Understanding Economics

Lesson 3: Wealth Distribution:
There IS Such a Thing as Natural Law!

Please read chapters 11 - 18 and the Supplements on Rent and Capital .

1. How does the economic meaning of rent differ from the common usage of the term?            | Text |

2. The rent of land depends upon            | Text |

a. the state of the overall economy.
b. how useful the land is in production.
c. its advantage over freely-available land.
d. the availability of capital.
e. the surrounding community.
3. If labor must resort to land of inferior quality to get it free, what happens to the rents on better lands?            | Supplement |

4. When Henry George writes about the "general rate of wages," he is referring to            | Text |

a. the average wage paid to workers in a particular nation.
b. the legal minimum wage.
c. a wage rate that is secured by collective bargaining.
d. the level of wages required to support a family of four.
e. None of the above.
5. The general rate of wages depends on            | Text |

a the best alternative for self-employment.
b a base wage level set by the government.
c whatever employers can get away with.
d the average level of worker productivity.
6. If a new settler stakes a claim adjacent to an earlier settler,            | Text |

a. conflict is likely.
b. the first settler's land will increase in value.
c. the first settler's life will not change.
d. both will be better off.
7. The term "margin of production" is another way of saying,            | Supplement |

a. "the cost of producing one more unit of wealth."
b. "the limit past which production is no longer profitable."
c. "the place where investment yields the highest return."
d. "the best available opportunity for self-employment."
e. "the outer boundary of an industrial area."
8. What is the relationship of the Law of Rent to the other Laws of Distribution?            | Text |

9. a) What is economic interest?            | Text |

b) What are some returns that are commonly confused with interest?            | Text |

10. What keeps capital owners from making people pay more than the general rate of interest?            | Text |

11. The general rate of interest goes up when            | Text |

a. wages are reduced.
b. the margin of production is pushed outward.
c. the general rate of wages goes up.
d. the central bank raises interest rates.
12. At the margin of production, interest equals            | Text |

a. what people are willing to pay to use capital immediately.
b. rent minus wages.
c. the general rate of wages.
d. the value of additional production due to the use of capital.
13. The value of capital can increase, independently of labor applied to it, if            | Text |

a. overall production is increasing.
b. it is in a form that is naturally capable of increase.
c. it can be taken to a place where people are willing to pay more for it.
d. all af the above
e. b & c, but not a
14. What is the common point at which the general rates of wages, interest and rent are determined?            | Text |