Deck 29: Rent, interest, and Profit

Question 1

Who wanted to tax away all rent from landlords?

A)David Ricardo
B)Henry George
C)Joseph Schumpeter
D)Frank Knight

Answer 1

B

Question 2

The present value of a dollar received one year from now,given a current interest rate of 10%,is about

A)$.90.
B)$.91.
C)$1.00.
D)$1.09.
E)$1.10.

Answer 2

B

Question 3

Economic rent is paid

A)only to landlords.
B)to resources which would be made available for lower payments.
C)illegally.
D)only in socialist economies.

Answer 3

B

Question 4

Which is not determined by supply and demand?

A)The wage rate
B)The interest rate
C)Rent
D)Profits

Question 5

The supply urban land

A)is fixed.
B)varies from time to time.
C)rises with demand
D)is higher in urban areas than in rural areas.

Question 6

"Profits are a reward for risk-bearing" would be a view held by

A)Joseph Schumpeter.
B)Frank Knight.
C)Henry George.
D)Karl Marx.

Question 7

Henry George advocated each of the following except that

A)all land should be free.
B)all rents should be taxed away.
C)the government should raise all its tax revenue from a single tax on land.
D)since land did not really belong to the landlords,rent was an unearned surplus.

Question 8

In general,a plot of land goes to

A)whomever the government designates.
B)the highest bidder.
C)the person who can make the best use of it.

Question 9

In economics we say the amount of land is

A)fixed.
B)variable.
C)both fixed and variable.
D)neither fixed nor variable.

Question 10

The main factor in determining how much one plot of land is worth relative to another plot is

A)its fertility.
B)the average amount of rainfall.
C)its location.
D)None of the choices are true.

Question 11

A higher rent ________ lead to an increase in the quantity of land supplied.

A)will definitely
B)will probably
C)may
D)will not

Question 12

Henry George thought that

A)landowners deserve the economic rent that their land holdings provide.
B)a single tax on land equal to the unearned surplus that landowners receive would pay for all needed government.
C)economic inefficiency would result from a tax on the unearned surplus that landowners receive annually.
D)landowners bear most of the costs associated with economic growth.

Question 13

__________ sees the entrepreneur as an exploiter of labor.

A)Joseph Schumpeter
B)Frank Knight
C)Henry George
D)Karl Marx

Question 14

Increases in rent are generally due to

A)rises in the supply of land.
B)rises in the MRP of land.
C)declines in the supply of land.
D)declines in the MRP of lanD.

Question 15

Which statement is true?

A)As rents rise more marginal land is used.
B)As rents rise less marginal land is used.
C)Land is basically free.We pay rent for the buildings that are situated on the land.
D)None of the statements are true.

Question 16

Which statement is true?

A)The supply of loanable funds is less elastic than the supply of land.
B)The supply of loanable funds is more elastic than the supply of land.
C)The supply of loanable funds is as elastic as the supply of land.

Question 17

A change in rent will be brought about by a change in

A)the supply of land.
B)the demand for land.
C)both the supply of and the demand for land.
D)neither the supply of nor the demand for lanD.

Question 18

Which statement is true?

A)Stores charge high prices because they have to pay high rents.
B)A firm's demand for land is derived from a firm's MRP curve for land.
C)The supply of land varies from year to year.
D)None of the statements are true.

Question 19

As the demand for land rises

A)rents rise and more marginal land comes into use.
B)rents fall and more marginal land comes into use.
C)rents rise and more land becomes marginal.
D)rents fall and more land becomes marginal.

Question 20

Profits are

A)less than 10% of national income.
B)a little more than 20% of national income.
C)almost 50% of national income.
D)over 60% of national income.

Question 21

Economic rents

A)accrue only to land.
B)accrue only to labor.
C)accrue only to entrepreneurs.
D)can accrue to any resource.

Question 22

Changes in rent on a plot of land are chiefly due to

A)changes in demand.
B)changes in supply.
C)changes in both demand and supply.
D)changes in neither supply nor demanD.

Question 23

The marginal revenue product schedule for land refers to

A)a firm's demand for land.
B)the final demand for land.
C)the firm's supply of land.
D)the marginal physical product schedule for lanD.

Question 24

Which of the following in NOT a source of profit?

A)Innovation
B)Wages
C)Exercise of monopoly power
D)Risk taking

Question 25

All of the following would agree that rent should not be paid to landlords except

A)many biblical prophets.
B)Pierre Joseph Proudhon.
C)Henry George.
D)most economists.

Question 26

The single-tax movement,headed by Henry George,refers to the idea that

A)taxes on rent are less costly to administer than other taxes.
B)rent is a surplus that can be taxed without distorting resource allocation.
C)rent should not be taxed because it is a free gift of nature.
D)rent is based on a derived demand and should not be taxeD.

Question 27

The present value of $100 received 3 years from now given a current interest rate of 6% is

A)$82.00.
B)$83.96.
C)$100.00.
D)$116.00.
E)$118.00.

Question 28

In general the present value of $1,000 received in the future will

A)be independent of the market rate of interest.
B)be lower,the higher the market rate of interest.
C)be lower,the lower the market rate of interest.
D)worth the same whether received one year from today or two years from today.

Question 29

Which statement is true?

A)Rent and wages,but not interest,are determined by supply and demand.
B)Wages and interest,but not rent,are determined by supply and demand.
C)Rent and interest,but not wages,are determined by supply and demand.
D)Rent,interest,and wages are determined by supply and demanD.

Question 30

Which statement is true?

A)Frank Knight believed that capital is surplus value that has been stolen from the worker.
B)Joseph Schumpeter believed that risk-bearing is no part of the entrepreneurial function.
C)Karl Marx believed that profits were the capitalist's reward for innovation.
D)None of the statements are true.

Question 31

Which statement is false?

A)The most important determinant of the value of an acre of land is its location.
B)The supply of land is virtually fixed.
C)Land is not a resource;only the minerals that are found under it are resources.
D)A firm's demand for land is its marginal revenue product schedule for lanD.
E)None of the statements is false.

Question 32

Frank Knight's theory of profit focuses on ______ and Joseph Schumpeter's theory of profit focuses on ______.

A)risk bearing;innovation
B)innovation;risk bearing
C)risk bearing;risk bearing
D)innovation;innovation

Question 33

Which statement is true?

A)Rent,but not the interest rate is determined by supply and demand.
B)The interest rate,but not rent,is determined by supply and demand.
C)Both rent and the interest rate are determined by supply and demand.
D)Neither rent nor the interest rate is determined by supply and demanD.

Question 34

If Bristol-Myers Squibb discovered a miracle drug that cured some forms of cancer,which theory would apply to the profits it earned?

A)Reward for innovation.
B)Reward for risk-taking.
C)Monopoly profits.
D)All of choices are true.

Question 35

Given the market rate of interest,the present value of $10,000 to be received after a period of 5 years

A)will be more than the present value of $10,000 to be received after a period of 4 years.
B)will be less than the present value of $10,000 to be received after a period of 6 years.
C)will be more than the present value of $10,000 to be received after a period of 6 years.
D)will be the same as the present value of $10,000 to be received after a period of 6 years.
E)will be the same as the present value of $10,000 to be received after a period of 4 years.

Question 36

A shortage of competition is central to the entrepreneur in the ________ theory of profit.

A)risk taker
B)innovator
C)monopolist
D)exploiter of labor

Question 37

The present value of $1000 received 2 years from now given the current rate of interest

A)is less than the present value of $1000 received 1 year from now.
B)is the same as $1000 received 3 years from today.
C)is the same as $1000 received 1 year from today.
D)is less than $1000 received 3 years from today.

Question 38

Frank Knight said that profit

A)is indistinguishable from risk.
B)exists when the probability of a given event cannot be predicted reliably.
C)can be incorporated into the cost structure of production.
D)forces entrepreneurs to make unwise decisions with imperfect information.

Question 39

Changes in land rents in the United States are chiefly the result of

A)changes in the demand for land.
B)increased land fertility.
C)production of new land.
D)changes in the supply of lanD.

Question 40

Who said this? "Who is entitled to the rent of land? The producer of the land without doubt.Who made the land? God.Then,proprietor,retire!"

A)David Ricardo
B)Henry George
C)Pierre Joseph Proudhon
D)Joseph Schumpeter
E)Frank Knight

Question 41

Usury laws are popular with _______.

A)the public and with economists
B)the public,but not with economists
C)economists,but not with public
D)neither the public nor with economists

Question 42

Which statement is false?

A)Rent is an excellent means of efficiently allocating the use of scarce land.
B)There is a very strong current in economic thought that denies the landlord's claim to rent.
C)"The land shall not be sold forever" is a biblical admonition with which some people still agree.
D)None of the statements is false.

Question 43

The horizontal dotted line is

A)a price ceiling.
B)a price floor.
C)can be either a price ceiling or a price floor.
D)is neither a price ceiling nor a price floor.

Question 44

If the output per acre of land triples,then the productivity of an acre of land

A)has been cut by two-thirds.
B)has been cut by one-third.
C)has stayed about the same.
D)has increaseD.
E)has tripled.

Question 45

Which of these does not interfere with the price mechanism?

A)Usury laws
B)Minimum wage laws
C)Farm price supports,or price floors
D)The law of supply and demand

Question 46

The horizontal dotted line is

A)a price ceiling.
B)a price floor.
C)can be either a price ceiling or a price floor.
D)is neither a price ceiling nor a price floor.

Question 47

Usury laws lead to

A)a surplus of loanable funds.
B)a shortage of loanable funds.
C)a floor under interest rates.
D)more lenders than borrowers.

Question 48

Which statement is true?

A)Usury laws hurt borrowers by forcing them to pay very high interest rates.
B)Usury laws hurt borrowers by preventing them from getting loans,albeit at higher rates of interest.
C)Usury laws hurt borrowers by making them into lenders.
D)Usury laws do not hurt borrowers.

Question 49

If there were no usury law the quantity of money borrowed would be $________ billion.

A)125
B)250
C)275
D)300
E)400

Question 50

Usury is considered the charging of

A)higher interest rates than people are willing to pay.
B)lower interest rates than people are willing to pay.
C)unconscionably high interest rates.
D)extremely low rates of interest.

Question 51

If there were no usury law the interest rate would be _________%.

A)6
B)12
C)18
D)24
E)30

Question 52

Who said this: "The most hated sort,with the greatest reason,is usury,which makes a gain out of money itself,and not from the natural objects of it.For money was intended to be used in exchange,but not to increase at interest.....of all modes of getting wealth this is the most unnatural."

A)Aristotle
B)Moses
C)Benjamin Franklin
D)Frank Knight
E)Joseph Schumpeter

Question 53

Which statement is true?

A)Joseph Schumpeter said,"risk bearing is no part of the entrepreneurial function."
B)Benjamin Franklin said,"It is better to borrow than to lend."
C)Aristotle said,"the fair rate of interest is exactly what the market will bear."
D)David Ricardo said,"the landlord's return,rent,should be taxed away by the government."

Question 54

If there were no usury law the interest rate would be ________%.

A)under 18
B)18
C)22
D)24
E)28

Question 55

During a time of very tight credit,if usury laws were passed,

A)interest rates would tend to be lower.
B)interest rates would not be affected.
C)interest rates would tend to be higher.

Question 56

Which statement is true?

A)Usury laws hurt some borrowers,but don't interfere with the price mechanism.
B)Usury laws hurt some borrowers and interfere with the price mechanism.
C)Usury laws interfere with the price mechanism,but don't hurt borrowers.
D)Usury laws neither interfere with the price mechanism,nor hurt borrowers.

Question 57

If there were no usury law the quantity of money borrowed would be $_______ billion.

A)80
B)110
C)130
D)140
E)160

Question 58

If the dotted horizontal line represents the effect of a usury law then there is a ____ of loanable funds of _____ billion dollars.

A)surplus;275
B)shortage;275
C)surplus;400
D)shortage;400

Question 59

If the dotted horizontal line represents the effect of a usury law then there is a _____ of loanable funds of _________ billion dollars.

A)surplus;50
B)shortage;50
C)surplus;110
D)shortage;110

Question 60

Which statement is true?

A)Usury laws enable banks to charge higher credit card interest than the price mechanism would allow.
B)Usury laws prevent banks from charging higher credit card interest rates that the price mechanism would allow.
C)Usury laws have never had any effect on how much interest is charged.
D)None of the statements is true.

Question 61

If there were no usury law,the interest rate would be _________%.

A)18
B)20
C)23
D)26
E)28

Question 62

Statement I.Prices are high because rents are high.
Statement II.The supply of land is relatively elastic.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 63

Which is the most accurate statement?

A)Fringe and sub-prime lending should be outlawed.
B)Poor people cannot get loans in the United States.
C)Payday lenders like the Military Financial Network make low interest loans to our military personnel.
D)When poor people get personal loans,they usually pay much higher interest rates than the average American.

Question 64

In 2009 total profits (corporate pretax profits and proprietors;income)were over $________ billion.

A)500
B)1500
C)2000
D)3000
E)3500

Question 65

The present value of a dollar rises as

A)the interest rate declines and the number of years you wait for your money declines.
B)the interest rate rises and the number of years you wait for your money rises.
C)the interest rate declines and the number of years you wait for your money rises.
D)the interest rate rises and the number of years you wait for your money declines.

Question 66

Congress passed a law effective in October 2007 which:

A)placed a 36 percent maximum of payday loans.
B)placed a 36 percent maximum of payday loans made to active duty personnel and their families.
C)released all restrictions on interest rates charged by payday loan companies.
D)restricted payday loan companies from operating in 15 states.

Question 67

With this usury law in effect there is a _______ of $________ billion.

A)surplus;10
B)surplus;20
C)shortage;10
D)shortage;20

Question 68

As the demand for land falls

A)rents rise and more marginal land comes into use.
B)rents fall and less marginal land is used.
C)rents rise and less marginal land is used.
D)rents fall and more marginal land comes into use.

Question 69

Statement I: Sometimes land (as a factor of production)is confused with what is built on it.
Statement II: There is a finite amount of land.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 70

The forces of demand and supply determine each of these except

A)the interest rate.
B)the profit rate.
C)rent.

Question 71

Which statement is true?

A)Total profits (corporate pretax profits and proprietors' income)is about one third of GDP.
B)Profits,like rent and interest,are determined by supply and demand.
C)There is more agreement among economists about a theory of profit determination than a theory of interest rate determination.
D)Total profits (corporate pretax profits and proprietors' income)is about one sixth of GDP.

Question 72

About how much is the present value of $1 that will be paid to you in 3 years if the interest rate were 5%?

A)$1.14
B)$1.05
C)$1.00
D)$.95
E)$.86

Question 73

Which economist believes all profits are derived from the exploitation of workers?

A)Frank Knight
B)Joseph Schumpeter
C)Karl Marx
D)John Maynard Keynes

Question 74

Statement I.All land has the same economic value.
Statement II.The supply of land varies with demand.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 75

A usury law is a price _______ and leads to a _______ of loanable funds.

A)floor;surplus
B)floor;shortage
C)ceiling;surplus
D)ceiling;shortage

Question 76

The theory of rent formulated by ______ is still used by most economists today.

A)Karl Marx
B)David Ricardo
C)Frank Knight
D)Joseph Schumpeter
E)Pierre-Joseph Proudhon

Question 77

Which statement is false?

A)Rent is an excellent means of efficiently allocating the use of scarce land.
B)Economists dislike the way the price mechanism works because it leads to extremely high rents and interest rates.
C)The interest rate is especially important to long-term investment projects.
D)The projected long-term corporate profits are important when considering investment projects.

Question 78

Which statement is true about the present value of a dollar that will be received n years from now?

A)It is always negative.
B)It is worth less than a dollar received in the future.
C)It is worth more than a dollar received in the future because of inflation.
D)None of the statements is true.

Question 79

During the Great Recession of 2008,which of the following industries generated the greatest profits?

A)Discount stores (Walmart).
B)Oil industry (Exxon).
C)Computer software (Microsoft).
D)Automobile (General Motors).

Question 80

The horizontal dotted line is

A)a price ceiling.
B)a price floor.
C)either a price ceiling or a price floor.
D)neither a price ceiling nor a price floor.