Question 1

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 incomeF) A) and B)
G) All of the above

Question 2

Some people have argued that government should provide only those goods that we would truly define as public goods.If so,which of the following should government produce?

Accepted Answer

A)   National Defense
B)   day-care centers for children of working mothers
C)   mail delivery
D)   unemployment benefits
E)   subsidies for agricultural productsF) C) and D)
G) A) and B)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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) B) and D)
G) B) and C)

Question 7

Which of the following taxes is most clearly based on the benefits-received principle of taxation?

Accepted Answer

A)   corporate income tax
B)   gasoline tax
C)   personal income tax
D)   payroll tax
E)   value added taxF) A) and B)
G) A) and C)

Question 8

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

Question 9

Owners of corporations are referred to most frequently as

Accepted Answer

A)   entrepreneurs
B)   lien holders
C)   limited partners
D)   managers
E)   stockholdersF) A) and D)
G) C) and D) E

Question 10

Which of the following taxes is based on the benefits-received principle?

Accepted Answer

A)   corporate income taxes
B)   personal income taxes
C)   property taxes
D)   gasoline excise taxes
E)   user fees that collect the same amount from each personF) B) and D)
G) A) and B)

Question 11

Firms are organized in one of three ways:

Accepted Answer

A)   As a sole proprietorship,as a partnership,as a corporation
B)   As a sole proprietorship,as a cooperative,as a not-for-profit organization
C)   As a partnership,as a consumer cooperative,as a corporation
D)   As a corporation,as a producer cooperative,as a partnership
E)   As a cooperative,as a not-for-profit organization,as a partnershipF) A) and D)
G) B) and E)

Question 12

Which of the following is incorrect about not-for-profit organizations?

Accepted Answer

A)   They engage in charitable activities
B)   Are usually exempt from taxes
C)   Include museums and nonprofit hospitals
D)   Include labor unions
E)   Include government agenciesF) A) and B)
G) C) and D)

Question 13

The personal income tax is based on the benefits-received principle of taxation.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a justification for taxes?

Accepted Answer

A)   the ability-to-pay principle
B)   the progressive tax principle
C)   the proportional tax principle
D)   the regressive tax principle
E)   the desire of the government to spend more fundsF) D) and E)
G) All of the above A

Question 15

Natural monopolies occur when

Accepted Answer

A)   government antitrust laws are too weak or not enforced
B)   negative externalities are present
C)   firms collude to set prices and divide the market among themselves
D)   one firm can service the market more cheaply than two or more firms can
E)   a public good is produced by a private firmF) A) and C)
G) A) and D)

Question 16

Under a regressive income tax system,individuals with higher incomes pay higher marginal tax rates.

Accepted Answer

A) True 
 B)False

Question 17

The primary reason why individuals are willing to pay entrepreneurs to organize production is

Accepted Answer

A)   that they have to guarantee that the entrepreneur will make a profit
B)   they avoid taxation when activities are organized by someone else
C)   that it is better for businesses to pay taxes than individuals
D)   that it reduces transaction costs
E)   that entrepreneurs are more vulnerable in the case of the ownerF) A) and E)
G) D) and E)

Question 18

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

Accepted Answer

A) True 
 B)False  True

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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 financingF) None of the above
G) B) and D)

Exam 3: Economic Decision Makers

In the following situation,the tax system is

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Some people have argued that government should provide only those goods that we would truly define as public goods.If so,which of the following should government produce?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following taxes is most clearly based on the benefits-received principle of taxation?

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.What type of tax is this?

Correct AnswerverifiedShow Answer

Owners of corporations are referred to most frequently as

Correct AnswerverifiedE

Which of the following taxes is based on the benefits-received principle?

Correct AnswerverifiedShow Answer

Firms are organized in one of three ways:

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Which of the following is incorrect about not-for-profit organizations?

Correct AnswerverifiedShow Answer

The personal income tax is based on the benefits-received principle of taxation.

Correct AnswerverifiedShow Answer

Which of the following is a justification for taxes?

Correct AnswerverifiedA

Natural monopolies occur when

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Under a regressive income tax system,individuals with higher incomes pay higher marginal tax rates.

Correct AnswerverifiedShow Answer

The primary reason why individuals are willing to pay entrepreneurs to organize production is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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E

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A

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True

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