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Karen earned a large income by buying houses when they were selling for relatively low prices, and selling them at a later time when they were selling for relatively high prices. Which of the following theories of profit best describes the reason behind her success?
a.Uncertainty is the source of profits.
b.Profit is the reward for alertness to arbitrage opportunities.
c.Profit is the return to the entrepreneur as innovator.
d.Land is always a source of economic profit.
e.If you work hard enough, you will be rewarded.
172.Risk is
a.different than uncertainty in that the probability of an uncertain event can be estimated whereas the probability of a risky event cannot be.
b.the source of all economic rent.
c.considered a major factor in the theory of profit that emphasizes the entrepreneur as innovator.
d.equal to the probability that an event will occur divided by the probability that the event will not occur.
e.none of the above
173.If a person pays back $2,300 on a loan of $1,900, the interest is __________ and the interest rate is approximately __________ percent.
a.$400; 21.05
b.$2,300; 17.4
c.$400; 17.4
d.$400; 11.4
e.none of the above
174.The producers of good X are earning (positive) economic profits and the producers of good Z are receiving economic losses. A likely consequence is that (in time) resources will be shifted out of producing good Z and into producing good X. Here profit and loss are most closely serving as
a.signals-telling entrepreneurs where resources should be moved.
b.signals-telling entrepreneurs who is a success and who isn't.
c.an accounting device-observed by those who have to pay taxes and those who do not have to pay taxes.
d.signals-telling tax collectors from whom to collect taxes and from whom not to collect taxes.
175.Mario earns profits by developing a product that is unusual, unique, and greatly in demand. Which of the following theories of profit best describes the reason behind his success?
a.Uncertainty is the source of profits.
b.Profit is the reward for alertness to arbitrage opportunities.
c.Profit is the return to the entrepreneur as innovator.
d.Profit is the return for being smart.
e.Profit is the return for being in the right place at the right time.
176.Which of the following is true?
a.As interest rates increase, present values increase.
b.Pure economic rent is a payment to a monopolist for the monopolist's product.
c.Ricardo argued that land rent is price determined, not price determining.
d.The present value of $10,000 in one year, at a 6 percent interest rate, is $9,200.
e.none of the above
177.Which of the following statements is false?
a.Interest would not exist in a barter (moneyless) economy because there is no money in a barter economy.
b.The real interest rate is equal to the nominal interest rate minus the expected inflation rate.
c.The source of monopoly profits is often high barriers to entry.
d.The nominal interest rate will equal the real interest rate only when the expected inflation rate is zero.
178.Which of the following is a theory of the source of profit?
a.uncertainty is the source of profit
b.the alertness to broadly defined arbitrage opportunities is the source of profit
c.the return to the entrepreneur for innovation is the source of profit
d.a and c
e.a, b and c
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