Question 1

The movement of households from rural to urban settings reduced the degree of specialization in household production.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a disadvantage of a corporation compared to a sole proprietorship?

Accepted Answer

A)   Limited liability
B)   Difficulty raising start-up money
C)   Lack of profitability
D)   Double taxation of corporate income
E)   Vulnerability in the case of the death of an ownerF) All of the above
G) A) and C)

Question 4

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. This is an example of:

Accepted Answer

A)   progressive taxation.
B)   proportional taxation.
C)   regressive taxation.
D)   a property tax.
E)   a tax based on the benefits-principle of taxation.F) C) and D)
G) A) and E) B

Question 5

A tax is said to be progressive if:

Accepted Answer

A)   the absolute size of the tax (in dollars)  increases as income increases.
B)   the wealthy pay a smaller percentage of their income than the poor.
C)   the average tax rate falls as income rises.
D)   the proportion of income paid as taxes increases as income increases.
E)   the proceeds are used to pay for liberal political programs.F) A) and C)
G) C) and D)

Question 6

Import quotas on sugar entering the United States result in lower sugar prices in the United States.

Accepted Answer

A) True 
 B)False

Question 7

When you throw trash out your car window you are creating:

Accepted Answer

A)   a positive externality.
B)   a negative externality.
C)   a private good.
D)   a public good.
E)   both a private and a public good.F) C) and D)
G) None of the above

Question 8

The following table shows tax payments made for various incomes. According to the information in the table below, 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.F) All of the above
G) B) and E)

Question 9

An external benefit is a benefit from an activity that falls on a third party which is not involved in the activity.

Accepted Answer

A) True 
 B)False

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 product quality and prices.F) All of the above
G) B) and C) C

Question 11

If 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.F) B) and C)
G) A) and B)

Question 12

The table below shows taxes paid for various incomes. According to the information in the table below, the tax system is:

Accepted Answer

A)   progressive through all levels of income.
B)   proportional throughout all levels of income.
C)   regressive throughout all levels of income.
D)   based on the benefits-received principle.
E)   proportional only between income levels $1,000 and $3,000.F) A) and D)
G) A) and B) C

Question 13

A positive externality is one in which there is an external benefit bestowed on a third party.

Accepted Answer

A) True 
 B)False

Question 14

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 restrictionsF) A) and B)
G) A) and E)

Question 15

Which of the following is true about a 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 the 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.F) A) and C)
G) C) and D)

Question 16

In recent decades, international trade has been:

Accepted Answer

A)   a constant percentage of U.S. GDP.
B)   a declining fraction of U.S. GDP.
C)   an increasing fraction of U.S. GDP.
D)   declining as measured by total dollars spent.
E)   constant as measured by total dollars spent.F) C) and D)
G) A) and E)

Question 17

A corporation is a legal entity owned by stockholders whose liability is limited to the value of their stock ownership. See 3-2: The Firm

Accepted Answer

A) True 
 B)False

Question 18

Brian is the sole proprietor of Long Voyage Software, which generates maps for wilderness trips. He started the business with an initial investment of $80,000. A faulty map caused one customer to get hopelessly lost. After her rescue and recuperation, she sued Long Voyage for $5,000,000. Which of the following is true?

Accepted Answer

A)   The customer can be awarded only $80,000-what the firm has available to pay.
B)   The customer can be awarded $5,000,000 but can get only $80,000.
C)   The customer can be awarded $5,000,000, but Brian personally won't have to pay more than $80,000.
D)   If $5,000,000 is awarded, Brian will have to pay none of it.
E)   If $5,000,000 is awarded, Brian is personally responsible for paying all of it.F) C) and D)
G) B) and C)

Question 19

When the government sells something it produces, _____.

Accepted Answer

A)   revenue received must be greater than cost to justify government production
B)   revenue received must equal cost because government is a nonprofit organization
C)   the price does not always reflect the cost of producing the good
D)   the price charged is an accurate measure of the benefits generated
E)   it prices the good the same way a natural monopolist wouldF) B) and C)
G) None of the above

Question 20

In terms of the numbers of firms in the U.S. economy, the most common type of firm is the:

Accepted Answer

A)   corporation.
B)   partnership.
C)   sole proprietorship.
D)   nonprofit organization.
E)   limited partnership corporation.F) A) and B)
G) A) and C)

Exam 3: Economic Decision Makers

The movement of households from rural to urban settings reduced the degree of specialization in household production.

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a disadvantage of a corporation compared to a sole proprietorship?

Correct Answer
verified

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. This is an example of:

Correct Answer
verified
B

A tax is said to be progressive if:

Correct Answer
verified

Import quotas on sugar entering the United States result in lower sugar prices in the United States.

Correct Answer
verified

When you throw trash out your car window you are creating:

Correct Answer
verified

The following table shows tax payments made for various incomes. According to the information in the table below, the tax system is:

Correct Answer
verified

An external benefit is a benefit from an activity that falls on a third party which is not involved in the activity.

Correct Answer
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Rationality in the household decision-making process means that:

Correct Answer
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C

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

Correct Answer
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The table below shows taxes paid for various incomes. According to the information in the table below, the tax system is:

Correct Answer
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C

A positive externality is one in which there is an external benefit bestowed on a third party.

Correct Answer
verified

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

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

Correct Answer
verified

In recent decades, international trade has been:

Correct Answer
verified

A corporation is a legal entity owned by stockholders whose liability is limited to the value of their stock ownership. See 3-2: The Firm

Correct Answer
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Correct Answer
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When the government sells something it produces, _____.

Correct Answer
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In terms of the numbers of firms in the U.S. economy, the most common type of firm is the:

Correct Answer
verified

Exam 3: Economic Decision Makers

The movement of households from rural to urban settings reduced the degree of specialization in household production.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of a corporation compared to a sole proprietorship?

Correct AnswerverifiedShow Answer

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. This is an example of:

Correct AnswerverifiedB

A tax is said to be progressive if:

Correct AnswerverifiedShow Answer

Import quotas on sugar entering the United States result in lower sugar prices in the United States.

Correct AnswerverifiedShow Answer

When you throw trash out your car window you are creating:

Correct AnswerverifiedShow Answer

The following table shows tax payments made for various incomes. According to the information in the table below, the tax system is:

Correct AnswerverifiedShow Answer

An external benefit is a benefit from an activity that falls on a third party which is not involved in the activity.

Correct AnswerverifiedShow Answer

Rationality in the household decision-making process means that:

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

The table below shows taxes paid for various incomes. According to the information in the table below, the tax system is:

Correct AnswerverifiedC

A positive externality is one in which there is an external benefit bestowed on a third party.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In recent decades, international trade has been:

Correct AnswerverifiedShow Answer

A corporation is a legal entity owned by stockholders whose liability is limited to the value of their stock ownership. See 3-2: The Firm

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the government sells something it produces, _____.

Correct AnswerverifiedShow Answer

In terms of the numbers of firms in the U.S. economy, the most common type of firm is the:

Correct AnswerverifiedShow Answer

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B

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C

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C

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