Chapter 30 - Rent, Interest, and Profit

1		Which of the following is not determined by supply and demand?
			A)	rent
			B)	interest
			C)	profit
			D)	wages
2		The supply of land at a particular location is
			A)	perfectly elastic.
			B)	elastic.
			C)	inelastic.
			D)	perfectly inelastic.
3		When the lease on a store at Broadway and Main is ending, the landlord tells the store owner that the rent will double. We may conclude that
			A)	the landlord is greedy.
			B)	the demand for that location had doubled (ignoring inflation) since the original lease was signed.
			C)	land around Broadway and main has become more scarce.
			D)	the landlord just doesn't like the store owner.
4		The demand for a parcel of land at the intersection of two highways goes up. This increase in demand results in
			A)	an increase in the price of the land.
			B)	an increase in the quantity of the land.
			C)	an increase in price and quantity.
5		Statement I. The calculation of the economic rent earned by a salaried person is virtually the same as the calculation of the economic rent earned by a landlord. Statement II. The reason a store owner on a busy street charges higher prices than the store owner on a less busy street is because she pays a higher rent.
			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.
6		Which is the most accurate statement?
			A)	The basic economic function of rent is to provide incomes to landlords.
			B)	If landlords could be forced to lower rents, store owners would charge lower prices.
			C)	Rent acts as a guidance mechanism, directing the most productive (i.e., highest-paying) enterprises to the most desirable (i.e., expensive) land.
			D)	Rent is inherently unfair and should be abolished.
7		Statement I. The demand for loanable funds is almost completely inelastic. Statement II. Interest rates are set by the federal government.
			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.
8		What constitutes a "fair" rate of interest was debated by each of the following except
			A)	Aristotle.
			B)	Mosaic laws in the book of Deuteronomy.
			C)	the Church in the Middle Ages.
			D)	the Federal Reserve Board of Governors.
9		When the supply of loanable funds rises, the interest rate ______and the quantity of money lent _____.
			A)	rises, rises
			B)	falls, falls
			C)	rises, falls
			D)	falls, rises
10		An interest rate ceiling keeps interest rates _______ and creates a ___________ of loanable funds.
			A)	down, shortage
			B)	down, surplus
			C)	up, shortage
			D)	up, surplus
11		Statement I. The net productivity of capital is a firm's MRP schedule of capital. Statement II. As the capital cost rises, the net productivity of capital declines.
			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.
12		When the interest rate rises, the value of an asset
			A)	rises.
			B)	falls.
			C)	remains the same.
13		Statement I. A dollar today is worth more than a dollar you will have in the future. Statement II. Profits are determined by supply and 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.
14		As the interest rate falls, the present value of a dollar
			A)	rises.
			B)	falls.
			C)	stays the same.
15		Karl Marx's theory of profits was based on the view that the entrepreneur was a(n)
			A)	risk taker.
			B)	innovator.
			C)	monopolist.
			D)	exploiter of labor.