Question 1

If a farmer faces a drop in the rent he must pay for his land, he will react to this by:
A)dropping the price of his crop.
B)trying to move to a point on the production function where he uses more land and less of other inputs.
C)substituting away from land to inputs with higher marginal products.
D)shifting to another part of the production function where the marginal product of land is higher.
E)increasing the price of his crop.

Accepted Answer

A drop in rent makes land cheaper, so the farmer may use more land and less of other inputs to minimize costs and maximize production efficiency.

Question 2

If you wanted to increase tax revenue most efficiently, you should advocate taxing:
A)goods with inelastic supply.
B)goods with inelastic demand like necessities.
C)inputs with inelastic derived demand curves.
D)inputs with totally inelastic supply.
E)any of the above.

Accepted Answer

E

Question 3

Pure economic rent is the payment to factors of production which:
A)have relatively inelastic supplies and have positive marginal products.
B)are depleted over time and have no external economies.
C)have no substitutes and are produced under perfectly competitive conditions.
D)have fixed supplies and no alternative uses.
E)have fixed supplies with many alternative uses.

Accepted Answer

Pure economic rent is the payment made for the use of land or any other resource that is perfectly inelastic in supply, meaning its supply cannot be increased no matter how much its price rises. This is because these resources have fixed supplies and no alternative uses, making them perfectly inelastic.

Question 4

The derived demand for a factor tends to be inelastic if the demand for the product tends to be:
A)very inelastic.
B)very elastic.
C)moderately elastic.
D)capable of being met by a variety of modes of production.
E)very capricious and volatile.

Accepted Answer

If the demand for the product is very inelastic, it means that consumers are willing to pay a high price for it regardless of changes in its price or other factors. This makes the demand for the factor that produces the product relatively stable and hence inelastic.

Question 5

The basis for Henry George's single-tax program was to tax:
A)all implicit and explicit returns so as to prevent any shifting of the tax.
B)payments to landlords, with no attention to the distorting effects on production.
C)the earned increment of land value, and then to rebate part of the tax back to the landlord.
D)the unearned increment of land value without shifting the tax forward to consumers.
E)all land so as to do away with any neighborhood and externality effects.

Accepted Answer

Henry George's single-tax program was to tax the unearned increment of land value without shifting the tax forward to consumers. This meant that instead of taxing income, sales, or capital, the tax would solely focus on the value that goes up due to external factors such as population growth, development, and public investments. The idea was that this tax would encourage efficient use of land and discourage land speculation.

Question 6

An externality is:
A)an activity that imposes involuntary costs or benefits on others, or an activity whose effects are not completely reflected in its market price.
B)an activity that does not impose involuntary costs or benefits on other, or an activity whose effects are completely reflected in its market price.
C)is not a consideration in economics.
D)none of the above.

Accepted Answer

An externality is an activity that imposes involuntary costs or benefits on others, or an activity whose effects are not completely reflected in its market price. It is an important concept in economics as it can lead to market inefficiencies and the need for government intervention to address the external costs or benefits. Option B is not correct as an externality does impose costs or benefits on others, and its effects are not completely reflected in the market price. Option C is not correct as externalities are an important consideration in economics. Option D is not correct.

Question 7

If a factor of production receives rent, the rent is determined by the:
A)price of the final good.
B)elasticity of the factor's supply.
C)cost of the factor's inputs.
D)price of all other factors.
E)all of the above.

Accepted Answer

The answer of If a factor of production receives rent,...

Question 8

A tax on economic rent would most likely:
A)reduce considerably the supply of land in use.
B)increase greatly the supply of land in use.
C)have little or no effect on the supply of land in use.
D)change the supply of land in use, but not in a predictable way.
E)be shifted forward onto the consumer.

Accepted Answer

A tax on economic rent, which is the income generated by the use of a scarce resource such as land, would not affect the supply of land in use. This is because the supply of land is fixed and cannot be increased or decreased in response to changes in demand or taxation. Therefore, the tax would be borne entirely by the landowner and would not affect the amount or quality of land available for use.

Question 9

Which of the following is not associated with the concept of profit?
A)Rewards for risk-taking.
B)Rewards for innovation.
C)Monopoly returns.
D)Implicit returns to factors supplied by owners.
E)All of the above are related to the concept of profit.

Accepted Answer

All the options (A, B, C, D) are associated with the concept of profit in various ways. Profits can be seen as rewards for risk-taking, innovation, monopoly returns, and implicit returns to factors supplied by owners.

Question 10

"Pure economic rent" exists when the:
A)supply of land is perfectly inelastic.
B)supply of land is perfectly elastic.
C)demand for land is perfectly inelastic.
D)demand for land is perfectly elastic.
E)outright purchase and ownership of land is forbidden by law.

Accepted Answer

Pure economic rent exists when the supply of land is perfectly inelastic, meaning that the quantity of land cannot be increased or decreased regardless of changes in demand for it. In this situation, the price of land is entirely determined by the demand for it, and any increase in demand will result in an increase in the price of land, leading to economic rent for landowners.

Question 11

A commodity is called appropriable when:
A)firms or consumers can capture its full economic value.
B)firms or consumers can not capture its full economic value
C)firms or consumers can capture only a small part of its economic value
D)none of the above.

Accepted Answer

An appropriable commodity is one that firms or consumers can capture its full economic value. This means that they can fully benefit from the ownership or control of the commodity, without losing out on any potential profits or benefits that the commodity may offer. In contrast, non-appropriable commodities are those that cannot be fully owned or controlled by any one party, such as public goods or natural resources with no clear property rights.

Question 12

Which of the following are policies to correct the inefficiencies from externalities?
A)government programs, regulations
B)market solutions, market fees
C)market solutions, tradeable emissions permits
D)all of the above
E)none of the above.

Accepted Answer

All the options listed (government programs, regulations, market solutions, market fees, and tradeable emissions permits) are policies designed to correct inefficiencies caused by externalities. These measures aim to internalize the external costs or benefits associated with economic activities.

Question 13

If you want to maximize tax revenue, you should advocate taxing inputs used in the production of goods:
A)with many substitutes.
B)that are elastically demanded.
C)that are inelastically demanded.
D)that have price elasticities of demand equal to approximately 1 so that total sales are unaffected.
E)with many complements.

Accepted Answer

Inputs that are inelastically demanded are necessary for the production process and cannot be easily substituted, meaning that a tax on these inputs will not significantly decrease their usage. This can lead to higher tax revenue for the government.

Question 14

How does pollution lead to economic inefficiency?
A)damage is done to the factory, requires more maintenance.
B)external damage is done to the surrounding environment.
C)harming the air quality affects society.
D)all of the above.
E)none of the above.

Accepted Answer

Pollution can lead to economic inefficiency in several ways. Firstly, it can cause damage to the factory, which may require more maintenance and repair costs. Secondly, pollution can cause external damage to the surrounding environment, which can lead to additional costs for the company to rectify the damage. Lastly, pollution can harm air quality, which affects society as a whole, and can lead to additional healthcare costs, which ultimately reduce economic efficiency.

Question 15

Appropriable natural resources include:
A)land
B)mineral resources
C)trees
D)all of the above
E)none of the above.

Accepted Answer

Appropriable natural resources are those that can be claimed by an individual or group, and can be used for private benefit. Land, mineral resources, and trees are all examples of appropriable natural resources as they can be owned and used for economic purposes.

Question 16

The charge for the use of the summit of Mt.Everest by a snow cone company (allowing that the sale of snow cones is the only activity the summit is useful for)is an example of:
A)external economies.
B)pure economic rents.
C)backward-bending supply.
D)the law of diminishing returns.
E)none of the above.

Accepted Answer

Pure economic rents refer to the payment made for the use of a scarce resource that has no alternative use. In this case, the summit of Mt.Everest is a scarce resource that has no alternative use except for the sale of snow cones. Therefore, the charge for the use of the summit is an example of pure economic rent.

Question 17

Which of the following was negotiated in 1997 that was a binding commitment to reduce emissions of greenhouse gases?
A)Greenhouse Protocol.
B)Kyoto Protocol.
C)Global Concern Protocol.
D)World Protocol.
E)none of the above.

Accepted Answer

The Kyoto Protocol was negotiated in 1997 as a binding agreement to reduce emissions of greenhouse gases. It was adopted by the United Nations Framework Convention on Climate Change (UNFCCC) and aimed to reduce emissions by an average of 5.2% below 1990 levels from the period of 2008-2012.

Question 18

How does the government enforce a pollution regulation?
A)command and control regulations.
B)no regulations.
C)let firms regulate themselves.
D)provide incentives not to pollute.
E)none of the above.

Accepted Answer

Command and control regulations involve setting specific limits on the amount of pollution a firm can emit and enforcing those limits through inspections and penalties for noncompliance. This is one of the most common methods used by governments to enforce pollution regulations.

Question 19

Which of the following are renewable resources?
A)agricultural land
B)forests
C)solar energy
D)all of the above
E)none of the above.

Accepted Answer

Agricultural land and forests can be managed sustainably and renewable resources of timber and crops can be harvested from them. Solar energy is a renewable resource that is constantly replenished by the sun. Therefore, all of the above are renewable resources.

Question 20

The most important economic function of rental payments for the use of land is to:
A)assure owners of land some return for its use.
B)determine how land will be rationed into different uses.
C)assure an adequate supply of land in the society as a whole.
D)equalize the distribution of factor payments.
E)make sure that there is some land left for future use.

Accepted Answer

Rental payments for the use of land play a crucial role in determining how land is allocated or rationed among various competing uses, based on the willingness and ability of different users to pay for its use. This mechanism helps in the efficient allocation of land resources to their most valued uses.

Quiz 14: Capital, Interest, and Profits Part Four: Applications of Economic Principles

If a farmer faces a drop in the rent he must pay for his land, he will react to this by:

If you wanted to increase tax revenue most efficiently, you should advocate taxing:

Pure economic rent is the payment to factors of production which:

The derived demand for a factor tends to be inelastic if the demand for the product tends to be:

The basis for Henry George's single-tax program was to tax:

An externality is:

If a factor of production receives rent, the rent is determined by the:

A tax on economic rent would most likely:

Which of the following is not associated with the concept of profit?

"Pure economic rent" exists when the:

A commodity is called appropriable when:

Which of the following are policies to correct the inefficiencies from externalities?

If you want to maximize tax revenue, you should advocate taxing inputs used in the production of goods:

How does pollution lead to economic inefficiency?

Appropriable natural resources include:

The charge for the use of the summit of Mt.Everest by a snow cone company (allowing that the sale of snow cones is the only activity the summit is useful for) is an example of:

Which of the following was negotiated in 1997 that was a binding commitment to reduce emissions of greenhouse gases?

How does the government enforce a pollution regulation?

Which of the following are renewable resources?

The most important economic function of rental payments for the use of land is to: