Question 1

Which of the four types of economic decision makers is most important?

Accepted Answer

A)   firms,because they produce all goods and services in the economy
B)   households,because they demand goods and services and supply resources
C)   government,because it ultimately sets and enforces the "rules of the game"
D)   government,because it steps in when there is market failure
E)   the rest of the world,because there are over 150 countriesF) C) and E)
G) B) and D)

Question 2

Which of the following is a result of increased real wages in the United States?

Accepted Answer

A)   a decrease in the quantity of services demanded by households
B)   an increase in the opportunity cost of remaining employed in the home
C)   a decrease in the opportunity cost of working outside the home
D)   a decline in the number of households providing labor outside the home
E)   reduced use of labor-saving devices in householdsF) A) and D)
G) A) and C)

Question 3

A disadvantage of the corporate form of business organization is that corporate income is taxed twice.

Accepted Answer

A) True 
 B)False

Question 4

Which resource generates the largest share of the income in the United States?

Accepted Answer

A)   labor
B)   land
C)   capital
D)   entrepreneurial ability
E)   moneyF) A) and E)
G) C) and E)

Question 5

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

Accepted Answer

A)   limited liability
B)   difficulty raising start-up money
C)   lack of profitability
D)   corporate income is taxed twice
E)   corporations are more vulnerable in the case of the death of an ownerF) A) and D)
G) All of the above

Question 6

Which form of business organization is the most common in the United States?

Accepted Answer

A)   sole proprietorship
B)   partnership
C)   corporation
D)   nonprofit organization
E)   S-corporationF) A) and D)
G) C) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Gross Domestic Product is the value of all

Accepted Answer

A)   goods and services produced during a particular year
B)   goods and services sold during a particular year
C)   final goods and services sold during a particular year
D)   final goods and services produced during a particular year
E)   final goods and services produced and sold during a particular yearF) C) and D)
G) B) and E)

Question 10

The term "fiscal policy" refers to

Accepted Answer

A)   the amount of physical output produced by firms
B)   the means by which government policy makes firms more productive
C)   the avenue by which government influences credit markets
D)   spending and taxing by governments
E)   a tool of government that works in the opposite direction of monetary policyF) None of the above
G) A) and E)

Question 11

As the real wage increases,the opportunity cost of working outside the home increases.

Accepted Answer

A) True 
 B)False

Question 12

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) A) and D)
G) C) and D)

Question 13

Gross Domestic Product is the market value of

Accepted Answer

A)   all exchanges made during the course of a year
B)   all final goods produced during the course of a year
C)   all monetary transactions during the course of a year
D)   all the goods produced during the course of a year over and above what is required to maintain the population and the stock of capital
E)   all final goods sold during the course of a yearF) A) and B)
G) A) and D)

Question 14

Which of the following is a reason why government is a participant in a market-oriented economy?

Accepted Answer

A)   to enforce contracts and protect private property
B)   to promote collusion
C)   to promote the growth of natural monopolies
D)   to provide more inequality in the distribution of income
E)   all of the aboveF) A) and E)
G) C) and D)

Question 15

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)   dividendsF) B) and E)
G) None of the above

Question 16

Which of the following is not a reason why some production continues in households?

Accepted Answer

A)   Some household production requires many specialized resources
B)   The opportunity cost of household production has decreased over time
C)   Household production avoids taxes
D)   There have been important technological advances in household production
E)   Some households prefer the ability to control productionF) A) and B)
G) All of the above

Question 17

Which of the following is not a function of government?

Accepted Answer

A)   promotion of competition
B)   stabilization to achieve the macroeconomic goals
C)   redistribution of income through taxation and transfer payments
D)   production of public goods
E)   providing the economy's private goodsF) A) and E)
G) A) and D)

Question 18

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 budgetF) B) and C)
G) A) and C)

Question 19

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.F) A) and B)
G) B) and E)

Question 20

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 stabilityF) A) and B)
G) A) and E)

Exam 3: Economic Decision Makers

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

Correct AnswerverifiedShow Answer

Which of the following is not a function of government?

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

Correct AnswerverifiedShow Answer

Which of the following is a reason why government is a participant in a market-oriented economy?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The term "fiscal policy" refers to

Correct AnswerverifiedShow Answer

A disadvantage of the corporate form of business organization is that corporate income is taxed twice.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Gross Domestic Product is the market value of

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

Correct AnswerverifiedShow Answer

Which form of business organization is the most common in the United States?

Correct AnswerverifiedShow Answer

When the government sells something it produces,

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Which resource generates the largest share of the income in the United States?

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Gross Domestic Product is the value of all

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Which of the following is not a reason why some production continues in households?

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As the real wage increases,the opportunity cost of working outside the home increases.

Correct AnswerverifiedShow Answer

Which of the following is a result of increased real wages in the United States?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the four types of economic decision makers is most important?

Correct AnswerverifiedShow Answer

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