Question 1

Which of the following was not a belief of Henry George and the single-tax movement?

Accepted Answer

A)   Rental income is unfair because landlords do not really earn it from any productive effort.
B)   Rental income should be taxed heavily and should be the primary source of revenues for the government.
C)   Taxing rental income would adversely affect allocative efficiency because the tax would change how landlords use their land.
D)   The single tax on rent would not adversely affect society's productive efficiency.E) A) and C)
F) None of the above

Question 2

As viewed by society, economic rent is not a cost but rather a surplus payment.

Accepted Answer

A) True 
 B)False

Question 3

Economists would not consider which one of the following to be a productive economic resource?

Accepted Answer

A)   land
B)   capital goods
C)   money
D)   entrepreneurshipE) A) and B)
F) B) and D)

Question 4

An increase in the demand for loanable funds may be caused by a(n)

Accepted Answer

A)   increase in the availability of loanable funds.
B)   increase in consumers' willingness to save.
C)   increase in business borrowing.
D)   decrease in the interest rate.E) A) and B)
F) A) and C)

Question 5

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) A) and B)
F) A) and C)

Question 6

"Pure rate of interest" refers to the interest rate that

Accepted Answer

A)   borrowers pay to lenders in their own family or circle of close friends.
B)   serves solely as payment to lenders for giving up current use of their funds.
C)   is the difference between the actual rate and the theoretical rate.
D)   measures the compensation to lenders for taking on the risks involved.E) A) and B)
F) A) and C)

Question 7

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) C) and D)
F) B) and D)

Question 8

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) B) and D)
F) B) and C)

Question 9

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) None of the above
F) B) and D)

Question 10

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) A) and B)
F) A) and C)

Question 11

The aggregate economic rent received by a productive resource will decrease, ceteris paribus, whenever the

Accepted Answer

A)   demand for the resource increases.
B)   price of the resource decreases.
C)   demand for the resource decreases.
D)   supply curve shifts to the right.E) B) and C)
F) A) and D)

Question 12

The characteristic that makes economic rent distinct from wages, interest, and profit is that it is

Accepted Answer

A)   payment for a resource that is completely fixed in total supply.
B)   always expressed in dollars, never in percent.
C)   fixed by annual or monthly contracts.
D)   makes the supply of the resource increase if its rent rises.E) A) and B)
F) B) and D)

Question 13

Profit-maximizing businesses will buy more new machinery only if

Accepted Answer

A)   the interest rate increases.
B)   labor costs are low and expected to fall.
C)   the expected rate of return of the new machinery is greater than the interest rate.
D)   the present value of the new machinery is lower than its purchase price.E) A) and B)
F) A) and C)

Question 14

The demand for loanable funds is downsloping

Accepted Answer

A)   because businesses find that more investments are profitable at low interest rates than at high interest rates.
B)   because households are willing to save more at high interest rates than at low interest rates.
C)   only when the nominal interest rate exceeds the real interest rate.
D)   because the amount of profitable business investment varies directly with the interest rate.E) A) and D)
F) C) and D)

Question 15

Entrepreneurs can generate economic profits by all of the following, except

Accepted Answer

A)   developing popular new products.
B)   reducing production costs below rivals' costs.
C)   creating and maintaining monopoly power.
D)   laying off workers in order to cut costs.E) C) and D)
F) None of the above D

Question 16

The marginal revenue product (MRP)  of land declines as more land is brought into use. As a result, the

Accepted Answer

A)   demand curve for land is downsloping.
B)   demand curve for land is upsloping.
C)   supply curve for land is downsloping.
D)   supply curve for land is upsloping.E) A) and D)
F) All of the above

Question 17

Demand is the active and supply the passive determinant of land rent.

Accepted Answer

A) True 
 B)False

Question 18

Interest represents a cost to the borrower, but an income to the lender.

Accepted Answer

A) True 
 B)False  True

Question 19

A decrease in saving that leads to an increase in the interest rate will

Accepted Answer

A)   decrease the amount of investment spending.
B)   only result in a surplus of loanable funds.
C)   shift the demand for loanable funds to the right, increasing net investment.
D)   shift the demand for loanable funds to the left, causing a decrease in investment.E) C) and D)
F) All of the above A

Question 20

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) None of the above
F) A) and C)

Exam 18: Rent, Interest, and Profit

Which of the following was not a belief of Henry George and the single-tax movement?

Correct AnswerverifiedShow Answer

As viewed by society, economic rent is not a cost but rather a surplus payment.

Correct AnswerverifiedShow Answer

Economists would not consider which one of the following to be a productive economic resource?

Correct AnswerverifiedShow Answer

An increase in the demand for loanable funds may be caused by a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

"Pure rate of interest" refers to the interest rate that

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

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

Correct AnswerverifiedShow Answer

Usury laws

Correct AnswerverifiedShow Answer

The equilibrium interest rate equates

Correct AnswerverifiedShow Answer

The aggregate economic rent received by a productive resource will decrease, ceteris paribus, whenever the

Correct AnswerverifiedShow Answer

The characteristic that makes economic rent distinct from wages, interest, and profit is that it is

Correct AnswerverifiedShow Answer

Profit-maximizing businesses will buy more new machinery only if

Correct AnswerverifiedShow Answer

The demand for loanable funds is downsloping

Correct AnswerverifiedShow Answer

Entrepreneurs can generate economic profits by all of the following, except

Correct AnswerverifiedD

The marginal revenue product (MRP) of land declines as more land is brought into use. As a result, the

Correct AnswerverifiedShow Answer

Demand is the active and supply the passive determinant of land rent.

Correct AnswerverifiedShow Answer

Interest represents a cost to the borrower, but an income to the lender.

Correct AnswerverifiedTrue

A decrease in saving that leads to an increase in the interest rate will

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

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D

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True

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A

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