Question 1

Goods and services produced by the government are sold at prices that are set to recover production costs.

Accepted Answer

A) True 
 B)False  False

Question 2

The statement "Households maximize utility" means that households

Accepted Answer

A) try to be as useful as possible to the economy 
B) are only interested in maximizing their earnings 
C) are assumed to buy useful things before they buy luxuries 
D) are only interested in acquiring material wealth 
E) are assumed to do what they think will increase their satisfaction 
A) try to be as useful as possible to the economy 
B) are only interested in maximizing their earnings 
C) are assumed to buy useful things before they buy luxuries 
D) are only interested in acquiring material wealth 
E) are assumed to do what they think will increase their satisfaction E

Question 3

Two important roles of government in the economy are to safeguard private property and enforce contracts.

Accepted Answer

A) True 
 B)False  True

Question 4

An import quota taxes an import but does not set a limit on how much may be imported.

Accepted Answer

A) True 
 B)False

Question 5

Under a regressive income tax system, individuals with higher incomes pay higher marginal tax rates.

Accepted Answer

A) True 
 B)False

Question 6

A group of farmers in southwestern Pennsylvania selling locally raised natural beef would be identified as a

Accepted Answer

A) not-for-profit organization 
B) S corporation 
C) producer cooperative 
D) sole proprietorship 
E) cottage industry 
A) not-for-profit organization 
B) S corporation 
C) producer cooperative 
D) sole proprietorship 
E) cottage industry

Question 7

Which of the following is one of the chief reasons for the increased number of married women in the U.S.work force?

Accepted Answer

A) The marginal cost of working in the labor force has increased. 
B) Jobs provide greater independence and self-worth. 
C) The opportunity cost of household work has increased. 
D) The sunk cost of household appliances has risen to the point that women must work to make payments on them. 
E) Women spend more time in the market as a result of the increasing division of labor in household production. 
A) The marginal cost of working in the labor force has increased. 
B) Jobs provide greater independence and self-worth. 
C) The opportunity cost of household work has increased. 
D) The sunk cost of household appliances has risen to the point that women must work to make payments on them. 
E) Women spend more time in the market as a result of the increasing division of labor in household production.

Question 8

Nonprofit, or not-for-profit, firms

Accepted Answer

A) maximize revenue instead of profit 
B) minimize cost rather than maximize profit 
C) often pursue goals other than profit maximization 
D) pursue profit as their main goal despite their name 
E) have no incentive to produce efficiently 
A) maximize revenue instead of profit 
B) minimize cost rather than maximize profit 
C) often pursue goals other than profit maximization 
D) pursue profit as their main goal despite their name 
E) have no incentive to produce efficiently

Question 9

The least common form of business organization in the United States is the partnership.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would be the best example of a corporation?

Accepted Answer

A) The legal office of Alias, Smith and Jones 
B) A local mom and pop restaurant 
C) Microsoft 
D) A local hospital 
E) A State University 
A) The legal office of Alias, Smith and Jones 
B) A local mom and pop restaurant 
C) Microsoft 
D) A local hospital 
E) A State University

Question 11

Which of the following is a reason why government is a participant in a market-oriented economy?

Accepted Answer

A) to enforce contracts and protect private property 
B) to promote collusion 
C) to promote the growth of natural monopolies 
D) to provide more inequality in the distribution of income 
E) all of the above 
A) to enforce contracts and protect private property 
B) to promote collusion 
C) to promote the growth of natural monopolies 
D) to provide more inequality in the distribution of income 
E) all of the above

Question 12

Government policies are coercive, whereas markets are not.This implies that

Accepted Answer

A) government activity will always be less efficient than market activity 
B) households cannot maximize utility if they consume any government goods and services 
C) market transactions result in an equal number of gainers and losers 
D) self-interest and public interest are always in conflict 
E) government can provide some goods and services when private markets fail to do so 
A) government activity will always be less efficient than market activity 
B) households cannot maximize utility if they consume any government goods and services 
C) market transactions result in an equal number of gainers and losers 
D) self-interest and public interest are always in conflict 
E) government can provide some goods and services when private markets fail to do so

Question 13

What part of federal government spending has grown the most rapidly in recent years?

Accepted Answer

A) national defense 
B) welfare 
C) interest on the national debt 
D) social security and Medicare 
E) all other forms of federal government spending 
A) national defense 
B) welfare 
C) interest on the national debt 
D) social security and Medicare 
E) all other forms of federal government spending

Question 14

Messitt and McNulty spend $50, 000 each to form a law partnership.On the first day someone trips over a potted plant in their lobby and sues them for $400, 000.Which of the following is true?

Accepted Answer

A) If a $400, 000 judgment is against the partnership, then each partner will have to pay $200, 000. 
B) If a $400, 000 judgment is against the partnership and if McNulty cannot afford to pay any of it, then Messitt is liable for $400, 000. 
C) Messitt's liability is limited to $300, 000 because she owns three quarters of the firm. 
D) Each individual partner cannot be sued for more than $200, 000. 
E) Only McNulty is personally responsible for the damages because he was the one who put the potted plant in the office. 
A) If a $400, 000 judgment is against the partnership, then each partner will have to pay $200, 000. 
B) If a $400, 000 judgment is against the partnership and if McNulty cannot afford to pay any of it, then Messitt is liable for $400, 000. 
C) Messitt's liability is limited to $300, 000 because she owns three quarters of the firm. 
D) Each individual partner cannot be sued for more than $200, 000. 
E) Only McNulty is personally responsible for the damages because he was the one who put the potted plant in the office.

Question 15

Personal income in the United States is primarily determined by selling labor services.

Accepted Answer

A) True 
 B)False

Question 16

A cottage industry is one that

Accepted Answer

A) produces rural housing 
B) takes advantage of the division of labor 
C) uses highly specialized resources in a complex production process 
D) produces cottage cheese 
E) carries out production in workers' homes 
A) produces rural housing 
B) takes advantage of the division of labor 
C) uses highly specialized resources in a complex production process 
D) produces cottage cheese 
E) carries out production in workers' homes

Question 17

In terms of total sales, the dominant form of business firm in the U.S.economy is the

Accepted Answer

A) corporation 
B) sole proprietorship 
C) partnership 
D) nonprofit organization 
E) limited partnership corporation 
A) corporation 
B) sole proprietorship 
C) partnership 
D) nonprofit organization 
E) limited partnership corporation

Question 18

Which of the following is not an example of a business operated by a consumer cooperative?

Accepted Answer

A) grocery store 
B) apartment building 
C) Sunkist, a farm cooperative owned and operated by citrus growers 
D) health plan 
E) electric power facility 
A) grocery store 
B) apartment building 
C) Sunkist, a farm cooperative owned and operated by citrus growers 
D) health plan 
E) electric power facility

Question 19

Household income is spent on all of the following except one.Which is the exception?

Accepted Answer

A) services 
B) tax payments 
C) durable goods 
D) nondurable goods 
E) dividends 
A) services 
B) tax payments 
C) durable goods 
D) nondurable goods 
E) dividends

Question 20

Suppose you own a proprietorship that is in serious financial difficulty.The assets of the company are $100, 000, but liabilities are $175, 000.You also have, however, stock in General Motors worth $200, 000.If you file bankruptcy, what amount of personal assets do you stand to lose?

Accepted Answer

A) $100, 000 
B) $75, 000 
C) $200, 000 
D) $275, 000 
E) $375, 000 
A) $100, 000 
B) $75, 000 
C) $200, 000 
D) $275, 000 
E) $375, 000

Exam 3: Economic Decision Makers

Goods and services produced by the government are sold at prices that are set to recover production costs.

The statement "Households maximize utility" means that households

Two important roles of government in the economy are to safeguard private property and enforce contracts.

An import quota taxes an import but does not set a limit on how much may be imported.

Under a regressive income tax system, individuals with higher incomes pay higher marginal tax rates.

A group of farmers in southwestern Pennsylvania selling locally raised natural beef would be identified as a

Which of the following is one of the chief reasons for the increased number of married women in the U.S.work force?

Nonprofit, or not-for-profit, firms

The least common form of business organization in the United States is the partnership.

Which of the following would be the best example of a corporation?

Which of the following is a reason why government is a participant in a market-oriented economy?

Government policies are coercive, whereas markets are not.This implies that

What part of federal government spending has grown the most rapidly in recent years?

Messitt and McNulty spend $50, 000 each to form a law partnership.On the first day someone trips over a potted plant in their lobby and sues them for $400, 000.Which of the following is true?

Personal income in the United States is primarily determined by selling labor services.

A cottage industry is one that

In terms of total sales, the dominant form of business firm in the U.S.economy is the

Which of the following is not an example of a business operated by a consumer cooperative?

Household income is spent on all of the following except one.Which is the exception?

Suppose you own a proprietorship that is in serious financial difficulty.The assets of the company are $100, 000, but liabilities are $175, 000.You also have, however, stock in General Motors worth $200, 000.If you file bankruptcy, what amount of personal assets do you stand to lose?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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