Question 1

The largest source of household income in the United States is:

Accepted Answer

A) stock dividends. 
B) wages and salaries. 
C) interest earnings. 
D) rental income. 
A) stock dividends. 
B) wages and salaries. 
C) interest earnings. 
D) rental income.

Question 2

Private property rights:

Accepted Answer

A) are essential elements of a market economy. 
B) do not need to be enforced in market economies. 
C) must be established before a socialist economy can function properly. 
D) ensure an equitable distribution of income in market economies. 
A) are essential elements of a market economy. 
B) do not need to be enforced in market economies. 
C) must be established before a socialist economy can function properly. 
D) ensure an equitable distribution of income in market economies.

Question 3

Capitalism and socialism have not existed forever. Capitalism came into existence in the:

Accepted Answer

A) mid-1800s and socialism came into existence in the early 1900s. 
B) early 1900s and socialism came into existence in the mid-1800s. 
C) mid-1700s and socialism came into existence in the early 1900s. 
D) early 1900s and socialism came into existence in the mid-1700s. 
A) mid-1800s and socialism came into existence in the early 1900s. 
B) early 1900s and socialism came into existence in the mid-1800s. 
C) mid-1700s and socialism came into existence in the early 1900s. 
D) early 1900s and socialism came into existence in the mid-1700s.

Question 4

In the United States, government performs all of the following functions except:

Accepted Answer

A) redistributing income. 
B) purchasing goods and services. 
C) regulating the economy. 
D) determining production levels. 
A) redistributing income. 
B) purchasing goods and services. 
C) regulating the economy. 
D) determining production levels.

Question 5

Which of the following is the best example of a macroeconomic externality?

Accepted Answer

A) One person saving less without considering the effect on their retirement needs 
B) Many people saving more without considering the effect on unemployment 
C) One person starting a business without knowing whether the goods will sell 
D) One person spending more in order to help stimulate the economy 
A) One person saving less without considering the effect on their retirement needs 
B) Many people saving more without considering the effect on unemployment 
C) One person starting a business without knowing whether the goods will sell 
D) One person spending more in order to help stimulate the economy

Question 6

What is the central tool of coordination in a market economy?

Accepted Answer

The central tool of

Question 7

In the mercantilist system:

Accepted Answer

A) markets, rather than political forces, make the central economic decisions. 
B) serfs make the central economic decisions. 
C) governments let the market decide what to produce. 
D) governments distributed the rights to produce. 
A) markets, rather than political forces, make the central economic decisions. 
B) serfs make the central economic decisions. 
C) governments let the market decide what to produce. 
D) governments distributed the rights to produce.

Question 8

In a market economy, society relies on the self-interest of individuals to determine what, how, and for whom to produce.

Accepted Answer

A) True 
 B)False

Question 9

A defining difference in what makes a firm a sole proprietorship, partnerships, or a corporation is the:

Accepted Answer

A) size of each type of business. 
B) number of each type of business. 
C) nature of ownership and accountability for each type of business. 
D) profitability of each type of business. 
A) size of each type of business. 
B) number of each type of business. 
C) nature of ownership and accountability for each type of business. 
D) profitability of each type of business.

Question 10

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 11

Private property rights are essential to market economies.

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

Households do all of the following except:

Accepted Answer

A) receive income that is redistributed by the government. 
B) demand labor services from businesses in the factor market. 
C) demand goods and services from businesses in the goods market. 
D) supply labor services to the government in the factor market. 
A) receive income that is redistributed by the government. 
B) demand labor services from businesses in the factor market. 
C) demand goods and services from businesses in the goods market. 
D) supply labor services to the government in the factor market.

Question 14

Which of the following is one of the macroeconomic goals established by the 1946 Employment Act?

Accepted Answer

A) Preventing large fluctuations in exchange rates 
B) Maintaining a constant level of consumer expenditure 
C) Providing an economic environment conducive to growth 
D) Ensuring that employers pay workers a minimum wage sufficient to escape poverty 
A) Preventing large fluctuations in exchange rates 
B) Maintaining a constant level of consumer expenditure 
C) Providing an economic environment conducive to growth 
D) Ensuring that employers pay workers a minimum wage sufficient to escape poverty

Question 15

When a government intervenes in an economy in a way that influences the relationship between households and businesses, it is:

Accepted Answer

A) serving as an economic actor. 
B) serving as an economic referee. 
C) serving the public good. 
D) reducing social welfare by interfering with the invisible hand. 
A) serving as an economic actor. 
B) serving as an economic referee. 
C) serving the public good. 
D) reducing social welfare by interfering with the invisible hand.

Question 16

List four ways in which the decisions of households are important to the economy.

Accepted Answer

Households decide what is produced throu

Question 17

In principle, households ultimately control:

Accepted Answer

A) businesses. 
B) the government. 
C) both businesses and the government. 
D) neither businesses nor the government. 
A) businesses. 
B) the government. 
C) both businesses and the government. 
D) neither businesses nor the government.

Question 18

A business is most likely to be characterized as a corporation if:

Accepted Answer

A) it has two or more owners, with each owner liable for every other owner's actions. 
B) it has only one owner. 
C) it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person" regardless of their investment. 
D) each owner is liable only to the extent of his or her own investment. 
A) it has two or more owners, with each owner liable for every other owner's actions. 
B) it has only one owner. 
C) it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person" regardless of their investment. 
D) each owner is liable only to the extent of his or her own investment.

Question 19

Businesses are on the:

Accepted Answer

A) supply side of factor markets and the demand side of goods markets. 
B) demand side of factor markets and the supply side of goods markets. 
C) supply side of both factor markets and goods markets. 
D) demand side of both factor markets and goods markets. 
A) supply side of factor markets and the demand side of goods markets. 
B) demand side of factor markets and the supply side of goods markets. 
C) supply side of both factor markets and goods markets. 
D) demand side of both factor markets and goods markets.

Question 20

The difference between capitalism and mercantilism is that under capitalism:

Accepted Answer

A) craft guilds rather than merchants own capital. 
B) the invisible hand is more important than the government. 
C) industrialists' views are represented by craft guild organizations. 
D) the state plays a more active role in coordinating economic activity. 
A) craft guilds rather than merchants own capital. 
B) the invisible hand is more important than the government. 
C) industrialists' views are represented by craft guild organizations. 
D) the state plays a more active role in coordinating economic activity.

Exam 3: Economic Institutions

The largest source of household income in the United States is:

Private property rights:

Capitalism and socialism have not existed forever. Capitalism came into existence in the:

In the United States, government performs all of the following functions except:

Which of the following is the best example of a macroeconomic externality?

What is the central tool of coordination in a market economy?

In the mercantilist system:

In a market economy, society relies on the self-interest of individuals to determine what, how, and for whom to produce.

A defining difference in what makes a firm a sole proprietorship, partnerships, or a corporation is the:

Private property rights are essential to market economies.

A market economy:

Households do all of the following except:

Which of the following is one of the macroeconomic goals established by the 1946 Employment Act?

When a government intervenes in an economy in a way that influences the relationship between households and businesses, it is:

List four ways in which the decisions of households are important to the economy.

In principle, households ultimately control:

A business is most likely to be characterized as a corporation if:

Businesses are on the:

The difference between capitalism and mercantilism is that under capitalism:

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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