Question 1

Which of the following statements is correct?

Accepted Answer

A) Stockholders are legally liable for all the debt of a corporation. 
B) A corporation is a business that is legally owned by its employees. 
C) Corporations are legal entities that, in law, are treated as persons. 
D) Most large companies and many small companies in the United States are not corporations. 
A) Stockholders are legally liable for all the debt of a corporation. 
B) A corporation is a business that is legally owned by its employees. 
C) Corporations are legal entities that, in law, are treated as persons. 
D) Most large companies and many small companies in the United States are not corporations. C

Question 2

Which of the following is the best example of a demerit good?

Accepted Answer

A) Cigarettes 
B) Whole-wheat bread 
C) Bicycles 
D) Education 
A) Cigarettes 
B) Whole-wheat bread 
C) Bicycles 
D) Education A

Question 3

A partnership is a business:

Accepted Answer

A) with two or more owners, with each owner liable for every other owner's actions. 
B) that has only one owner. 
C) legally treated as a person and owned by stockholders who are not liable for the actions of the corporate "person." 
D) in which each owner is liable only to the extent of his or her own investment. 
A) with two or more owners, with each owner liable for every other owner's actions. 
B) that has only one owner. 
C) legally treated as a person and owned by stockholders who are not liable for the actions of the corporate "person." 
D) in which each owner is liable only to the extent of his or her own investment. A

Question 4

Businesses fail because:

Accepted Answer

A) they follow the principle of consumer sovereignty too closely. 
B) the invisible hand determines that they are not producing something that is socially valuable. 
C) they earn excessive profits. 
D) entrepreneurship is present. 
A) they follow the principle of consumer sovereignty too closely. 
B) the invisible hand determines that they are not producing something that is socially valuable. 
C) they earn excessive profits. 
D) entrepreneurship is present.

Question 5

Market and socialist economies can be contrasted in all the following ways except that:

Accepted Answer

A) under a market economy labor is allocated by individual choice based on wage levels; under traditional socialism it is allocated by a government planning board. 
B) under a market economy government plays no role in the market; under socialism, government planning boards make most major economic decisions. 
C) under a market economy the distribution of income is to each according to his ability, effort, and inheritance; under ideal socialism the distribution of income is to each according to his need. 
D) under a market economy self-interest is the primary motive of economic activity; under socialism, individuals are supposed to act from considerations of the general good. 
A) under a market economy labor is allocated by individual choice based on wage levels; under traditional socialism it is allocated by a government planning board. 
B) under a market economy government plays no role in the market; under socialism, government planning boards make most major economic decisions. 
C) under a market economy the distribution of income is to each according to his ability, effort, and inheritance; under ideal socialism the distribution of income is to each according to his need. 
D) under a market economy self-interest is the primary motive of economic activity; under socialism, individuals are supposed to act from considerations of the general good.

Question 6

Japan, Germany, France, Britain, and the United States meet to try to coordinate their economic policies. This informal association is called:

Accepted Answer

A) the WTO. 
B) the Group of Five. 
C) the IMF. 
D) the OECD 
A) the WTO. 
B) the Group of Five. 
C) the IMF. 
D) the OECD

Question 7

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 8

The ability to organize and meet an objective, such as meeting regulatory and financial requirements to start and run a business, is known as:

Accepted Answer

A) business sovereignty. 
B) consumer sovereignty. 
C) democratic capitalism. 
D) entrepreneurship. 
A) business sovereignty. 
B) consumer sovereignty. 
C) democratic capitalism. 
D) entrepreneurship.

Question 9

Which of the following is a disadvantage of setting up a business as a corporation?

Accepted Answer

A) Limited personal liability 
B) Greater ability to get funds 
C) Limited control by owners 
D) Risk of personal assets not invested in the firm 
A) Limited personal liability 
B) Greater ability to get funds 
C) Limited control by owners 
D) Risk of personal assets not invested in the firm

Question 10

Which of the following is not an example of government's role as a referee?

Accepted Answer

A) Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want 
B) Regulations governing safety in the workplace, wages, overtime, and hours of work 
C) Laws prohibiting businesses from meeting to fix prices 
D) Laws that require states and the federal government to balance their budgets 
A) Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want 
B) Regulations governing safety in the workplace, wages, overtime, and hours of work 
C) Laws prohibiting businesses from meeting to fix prices 
D) Laws that require states and the federal government to balance their budgets

Question 11

How does socialism as it was practiced differ from socialism in theory?

Accepted Answer

Socialism in theory can rely on individu

Question 12

A primary goal of the World Bank is to:

Accepted Answer

A) channel low-interest loans to developing countries to foster economic growth. 
B) work out repayment plans for developing countries with large international debt. 
C) finance private investment projects around the world. 
D) negotiate trade agreements between nations. 
A) channel low-interest loans to developing countries to foster economic growth. 
B) work out repayment plans for developing countries with large international debt. 
C) finance private investment projects around the world. 
D) negotiate trade agreements between nations.

Question 13

The goal of socialist economies is to distribute what is produced according to the needs of individuals. Market economies tend to distribute what is produced according to ability and effort.

Accepted Answer

A) True 
 B)False

Question 14

In a socialist economic system:

Accepted Answer

A) markets are relied upon to decide what to produce, but government intervenes when necessary. 
B) individuals tell government what to produce and the government decides how best to achieve that goal. 
C) government planning boards decide what to produce, but rely on markets to achieve that goal. 
D) government planning boards decide what to produce and then give individuals directives how to achieve those goals. 
A) markets are relied upon to decide what to produce, but government intervenes when necessary. 
B) individuals tell government what to produce and the government decides how best to achieve that goal. 
C) government planning boards decide what to produce, but rely on markets to achieve that goal. 
D) government planning boards decide what to produce and then give individuals directives how to achieve those goals.

Question 15

In a market economy:

Accepted Answer

A) government owns the means of production so that it can produce what is in society's best interest. 
B) businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest. 
C) workers are directed by government planning boards to produce what is in society's best interest. 
D) government sets prices to make necessities affordable because it is in society's best interest to make necessities affordable. 
A) government owns the means of production so that it can produce what is in society's best interest. 
B) businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest. 
C) workers are directed by government planning boards to produce what is in society's best interest. 
D) government sets prices to make necessities affordable because it is in society's best interest to make necessities affordable.

Question 16

Which two systems require the least amount of government intervention?

Accepted Answer

A) Mercantilism and capitalism 
B) Feudalism and socialism 
C) Capitalism and feudalism 
D) Mercantilism and socialism 
A) Mercantilism and capitalism 
B) Feudalism and socialism 
C) Capitalism and feudalism 
D) Mercantilism and socialism

Question 17

Relative to corporations, sole proprietorships are:

Accepted Answer

A) more numerous and smaller in size. 
B) less numerous and smaller in size. 
C) more numerous and larger in size. 
D) less numerous and larger in size. 
A) more numerous and smaller in size. 
B) less numerous and smaller in size. 
C) more numerous and larger in size. 
D) less numerous and larger in size.

Question 18

A company such as Microsoft or Pepsi Co. is a legal hassle to organize, difficult to monitor, and possibly could double tax income. It is an example of a:

Accepted Answer

A) consumer. 
B) sole proprietorship. 
C) partnership. 
D) corporation. 
A) consumer. 
B) sole proprietorship. 
C) partnership. 
D) corporation.

Question 19

Which of the following occur in the real world?

Accepted Answer

A) Neither market failures nor government failures 
B) Government failures but not market failures 
C) Market failures but not government failures 
D) Both market failures and government failures 
A) Neither market failures nor government failures 
B) Government failures but not market failures 
C) Market failures but not government failures 
D) Both market failures and government failures

Question 20

Which of the following is not an example of government's role as an actor?

Accepted Answer

A) Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want 
B) Social security tax cuts that reduce the percentage paid by employees 
C) Increases in social security spending 
D) Laws that require states and the federal government to balance their budgets 
A) Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want 
B) Social security tax cuts that reduce the percentage paid by employees 
C) Increases in social security spending 
D) Laws that require states and the federal government to balance their budgets

Exam 3: Economic Institutions

Which of the following statements is correct?

Which of the following is the best example of a demerit good?

A partnership is a business:

Businesses fail because:

Market and socialist economies can be contrasted in all the following ways except that:

Japan, Germany, France, Britain, and the United States meet to try to coordinate their economic policies. This informal association is called:

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

The ability to organize and meet an objective, such as meeting regulatory and financial requirements to start and run a business, is known as:

Which of the following is a disadvantage of setting up a business as a corporation?

Which of the following is not an example of government's role as a referee?

How does socialism as it was practiced differ from socialism in theory?

A primary goal of the World Bank is to:

The goal of socialist economies is to distribute what is produced according to the needs of individuals. Market economies tend to distribute what is produced according to ability and effort.

In a socialist economic system:

In a market economy:

Which two systems require the least amount of government intervention?

Relative to corporations, sole proprietorships are:

A company such as Microsoft or Pepsi Co. is a legal hassle to organize, difficult to monitor, and possibly could double tax income. It is an example of a:

Which of the following occur in the real world?

Which of the following is not an example of government's role as an actor?

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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