Deck 10: Households and Businesses: An Overview

Question 1

Microeconomics, unlike macroeconomics, focuses on:

A) individual households and businesses, and how they make decisions.
B) households and businesses as groups, and their relationship to other households and businesses.
C) individual households and businesses, and how their behavior affects overall economic activity.
D) households and businesses as groups, and how their behavior affects overall economic activity.

Answer 1

individual households and businesses, and how they make decisions.

Question 2

Statistics on household units include:

A) more people than statistics on family units.
B) fewer people than statistics on family units.
C) the same number of people as statistics on family units.
D) no people; they measure the number of housing units where people could live.

Answer 2

more people than statistics on family units.

Question 3

Household statistics include individuals living alone or in groups in:

A) apartments.
B) military barracks.
C) college residence halls.
D) all of the above.

Answer 3

apartments.

Question 4

Which of the following statements is true?

A) Household and family statistics include exactly the same people.
B) All people living in households could be included in family statistics.
C) All people living in families could be included in household statistics.
D) People can be included in either household or family statistics, but never both.

Question 5

In the U.S. over the last two decades:

A) the total number of households has decreased.
B) the percentage of households with only one person has slightly increased.
C) the total number of households has remained approximately the same.
D) the percentage of households with only one person has remained approximately the same.

Question 6

In the U.S. over the last two decades there has been a decrease in the:

A) total number of households.
B) average number of persons per household.
C) percentage of households with one person.
D) all of the above.

Question 7

Which of the following statements is FALSE?

A) The average age of the U.S. population is approximately 55 years old.
B) The population of the U. S. is approximately 300 million.
C) There are more women than men in the U. S. population.
D) Most people in the U. S. live in urban areas.

Question 8

The population of the U.S. on average can be characterized as:

A) old and rural.
B) old and urban.
C) young (under 40) and rural.
D) young (under 40) and urban.

Question 9

Household pretax income that is used for spending, paying taxes, and saving is:

A) private income.
B) national income.
C) personal income.
D) disposable income.

Question 10

Personal income is:

A) per capita income, or income per person.
B) household income used for spending, saving, and paying taxes.
C) after-tax income available to households for spending and saving.
D) household income that is available for spending after taxes and saving have been deducted.

Question 11

The largest source of personal income in the U.S. is:

A) transfer payments.
B) proprietors' income.
C) dividends and interest income.
D) wages, salaries, and other labor income.

Question 12

From 1980 to 2010, which of the following has been the smallest source of total income going to U.S. households?

A) Rental income.
B) Transfer payments.
C) Wages, salaries, and other labor income.
D) All of the above.

Question 13

A transfer payment is

A) money transferred from a corporation to its stockholders.
B) money received from the government for which there is no direct work performed in return.
C) income earned from rent, interest, and dividends.
D) all of the above are examples of transfer payments.

Question 14

Which of the following is NOT considered earned income?

A) Dividends.
B) Interest income.
C) Transfer payments.
D) Proprietors' income.

Question 15

From 1980 to 2010, transfer payments:

A) increased as a percentage of total income going to U.S. households.
B) decreased as a percentage of total income going to U.S. households.
C) accounted for less than 1% of total income going to U.S. households.
D) at first increased, and then decreased, as a percentage of total income going to U.S. households.

Question 16

The largest transfer program in the U.S. is:

A) Social Security.
B) public assistance.
C) public employee, railroad, and veteran retirement.
D) workers compensation and unemployment benefits.

Question 17

The average income of households:

A) headed by a married couple is approximately twice the average income of all households.
B) whose head graduated high school is greater than the average income of all households.
C) with a head over 65 years of age is less than the average income of households with a head in the late twenties through early thirties.
D) all of the above.

Question 18

Of the following groups, the highest average household income occurs in households headed by a:

A) female.
B) high school graduate.
C) person with a college degree.
D) person in their late 20s or early 30s.

Question 19

Of the following, the lowest average household income would likely be found in households headed by a:

A) married couple.
B) college graduate.
C) person aged 25-34 years.
D) person 65 years of age or older.

Question 20

The average annual money income of households in the U.S. in 2010 was approximately:

A) $26,000.
B) $50,000.
C) $80,000.
D) $150,000.

Question 21

Which of the following statements is FALSE?

A) Average household money income in the U.S. in 2010 was about $50,000.
B) Statistically, years of education is directly related to average household money income.
C) Families headed by a married couple earn more on average than households headed by someone 65 years of age or older.
D) The average income of households headed by a person attaining a bachelor's degree is about equal to the average income for all U.S. households.

Question 22

The majority of household income is used for:

A) taxes.
B) saving.
C) spending.
D) entertainment.

Question 23

The majority of household income is used to purchase goods and services. After that, on average, the next largest part of household income is:

A) saved.
B) used for personal taxes and nontax payments.
C) used for interest payments and other finance charges.
D) set aside for future use, such as a house purchase or college education.

Question 24

Generally, the percentage of income taxed and saved is:

A) less in higher income households than in lower income households.
B) greater in higher income households than in lower income households.
C) not related in any systematic way to the average level of household income.
D) about the same in higher income households as in lower income households.

Question 25

The largest percentage of household spending is used to:

A) pay taxes.
B) purchase services.
C) purchase durable goods.
D) purchase nondurable goods.

Question 26

Durable goods:

A) are recycled goods.
B) have a short useful life.
C) have more than one use.
D) have a useful life of more than one year.

Question 27

An example of a durable good is:

A) a haircut.
B) an automobile.
C) a three-week trip to Italy.
D) a box of Girl Scout cookies.

Question 28

An example of a nondurable good is:

A) an automobile.
B) a visit to the dentist.
C) a meal at a restaurant.
D) a semester of education.

Question 29

Which of the following statements is FALSE?

A) Most household expenditures are for services.
B) Personal income refers to income that remains after taxes have been paid.
C) The largest source of household income is wages, salaries, and other labor income.
D) The largest percentage of personal income goes for purchases of goods and services.

Question 30

To maximize economic well-being, a person should:

A) acquire all the goods and services that can be obtained.
B) follow the course of action that minimizes costs, regardless of the benefits.
C) follow the course of action that offers the greatest benefits, regardless of the costs.
D) balance the benefits and costs of different courses of action and select the one that adds most to satisfaction.

Question 31

Maximizing economic well-being requires that:

A) an individual earn the maximum attainable income.
B) the benefits and costs of different courses of action be weighed.
C) an individual acquire all of the goods and services that can possibly be attained with a given income.
D) all of the above.

Question 32

The economic goal of an individual is to maximize his/her:

A) profit.
B) income.
C) economic well-being.
D) consumption of goods and services.

Question 33

Which of the following statements is FALSE?

A) Individuals are unable to obtain all the goods and services they would like because incomes are limited.
B) An individual's inability to acquire all the goods and services he or she would like is a personal version of the basic economic problem.
C) To maximize economic satisfaction an individual must, within the limits of his or her income, pick the combination of goods and services that maximizes total utility.
D) Maximizing satisfaction is easier in economically advanced countries than in less developed countries because individuals' income earning potentials are limitless in advanced countries.

Question 34

Maximizing satisfaction from consuming goods and services with limited incomes is difficult for individuals because:

A) they are not interested in the satisfaction to be obtained from purchasing goods and services.
B) they feel a need to save, but saving does not contribute to their sense of economic well-being.
C) they can spend their incomes in different ways, each resulting in a different level of satisfaction.
D) the limits imposed by their incomes leave no choices about the goods and services they will purchase.

Question 35

When trying to maximize economic well-being from choosing among the purchase of different goods, the individual must consider:

A) the prices of the goods.
B) his or her limited income.
C) the utility received from the different goods.
D) all of the above.

Question 36

The satisfaction realized from consuming a good or service is referred to by economists as:

A) utility.
B) economic gain.
C) consumer surplus.
D) consumer well-being.

Question 37

The goal of an individual in making a spending decision is to purchase the combination of goods and services that:

A) is the least expensive.
B) allows the greatest amount of saving.
C) requires the smallest amount of time to obtain.
D) gives maximum satisfaction within the limits of his/her income.

Question 38

To maximize utility an individual should purchase items that:

A) have the lowest price.
B) provide the highest satisfaction.
C) have the highest market demand.
D) provide the highest satisfaction per dollar spent.

Question 39

To maximize utility from the purchase of expensive candy that costs twice as much as cheap candy, the added satisfaction from the expensive candy should be:

A) equal to the added satisfaction from the cheap candy.
B) at least as great as the added satisfaction from the cheap candy.
C) at least twice as great as the added satisfaction from the cheap candy.
D) at least half as great as the added satisfaction from the cheap candy, since a given expenditure will buy only half as much expensive candy.

Question 40

A consumer attempting to maximize his or her satisfaction from consuming different goods needs to look at:

A) the amount that would be spent on each good.
B) the total satisfaction that each good would provide.
C) the added satisfaction provided by each good in comparison to its price.
D) whether the goods are durable or nondurable, and whether he or she is buying them for his/her own or someone else's use.

Question 41

To maximize satisfaction from purchasing several different goods and services, expenditures must be allocated so that:

A) the cost of the purchases is minimized.
B) only the items that have the highest utility numbers are selected.
C) the percentage of expenditures going to durable goods is maximized.
D) the items that give the most utility for the purchaser's money are selected.

Question 42

Suppose Good A costs $1.00 per unit and Good B costs $2.00 per unit. If each additional unit of Good B adds three times as much to your total satisfaction than is added by each additional unit of Good A, you will increase your total satisfaction from consuming goods A and B by:

A) ceasing to consume both goods.
B) consuming less of Good A and more of Good B.
C) consuming more of Good A and less of Good B.
D) continuing to consume both goods in the same proportion.

Question 43

Suppose each additional unit of Good X adds three times as much to your total satisfaction as is added by each additional unit of Good Y, and that Good Y costs $12.00. To maximize your satisfaction from consuming Good X and Good Y, you should be willing to spend:

A) up to $12.00 on Good X.
B) up to $36.00 on Good X.
C) no more than $15.00 on Good X.
D) between $48.00 and $60.00 on Good X.

Question 44

If a concert ticket costs ten times as much as a movie ticket, maximizing satisfaction from attending the concert requires that the additional utility from the concert be:

A) at least as great as the additional utility from attending the movie.
B) at least ten times as great as the additional utility from attending the movie.
C) no more than ten times as great as the additional utility from attending the movie.
D) none of the above.

Question 45

Attending a concert costs Barney eight times as much as going to a movie, and gives four times the additional satisfaction that the movie gives. To maximize his satisfaction Barney should go to the:

A) movie because it costs less.
B) concert because he would enjoy it more than the movie.
C) movie because he would get more satisfaction from each dollar spent.
D) concert for part of the evening, and then to the movie later in the evening.

Question 46

-To maximize the satisfaction from a $240.00 expenditure, a person should buy:

A) 2 units of Good X.
B) 6 units of Good Y.
C) 12 units of Good Z.
D) 1 unit of Good X plus 3 units of Good Y.

Question 47

-To maximize satisfaction, the first good in the table you should purchase is:

A) any of the goods, since each adds utility.
B) Good Z because it is the cheapest of the three.
C) Good X because it has the highest additional utility.
D) Good Y because it has the highest additional utility per dollar spent.

Question 48

Given the four goods below, which one adds the most utility for the purchaser's money?

A) Good 1.
B) Good 2.
C) Good 3.
D) Good 4.

Question 49

Given the four goods below, which one adds the most utility for the purchaser's money?

A) Good 1.
B) Good 2.
C) Good 3.
D) Good 4.

Question 50

To maximize satisfaction from purchasing several different goods and services, expenditures must be allocated in a way that:

A) leaves some income for saving.
B) adds the most utility for the purchaser's money.
C) causes the highest utility items, regardless of their prices, to be chosen.
D) results in the acquisition of the largest amount of goods and services for the purchaser's money.

Question 51

The rule for maximizing satisfaction from purchasing goods and services is:

A) practiced by buyers in the real world.
B) valid only for high income earners.
C) only true for purchasing decisions by businesses.
D) a principle found in economics textbooks that is not practiced by buyers in the real world.

Question 52

To maximize the satisfaction from consuming good A and good B, each should be purchased up to the point where the relationship between their marginal utilities and prices is:

A) MUa/Pa = MUb/Pb.
B) MUa - Pa = MUb - Pb.
C) MUa + Pa = MUb + Pb.
D) (MUa x Pa) + (MUb x Pb) = 1.

Question 53

The price of good X is $16.00, the price of good Y is $24.00, and the marginal utility from the last unit of good X consumed is 48 units of satisfaction. To maximize total satisfaction from consuming this amount of goods X and Y, the marginal utility for good Y must be:

A) 48 units of satisfaction.
B) 56 units of satisfaction.
C) 72 units of satisfaction.
D) not enough information to answer the question.

Question 54

Suppose that, for a particular buyer of Goods A and B, MUa/Pa = 1.5 and MUb/Pb = 2.5. Based on this information you know:

A) the price of Good A is less than the price of Good B.
B) both goods are overpriced because both MU/P ratios are greater than 1.
C) this buyer would increase total satisfaction by consuming more of Good A and less of Good B.
D) this buyer would increase total satisfaction by consuming less of Good A and more of Good B.

Question 55

Suppose that, for a buyer of Goods X and Y, MUx/Px = 0.8 and MUy/Py = 1.2. Based on this information, which of the following must be true?

A) The price of Good X is less than the price of Good Y.
B) The demand for Good X is price inelastic and the demand for Good Y is price elastic.
C) The total satisfaction from consuming Good X is less than the total satisfaction from consuming Good Y.
D) The last dollar spent on Good X adds fewer units of satisfaction than are added by the last dollar spent on Good Y.

Question 56

Mariellen is considering buying Good A and Good B. Her MUa/Pa is 1.5, and Good B costs $60. How many points will Good B need to add to her utility for her to maximize her satisfaction from consuming both goods?

A) 24 points.
B) 30 points.
C) 60 points.
D) 90 points.

Question 57

According to Application 10.1, "Family Gossip:"

A) it is to be expected that members of the same family will have very similar opinions about the costs and benefits of a given spending decision.
B) for "once in a lifetime" purchases, such as a wedding dress, most people think that a high price for what is purchased should play little, if any, role in the decision to make the purchase.
C) both of the above.
D) none of the above.

Question 58

To maximize satisfaction from earning income, an individual should:

A) always take time off from work when the opportunity presents itself.
B) balance the satisfaction from gaining more income against what is given up to earn that income.
C) earn only the amount of income that is necessary to support his or her current purchases of goods and services.
D) work more hours whenever possible since the additional income from the extra work will reduce the scarcity problem.

Question 59

To maximize satisfaction from earning income, an individual should:

A) work as few hours as possible.
B) obtain the highest paying job possible.
C) balance the added income from working against the opportunities forgone because of work.
D) all of the above.

Question 60

Which of the following costs and benefits should always be ruled out when determining the well-being from holding a job?

A) The personal satisfaction from holding the job.
B) The financial costs, such as travel costs, of holding the job.
C) The nonmonetary costs, such as long hours, of holding the job.
D) None of the above should be ruled out.

Question 61

To maximize satisfaction from earning income or from consuming goods and services, you must:

A) earn or consume no more than is needed.
B) earn all of the income that can be earned or consume all of the goods and services that can be consumed.
C) balance your earning or spending patterns against the earning or spending patterns of other individuals to see how they compare.
D) balance the advantages and disadvantages of alternative earning or spending strategies and choose the one that appears to be the best.

Question 62

Application 10.2, "You Decide:"

A) gives examples of costs and benefits influencing people's career and job decisions.
B) asks the question, "how important does something need to be to justify the time required to evaluate its costs and benefits?"
C) gives a list of costs and benefits that should be considered when making very expensive purchases - such as buying a house.
D) none of the above.

Question 63

In order to operate, a business must be legally organized as a:

A) corporation.
B) partnership.
C) proprietorship.
D) any of the above.

Question 64

Difficulty in raising large amounts of funds is a problem mainly for:

A) corporations.
B) partnerships and corporations.
C) sole proprietorships and corporations.
D) sole proprietorships and partnerships.

Question 65

A proprietorship is a:

A) legal entity with limited liability.
B) single-owner business with limited liability.
C) single-owner business with unlimited liability.
D) multiple-owner business with unlimited liability.

Question 66

A sole proprietorship can raise money for business expansion by:

A) issuing bonds.
B) issuing stocks.
C) borrowing from private sources, such as banks.
D) all of the above.

Question 67

Unlimited liability is a risk faced by:

A) a sole proprietor.
B) a bondholder in a corporation.
C) a stockholder in a corporation.
D) all of the above.

Question 68

Which of the following statements about a sole proprietorship is FALSE?

A) It is relatively easy to start a business that is organized as a sole proprietorship.
B) The owner of a sole proprietorship can act relatively independently when making decisions.
C) A sole proprietor can raise money by borrowing from financial institutions, issuing stocks, and issuing bonds.
D) Courts may take a sole proprietor's personal assets to pay the business' debts if the business does not have the funds to pay them directly.

Question 69

When a partnership goes into default:

A) each of the general partners is responsible for payment of the entire debt.
B) each of the general partners is responsible for his or her share of the outstanding debt.
C) each of the partners, including limited partners, is responsible for payment of the entire debt.
D) each of the partners, including limited partners, is responsible for his or her share of the outstanding debt.

Question 70

In a partnership:

A) the partner designated as the sole proprietor is fully liable for the debts of the business.
B) all general partners are fully liable for the debts of the business.
C) liability for the debts of the business are divided equally among all general partners.
D) there are no owners of the business and the managers are responsible for the business' debts.

Question 71

A general partner in a partnership:

A) cannot by law receive a salary.
B) is the founding member of the company.
C) has unlimited liability for the business' debts.
D) answers only to the partnership's stockholders.

Question 72

A partnership is similar to a sole proprietorship in that:

A) both can issue stock.
B) it allows the pooling of capital and experience.
C) the partners may be subject to unlimited liability.
D) none of the above.

Question 73

A business can continue on indefinitely if it is organized as a:

A) corporation.
B) partnership.
C) sole proprietorship.
D) corporation or partnership.

Question 74

A business owner's liability is always limited when the owner is:

A) a sole proprietor.
B) a common stockholder.
C) in an unincorporated business.
D) a general partner in a partnership.

Question 75

Limited liability is a characteristic of:

A) corporations.
B) sole proprietorships and partnerships.
C) corporations and sole proprietorships.
D) corporations, partnerships, and sole proprietorships.

Question 76

Last year Mr. Mooka spent $5,000 to acquire 100 shares of stock in a dairy business that later declared bankruptcy. The dairy business' creditors can sue Mr. Mooka for:

A) $0.
B) $5,000.
C) $50 (1 share).
D) all of the company's debts.

Question 77

Mr. Mahi owns The Exotic Fish Shop, and Ms. Jones owns 100 shares of XYZ Corporation stock. If both The Exotic Fish Shop and XYZ Corporation go bankrupt:

A) neither Mr. Mahi nor Ms. Jones will lose any personal assets.
B) both Mr. Mahi and Ms. Jones may need to use their personal assets to pay business debts.
C) Mr. Mahi is protected from all losses, but Ms. Jones' personal assets are subject to use as payment for the corporation's debts.
D) Mr. Mahi's personal assets are subject to use as payment for his business debts, and Ms. Jones loses the amount she paid for her stock.

Question 78

Which of the following entitles its holder to the same dividend every year?

A) Common stock of a corporation.
B) Common stock of a partnership.
C) Preferred stock of a corporation.
D) Preferred stock of a proprietorship.

Question 79

Which of the following pays its holder an amount that is dependent on the business' level of profit?

A) A bond.
B) Common stock.
C) Preferred stock.
D) All of the above.

Question 80

Stockholders who own a corporation:

A) appoint the board of directors, which runs the corporation for top management.
B) appoint top management, which selects the board of directors to run the corporation.
C) govern the corporation and appoint top management to serve on the board of directors.
D) elect the board of directors, which governs the corporation and appoints top management to run the corporation.