Question 1

Which of the following does not explain differences in rent for different parcels of land?

Accepted Answer

A)   productivity differences
B)   demand differences
C)   supply-elasticity differences
D)   marginal-revenue-product differencesE) A) and B)
F) All of the above

Question 2

The demand curve for loanable funds represents the behavior of

Accepted Answer

A)   lenders.
B)   savers.
C)   borrowers.
D)   bankers.E) A) and B)
F) A) and D)

Question 3

Entrepreneurs normally do all of the following except

Accepted Answer

A)   taking the initiative in combining other resources to produce goods or services.
B)   making the basic, nonroutine policy decisions for their organization.
C)   bearing the risks involved in introducing new products or production innovations.
D)   getting hired as a top executive in established corporations.E) C) and D)
F) B) and D)

Question 4

Which of the following statements is correct?

Accepted Answer

A)   Rent performs an incentive function, but not a rationing function.
B)   Wage rate does not perform an incentive function in the supply of labor.
C)   Profits are payments to capital resource owners.
D)   Demand is the "active," and supply the "passive," determinant of land rent.E) All of the above
F) A) and D)

Question 5

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 D)
F) B) and C)

Question 6

Which of the following is not a major criticism of the single-tax movement?

Accepted Answer

A)   It is impractical because most income payments are a mixture of interest, rent, wages, and profits.
B)   It is inefficient because the land-rent tax will distort the use of land resources, thereby preventing allocative efficiency.
C)   It is unfair because there are other "unearned" incomes besides land rent, such as capital-gains income.
D)   It is inadequate because current levels of government spending are too big to be sufficiently funded by rent tax alone.E) B) and C)
F) B) and D)

Question 7

Since 1900, the relative share of "wages & salaries, plus proprietors' income" in the total income earned by Americans in a typical year has been about

Accepted Answer

A)   20 percent.
B)   50 percent.
C)   80 percent.
D)   95 percent.E) All of the above
F) C) and D)

Question 8

Reducing the payment of rent to landowners will decrease the quantity of land supplied.

Accepted Answer

A) True 
 B)False

Question 9

The economist who advocated a single tax on land was

Accepted Answer

A)   Adam Smith.
B)   John Maynard Keynes.
C)   Henry George.
D)   Milton Friedman.E) A) and D)
F) C) and D)

Question 10

Opponents of land nationalization argue that private ownership

Accepted Answer

A)   allows rent to function as an efficient allocation mechanism.
B)   is fair in terms of equalizing income distribution.
C)   follows the natural order of things in society.
D)   is consistent with detailed government planning for land use.E) None of the above
F) B) and D)

Question 11

(Consider This)  Entrepreneurs' focus on profit encourages efficiency

Accepted Answer

A)   at the expense of employees.
B)   except in a market system.
C)   when properly regulated by the government.
D)   by encouraging the entrepreneur to use the MB = MC rule for every aspect of the business.E) A) and D)
F) B) and C)

Question 12

Which of the following interest rates is usually the highest?

Accepted Answer

A)   30-year mortgage rate
B)   20-year Treasury bond rate
C)   consumer credit-card rate
D)   prime rate of banksE) A) and D)
F) C) and D)

Question 13

It is most likely that a firm would borrow funds to expand its capital facilities when the

Accepted Answer

A)   pure rate of interest is greater than the real rate of interest.
B)   expected rate of return is greater than the interest rate.
C)   demand for money is greater than the supply of money.
D)   real rate of interest is greater than the nominal rate of interest.E) All of the above
F) None of the above

Question 14

Which expression is used to calculate the future value of an amount of money?

Accepted Answer

A)    Present Value × (1 + interest rate) time
B)   Present Value/(1 + interest rate) time
C)   Present Value × (1 + time) interest rate
D)   (1 + interest rate) time/Present ValueE) A) and C)
F) All of the above

Question 15

Usury laws are a special case of "price floors" applied to the loanable funds market.

Accepted Answer

A) True 
 B)False

Question 16

There will be pressure on the interest rate for loanable funds to increase when

Accepted Answer

A)   supply increases.
B)   demand decreases.
C)   quantity supplied exceeds quantity demanded.
D)   quantity demanded exceeds the quantity supplied.E) B) and C)
F) A) and B)

Question 17

Critics of a single tax on land oppose the idea because

Accepted Answer

A)   it would overtax the population.
B)   changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents.
C)   it would disproportionately tax the richest members of society.
D)   it would cause too much land to be brought out of production.E) B) and C)
F) A) and B)

Question 18

If the interest rate is 10 percent, what is the present value of $25,000 received two years from now?

Accepted Answer

A)   $20,000
B)   $20,661
C)   $30,250
D)   $30,000E) A) and D)
F) C) and D)

Question 19

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 18: Rent, Interest, and Profit

The economist who advocated a single tax on land was

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Usury laws are a special case of "price floors" applied to the loanable funds market.

Correct AnswerverifiedShow Answer

Opponents of land nationalization argue that private ownership

Correct AnswerverifiedShow Answer

In the market for loanable funds,

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If the interest rate is 10 percent, what is the present value of $25,000 received two years from now?

Correct AnswerverifiedShow Answer

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Correct AnswerverifiedShow Answer

Critics of a single tax on land oppose the idea because

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The demand curve for loanable funds represents the behavior of

Correct AnswerverifiedShow Answer

Entrepreneurs normally do all of the following except

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Which expression is used to calculate the future value of an amount of money?

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Which of the following interest rates is usually the highest?

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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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It is most likely that a firm would borrow funds to expand its capital facilities when the

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Which of the following statements is correct?

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Which of the following does not explain differences in rent for different parcels of land?

Correct AnswerverifiedShow Answer

Reducing the payment of rent to landowners will decrease the quantity of land supplied.

Correct AnswerverifiedShow Answer

(Consider This) Entrepreneurs' focus on profit encourages efficiency

Correct AnswerverifiedShow Answer

Since 1900, the relative share of "wages & salaries, plus proprietors' income" in the total income earned by Americans in a typical year has been about

Correct AnswerverifiedShow Answer

Which of the following is not a major criticism of the single-tax movement?

Correct AnswerverifiedShow Answer

There will be pressure on the interest rate for loanable funds to increase when

Correct AnswerverifiedShow Answer

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