Question 1

Households supply factors of production to businesses and are paid by businesses for doing so. The market where this interaction takes place is called the factor market.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not one of the three principal components of a socialist economy?

Accepted Answer

A)  Government ownership of the means of production 
B)  Workers directed by a government planning board as to where they will work and how much they will be paid 
C)  Entrepreneurs are encouraged by the profit motive, rather than government directive, to satisfy consumer wants in the most efficient manner possible 
D)  Distribution is according to need 
A)  Government ownership of the means of production 
B)  Workers directed by a government planning board as to where they will work and how much they will be paid 
C)  Entrepreneurs are encouraged by the profit motive, rather than government directive, to satisfy consumer wants in the most efficient manner possible 
D)  Distribution is according to need

Question 3

One advantage of a sole proprietorship over a partnership is:

Accepted Answer

A)  direct control by the owner. 
B)  limited liability. 
C)  the ability to share the work and risks of business. 
D)  greater ease of obtaining financing. 
A)  direct control by the owner. 
B)  limited liability. 
C)  the ability to share the work and risks of business. 
D)  greater ease of obtaining financing.

Question 4

A primary goal of the International Monetary Fund (IMF) is to:

Accepted Answer

A)  promote economic negotiations and cooperation among industrialized countries. 
B)  work out repayment plans for developing countries with large international debts. 
C)  protect the interests of the United States abroad. 
D)  negotiate trade agreements between nations. 
A)  promote economic negotiations and cooperation among industrialized countries. 
B)  work out repayment plans for developing countries with large international debts. 
C)  protect the interests of the United States abroad. 
D)  negotiate trade agreements between nations.

Question 5

McDonald's Corporation lost a battle to keep a Singapore firm, Future Enterprises, from selling goods under the labels MacNoodles, MacTea, and MacChocolate. In this case, the court system in Singapore was defining:

Accepted Answer

A)  globalization. 
B)  limited liability. 
C)  consumer sovereignty. 
D)  property rights. 
A)  globalization. 
B)  limited liability. 
C)  consumer sovereignty. 
D)  property rights.

Question 6

Since the late 1980s:

Accepted Answer

A)  the Soviet socialist economic and political structure has spread to other nations. 
B)  the Soviet socialist economic and political structure has fallen apart. 
C)  the Soviet Union installed Soviet-dominated governments in a number of Eastern European countries. 
D)  socialism has gained popularity among the governments of Eastern Europe. 
A)  the Soviet socialist economic and political structure has spread to other nations. 
B)  the Soviet socialist economic and political structure has fallen apart. 
C)  the Soviet Union installed Soviet-dominated governments in a number of Eastern European countries. 
D)  socialism has gained popularity among the governments of Eastern Europe.

Question 7

Which of the following was a Marxist prediction?

Accepted Answer

A)  Production would move from large to ever-smaller factories. 
B)  Standards of living would increase because of improved productivity and technological advance. 
C)  There would be significant differentiation between workers and owners of factories. 
D)  The use of business power would increase competition. 
A)  Production would move from large to ever-smaller factories. 
B)  Standards of living would increase because of improved productivity and technological advance. 
C)  There would be significant differentiation between workers and owners of factories. 
D)  The use of business power would increase competition.

Question 8

In 11th century Europe, the central economic decisions were made by:

Accepted Answer

A)  the nation-state. 
B)  tradition and the lord of the manor. 
C)  the church. 
D)  central governments. 
A)  the nation-state. 
B)  tradition and the lord of the manor. 
C)  the church. 
D)  central governments.

Question 9

Governments establish the laws that regulate the interaction between businesses and households but do not serve as actors in the economy themselves.

Accepted Answer

A) True 
 B)False

Question 10

The Soviet socialist economy fell apart primarily because:

Accepted Answer

A)  it was based on barter rather than monetary exchange. 
B)  individuals are not motivated by self-interest. 
C)  workers lacked incentives to work and production was inefficient. 
D)  markets failed to develop. 
A)  it was based on barter rather than monetary exchange. 
B)  individuals are not motivated by self-interest. 
C)  workers lacked incentives to work and production was inefficient. 
D)  markets failed to develop.

Question 11

Flu vaccinations of school children have the unintended effect of protecting the vulnerable elderly from contracting the virus. This is an example of a:

Accepted Answer

A)  free rider problem. 
B)  social force. 
C)  goods distribution. 
D)  positive externality. 
A)  free rider problem. 
B)  social force. 
C)  goods distribution. 
D)  positive externality.

Question 12

Which of the following is most likely an action that supports competition?

Accepted Answer

A)  Requiring professionals, such as architects and engineers, to be licensed 
B)  Using tariffs to restrict the ability of foreign firms to sell products in domestic markets 
C)  Preventing two dominant firms in the same market from merging 
D)  Granting subsidies to farmers based on production levels 
A)  Requiring professionals, such as architects and engineers, to be licensed 
B)  Using tariffs to restrict the ability of foreign firms to sell products in domestic markets 
C)  Preventing two dominant firms in the same market from merging 
D)  Granting subsidies to farmers based on production levels

Question 13

What kind of externalities affects the levels of unemployment, inflation, or growth in the economy as a whole?

Accepted Answer

A)  Positive 
B)  Negative 
C)  Macroeconomic 
D)  Microeconomic 
A)  Positive 
B)  Negative 
C)  Macroeconomic 
D)  Microeconomic

Question 14

The tax revenues of federal, state, and local governments have different sources, in that the federal government relies primarily on:

Accepted Answer

A)  income taxes; state and local governments rely to a greater extent on sales and property taxes. 
B)  sales and property taxes; state and local governments rely to a greater extent on income taxes. 
C)  excise and property taxes; state and local governments rely on sales taxes. 
D)  sales taxes; state and local governments rely on excise and property taxes. 
A)  income taxes; state and local governments rely to a greater extent on sales and property taxes. 
B)  sales and property taxes; state and local governments rely to a greater extent on income taxes. 
C)  excise and property taxes; state and local governments rely on sales taxes. 
D)  sales taxes; state and local governments rely on excise and property taxes.

Question 15

When Coca Cola introduced a new, low-calorie version of Coca Cola called C2, despite a major marketing effort, sales of C2 were weak and many doubted that the product would last. Coke's experience with C2 illustrates the economic concept of:

Accepted Answer

A)  producer sovereignty. 
B)  consumer sovereignty. 
C)  limited liability. 
D)  market failure. 
A)  producer sovereignty. 
B)  consumer sovereignty. 
C)  limited liability. 
D)  market failure.

Question 16

In the factor market:

Accepted Answer

A)  households supply factors of production to business and are paid by business for doing so. 
B)  households supply factors of production to business and are paid by government for doing so. 
C)  business produces goods and services and sells them to households and government. 
D)  government produces goods and services and supplies them to households and business. 
A)  households supply factors of production to business and are paid by business for doing so. 
B)  households supply factors of production to business and are paid by government for doing so. 
C)  business produces goods and services and sells them to households and government. 
D)  government produces goods and services and supplies them to households and business.

Question 17

Adam Smith advocated laissez-faire because he believed it was in the interest of:

Accepted Answer

A)  capitalists, whom he regarded as the most dynamic and progressive element in society. 
B)  the proletariat, who would receive higher wages. 
C)  the government, which would profit from higher taxes. 
D)  society as a whole. 
A)  capitalists, whom he regarded as the most dynamic and progressive element in society. 
B)  the proletariat, who would receive higher wages. 
C)  the government, which would profit from higher taxes. 
D)  society as a whole.

Question 18

Assuming government's goal is to benefit society as much as possible:

Accepted Answer

A)  actions with negative and positive externalities should be encouraged. 
B)  actions with negative and positive externalities should be restricted. 
C)  actions with negative externalities should be encouraged and actions with positive externalities should be restricted. 
D)  actions with negative externalities should be restricted and actions with positive externalities should be encouraged. 
A)  actions with negative and positive externalities should be encouraged. 
B)  actions with negative and positive externalities should be restricted. 
C)  actions with negative externalities should be encouraged and actions with positive externalities should be restricted. 
D)  actions with negative externalities should be restricted and actions with positive externalities should be encouraged.

Question 19

Enron executives were charged with numerous counts of corporate fraud and corruption. Among the charges was insider trading, which involves the trading of a corporation's stock by insiders who may have access to information that the public does not. Which role is the government playing when it makes insider trading illegal?

Accepted Answer

A)  Providing for public goods 
B)  Promoting effective and workable competition 
C)  Correcting for externalities 
D)  Adjusting for undesirable market results 
A)  Providing for public goods 
B)  Promoting effective and workable competition 
C)  Correcting for externalities 
D)  Adjusting for undesirable market results

Question 20

A market economy:

Accepted Answer

A)  requires government to set prices. 
B)  allocates according to need. 
C)  distributes property rights. 
D)  relies on the invisible hand to coordinate supply and demand. 
A)  requires government to set prices. 
B)  allocates according to need. 
C)  distributes property rights. 
D)  relies on the invisible hand to coordinate supply and demand.

Exam 3: Economic Institutions

Households supply factors of production to businesses and are paid by businesses for doing so. The market where this interaction takes place is called the factor market.

Which of the following is not one of the three principal components of a socialist economy?

One advantage of a sole proprietorship over a partnership is:

A primary goal of the International Monetary Fund (IMF) is to:

McDonald's Corporation lost a battle to keep a Singapore firm, Future Enterprises, from selling goods under the labels MacNoodles, MacTea, and MacChocolate. In this case, the court system in Singapore was defining:

Since the late 1980s:

Which of the following was a Marxist prediction?

In 11th century Europe, the central economic decisions were made by:

Governments establish the laws that regulate the interaction between businesses and households but do not serve as actors in the economy themselves.

The Soviet socialist economy fell apart primarily because:

Flu vaccinations of school children have the unintended effect of protecting the vulnerable elderly from contracting the virus. This is an example of a:

Which of the following is most likely an action that supports competition?

What kind of externalities affects the levels of unemployment, inflation, or growth in the economy as a whole?

The tax revenues of federal, state, and local governments have different sources, in that the federal government relies primarily on:

When Coca Cola introduced a new, low-calorie version of Coca Cola called C2, despite a major marketing effort, sales of C2 were weak and many doubted that the product would last. Coke's experience with C2 illustrates the economic concept of:

In the factor market:

Adam Smith advocated laissez-faire because he believed it was in the interest of:

Assuming government's goal is to benefit society as much as possible:

A market economy:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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