Question 1

Household production is more likely to occur when

Accepted Answer

A) it requires many specialized resources 
B) technology makes it more costly than market production 
C) tax avoidance is undesirable 
D) less control over the final product is desirable 
E) the opportunity cost of household work is relatively small 
A) it requires many specialized resources 
B) technology makes it more costly than market production 
C) tax avoidance is undesirable 
D) less control over the final product is desirable 
E) the opportunity cost of household work is relatively small

Question 2

When externalities are present,market prices do not reflect all the social costs or benefits of the activity.

Accepted Answer

A) True 
 B)False

Question 3

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 4

A common assumption that economists make about the behavior of elected officials is that they try to

Accepted Answer

A) maximize the size of their government salaries 
B) maximize the size of their control over the budget process 
C) maximize the number of votes they receive in the next election 
D) minimize the government's expenditures in order to balance the budget 
E) conform to the wishes of special interest groups so that the government behaves as a single,consistent decision maker 
A) maximize the size of their government salaries 
B) maximize the size of their control over the budget process 
C) maximize the number of votes they receive in the next election 
D) minimize the government's expenditures in order to balance the budget 
E) conform to the wishes of special interest groups so that the government behaves as a single,consistent decision maker

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Public goods are both rival and nonexclusive.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following represents the largest source of income for U.S.households?

Accepted Answer

A) personal interest 
B) proprietor's income 
C) wages and salaries 
D) rental income 
E) transfer payments 
A) personal interest 
B) proprietor's income 
C) wages and salaries 
D) rental income 
E) transfer payments

Question 8

Harold,a delivery man,washes and irons his own shirts.Sarah,his boss,sends her clothes to a laundry.Which is the most plausible economic explanation for this difference?

Accepted Answer

A) Harold must enjoy ironing more than Sarah does. 
B) Harold must be better at ironing than Sarah is. 
C) The opportunity cost of ironing is greater for Harold. 
D) Harold probably has an absolute advantage in ironing. 
E) Sarah has a higher opportunity cost of laundering her clothes than Harold does. 
A) Harold must enjoy ironing more than Sarah does. 
B) Harold must be better at ironing than Sarah is. 
C) The opportunity cost of ironing is greater for Harold. 
D) Harold probably has an absolute advantage in ironing. 
E) Sarah has a higher opportunity cost of laundering her clothes than Harold does.

Question 9

Which of the following is true of public goods?

Accepted Answer

A) The market mechanism helps to signal the quantity that is demanded by the public. 
B) Payment for consumption is efficiently provided by market prices. 
C) Consumption by one person does not preclude consumption of the same good by another person. 
D) The public sector is guided to produce the correct quantity by market prices. 
E) Voluntary contributions will be sufficient to finance the production of public goods. 
A) The market mechanism helps to signal the quantity that is demanded by the public. 
B) Payment for consumption is efficiently provided by market prices. 
C) Consumption by one person does not preclude consumption of the same good by another person. 
D) The public sector is guided to produce the correct quantity by market prices. 
E) Voluntary contributions will be sufficient to finance the production of public goods.

Question 10

Which of the following is an advantage of a sole proprietorship?

Accepted Answer

A) the ability to pool resources 
B) limited liability 
C) double tax exemption of the firm's earnings 
D) ease of organization 
E) ease of raising funds 
A) the ability to pool resources 
B) limited liability 
C) double tax exemption of the firm's earnings 
D) ease of organization 
E) ease of raising funds

Question 11

The funds to pay for police protection are usually raised through taxation because

Accepted Answer

A) police protection would be hard to provide exclusively to those who voluntarily pay for it 
B) people would not voluntarily pay salaries to officials who might arrest them 
C) police protection is a basic necessity 
D) goods financed through taxation can be guaranteed to all who pay for it 
E) the government believes that those who receive the benefits from the service should pay for it 
A) police protection would be hard to provide exclusively to those who voluntarily pay for it 
B) people would not voluntarily pay salaries to officials who might arrest them 
C) police protection is a basic necessity 
D) goods financed through taxation can be guaranteed to all who pay for it 
E) the government believes that those who receive the benefits from the service should pay for it

Question 12

You are more likely to do-it-yourself than hire a plumber to repair a leaky drain pipe

Accepted Answer

A) as the tax rate on your earned income dramatically decreases 
B) if the opportunity cost of your time decreases 
C) the less knowledge and experience in plumbing repair work that you possess 
D) if you already own the specialized tools required to complete the repair work 
E) as the transaction cost of the do-it-yourself repair work increases 
A) as the tax rate on your earned income dramatically decreases 
B) if the opportunity cost of your time decreases 
C) the less knowledge and experience in plumbing repair work that you possess 
D) if you already own the specialized tools required to complete the repair work 
E) as the transaction cost of the do-it-yourself repair work increases

Question 13

A tariff is

Accepted Answer

A) a tax on imports 
B) a legal limit on quantities of goods that can be imported 
C) a voluntary limit on quantities of goods that can be imported 
D) a quality restriction on imports 
E) a subsidy for exports 
A) a tax on imports 
B) a legal limit on quantities of goods that can be imported 
C) a voluntary limit on quantities of goods that can be imported 
D) a quality restriction on imports 
E) a subsidy for exports

Question 14

A cooperative,or "co-op" for short,is a single-owner firm.

Accepted Answer

A) True 
 B)False

Question 15

Raghib teaches mathematics at Camford University and receives $40,000 per year.His spouse,Noraini,works as a self-employed computer programmer and charges $40 per hour.Which of the following is true?

Accepted Answer

A) Raghib's income is personal interest; Noraini's is wages 
B) Raghib's income is a salary; Noraini's is personal interest 
C) Both Raghib and Noraini receive proprietor's income 
D) Both Raghib and Noraini receive wage or salary income 
E) Raghib's income is a salary,and Noraini's income is a proprietor's income 
A) Raghib's income is personal interest; Noraini's is wages 
B) Raghib's income is a salary; Noraini's is personal interest 
C) Both Raghib and Noraini receive proprietor's income 
D) Both Raghib and Noraini receive wage or salary income 
E) Raghib's income is a salary,and Noraini's income is a proprietor's income

Question 16

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

Question 17

Trade restrictions can take any of the following forms except one.Which is the exception?

Accepted Answer

A) tariffs 
B) free trade agreements 
C) quotas 
D) voluntary trade restrictions 
E) health and safety restrictions 
A) tariffs 
B) free trade agreements 
C) quotas 
D) voluntary trade restrictions 
E) health and safety restrictions

Question 18

The excise tax on gasoline is based on the ability-to-pay principle of taxation.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true about sole proprietorship in the United States?

Accepted Answer

A) It is the most common form of business organization. 
B) It is responsible for a large portion of total production of goods and services. 
C) It offers the owner the least personal liability of any form of business organization. 
D) There is no opportunity cost to operating the business. 
E) Only one individual can work in such a firm. 
A) It is the most common form of business organization. 
B) It is responsible for a large portion of total production of goods and services. 
C) It offers the owner the least personal liability of any form of business organization. 
D) There is no opportunity cost to operating the business. 
E) Only one individual can work in such a firm.

Question 20

Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales?

Accepted Answer

A) partnerships,sole proprietorships,corporations 
B) sole proprietorships,partnerships,corporations 
C) sole proprietorships,corporations,partnerships 
D) corporations,partnerships,sole proprietorships 
E) partnerships,corporations,sole proprietorships 
A) partnerships,sole proprietorships,corporations 
B) sole proprietorships,partnerships,corporations 
C) sole proprietorships,corporations,partnerships 
D) corporations,partnerships,sole proprietorships 
E) partnerships,corporations,sole proprietorships

Exam 3: Economic Decision Makers

Household production is more likely to occur when

When externalities are present,market prices do not reflect all the social costs or benefits of the activity.

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

A common assumption that economists make about the behavior of elected officials is that they try to

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

Public goods are both rival and nonexclusive.

Which of the following represents the largest source of income for U.S.households?

Harold,a delivery man,washes and irons his own shirts.Sarah,his boss,sends her clothes to a laundry.Which is the most plausible economic explanation for this difference?

Which of the following is true of public goods?

Which of the following is an advantage of a sole proprietorship?

The funds to pay for police protection are usually raised through taxation because

You are more likely to do-it-yourself than hire a plumber to repair a leaky drain pipe

A tariff is

A cooperative,or "co-op" for short,is a single-owner firm.

Raghib teaches mathematics at Camford University and receives $40,000 per year.His spouse,Noraini,works as a self-employed computer programmer and charges $40 per hour.Which of the following is true?

The statement "Households maximize utility" means that households

Trade restrictions can take any of the following forms except one.Which is the exception?

The excise tax on gasoline is based on the ability-to-pay principle of taxation.

Which of the following is true about sole proprietorship in the United States?

Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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