Question 1

Of the three levels of government in the United States,

Accepted Answer

A) only the federal government provides public goods 
B) only the federal government has the power to tax 
C) local governments are primarily responsible for primary and secondary education 
D) the federal government is primarily responsible for higher education 
E) state governments are primarily responsible for economic stability 
A) only the federal government provides public goods 
B) only the federal government has the power to tax 
C) local governments are primarily responsible for primary and secondary education 
D) the federal government is primarily responsible for higher education 
E) state governments are primarily responsible for economic stability

Question 2

Whether we look at marginal tax rates or average tax rates, the U.S.income tax is

Accepted Answer

A) progressive 
B) based on the benefits received 
C) proportional 
D) regressive 
E) All of the answers are correct. 
A) progressive 
B) based on the benefits received 
C) proportional 
D) regressive 
E) All of the answers are correct.

Question 3

Which category includes the largest number of firms?

Accepted Answer

A) sole proprietorship 
B) partnership 
C) corporation 
D) S-corporation 
E) limited partnerships 
A) sole proprietorship 
B) partnership 
C) corporation 
D) S-corporation 
E) limited partnerships

Question 4

All of the following are advantages of partnerships except one.Which is the exception?

Accepted Answer

A) they are relatively easy to start 
B) their profits are taxed once as personal income 
C) their liability is limited by each partner's share of the business 
D) a greater opportunity for specialization by the owners 
E) a continuation of the firm if one partner dies 
A) they are relatively easy to start 
B) their profits are taxed once as personal income 
C) their liability is limited by each partner's share of the business 
D) a greater opportunity for specialization by the owners 
E) a continuation of the firm if one partner dies

Question 5

The main source of revenue for the U.S.federal government is

Accepted Answer

A) personal income taxes 
B) corporate income taxes 
C) sales taxes 
D) borrowing on financial markets 
E) revenue from the sale of government goods and services 
A) personal income taxes 
B) corporate income taxes 
C) sales taxes 
D) borrowing on financial markets 
E) revenue from the sale of government goods and services

Question 6

Caleb teaches economics at Yucky State University and is paid $50, 000 per year.He also provides economic forecasts for local business for which he charges $100 per hour.Which of the following is true?

Accepted Answer

A) all of Caleb's income is salary 
B) some of Caleb's income is salary and some is personal interest 
C) all of Caleb's income is proprietor's income 
D) some of Caleb's income is salary and some is proprietor's income 
E) all of Caleb's income is personal interest 
A) all of Caleb's income is salary 
B) some of Caleb's income is salary and some is personal interest 
C) all of Caleb's income is proprietor's income 
D) some of Caleb's income is salary and some is proprietor's income 
E) all of Caleb's income is personal interest

Question 7

One thing that is not true about cooperatives is that they

Accepted Answer

A) put out raw materials, like wool and cotton, to rural households that turn it into finished products 
B) pool resources to buy and sell more efficiently 
C) try to minimize costs 
D) operate with limited liability of members 
E) enjoy tax-exempt status 
A) put out raw materials, like wool and cotton, to rural households that turn it into finished products 
B) pool resources to buy and sell more efficiently 
C) try to minimize costs 
D) operate with limited liability of members 
E) enjoy tax-exempt status

Question 8

The primary reason why individuals are willing to pay entrepreneurs to organize production is

Accepted Answer

A) that they have to guarantee that the entrepreneur will make a profit 
B) they avoid taxation when activities are organized by someone else 
C) that it is better for businesses to pay taxes than individuals 
D) that it reduces transaction costs 
E) that entrepreneurs are more vulnerable in the case of the owner 
A) that they have to guarantee that the entrepreneur will make a profit 
B) they avoid taxation when activities are organized by someone else 
C) that it is better for businesses to pay taxes than individuals 
D) that it reduces transaction costs 
E) that entrepreneurs are more vulnerable in the case of the owner

Question 9

Which component of U.S.household spending has grown the most over the past ten years?

Accepted Answer

A) taxes 
B) savings 
C) spending on services 
D) spending on nondurable goods 
E) spending on durable goods 
A) taxes 
B) savings 
C) spending on services 
D) spending on nondurable goods 
E) spending on durable goods

Question 10

A large number of businesses are organized as sole proprietorships because it is easy for them to acquire large sums of financing.

Accepted Answer

A) True 
 B)False

Question 11

The primary source of revenue for local governments is the property tax.

Accepted Answer

A) True 
 B)False

Question 12

In the United States, all levels of government together spend about

Accepted Answer

A) one out of every three dollars paid for finished goods and services 
B) half of the dollars paid for defense spending 
C) the same amount as private citizens and corporations 
D) one out of every three dollars paid for education 
E) 80 percent of their budgets on transfer payments 
A) one out of every three dollars paid for finished goods and services 
B) half of the dollars paid for defense spending 
C) the same amount as private citizens and corporations 
D) one out of every three dollars paid for education 
E) 80 percent of their budgets on transfer payments

Question 13

Mr.Thomson has a before-tax income of $20, 000 and paid taxes of $2, 000.Ms.Lynch had a before-tax income of $10, 000 and paid taxes of $1, 500.Based on this information, which of the following is correct?

Accepted Answer

A) The tax system is progressive. 
B) The tax system is proportional. 
C) The tax system is regressive. 
D) The tax system is based on the benefits received. 
E) There is insufficient information to answer the question. 
A) The tax system is progressive. 
B) The tax system is proportional. 
C) The tax system is regressive. 
D) The tax system is based on the benefits received. 
E) There is insufficient information to answer the question.

Question 14

Which of the following taxes is based on the benefits-received principle?

Accepted Answer

A) corporate income taxes 
B) personal income taxes 
C) property taxes 
D) gasoline excise taxes 
E) user fees that collect the same amount from each person 
A) corporate income taxes 
B) personal income taxes 
C) property taxes 
D) gasoline excise taxes 
E) user fees that collect the same amount from each person

Question 15

You are more likely to hire a plumber to repair a leaky drain pipe

Accepted Answer

A) as the tax rate on your earned income rises 
B) if you already own the specialized tools required to complete the plumbing repair work 
C) following an increase in the opportunity cost of your time 
D) the more knowledge and experience in plumbing repair work that you possess 
E) as the transaction cost of entering into a plumbing contract increases due to government regulations 
A) as the tax rate on your earned income rises 
B) if you already own the specialized tools required to complete the plumbing repair work 
C) following an increase in the opportunity cost of your time 
D) the more knowledge and experience in plumbing repair work that you possess 
E) as the transaction cost of entering into a plumbing contract increases due to government regulations

Question 16

If the real wage decreases, the opportunity cost of working in the home will

Accepted Answer

A) increase 
B) decrease 
C) not be affected 
D) increase as long as worker productivity also rises 
E) increase only if households want to maintain their standard of living 
A) increase 
B) decrease 
C) not be affected 
D) increase as long as worker productivity also rises 
E) increase only if households want to maintain their standard of living

Question 17

Revenue for the state governments in the United States comes primarily from income taxes.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following include the four basic resources supplied by households?

Accepted Answer

A) natural resources, labor, intelligence, capital 
B) money, labor, natural resources, entrepreneurial ability 
C) intellectual ability, physical ability, money, natural resources 
D) labor, capital, intelligence, entrepreneurial ability 
E) labor, natural resources, entrepreneurial ability, capital 
A) natural resources, labor, intelligence, capital 
B) money, labor, natural resources, entrepreneurial ability 
C) intellectual ability, physical ability, money, natural resources 
D) labor, capital, intelligence, entrepreneurial ability 
E) labor, natural resources, entrepreneurial ability, capital

Question 19

Which of the following is not a government transfer program?

Accepted Answer

A) unemployment compensation 
B) Social Security 
C) food stamps 
D) Medicare 
E) movement of soldiers to a different military base 
A) unemployment compensation 
B) Social Security 
C) food stamps 
D) Medicare 
E) movement of soldiers to a different military base

Question 20

Brian is the sole proprietor owner of Long Voyage Software, which generates maps for wilderness trips.He started the business with an initial investment of $80, 000.A faulty map caused one customer to get hopelessly lost.After her rescue and recuperation, she sued Long Voyage for $5, 000, 000.Which of the following is true?

Accepted Answer

A) The customer can be awarded only $80, 000--what the firm has available to pay. 
B) The customer can be awarded $5, 000, 000, but can get only $80, 000. 
C) The customer can be awarded $5, 000, 000, but Brian personally won't have to pay more than $80, 000. 
D) If $5, 000, 000 is awarded, Brian will have to pay none of it. 
E) If $5, 000, 000 is awarded, Brian is personally responsible for paying all of it. 
A) The customer can be awarded only $80, 000--what the firm has available to pay. 
B) The customer can be awarded $5, 000, 000, but can get only $80, 000. 
C) The customer can be awarded $5, 000, 000, but Brian personally won't have to pay more than $80, 000. 
D) If $5, 000, 000 is awarded, Brian will have to pay none of it. 
E) If $5, 000, 000 is awarded, Brian is personally responsible for paying all of it.

Exam 3: Economic Decision Makers

Of the three levels of government in the United States,

Whether we look at marginal tax rates or average tax rates, the U.S.income tax is

Which category includes the largest number of firms?

All of the following are advantages of partnerships except one.Which is the exception?

The main source of revenue for the U.S.federal government is

Caleb teaches economics at Yucky State University and is paid $50, 000 per year.He also provides economic forecasts for local business for which he charges $100 per hour.Which of the following is true?

One thing that is not true about cooperatives is that they

The primary reason why individuals are willing to pay entrepreneurs to organize production is

Which component of U.S.household spending has grown the most over the past ten years?

A large number of businesses are organized as sole proprietorships because it is easy for them to acquire large sums of financing.

The primary source of revenue for local governments is the property tax.

In the United States, all levels of government together spend about

Mr.Thomson has a before-tax income of $20, 000 and paid taxes of $2, 000.Ms.Lynch had a before-tax income of $10, 000 and paid taxes of $1, 500.Based on this information, which of the following is correct?

Which of the following taxes is based on the benefits-received principle?

You are more likely to hire a plumber to repair a leaky drain pipe

If the real wage decreases, the opportunity cost of working in the home will

Revenue for the state governments in the United States comes primarily from income taxes.

Which of the following include the four basic resources supplied by households?

Which of the following is not a government transfer program?

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

Filters