the price paid for the use of land and other nonreproducible resources.
To say that land rent performs no incentive function means that:
higher rental payments will not bring forth a larger quantity of land.
Economic rent refers to the price paid for land and other natural resources that:
are fixed in total supply.
Refer to the above diagram. Land:
would be a free resource if demand is D4 or less.
Refer to the above diagram. If demand is D2, a tax of A per acre will:
not affect the quantity of land available to society.
Refer to the above diagrams. Assume that only wheat can be grown on the three grades of land shown in Figures a, b, and c. Also assume that identical amounts of labor, capital, and other needed inputs are used in farming each grade of land. On the basis of these three figures we:
can say that the land in Figure c is most productive.
Assume that only wheat can be grown on the three grades of land shown in Figures a, b, and c. Also assume that identical amounts of labor, capital, and other needed inputs are used in farming each grade of land. On the basis of these three figures we can say that:
the land shown in Figure (a) only is a "free good."
Refer to the above table, in which the values for columns (2) through (5) are in acres. Positive land rent will occur if the relevant columns are:
(1), (2), and (3) and (1), (2), and (4).
The economist who advocated a single tax on land was:
Interest is the:
price paid for the use of money.
Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is:
The equilibrium interest rate equates:
the quantities demanded and supplied of loanable funds.
The supply curve of loanable funds is upsloping because:
households are willing to save more at high interest rates than they are at low interest rates.
The fact that people prefer present consumption to future consumption results in:
an upsloping supply of loanable funds curve.
Other things equal, an increase in the productivity of capital goods will:
increase the demand for loanable funds and increase the equilibrium interest rate.
Refer to the above diagram. The demand for loanable funds curve D1 slopes downward because:
business will borrow more funds at lower interest rates than at higher ones.
Refer to the above diagram. The supply of loanable funds curve S1 slopes upward because:
at higher interest rates households will make more funds available for lending.
Refer to the above diagram. If the supply of loanable funds is S1 and the demand for loanable funds is D1, the equilibrium interest rate and quantity of funds borrowed will be:
F and A.
Refer to the above diagram. If the supply of loanable funds is S0 and the demand for loanable funds is D0, the equilibrium interest rate and quantity of funds borrowed will be:
F and C.
Refer to the above diagram. Suppose that the demand for loanable funds is D0 and the supply of loanable funds initially is S0. If the supply of loanable funds declines to S1, the equilibrium interest rate will:
increase from F to G.
The pure rate of interest refers to the:
nterest rate paid on virtually riskless long-term bonds
A lower equilibrium interest rate:
increases investment, increases total spending, and increases total output.
The equilibrium interest rate:
allocates the available supply of loanable funds to investment projects that have high enough rates of return to justify the borrowing.
Changes in the equilibrium interest rate will:
affect both the size of the domestic output and the allocation of capital goods among industries.
The real rate of interest is:
the interest rate after adjustment has been made for inflation.
In making an investment decision a business firm is most interested in the:
real interest rate.
establish a legal ceiling on interest rates
In a purely competitive static economy:
economic profit would be zero.
Which of the following represents an uninsurable risk to a business firm?
the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product
The largest single share of all income earned by Americans consists of:
wages and salaries.
Currently capitalist income, that is, corporate profits, interest, and rent, accounts for about what percentage of the income paid to American resource suppliers?
The two main characteristics of a public good are:
nonrivalry and nonexcludability.
Unlike a private good, a public good:
has benefits available to all, including nonpayers.
Which of the following is an example of a public good?
a weather warning system
An example of a public good is:
A public good:
is available to all and cannot be denied to anyone.
The market system does not produce public goods because:
private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.
Because of the free-rider problem:
the market demand for a public good is nonexistent or understated.
At the optimal quantity of a public good:
marginal benefit equals marginal cost.
A demand curve for a public good is determined by:
summing vertically the individual demand curves for the public good
Refer to the above diagrams in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. The collective willingness to pay for the 1st unit of this public good is:
Cost-benefit analysis attempts to:
compare the benefits and costs associated with any economic project or activity.
On the basis of the above data we can say that:
Program B is the most efficient on economic grounds.
A positive externality or spillover benefit occurs when:
the benefits associated with a product exceed those accruing to people who consume it.
Refer to the above diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. Without government interference, this market will result in:
an overallocation of resources to this product.
The Coase theorem states that:
bargaining between private parties will remedy externality problems where property rights are clearly defined, the number of people involved are few, and bargaining costs are small.
The Coase theorem:
suggests that in some circumstances government intervention is not needed to resolve externality problems.
The proposition that under some circumstances externalities can get resolved through private negotiation is known as:
the Coase theorem.
Suppose that a large tree on Betty's property is blocking Chuck's view of the lake below. Betty accepts Chuck's offer to pay Betty $100 for the right to cut down the tree. This situation describes:
the Coase theorem.
Clearly defined property rights and liability rules reduce negative externalities by:
threatening the perpetrators with lawsuits.
The tendency for society to overuse and therefore abuse common resources is called the:
tragedy of the commons.
Depletion of fish stocks through overfishing is a good example of the:
tragedy of the commons.
The creation of markets for pollution rights would provide:
both an incentive not to pollute and revenue which could be devoted to environmental improvement.
The right to buy and sell emission rights for sulfur-dioxide pollution was granted in the:
Clean Air Act of 1990.
The socially optimal amount of pollution abatement occurs where society's marginal:
benefit of abatement equals its marginal cost of abatement.
The marginal benefit to society of reducing pollution declines with increases in pollution abatement because of the law of:
diminishing marginal utility.
Government can promote workplace safety by:
providing workers information about workplace hazards.
Professional buyers of antiques often have more information about the value of antique objects than do the sellers. This illustrates:
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