Question 1

Profits account for a smaller share of total U.S.income than interest income.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

One effect of a usury law is that it will

Accepted Answer

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

Question 4

Other things equal, the interest rate on a loan will be larger,

Accepted Answer

A)  the less the risk involved.
B)  the larger the amount of the loan.
C)  the longer the length of the loan.
D)  if loan interest is exempt from taxation.E) A) and D)
F) A) and C)

Question 5

The minimum rate of return or payment necessary to keep an entrepreneur in some specific enterprise is referred to as

Accepted Answer

A)  the pure rate of interest.
B)  the real interest rate.
C)  economic profit.
D)  normal profit.E) A) and B)
F) B) and C)

Question 6

Investment and R&D decisions by firms are based on nominal interest rates, not real interest.

Accepted Answer

A) True 
 B)False

Question 7

Which type of income contributes the smallest share to total income in the U.S.?

Accepted Answer

A)  wages
B)  interest
C)  rent
D)  profitsE) B) and C)
F) All of the above

Question 8

Interest rates of various loans vary over a wide range due to differences in all of the following, except

Accepted Answer

A)  borrower characteristics.
B)  maturity of the loan.
C)  loan size.
D)  lender characteristics.E) C) and D)
F) B) and D)

Question 9

Economic profit affects

Accepted 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.E) B) and C)
F) B) and D)

Question 10

(Last Word)  Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425) .The interest rate on this loan is about

Accepted Answer

A)  12.5 percent.
B)  14.5 percent.
C)  17.6 percent.
D)  10 percent.E) None of the above
F) All of the above

Question 11

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) A) and B)
F) All of the above

Question 12

(Consider This)  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 C)
F) B) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Some countries have negative nominal interest rates.Which of the following statements about this situation is not true?

Accepted Answer

A)  A saver or lender will get back less than the amount she invested.
B)  This is mostly a result of deliberate central bank policies.
C)  Consumers are expected to save more and consume less.
D)  Consumers are expected to borrow more and spend more.E) B) and D)
F) A) and D)

Question 15

The reason why socialists favor the nationalization of land is that

Accepted Answer

A)  land is a scarce resource.
B)  the rent received by landowners does not represent anything they produced.
C)  there is a fixed total supply of land.
D)  land is not a productive resource.E) C) and D)
F) A) and B)

Question 16

A normal profit is

Accepted Answer

A)  the average profitability of a firm over one complete business cycle.
B)  calculated by subtracting explicit costs from total revenue.
C)  the "price" required to retain entrepreneurial talent in some particular line of production.
D)  the amount by which total revenue exceeds total operating costs.E) A) and B)
F) A) and C)

Question 17

In the market for loanable funds,

Accepted Answer

A)  an increase in available bank lending will increase the interest rate.
B)  a decrease in saving will reduce the interest rate.
C)  an increase in borrowing for investment will increase the interest rate.
D)  a decrease in government borrowing will increase the interest rate.E) A) and B)
F) A) and D)

Question 18

Which of the following is correct?

Accepted Answer

A)  Money is a resource, but real capital is not.
B)  Real capital is a resource, but money is not.
C)  Neither money nor real capital is a resource.
D)  Both money and real capital are resources.E) B) and D)
F) All of the above

Question 19

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) None of the above

Question 20

Landowners will not receive any rent so long as

Accepted Answer

A)  there is any tax on land.
B)  the supply and demand curves for land intersect.
C)  the supply curve of land is perfectly inelastic.
D)  the supply curve lies entirely to the right of the demand curve.E) A) and D)
F) None of the above

Exam 18: Rent, Interest, and Profit

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

Correct AnswerverifiedShow Answer

The minimum rate of return or payment necessary to keep an entrepreneur in some specific enterprise is referred to as

Correct AnswerverifiedShow Answer

Investment and R&D decisions by firms are based on nominal interest rates, not real interest.

Correct AnswerverifiedShow Answer

Which type of income contributes the smallest share to total income in the U.S.?

Correct AnswerverifiedShow Answer

Interest rates of various loans vary over a wide range due to differences in all of the following, except

Correct AnswerverifiedShow Answer

One effect of a usury law is that it will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the market for loanable funds,

Correct AnswerverifiedShow Answer

(Consider This) Entrepreneurs' singular focus on profit

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Some countries have negative nominal interest rates.Which of the following statements about this situation is not true?

Correct AnswerverifiedShow Answer

The reason why socialists favor the nationalization of land is that

Correct AnswerverifiedShow Answer

Other things equal, the interest rate on a loan will be larger,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Profits account for a smaller share of total U.S.income than interest income.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

(Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425) .The interest rate on this loan is about

Correct AnswerverifiedShow Answer

Landowners will not receive any rent so long as

Correct AnswerverifiedShow Answer

A normal profit is

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

Economic profit affects

Correct AnswerverifiedShow Answer

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