How does the economists use of the term rent differ from everyday usage Explain: Though

How does the economists use of the term rent differ from everyday usage? Explain: Though rent need not be paid by society to make land available, rental payments are useful in guiding land into the most productive uses. LO18.1

Explain why economic rent is a surplus payment when viewed by the economy as a whole but a cost of production from the standpoint of individual firms and industries. Explain: Land rent performs no incentive function for the overall economy. LO18.1

How does Henry Georges proposal for a single tax on land relate to the elasticity of the supply of land? Why are there so few remaining advocates of Georges proposal? LO18.1

If money is not an economic resource, why is interest paid and received for its use? What considerations account for the factthat interest rates differ greatly on various types of loans? Use those considerations to explain the relative sizes of the interest rates on the following: LO18.2 a. A 10-year $1,000 government bond. b. A $20 pawnshop loan. c. A 30-year mortgage loan on a $175,000 house. d. A 24-month $12,000 commercial bank loan to finance the purchase of an automobile. e. A 60-day $100 loan from a personal finance company.

Why is the supply of loanable funds upsloping? Why is the demand for loanable funds downsloping? Explain the equilibrium interest rate. List some factors that might cause it to change. LO18.3

Here is the deal: You can pay your college tuition at the beginning of the academic year or the same amount at the end of the academic year. You either already have the money in an interestbearing account or will have to borrow it. Deal, or no deal? Explain your financial reasoning. Relate your answer to the time-value of money, present value, and future value. LO18.4

What are the major economic functions of the interest rate? How might the fact that many businesses finance their investment activities internally affect the efficiency with which the interest rate performs its functions? LO18.5

Distinguish between nominal and real interest rates. Which is more relevant in making investment and R&D decisions? If the nominal interest rate is 12 percent and the inflation rate is 8 percent, what is the real rate of interest? LO18.5

Historically, usury laws that put below-equilibrium ceilings on interest rates have been used by some states to make creditavailable to poor people who could not otherwise afford to borrow. Critics contend that poor people are those most likely to be hurt by such laws. Which view is correct? LO18.5

How do the concepts of accounting profit and economic profit differ? Why is economic profit smaller than accounting profit? What are the three basic sources of economic profit? Classify each of the following according to those sources: LO18.6 a. A firms profit from developing and patenting a new medication that greatly reduces cholesterol and thus diminishes the likelihood of heart disease and stroke. b. A restaurants profit that results from the completion of a new highway past its door. c. The profit received by a firm due to an unanticipated change in consumer tastes.

Why is the distinction between insurable and uninsurable risks significant for the theory of profit? Carefully evaluate: All economic profit can be traced to either uncertainty or the desire to avoid it. What are the major functions of economic profit? LO18.6

What is the combined rent, interest, and profit share of the income earned by Americans in a typical year if proprietors income is included within the labor (wage) share? LO18.7

last word Assume that you borrow $5,000, and you pay back the $5,000 plus $250 in interest at the end of the year. Assuming no inflation, what is the real interest rate? What would the interest rate be if the $250 of interest had been discounted at the time the loan was made? What would the interest rate be if you were required to repay the loan in 12 equal monthly installments?