Question 1

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 D

Question 2

Household income is spent on all of the following except one. Which is the exception?

Accepted Answer

A)  services 
B)  tax payments 
C)  durable goods 
D)  nondurable goods 
E)  dividends 
A)  services 
B)  tax payments 
C)  durable goods 
D)  nondurable goods 
E)  dividends E

Question 3

In recent years, redistribution has been the fastest growing category of federal government outlays.

Accepted Answer

A) True 
 B)False  True

Question 4

Taxes collected on the basis of the benefits-received principle

Accepted Answer

A)  provide the states with their main sources of revenue 
B)  tend to redistribute income from rich to poor 
C)  collect the same total amount from each individual 
D)  connect the revenue side of the budget with the spending side of the budget 
E)  make it possible for government to spend money on activities that markets can't provide 
A)  provide the states with their main sources of revenue 
B)  tend to redistribute income from rich to poor 
C)  collect the same total amount from each individual 
D)  connect the revenue side of the budget with the spending side of the budget 
E)  make it possible for government to spend money on activities that markets can't provide

Question 5

Which of the following have their profits taxed twice?

Accepted Answer

A)  sole proprietorships 
B)  partnerships 
C)  corporations 
D)  nonprofit institutions 
E)  S-corporations 
A)  sole proprietorships 
B)  partnerships 
C)  corporations 
D)  nonprofit institutions 
E)  S-corporations

Question 6

The movement in U.S. population from the farms to urban areas was caused primarily by

Accepted Answer

A)  each member of a farm family specializing in a particular set of tasks 
B)  a sharp increase in farm productivity 
C)  a decline in the demand for labor in urban areas 
D)  a sharp decline in the demand for agricultural products 
E)  increased education among married women 
A)  each member of a farm family specializing in a particular set of tasks 
B)  a sharp increase in farm productivity 
C)  a decline in the demand for labor in urban areas 
D)  a sharp decline in the demand for agricultural products 
E)  increased education among married women

Question 7

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 8

Since 1930, U.S. government spending as a percent of GDP has

Accepted Answer

A)  increased 
B)  decreased 
C)  stayed the same 
D)  showed no particular trend 
E)  increased by the same percent each year 
A)  increased 
B)  decreased 
C)  stayed the same 
D)  showed no particular trend 
E)  increased by the same percent each year

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would indicate that an income tax is progressive?

Accepted Answer

A)  high-income people pay $3,000; low-income people pay $1,000 
B)  low-income people pay $3,000; high-income people pay $1,000 
C)  high-income and low-income people all pay $1000 each 
D)  high-income people pay 20 percent of their income in taxes; low-income people pay 10 percent 
E)  both high-income and low-income people pay 10 percent of their income in taxes 
A)  high-income people pay $3,000; low-income people pay $1,000 
B)  low-income people pay $3,000; high-income people pay $1,000 
C)  high-income and low-income people all pay $1000 each 
D)  high-income people pay 20 percent of their income in taxes; low-income people pay 10 percent 
E)  both high-income and low-income people pay 10 percent of their income in taxes

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

Firms

Accepted Answer

A)  are where entrepreneurs combine resources 
B)  are economic units formed by profit-seeking entrepreneurs 
C)  are assumed to try to maximize profit 
D)  reward entrepreneurs with profits, which are sales revenue minus the cost of production 
E)  All of the answers are correct. 
A)  are where entrepreneurs combine resources 
B)  are economic units formed by profit-seeking entrepreneurs 
C)  are assumed to try to maximize profit 
D)  reward entrepreneurs with profits, which are sales revenue minus the cost of production 
E)  All of the answers are correct.

Question 13

Nonprofit, or not-for-profit, firms

Accepted Answer

A)  maximize revenue instead of profit 
B)  minimize cost rather than maximize profit 
C)  often pursue goals other than profit maximization 
D)  pursue profit as their main goal despite their name 
E)  have no incentive to produce efficiently 
A)  maximize revenue instead of profit 
B)  minimize cost rather than maximize profit 
C)  often pursue goals other than profit maximization 
D)  pursue profit as their main goal despite their name 
E)  have no incentive to produce efficiently

Question 14

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 15

If the real wage decreases, the opportunity cost of working in the home will

Accepted Answer

A)  increase 
B)  decrease 
C)  not be affected 
D)  increase as long as worker productivity also rises 
E)  increase only if households want to maintain their standard of living 
A)  increase 
B)  decrease 
C)  not be affected 
D)  increase as long as worker productivity also rises 
E)  increase only if households want to maintain their standard of living

Question 16

In the following situation, the tax system is

Accepted Answer

A)  progressive throughout all levels of income 
B)  progressive between $1,000 and $2,000 of income but regressive above $2,000 
C)  regressive throughout all levels of income 
D)  regressive between $1,000 and $2,000 of income but progressive above $2,000 
E)  proportional throughout all levels of income 
A)  progressive throughout all levels of income 
B)  progressive between $1,000 and $2,000 of income but regressive above $2,000 
C)  regressive throughout all levels of income 
D)  regressive between $1,000 and $2,000 of income but progressive above $2,000 
E)  proportional throughout all levels of income

Question 17

A progressive tax means

Accepted Answer

A)  people who make more money pay less total taxes 
B)  the marginal tax rate increases as income increases 
C)  the percentage of income paid out decreases as income increases 
D)  people who are poor receive the proceeds of the tax 
E)  the same thing as a flat-rate tax 
A)  people who make more money pay less total taxes 
B)  the marginal tax rate increases as income increases 
C)  the percentage of income paid out decreases as income increases 
D)  people who are poor receive the proceeds of the tax 
E)  the same thing as a flat-rate tax

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

If one US dollar costs 0.8 Euros, then 1 Euro must cost how many US dollars?

Accepted Answer

A)  0.5 
B)  0.8 
C)  1.0 
D)  1.25 
E)  1.5 
A)  0.5 
B)  0.8 
C)  1.0 
D)  1.25 
E)  1.5

Exam 3: Economic Decision Makers

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

Household income is spent on all of the following except one. Which is the exception?

In recent years, redistribution has been the fastest growing category of federal government outlays.

Taxes collected on the basis of the benefits-received principle

Which of the following have their profits taxed twice?

The movement in U.S. population from the farms to urban areas was caused primarily by

Which category includes the largest number of firms?

Since 1930, U.S. government spending as a percent of GDP has

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

Which of the following would indicate that an income tax is progressive?

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

Firms

Nonprofit, or not-for-profit, firms

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

If the real wage decreases, the opportunity cost of working in the home will

In the following situation, the tax system is

A progressive tax means

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

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

If one US dollar costs 0.8 Euros, then 1 Euro must cost how many US dollars?

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters