Question 1

In recent years defense expenditures has fallen as a share of federal government outlays.

Accepted Answer

A) True 
 B)False  True

Question 2

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 E

Question 3

Which of the following best defines foreign exchange?

Accepted Answer

A) a trade between two countries 
B) the market where exporting and importing activities take place 
C) the price of a currency relative to another currency 
D) the currency of another country used for trading 
E) the dollars that the United States uses to buy goods from other countries 
A) a trade between two countries 
B) the market where exporting and importing activities take place 
C) the price of a currency relative to another currency 
D) the currency of another country used for trading 
E) the dollars that the United States uses to buy goods from other countries D

Question 4

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 5

Suppose you form a legal partnership with your best friend, and she purchases consulting services calling for a $100,000 fee. Your business is broke, and you never wanted the consultants to work for you -- only your partner did. For how much of this debt are you legally liable?

Accepted Answer

A) none of it 
B) all of the $100,000 
C) the proportion reflected by the proportion of the business owned 
D) only an amount equal to the assets of the business 
E) $50,000 
A) none of it 
B) all of the $100,000 
C) the proportion reflected by the proportion of the business owned 
D) only an amount equal to the assets of the business 
E) $50,000

Question 6

Luigi owns and operates a small restaurant. The income he receives from the restaurant is classified as

Accepted Answer

A) saving 
B) proprietor's income 
C) wages and salaries 
D) rental income 
E) dividends 
A) saving 
B) proprietor's income 
C) wages and salaries 
D) rental income 
E) dividends

Question 7

Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. What type of tax is this?

Accepted Answer

A) progressive 
B) proportional 
C) regressive 
D) property tax 
E) one based on the benefits principle of taxation 
A) progressive 
B) proportional 
C) regressive 
D) property tax 
E) one based on the benefits principle of taxation

Question 8

The term "utility" means

Accepted Answer

A) satisfaction 
B) a low-valued good 
C) productivity 
D) adaptability 
E) efficiency 
A) satisfaction 
B) a low-valued good 
C) productivity 
D) adaptability 
E) efficiency

Question 9

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 10

Despite specialization and comparative advantage, household production still exists because for some households

Accepted Answer

A) the opportunity cost of production at home is greater than the cost of purchasing the good in the market 
B) production at home is less costly than purchasing the good in the market 
C) the value of home production exceeds the sunk cost of home production 
D) the value of home production is ignored 
E) food and clothing expenditures represent a small portion of their total budget 
A) the opportunity cost of production at home is greater than the cost of purchasing the good in the market 
B) production at home is less costly than purchasing the good in the market 
C) the value of home production exceeds the sunk cost of home production 
D) the value of home production is ignored 
E) food and clothing expenditures represent a small portion of their total budget

Question 11

The most common form of business organization in the United States is the sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) separation of ownership and control 
B) limited liability for business debt 
C) transferability of ownership and firm continuity over time 
D) ease of start-up 
E) ease of obtaining financing 
A) separation of ownership and control 
B) limited liability for business debt 
C) transferability of ownership and firm continuity over time 
D) ease of start-up 
E) ease of obtaining financing

Question 14

Which of the following did not occur during the Industrial Revolution?

Accepted Answer

A) Production became more reliant on highly specialized equipment. 
B) A more efficient division of labor was promoted. 
C) Workers bore much of the costs of production. 
D) The transaction costs of contracting with individual resource owners were reduced. 
E) Technological development increased the productivity of most workers. 
A) Production became more reliant on highly specialized equipment. 
B) A more efficient division of labor was promoted. 
C) Workers bore much of the costs of production. 
D) The transaction costs of contracting with individual resource owners were reduced. 
E) Technological development increased the productivity of most workers.

Question 15

Which of the following is not based on the benefits-received principle of taxation?

Accepted Answer

A) charging a fee for use of public golf courses 
B) differences between residential and out-of-state college tuition 
C) the excise tax on gasoline 
D) toll booths on a highway 
E) charging a fee per bag to haul away garbage 
A) charging a fee for use of public golf courses 
B) differences between residential and out-of-state college tuition 
C) the excise tax on gasoline 
D) toll booths on a highway 
E) charging a fee per bag to haul away garbage

Question 16

A realized capital gain is

Accepted Answer

A) the difference between the price of a share of stock and what the investor paid for it (i.e., the broker's fee) 
B) the difference between the original value of a piece of equipment and its depreciated value 
C) an increase in the net worth of a sole proprietorship or partnership 
D) an increase in the market value of a share of stock held by an individual 
E) the difference between the selling price and the purchase price of a share of stock 
A) the difference between the price of a share of stock and what the investor paid for it (i.e., the broker's fee) 
B) the difference between the original value of a piece of equipment and its depreciated value 
C) an increase in the net worth of a sole proprietorship or partnership 
D) an increase in the market value of a share of stock held by an individual 
E) the difference between the selling price and the purchase price of a share of stock

Question 17

The value of a country's imports cannot exceed the value of its exports.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would not be considered a role of the government?

Accepted Answer

A) promoting competition 
B) providing public goods 
C) providing externalities 
D) regulating natural monopolies 
E) safeguarding private property and enforcing contracts 
A) promoting competition 
B) providing public goods 
C) providing externalities 
D) regulating natural monopolies 
E) safeguarding private property and enforcing contracts

Question 20

You own stock worth an estimated $1 million in the LPL corporation. In addition, you have personal assets worth another $2 million. LPL becomes insolvent, with debts exceeding assets by $15 million. Your personal wealth will decline by

Accepted Answer

A) $0 
B) $1 million 
C) $1.5 million 
D) $3 million 
E) your proportion of the total outstanding stock shares times $15 million 
A) $0 
B) $1 million 
C) $1.5 million 
D) $3 million 
E) your proportion of the total outstanding stock shares times $15 million

Exam 4: Economic Decision Makers

In recent years defense expenditures has fallen as a share of federal government outlays.

Household production is more likely to occur when

Which of the following best defines foreign exchange?

Economists generally assume that

Suppose you form a legal partnership with your best friend, and she purchases consulting services calling for a $100,000 fee. Your business is broke, and you never wanted the consultants to work for you -- only your partner did. For how much of this debt are you legally liable?

Luigi owns and operates a small restaurant. The income he receives from the restaurant is classified as

Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. What type of tax is this?

The term "utility" means

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

Despite specialization and comparative advantage, household production still exists because for some households

The most common form of business organization in the United States is the sole proprietorship.

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

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

Which of the following did not occur during the Industrial Revolution?

Which of the following is not based on the benefits-received principle of taxation?

A realized capital gain is

The value of a country's imports cannot exceed the value of its exports.

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

Which of the following would not be considered a role of the government?

You own stock worth an estimated $1 million in the LPL corporation. In addition, you have personal assets worth another $2 million. LPL becomes insolvent, with debts exceeding assets by $15 million. Your personal wealth will decline by

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

Economic Tools and Economics Systems

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Agregate Demand

Aggregate 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

International Finance

Economic Development

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