) a heavy tax on land-rent income.
C) a flat tax.
D) a subsidy for land.

Correct Answer

verified

Show 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.

Correct Answer

verified

Show Answer

A) $4,310
B) $5,500
C) $5,010
D) $5,788

Correct Answer

verified

Show Answer

A) 12.5 percent.
B) 14.5 percent.
C) 17.6 percent.
D) 10 percent.

Correct Answer

verified

Show Answer

A) Interest rates would increase.
B) Interest rates would decrease.
C) The equilibrium quantity of loanable funds would decrease.
D) The equilibrium quantity of loanable funds would remain unchanged.

Correct Answer

verified

Show Answer

A) 14 percent and 20 percent, respectively.
B) 14 percent on both loans.
C) 18.8 percent on both loans.
D) 1.4 percent and 11.8 percent, respectively.

Correct Answer

verified

Show 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.

Correct Answer

verified

Show Answer

A) benefit lenders.
B) penalize borrowers.
C) increase the efficiency of investment.
D) subsidize borrowers with high incomes.

Correct Answer

verified

Show Answer

A) lenders are more willing to lend at lower, rather than higher, interest rates.
B) lenders are more willing to lend at higher, rather than lower, interest rates.
C) borrowers are more willing to borrow at lower, rather than higher, interest rates.
D) borrowers are more willing to borrow at higher, rather than lower, interest rates.

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

A) interest rates are higher if lenders are imperfectly, rather than purely, competitive.
B) the interest rate is less on small loans than on larger loans.
C) long-term loans normally command higher interest rates than short-term loans.
D) the greater the risk on a loan, the greater the interest rate.

Correct Answer

verified

Show Answer

A) Interest rates typically reflect the risk involved in extending a loan.
B) Interest rates are affected by households' spending decisions.
C) The equilibrium interest rate is determined by the intersection of the supply and demand schedules for loanable funds.
D) The supply of loanable funds is independent of the rate of interest.

Correct Answer

verified

Show Answer

A) increases saving, reduces total spending, and increases total output.
B) decreases saving, increases total spending, and decreases total output.
C) increases investment, increases total spending, and increases total output.
D) decreases investment, decreases total spending, and increases total output.

Correct Answer

verified

Show Answer

A) real capital.
B) entrepreneurial profits.
C) land.
D) labor income.

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer