Question 1

Goods and services produced by the government are sold at prices that are set to recover production costs.

Accepted Answer

A) True 
 B)False

Question 2

An example of a positive externality is

Accepted Answer

A) pollution because it affects people not directly involved with producing it 
B) a homeowner's maintenance of a beautiful lawn because this creates a benefit for neighbors 
C) creating a monopoly 
D) driving a car that emits pollution 
E) cigarette smoking because this imposes an indirect cost on people around the smoker 
A) pollution because it affects people not directly involved with producing it 
B) a homeowner's maintenance of a beautiful lawn because this creates a benefit for neighbors 
C) creating a monopoly 
D) driving a car that emits pollution 
E) cigarette smoking because this imposes an indirect cost on people around the smoker

Question 3

During recent elections,consumer groups in various states attempted to get the sales tax on all medicines and drugs removed.They argued that such a tax is "severely regressive." What is the economic interpretation of their statement?

Accepted Answer

A) The poor get ill more often than do the rich. 
B) The poor pay higher prices for medicine and drugs than do the rich. 
C) The poor pay a higher percentage of their income for medicine and drugs than do the rich. 
D) All consumers pay too much money for medicine and drugs. 
E) The sales tax discourages the poor from seeking medical treatment. 
A) The poor get ill more often than do the rich. 
B) The poor pay higher prices for medicine and drugs than do the rich. 
C) The poor pay a higher percentage of their income for medicine and drugs than do the rich. 
D) All consumers pay too much money for medicine and drugs. 
E) The sales tax discourages the poor from seeking medical treatment.

Question 4

The overall U.S.balance of payments

Accepted Answer

A) shows a deficit 
B) shows a surplus 
C) is the merchandise trade balance 
D) equals exports minus imports 
E) shows how deficits in one account are exactly offset by surpluses in other accounts 
A) shows a deficit 
B) shows a surplus 
C) is the merchandise trade balance 
D) equals exports minus imports 
E) shows how deficits in one account are exactly offset by surpluses in other accounts

Question 5

An import quota taxes an import but does not set a limit on how much may be imported.

Accepted Answer

A) True 
 B)False

Question 6

The largest source of federal government revenue is

Accepted Answer

A) corporate income taxes 
B) individual income taxes 
C) payroll taxes 
D) sales and excise taxes 
E) tariffs on imported goods and other customs fees and duties 
A) corporate income taxes 
B) individual income taxes 
C) payroll taxes 
D) sales and excise taxes 
E) tariffs on imported goods and other customs fees and duties

Question 7

A major disadvantage of the corporate form of business is limited liability.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

Which of the following is an example of a capital resource?

Accepted Answer

A) a bank loan 
B) a corporate bond 
C) a tractor used by a farmer 
D) a lawn tractor used by a household 
E) 100 acres of prime farmland 
A) a bank loan 
B) a corporate bond 
C) a tractor used by a farmer 
D) a lawn tractor used by a household 
E) 100 acres of prime farmland

Question 10

Rationality in the household decision-making process means that

Accepted Answer

A) all households make the same decisions 
B) everyone in the household agrees on all decisions 
C) households act in their own best interests 
D) households want to earn as much income as possible 
E) all households would make the same decisions given the same information on products qualities and prices 
A) all households make the same decisions 
B) everyone in the household agrees on all decisions 
C) households act in their own best interests 
D) households want to earn as much income as possible 
E) all households would make the same decisions given the same information on products qualities and prices

Question 11

Economists generally assume that

Accepted Answer

A) firms act to maximize the dividends paid to stockholders 
B) households act to maximize their wealth 
C) households act to maximize utility 
D) firms act to maximize revenue 
E) both households and firms act to minimize expenditures 
A) firms act to maximize the dividends paid to stockholders 
B) households act to maximize their wealth 
C) households act to maximize utility 
D) firms act to maximize revenue 
E) both households and firms act to minimize expenditures

Question 12

Which of the following is not a goal of government programs?

Accepted Answer

A) to enforce private property rights 
B) to prohibit natural monopolies 
C) to reduce pollution 
D) to transfer money from higher-income households to the poorest households 
E) to maintain price stability 
A) to enforce private property rights 
B) to prohibit natural monopolies 
C) to reduce pollution 
D) to transfer money from higher-income households to the poorest households 
E) to maintain price stability

Question 13

Personal income in the United States is primarily determined by selling labor services.

Accepted Answer

A) True 
 B)False

Question 14

In the following situation the tax system is 
$$\begin{array} { l r r r } 
\text { Taxable income } & \$ 5,000 & \$ 10,000 & \$ 20,000 \
\text { Tax payments } & \$ 500 & \$ 600 & \$ 1,600
\end{array}$$

Accepted Answer

A) progressive 
B) proportional 
C) regressive 
D) based on the benefits received 
E) there is insufficient information to answer the question 
A) progressive 
B) proportional 
C) regressive 
D) based on the benefits received 
E) there is insufficient information to answer the question

Question 15

A group of farmers in southwestern Pennsylvania selling locally raised natural beef would be identified as a

Accepted Answer

A) not-for-profit organization 
B) S corporation 
C) producer cooperative 
D) sole proprietorship 
E) cottage industry 
A) not-for-profit organization 
B) S corporation 
C) producer cooperative 
D) sole proprietorship 
E) cottage industry

Question 16

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 17

Some people have argued that government should provide only those goods that we would truly define as public goods.If so,which of the following should government produce?

Accepted Answer

A) National Defense 
B) day-care centers for children of working mothers 
C) mail delivery 
D) unemployment benefits 
E) subsidies for agricultural products 
A) National Defense 
B) day-care centers for children of working mothers 
C) mail delivery 
D) unemployment benefits 
E) subsidies for agricultural products

Question 18

The incidence of a tax refers to

Accepted Answer

A) who receives the benefits from the revenue generated by the tax 
B) the changes in the marginal tax rate as income increases 
C) whether the tax is regressive,proportional,or progressive 
D) who bears the burden of the tax 
E) whether the tax is based on the ability-to-pay principle 
A) who receives the benefits from the revenue generated by the tax 
B) the changes in the marginal tax rate as income increases 
C) whether the tax is regressive,proportional,or progressive 
D) who bears the burden of the tax 
E) whether the tax is based on the ability-to-pay principle

Question 19

The objective of the household is to

Accepted Answer

A) maximize household wealth 
B) own as much land as possible 
C) save as much money as possible 
D) acquire as many goods as possible 
E) maximize utility 
A) maximize household wealth 
B) own as much land as possible 
C) save as much money as possible 
D) acquire as many goods as possible 
E) maximize utility

Question 20

Household production increases when there is a stronger desire to avoid taxation.

Accepted Answer

A) True 
 B)False

Exam 3: Economic Decision Makers

Goods and services produced by the government are sold at prices that are set to recover production costs.

An example of a positive externality is

During recent elections,consumer groups in various states attempted to get the sales tax on all medicines and drugs removed.They argued that such a tax is "severely regressive." What is the economic interpretation of their statement?

The overall U.S.balance of payments

An import quota taxes an import but does not set a limit on how much may be imported.

The largest source of federal government revenue is

A major disadvantage of the corporate form of business is limited liability.

Household production is more likely to occur when

Which of the following is an example of a capital resource?

Rationality in the household decision-making process means that

Economists generally assume that

Which of the following is not a goal of government programs?

Personal income in the United States is primarily determined by selling labor services.

In the following situation the tax system is Taxable income \ 5,000 \ 10,000 \ 20,000 Tax payments \ 500 \ 600 \ 1,600

A group of farmers in southwestern Pennsylvania selling locally raised natural beef would be identified as a

Which category includes the largest number of firms?

Some people have argued that government should provide only those goods that we would truly define as public goods.If so,which of the following should government produce?

The incidence of a tax refers to

The objective of the household is to

Household production increases when there is a stronger desire to avoid taxation.

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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