Ch 18 Microeconomics JTCC

Economic rent, or pure rent, is

• a payment made for the use of housing, factory buildings, or capital goods.

• a payment for resources used in the production of "free goods."

• a payment for the use of those resources whose supply is perfectly elastic.

• 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.

• rent is not a cost to specific firms, but it is a cost from the standpoint of the economy as a whole.

• rent does not allocate land in terms of productive efficiency.

• rent tends to allocate land into the most productive uses.

Economic rent refers to the price paid for land and other natural resources that

• are fixed in total supply.

• vary directly with their market prices.

• vary inversely with their market prices.

• are available in nearly unlimited quantities.

The incentive function of prices

• indicates that price increases bring forth more of that resource.

• is the idea that competitive markets will always clear.

• applies to all resources.

• only applies to land.

The demand for farmland will increase if

• the demand for food decreases.

• technological advances make land more productive.

• the price of farm labor increases and the output effect exceeds the substitution effect.

• the supply of farmland increases.

The rent paid for the pasture land used to graze cattle would increase if

• the productivity of the land increased.

• people decided to consume more beef.

• oil deposits were discovered on the land.

• any of these occurred.

The demand for land is

• perfectly elastic.

• perfectly inelastic.

• upsloping.

• downsloping.

If a factor of production has no production cost and has a fixed supply, then payments to that factor constitute what economists call

• abnormal profits.

• economic rent.

• normal profits.

• interest payments.

Interest is the

• price paid for the use of money.

• opportunity cost of time.

• expectation of a future return on investment.

• reward for consuming rather than saving.

The loanable funds theory of interest shows that interest rates on loans are determined by

• the amount of money supply that the government has pumped into the economy.

• agreement, explicit or tacit, among the bank lending officers.

• supply and demand for funds available for lending.

• government analysts and government regulation.