1. What does the term “land” refer to in economics and why is it very inelastic in supply?

2. If the interest rate is 4% and you are offered a bond that will pay you $1,000 in two years, but no interest between now and then, what would you be willing to pay for this bond today?

3. What are the different ways in which businesses can acquire financial capital?

4. Why are colleges filled with young people rather than middle-aged individuals? If interest rates rose to over 10%, would this have any impact on the number of people attending college or its composition?

5. What is the difference between physical capital and human capital?

6. What do intellectual property rights protect and why are they important to entrepreneurship?

7. How do times of growth in the general economy encourage capital investments? How do recessions discourage capital investments? What happens to the cost of capital in boom times when the economy is growing? What happens in recessionary times?

8. Brazil spent billions in capital expenditures building new stadiums, roads, and public transportation to host the 2014 World Cup, and billions more in Rio de Janeiro to host the 2016 Summer Olympics. Brazil hoped that the major investment and global exposure from these events would generate future tourism and business investment. Explain how Brazil would use a rate of return approach to determine whether the effort and cost to host these events were worthwhile.

9. Suppose you wish to purchase a corporate bond that offers a coupon rate of 10% in the bond market. On a particular day, you notice the price of the bond listed as greater than “100.” Given this price, would the yield on this bond be greater than or less than 10%? List some possible reasons that would cause the price of the bond to exceed “100.”

10. When a company uses resources to train staff or subsidize tuition for employees, it is clearly investing in human capital. However, this investment is treated as current spending (cost of selling or producing goods) rather than investment. Should these activities be treated as investments and be reflected in the investment statistics of the economy?

11. Does it seem reasonable that a certain portion of the benefits of a college education is essentially a way to show prospective employers that you are reasonably intelligent, trainable, and have a certain degree of discipline?

12. The installation of solar panels is an expensive cost that provides savings over time. If the government passes higher tax deductions to individuals and firms who install solar panels, what will this do to the rate of return on solar panels?

13. Food trucks have become a billion dollar industry, serving creative and often healthy food options in places where traditional food options might be limited. For example, a food truck might stop at a local college campus during lunchtime, then go to an underprivileged district in the afternoon, and finally park near a local club in the evening. What are some advantages that food trucks have over traditional restaurants in terms of their land and capital costs?

14. A growing number of politicians are proposing to eliminate college tuition at public colleges and universities to every admitted student. Some have proposed this policy for two-year institutions, while others support the policy for all public institutions. Discuss the benefits and costs of this proposal in terms of human capital and financial capital.

15. Suppose you win the lottery and are given a choice to collect either the grand prize of $5 million in 10 annual installments of $500,000, or collect an immediate one-time payment of $4 million today. If the interest rate is 5% and that is what you use to discount future earnings, which option should you select to maximize the present value of the winnings?

16. The mayor of your city is considering building a new toll road to reduce congestion. The cost of the toll road is $10 million and is estimated to generate a profit (from tolls collected less expenses collecting the tolls and maintaining the road) of $2 million per year. If the discount rate is 8%, how many years would it take before the road is paid for if future income is discounted? (Hint: Calculate the present value of the annual profit—for year 1, discount $2 million by 8%.)

17. According to By the Numbers, in the year 2015 (the last year for which data are reported), approximately what percentage of high school graduates attended college? Approximately what percentage of college graduates attended a graduate program?

18. According to By the Numbers, by approximately what percentage did venture capital funding rise from its lowest point in 2010 to its peak in 2015?