18–41
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C. 50 percent
D. 80 percent
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
D iff ic ul ty : 01 Easy
Learning Objective: 18-07 List the share of U.S. earnings received by each of the factors of
production.
Test Bank: I
T o p i c : Income Shares
92. If labor’s share of the income paid to American resource suppliers is broadly defined as the
sum of wages and salaries and proprietors’ income, we can say that labor’s relative share has
D. decreased because of the decline of unionism.
93. Capitalist income (corporate profits, interest, and rent) has
D. fallen since 1900 because of the declining importance of corporations.
94. Defined narrowly as wages and salaries, labor’s share of the national income is about
A. 70 percent.
95. (Consider This) The story about economist Irving Fisher’s conversation with his masseuse
illustrates that
A. other things equal, interest rates are higher on smaller loans than on larger loans.
96. (Consider This) The story about economist Irving Fisher’s conversation with his masseuse
illustrates that interest payments arise because of
A. the possibility of inflation.
18–43
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written consent of McGraw-Hill Education.
Di fficu lty: 02 Medium
Learning Objective: 18-04 Demonstrate how interest rates relate to the time-value of money.
Test Bank: I
T o p i c : Time-Value of Money
97. (Consider This) Entrepreneurs’ singular focus on profit
A. often comes at the expense of efficiency.
98. (Consider This) Entrepreneurs’ focus on profit encourages efficiency
A. at the expense of employees.
99. (Last Word) Suppose you borrow $500 and agree to pay this $500 plus $75 of interest at
the end of a year. The interest rate is
A. 10 percent.
100. (Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest
at the time the loan is made (giving the borrower only $425). The interest rate on this loan is
about
A. 12.5 percent.
101. (Last Word) Suppose you deposit $5,000 in a bank that pays 10 percent interest
compounded twice a year. The actual annual interest rate you receive is
A. 10 percent.
18–45
102. (Last Word) Late payment fees and overdraft protection
A. are illegal under the Truth in Lending Act.
True / False Questions
103. Demand is the active and supply the passive determinant of land rent.
104. Different rents on land reflect differences in the marginal revenue product of land.
105. The free-land era of U.S. history reflected a situation in which the quantity of land
available at a zero price exceeded the quantity of land demanded.
106. Rent performs an incentive function, but no rationing function.
107. The interest rate is the price paid for the use of money.
108. Unlike most demand curves, the demand curve for loanable funds is upsloping.
18–47
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written consent of McGraw-Hill Education.
Di fficu lty: 02 Medium
Learning Objective: 18-03 Explain the loanable funds theory of interest rates.
Test Bank: I
T o p i c : Loanable Funds Theory of Interest Rates
109. Present value is the amount to which some current amount of money will grow as interest
compounds over time.
110. 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.
111. The future value of $3,000 deposited today at 5 percent interest is $3,646.52 four years
from now.
112. The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years
from now.
113. Other things equal, the shorter the loan period and the larger the loan size, the higher is the
interest rate charged by the lender.
114. The supply of loanable funds is perfectly elastic.
115. Economic profits are the salaries received by the hired managers of business corporations.
18–49
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written consent of McGraw-Hill Education.
Blooms: Understand
Di fficu lty: 02 Medium
Learning Objective: 18-06 Relate why economic profits occur, and how profits, along with
losses, allocate resources among alternative uses.
Test Bank: I
T o p i c : Economic Profit
116. The basic function of profits and losses is to allocate society‘s scarce resources to their
highest valued uses.
117. Economic profits are the entrepreneur’s reward for taking on the insurable risks of running
a business.
118. Broadly defined, labor’s share of national income has been remarkably stable since 1900.
18–50
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written consent of McGraw-Hill Education.
production.
Test Bank: I
T o p i c : Income Shares
Multiple Choice Questions
119. If a factor of production has no production cost and has a fixed supply, then payments to
that factor constitute what economists call
A. abnormal profits.
120. The characteristic that makes economic rent distinct from wages, interest, and profit is that
it is
D. makes the supply of the resource increase if its rent rises.
121. Which of the following resources is a “free and nonreproducible gift of nature”?
A. labor
18–51
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
Di fficu lty: 02 Medium
Learning Objective: 18-01 Explain the nature of economic rent and how it is determined.
Test Bank: II
Topic: Economic Rent
122. Which of the following factors is not a typical cause of changes in land rent?
A. demand for land
123.
What line in the graph would best represent the supply curve for land?
A. 1
18–52
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di fficu lty: 02 Medium
Learning Objective: 18-01 Explain the nature of economic rent and how it is determined.
Test Bank: II
Topic: Economic Rent
124.
Resource Supply
Demand
Price
A
B
C
D
100
$1
20
40
60
60
80
2
40
60
60
80
60
3
60
80
60
90
40
4
80
100
60
100
Refer to the demand schedule and possible supply schedules, A–D. There would be no
incentive function performed by price in which of the given resource supply schedules?
A. A
125.
Resource Supply
Demand
Price
A
B
C
D
100
$1
20
40
60
60
80
2
40
60
60
80
60
3
60
80
60
90
40
4
80
100
60
100
Refer to the demand schedule and possible supply schedules, A–D. Suppose that price
influences the availability of the economic resource, and the equilibrium price is $2. Which
resource supply schedule would apply in this case?
A. A
126.
Resource Supply
Demand
Price
A
B
C
D
100
$1
20
40
60
60
80
2
40
60
60
80
60
3
60
80
60
90
40
4
80
100
60
100
Refer to the demand schedule and possible supply schedules, A–D. Suppose that the supply of a
resource is given by the schedule that exhibits a zero price elasticity. If demand for the resource
increases from the original demand schedule by 20 units at each price, then the equilibrium
economic rent would be
D. $1.
18–54
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written consent of McGraw-Hill Education.
Topic: Economic Rent
127. Which of the following does not explain differences in rent for different parcels of land?
A. productivity differences
D. marginal-revenue-product differences
128. If the payment to an input is pure economic rent, then reducing that payment will
D. decrease the demand for the input.
129. The supply curve for a productive resource wherein price provides an incentive function is
A. vertical.
18–55
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written consent of McGraw-Hill Education.
Test Bank: II
Topic: Economic Rent
130. The aggregate economic rent received by a productive resource will decrease, ceteris
paribus, whenever the
D. supply curve shifts to the right.
131. Which of the following resource payments is considered by economists as surplus
payments?
A. wages for labor
132. Which of the following statements is correct?
A. Rent performs an incentive function, but not a rationing function.
18–56
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written consent of McGraw-Hill Education.
Blooms: Understand
Di fficu lty: 02 Medium
Learning Objective: 18–01 Explain the nature of economic rent and how it is determined.
Test Bank: II
Topic: Economic Rent
133. David Ricardo, a nineteenth-century economist, wrote, “The price of corn is high not
because a rent is paid, but a rent is paid because the price of the corn is high.” Which of the
following correctly explains Ricardo’s assertion?
A. The high rents landowners charge tenant farmers cause high corn prices.
tenant farmers to stop growing corn.
134. The reason why socialists favor the nationalization of land is that
A. land is a scarce resource.
135. Opponents of land nationalization argue that private ownership
18–57
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written consent of McGraw-Hill Education.
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.
136. In a market system, private ownership of land does not lead to which of the following
results?
D. Private land ownership aids economic growth because land rents reflect changes in tastes
and technologies.
137. The prices paid to a productive resource usually perform an incentive function except with
what resource?
D. entrepreneurial ability
138. In Progress and Poverty (1879), Henry George argued for
A. a progressive income tax.
139. Which of the following was not a belief of Henry George and the single-tax movement?
140. Henry George claimed that land-rent taxes would not impair economic efficiency because
D. rents represent a small part of income paid to American resource suppliers, so taxes on
wages and salaries are more disruptive.
18–59
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written consent of McGraw-Hill Education.
Di fficu lty: 02 Medium
Learning Objective: 18–01 Explain the nature of economic rent and how it is determined.
Test Bank: II
Topic: Economic Rent
141. Which of the following is not a major criticism of the single-tax movement?
A. It is impractical because most income payments are a mixture of interest, rent, wages, and
profits.
142.
Pure Land Rent, Per Acre
Land Demanded, Acres
$500
100,000
400
200,000
300
300,000
200
400,000
100
500,000
50
600,000
Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the
demand for this land is given in the table. What will be the equilibrium economic rent per acre?
A. $100
18–60
143.
Pure Land Rent, Per Acre
Land Demanded, Acres
$500
100,000
400
200,000
300
300,000
200
400,000
100
500,000
50
600,000
Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the
demand for this land is given in the table. How much of the farmland will be rented?
A. 200,000 acres
144.
Pure Land Rent, Per Acre
Land Demanded, Acres
$500
100,000
400
200,000
300
300,000
200
400,000