Last exam 3
Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1), (2), and (5), land rent will be:
$0 per acre
Refer to the table representing Kara's bank account. Assuming that $2000 was deposited into her account at the beginning of year 1, the value for cell A is:
$200
An electricity company has the opportunity to use natural gas to generate electricity at a cost of $30 per unit in 2 years. The current market rate is 4 percent. The present value of this cost is about:
$28
Matt fishes for tuna at a cost of $4 per ton. John fishes at a cost of $6 per ton. Each has a 1000 ITQ. The current market price is $8 per ton. What amount could Matt pay John to induce him to sell his ITQ?
$3000
Refer to the above graph. Assume the market for this product is in equilibrium at the intersection D2 and S1. The shift in supply form S1 to S2 is due to an excise tax imposed on the product. How much is the tax per unit of product?
$4
A mining company has the opportunity to extract from a coal reserve this year for a profit of $40 per pound. The current market rate of interest is 5 percent. The present value of this future extraction is
$40
The pure rate of interest is approximated by the:
rate paid on long term government bonds
Which of the following is correct?
real capital is a resource, but money is not
Suppose that in some year nominal interest rates are less than the rate of inflation. This means that:
real interest rates are negative
Capitalist income (corporate profits, interest, and rent) has:
remained approximately constant since 1900
In year 1 the price level is constant and the nominal rate of interest is 6 percent. But in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must:
rise by 3 percentage points
An oil producer discovers an oil supply in Texas that can be pumped for a profit of $50 per barrel now, $60 per barrel in three years, $80 per barrel in five years, or $90 a barrel in seven years. The current market rate of interest is 3 percent. When should the oil producer extract the oil to obtain the most profit per barrel in present value terms?
seven years
2. The real interest rate can be estimated by:
subtracting the rate of inflation from the nominal interest rate.
The demand for farmland will increase if:
technological advances make land more productive
A normal profit is:
the "price" required to retain entrepreneurial talent in some particular line of production
economic profit affects:
the allocation of resources and the level of resource use.
Pure or economic profit is:
the amount by which accounting profits exceed normal profits
The amount to which some current amount of money will grow as interest compounds over time is known as:
the future value of that sum of money.
Which of the following generalizations is false? Other things equal:
the interest rate is less on small loans than on larger loans.
Effective usury law cause:
a shortage of money in money markets
Economic rent refers to the price paid for land and other natural resources that
are fixed in total supply
Which of the above tax schedules is a proportional tax schedule throughout?
C
Data on total water use in the united States since 1950 show that it has:
Increased and then leveled off
Most economists believe that property taxes:
are regressive
If Kelly deposits $10000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawls, how much will Kelly have in her account at the end of 5 years?
$14,693
if the marginal tax rate is 20 percent, by how much must income have increased if your tax bill increases by $300?
$1500
Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is:
$1600
Refer to the table representing Kara's bank account. Assuming that $2000 was deposited into her account at the beginning of year 1, and no further deposits or withdrawals were made, the value for cell B:
$2,420
Jimmy fishes for salmon at a profit of $6000 for his 1000 ITQ. David has one ITQ and fishes for a cost of $5 per ton, but would like to buy more ITQ. The current market price is $10 per ton. What amound could David pay Jimmy to induce him to sell his ITQ?
$4500
On January 1, 2010, alex deposited $5000 into a savings account that pays interest of 5 percent, compounded annually. if he makes no further deposits or withdrawals, how much will Alex have in his account on December 31, 2012 (3 years later)?
$5,788
An oil company has the opportunity to extract oil from a reserve in three years with a per barrel profit of $70 per barrel. The current market rate of interest is 4 percent. The present value of this future extacation is about
$62
About what price per barrel of oil is necessary for biodiesel to become economically viable as an alternative energy source?
$80 per barrel
Refer to the 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), (4)
Refer to the above graph. What will be the quantity extracted if user costs are considered compared to the case where they are not considered?
10 units versus 30 units
Suppose you deposit $5000 in a bank that pays 10 percent interest compounded twice a year. the actual rate you receive is:
10.25 percent
Suppose you borrow $500 plus $75 of interest at the end of a year. The interest rate is:
15%
Approximately what percentage of the world's fisheries in 2009 was over exploited
30 percent
Approximately what percentage of the world's fisheries in 2009 was over exploited?
30 percent
In 2012, total government spending (comprising purchases and transfers) in the U.S>was about:
35 percent of the economy's total output
Refer to tthe diagram above. If box E represents government, box C businessess, box D for resource market, and box B the product market, then government hiring of teachers, soldiers, police, and judges would be illustrated by arrows:
5 and 6
Refer to the above graph. The excise tax on this product as shown in the graph is ultimately paid:
50 percent by consumers and 50 percent by producers
Refer to the table representing Darcy's bank account. Assuming that $1000 was deposited into her account at the beginning of the year 1, and no further deposits or withdrawals were made, what interest rate is being paid on Darcy's account
6 percent
In the graph above S0= supply curve for bourbon (seller's supply) D= demand curve for bourbon St= supply for bourbon plus excise tax on bourbon (effective supply as seen by buyers) Tax= an excise tax on bourbon (of $20 per case)
60 percent by buyers and 40 percent by sellers
Refer to the table representing Darcy's bank account. Assuming that $1000 was deposited into her account at the beginning of year 1, and no further deposits or withdrawals were made, how much interest would darcy in year 2 only?
63.60
Defined narrowly as wages and salaries, labor's share of the national income is about:
70 percent
Which of the above tax schedules is a regressive tax schedule throughout?
A
Which of the following statements about specific excise taxes is true?
A large portion of these taxes are often borne by the sellers, not shifted to the buyers
Energy efficiency requires that we employ:
A mix of energy inputs, some of which are more expensive than others.
If predictions that the world will run out of oil or petroleum in the next century become true, then:
Alternative sources would become viable
Donald fishes for swordfish at a cost of $6 per ton. Ronny fishes at a cost of $4 per ton. Both have one 1000 ITQ and the current market price is $10 per ton. If Donald sold his ITQ to Ronny for $5000, society would benefit from:
An efficiency saving in fishing costs of $2000
Linda fishes for Mahi Mahi at a cost of $10 per ton. tessa fishes at a cost of $8 per ton. Both have one 1000 ITQ and the current market price is $13. If Linda sold her ITQ to Tessa for $4000, society would benefit from:
An efficiency saving in fishing costs of $2000
Linda fishes for mahi mahi at a cost of $10 per ton. Tessa fishes at a cost of $8 per ton. Both have one 1000 ITQ and the current market price is $13. IF linda sold her ITQ to tessa for $4000, society would benefit from:
An efficiency saving in fishing costs of $2000
3. An example of a renewable resource would be:
Aquifers
Negative externalities form energy production should be considered when comparing the cost of an energy source because they:
Are an addition cost of using that source
Which one of the following is a correct description of the relationship between the price of oil and the production of alternative energy sources?
As the price of oil rises, the production of alternative energy sources rises
If a tax is progressive, then:
As the tax base increases, the marginal tax rate is greater than the average tax rate
The total fertility rate of a nation is the:
Average number of children a woman in the nation is expect to have during her lifetime
Under the total allowable catch (TAC) system of fishing:
Biologist deterimne the size of the catch based on sustainable level
Under the total allowable Catch (TAC) system of fishing:
Biologists determine the size of the catch based on sustainable levels
Which of the following statements best illustrates the time-value of money concept?
Bob is willing to forgo receiving $100 today in order to receive $110 next month
Refer to the table representing Darcy's bank account. Assuming that $1000 was deposited into her account at the beginning of year 1, and no further deposits or withdrawals were made, which cell(s) represents the future value of the initial deposit if the money remains in the account for two years?
Cells B and C
3. Other things equal, an increase in the productivity of capital goods will:
increase the demand for loanable funds and increase in productivity of capital goods will:
According to demographers. The "demographic transition" resulting from an increase in living standards follows a pattern of:
Death rates falling ahead of a decline in birth rates
Consider a coal mining company that can mine coal this year or next year. As expected future profits increase, the extraction quantity this year:
Decrases due to a higher user cost
Other thins being equal, the burden of a sales tax on a product will be borne entirely by the producer if
Demand is perfectly elastic
Commercially-run forestry companies that have secure property rights over their trees:
Do not harvest them as soon as possible, and do replant them when they are harvested
The graph above represents the market for a product where D1 and S1 show the initial supply and demand curves, and supply shifts to S2 due to a sales tax. The dead weight loss due to the tax is represented by area
EIG
The demographers predict that the worldwide total fertility rate will decline to one birth per woman per lifetime. If this happens, then:
Each generation will be half as large as the previous one.
which of the following is the larges expenditure item of local governments?
Education
Refer to the diagram. If the supply of loanable funds is S1 and the demand for loanable funds is D1, the equilibrium interest rate and the quantity of funds borrowed will be:
F & A
Refer to the diagram. If the supply of loanable funds is S0 and the demand for loanable funds is D0, the equilbirium interest rate and quantity of funds borrowed will be:
F and C
Consider an oil company that can pump oil from a reserve either this year or next year. As expected future profits decrease, the extraction quantity this year:
Increases due to a lower user cost
A fishery collapse occurs when the
Fishery's population is harvested at a higher rate than it reproduces
In 2011, the governments's total tax revenue as a percent of total output was highest in which of the following nation?
France
Excise taxes of the Federal government include the following items, except:
General sales tax
An example of a nonrenewable resource would be:
Gold ore
Which of the following is not a source of loanabe funds?
Government budget deficits
Refer to the diagram above. If box E represents government, box D the resource market, and box B the product marke, then flows (5) and (7) represent:
Government expenditures
Which of the following nation had the fastest growing area of forested land in the period 2005-2010?
Iceland
In the case of extraction of a nonrenewable resource, when user costs increase, it implies that expected future profits.
Increase, while the amount of current extraction decreases
Data on per capita energy use in the United States since 1950 show that it has:
Increased and then leveled off
Demographers refer to this as the "demographic transition". The reduction in death rates brought about by raising standards of living "causes a temporary population explosion because parents - initially unaware that such a revolutionary change in death rates has taken place - for a while keep having six or more children... to ensure that at least two will survive to adulthood." For which major industrialized country could this statement be used to explain its current population trend
India
"Tragedy of the Commons" points out all of the following, except:
Individual property rights tend to be tragically abused by the owners
Which of the following statements is true? The fertility rates for major industrialized countries in recent years show that Malthus's theory regarding population is:
Invalid because high standards of living have produced lower birthrates
The Federal personal income tax:
Is actually less progressive than official tax schedules would indicate because of various tax exemptions and deductions
What is most likely to happen when no logger owns the property rights to a forest that is open to logging?
It will be over-logged by loggers
The "replacement rate" is the birthrate necessary to:
Keep a nation's population from decreasing
Refer to the above graph. If total costs increase and the price of oil stays at $60, then the firm will extract
Less oil the current year
Data on per capita trash generation in the United States indicate that since 1990 it has:
Leveled off
In recent years, per capita energy use in developed countries such as the United states has:
Leveled off
Sue fishes for cod at a cost of $2 per ton, while Dave fishes at a cost of $4 per ton. Both have one 1000 ITQ at the current market price is $5 per ton. If dave sold his ITQ to sue for $2000, he and sue would
Make the sale because they're both better off
The primary focus of natural resouce economics is to develop policies for harvesting or extracting natural resources that:
Maximize the net benefits
The primary focus of natural resource economics is to develop policies for harvesting or extracting natural resources that:
Maximize the net benefits
In 2012, which of the following sources of energy contributed the larges share in U.S. electricity generation?
Natural gas
Which of the following nations saw a signifiant decline in the amount of land covered by forests in the period 2005-2010?
Nigeria
An electricity company is considering damming a small river to generate electricity at a cost of $160,000 and a profit of $200,000 in 5 years. The current market rate is 5 %. should the company make the investment?
No, the present value of the profit is less than the present value of the cost
An energy company has recently discovered a natural gas reserve. The company can tap this reserve at a cost of $350000 and obtain a profit of $450000 in three years. The current market rate is 15 percent. Should the company make the investment?
No, the present value of the profit is less than the present value of the cost.
2. Joe fishes for swordfish at a cost of $6 per ton. Ronny fishes at $4 per ton. Both have one 1000 ITQ and the current market price is $10 per ton. If joe sold his ITQ to Ronny for $7000, he and Ronny would:
Not make the sale because Joe is etter off and Ronny is not
Linda fishes for mahi mahi at a cost of $10 per ton, while Tessa fishes at a cost of $8 per ton. Both have one 1000 ITQ and the current market price is $13 per ton. If Linda sold her ITQ to Tessa for $3000, she and Tessa would:
Not make the sale because Tessa s better of and Linda is not
Which statement best describes the overall tax and transfer systems of the United States?
Our tax system does not by itself reallocate income: transfer payments help redistribute income form rich to poor
According to Paul Ehrlich's 1968 prediction in the Population Bomb population grow would result in:
Overuse of natural resources leading to famines
The tax which is most difficult to shift to others would be the:
Personal income tax
In 2012, which of the following sources of energy contributed the smallest share in U.S. electricity generation?
Petroleum
The key demand-side factors that cause the depletion of finite natural resources are:
Population and per capita consumption
If users can benefit form conservation, resources will be:
Preserved for future use
Which of the following is the best example of a market failure to conserve a resource resulting from poorly defined property rights?
Preserving elephants in Africa
To control production costs in the face of huge intra-day fluctuations in electricity demand, electricity companies often:
Produce at several plants with different operating costs
A decrease in interest rates:
Raises the present value of a future amount
Future shortages in natural resource markets are not expected to occur widely due to:
Reduced population growth
The following are government activities that are involved in public finance, except
Regulating the activities of firms in the financial sector of the economy
Refer to the above graph. If the current market price rises from $60 to $70 and user costs are not considered, the extraction quantity:
Rises by 10 units to 40 units
The long-run total demand for commodity resources is driven by which of the following forces?
Rising number of people alive and an increasing amount of consumption per person
The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except
Salaries to military personnel, public school teachers, and government inspectors
Which of the following is the most important source of tax revenue for state governments?
Sales and excise taxes
Refer to the above graph. If user costs increase, then the total cost line will:
Shift upward and the extraction cost line will stay the same
Taking into account infant and child mortality, the total fertility rate that this necessary to keep a country's population form falling over time is:
Slightly more than 2 births per woman per lifetime
the world's population increased so rapidly form 1800 to the present day because of higher
Standards of living and lower death rates
"Hydraulic fracking" has led to all of the following except:
Strengthening the argument for subsidizing alternative energy sources
When diamonds are mined in conflict or war-torn areas, there is:
Strong incentive for over-mining
A tax is regressve if it
Takes a smaller percentage of income as income increases
Which of the following countries had the highest fertility rate in 2012?
The United States
Demographers predict that declines in birthrates are in part due to:
The increased expense of raising a child in modern societies
The user cost of nonrenewable resoures is:
The opportunity cost of extracting and selling the resource today instead of in the future.
The equilibrium interest rate equates:
The quantities demanded and supplied of loanable funds.
One major reason why the survival of elephants is threatened is that
There is a lack of incentive for elephant preservation
Governments in certain nations are considering adopting policies to raise their low birthrates because of the concern with having:
Too few workers to support social programs
Based on the fertility-rate calcuations for major industrialized countries, their populations are expected to decline significantly in the coming years because the:
Total fertility rate and the replacement rate
A mining company's extraction costs curve is:
Upward-sloping because the more the company extracts, its marginal extraction costs increases
Which fishery has the greatest market value in terms of its catch?
Walleye pollock
The Key to optimally managing renewable and nonrenewable resources is to design incentive structures that:
Weigh the net benefits of current use with the benefits of future use
The incidence of taxation refers to:
Who in society actually pays the tax
An oil company is considering drilling in the Gulf at a current cost of $300,000 wit an expeted profit of $500,000 in three years. The current market rate is 10 percent. Should the company make the investment?
Yes, the present value of the profit is greater than the present value of the cost
The "time-value of money" refers to the fact that:
a given amount of money is more valuable the sooner it is obtained.
Henry George's single tax movement was based on the argument that:
a high tax on land rent is justified because land rent performs no incentive function
Changes in the equilibrium interest rate will:
affect both the size of the domestic ouput and the allocation of capital goods among industries.
The equilibrium interest rate:
affects both the size of total output and its composition.
The real rate of interest is the interest rate:
after adjustment has been made for inflation
A major purpose of usury laws is to make more funds available to low-income borrowers. Economic analysis suggested that usury laws:
allocate available funds to high-income borrowers.
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.
For all practical purposes, the supply of land is:
almost perfectly inelastic
In the market for loanable funds:
an increase in borrowing for investment will increase the interest rate.
The rent paid for the pasture land used to graze cattle would increase if:
any of these occurred
The demand for loanable funds is downsloping:
because businesses find that ore investments are profitable at low interest rates than at high interest rates.
Refer to the diagrams. Assume that only wheat an 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
Critics of a single tax on land oppose the idea because:
changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents
Other things equal, an increase in the equilibrium interest rate will:
decrease purchases of capital goods and reduce R&D spending.
The marginal revenue product (MRP) of land declines as more land is brought into use. As a result the:
demand curve for land is downsloping
Some economists advocate taxes on land because such taxes:
do not affect the supply of land
A unique characteristic of taxes on economic rents is that such taxes:
do not lead to a reallocation of the resource.
The demand for land is:
downsloping
Economic profit might result from:
dynamic change and uncertainty
Which of the following statements is correct?
economic rent is a price paid for productive land resources whose supply is perficty inelastic
Usury laws:
establish a legal ceiling on interest rates.
Refer to the table representing Darcy's bank account. Assuming that $1000 was deposited into her account at the beginning of ear 1, and no further deposits or withdrawals were made, the $1191 value at the end of year 3 represents the:
future value of the $1000 deposit made at the beginning of year 1
To say that land rent performs no incentive function means that:
higher rental payments will not bring forth a larger quantity of land.
Data on total water used in the United states since 1950 show that
increased and then leveled off
Refer to the 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 delines to S1, the equilibrium interest rate will:
increases from F to G
A Lower equilibrium interest rate:
increases investment, increases total spending, and increases total output.
The incentive function of prices:
indicates that price increases bring forth more of that resource.
what is a tradable fishing limit that gives the holder the right to harvest a given quantity of fish during a given time period?
individual transferable quota
The XYZ corporation can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the:
investment will be profitable
Refer to the table representing Kara's bank account. Assuming that $2000 was deposited into her account at the beginning of year 1, and no further deposits or withdrawals were made, the value for cell E:
is $2,662
Refer to the table representing Kara's bank account. Assuming that $2000 was deposited into her account at the beginning of year 1, and no further deposits or withdrawals were made, the value for cell D:
is $662
Refer to the tabe representing Kara's bank account. Assuming that $2000 was deposited into her account at the beginning of year 1, and no further deposits or withdrawals were made, the interest rate Kara is receiving on her account:
is 10 percent
effective usury laws
keep some low-income people from obtaining credit and loans.
Henry George advocated a single tax on:
land
Other things equal, interest rates are:
lower on less risky loans than on riskier loans.
Economic profit is most closely associated with:
monopoly, innovation, and uninsureable risks.
THe marginal revenue product (MRP) of land delines as more land is brought into production because:
of diminishing returns
A farmer discovers a natural gas reserve on his property. He can extract the natural gas for a profit of $40 per unit now, $55 per unit in one year, $57 per unit in two years and $60 in three years. The current market rate of interest is 6 percent. When should the farer extract the natural gas to obtain the most profit per unit in present value terms?
one year
The total supply of land is
perfectly inelastic
Over-extraction of a resource in the present can occur because:
property rights are not clearly defined
Which of the following is incorrect?
the nominal interest rate is the real interest rate less than the rate of inflation
Economic or pure rent is:
the price paid for the use of land and other non reproducible resources.
Effective usury laws cause:
the quantity of loanable funds demanded to exceed the quantity supplied.
Landowners will not receive any rent so long as:
the supply curve lies entirely to the right of the demand curve.
The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise becaue of:
the time-value of money
The largest single share of all income earned by Americans consists of:
wages and salaries
4. Refer to the diagram. Land:
would be a free resource if demand is D4 or less