Deck 3: Economic Decision Makers.

Question 1

Which of the following has displaced some household production?

A) fast-food restaurants
B) making clothes
C) cooking meals
D) planting crops
E) tending livestock

Answer 1

cooking meals

Question 2

The term utility refers to _____

A) satisfaction.
B) a low-valued good.
C) productivity.
D) adaptability.
E) efficiency.

Answer 2

satisfaction.

Question 3

A good or service has utility if it _____

A) is useful.
B) is used in the production process.
C) demonstrates scarcity.
D) satisfies consumers.
E) is labor-saving.

Answer 3

satisfies consumers.

Question 4

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

A) increase as long as worker productivity decreases.
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 5

Which of the following is one of the chief reasons for the change in the participation rate of married women in the U.S. workforce?

A) An increase in the marginal cost of working in the labor force
B) An increase in financial independence provided by jobs
C) An increase in the opportunity cost of household work
D) An increase in household appliances.
E) An increase in the time that women spend shopping.

Question 6

A household consists of _____

A) a single-family dwelling in an urban area.
B) individuals who live together under one roof.
C) individuals who share the same surname.
D) individuals who have a high DNA match.
E) a single-family dwelling in a farming community.

Question 7

One explanation for the change in the participation rate of married women in the U.S. labor force is that _____

A) fewer women are being trained for household work by the public school system.
B) the rapid growth in the service sector has increased job opportunities for women.
C) the cost of professional day care has increased.
D) couples are having more children.
E) husbands earn more today than they did previously.

Question 8

Households now produce ____for themselves and demand _____ from the market.

A) more; less
B) less; more
C) more; the same as before
D) the same as before; less
E) the same as before; the same as before

Question 9

Households act as demanders when they demand _____

A) that corporate executives and government officials be held accountable for their actions.
B) dividends from the stocks they hold.
C) interest and capital gains from the bonds they hold.
D) goods and services from firms and governments.
E) payments for the goods and services they sell to firms and governments.

Question 10

A household consists of _____

A) a house.
B) an apartment.
C) a family.
D) a single decision maker.
E) a minority.

Question 11

Economists assume that people try to maximize their level of satisfaction, sense of well-being, happiness, and overall welfare. This is known as _____

A) utility.
B) a low-valued good.
C) productivity.
D) adaptability.
E) efficiency.

Question 12

What gets produced in a market economy is determined by _____

A) government.
B) households.
C) firms.
D) technology.
E) central planning.

Question 13

The change in the labor force participation rate of married women in the United States is most often explained by _____

A) declining productivity in agricultural production.
B) a rise in average household size.
C) increased education and an increased demand for labor.
D) the decreased opportunity cost of working in the home.
E) declining productivity in household production.

Question 14

Choices households make do not include _____

A) what to buy.
B) where to live.
C) how much to save.
D) what to produce.
E) where to work.

Question 15

The satisfaction received from consumption is known as _____

A) utility.
B) a low-valued good.
C) productivity.
D) adaptability.
E) efficiency.

Question 16

Households act as suppliers when they provide _____

A) goods and services to firms and governments.
B) resources to firms and governments.
C) tax payments to governments.
D) demand for goods and services produced by firms.
E) money to firms in exchange for goods and services.

Question 17

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

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) An increase in the self-sufficiency of households

Question 18

Harold, a delivery man, washes and irons his own shirts. Sarah, his boss, sends her clothes to a laundry. Which of the following is the most plausible economic explanation for this difference?

A) Sarah has a comparative advantage in ironing.
B) The marginal cost of ironing is greater for Harold than for Sarah.
C) The opportunity cost of ironing is higher for Harold.
D) The average cost of ironing is greater for Harold.
E) Sarah has a higher opportunity cost of ironing than Harold.

Question 19

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

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 20

Since 1950, in the United States, there has been _____

A) a dramatic increase in the population living in rural areas.
B) a decline in the number of women in the labor force.
C) a decrease in the opportunity cost of working in the home.
D) more specialization of production within households.
E) a dramatic increase in the number of married women in the labor force.

Question 21

Luigi owns and operates a small restaurant. The income he receives from the restaurant is classified as _____

A) savings.
B) proprietor's income.
C) wages and salaries.
D) rental income.
E) dividends.

Question 22

Roxanne and Eileen live in an apartment building with a laundry room in the basement. Roxanne does her laundry at home, spending $4 and 5 hours per week. Eileen sends her laundry out, spending $20 and 15 minutes per week transporting the laundry. On the basis of the information given, which one of the following must be true?

A) Roxanne earns more income than Eileen.
B) Eileen earns more total income than Roxanne.
C) Eileen enjoys doing laundry; Roxanne does not.
D) Eileen has less laundry than Roxanne.
E) Eileen and Roxanne attach different utilities to time spent doing laundry.

Question 23

The largest share of household income in the United States comes from _____

A) personal interest.
B) dividends.
C) rental income.
D) wages and salaries.
E) transfer payments.

Question 24

Mark and Charles are roommates at college. Each has written a 25-page term paper for the same English class. They are equally poor typists. Charles types his own paper and gets paid by Mark to type his, too. On the basis of the information given, which one of the following must be true?

A) Mark's total utility from typing is higher than Charles's total utility from typing.
B) Charles needs more time to study than Mark.
C) Charles hates typing.
D) Mark and Charles have different utilities for typing but place the same value on time.
E) Mark's opportunity cost of typing is higher than Charles's.

Question 25

Which of the following includes the four basic resources supplied by households?

A) natural resources, labor, intelligence, capital
B) money, labor, natural resources, entrepreneurial ability
C) intellectual ability, physical ability, money, natural resources
D) labor, capital, intelligence, entrepreneurial ability
E) labor, natural resources, entrepreneurial ability, capital

Question 26

Which of the following statements is correct?

A) Utility is the same as usefulness.
B) Utility maximization depends on each household's earnings.
C) Utility maximization depends on each household's subjective goals.
D) Households' maximum utility is from acquiring material wealth.
E) Households do not benefit from utility maximization.

Question 27

Which of the following resources generates the largest share of household income in the United States?

A) labor
B) land
C) physical capital
D) entrepreneurial ability
E) dividends

Question 28

Economists generally assume that _____

A) firms act to maximize the dividends paid to stockholders.
B) households act to maximize their wealth.
C) households act to maximize utility.
D) firms act to maximize social welfare.
E) both households and firms act to minimize opportunity cost.

Question 29

Caleb teaches economics at Happy State University and is paid $50,000 per year. He also provides economic forecasts for local businesses for which he charges $100 per hour. Which of the following is true?

A) All of Caleb's income is salary.
B) Some of Caleb's income is salary, and some is personal interest.
C) All of Caleb's income is proprietor's income.
D) Some of Caleb's income is salary, and some is proprietor's income.
E) All of Caleb's income is personal interest.

Question 30

Economists assume that the objective of households is to _____

A) maximize household wealth.
B) own as much land as possible.
C) save as much money as possible.
D) acquire as many goods as possible.
E) maximize utility.

Question 31

Which of the following components of U.S. household spending has grown the most over the past ten years?

A) taxes
B) savings
C) spending on services
D) spending on nondurable goods
E) spending on durable goods

Question 32

Rationality in the household decision-making process means that _____

A) all households make the same decisions.
B) everyone in the household agrees on all decisions.
C) households act to maximize their level of satisfaction.
D) households want to earn as much income as possible.
E) all households have the same information on product quality and prices.

Question 33

Habib teaches mathematics at Camford University and receives $40,000 per year. His spouse, Amal, works as a self-employed computer programmer and charges $40 per hour. Which of the following is true?

A) Habib's income is his personal interest income; Amal's is wages.
B) Habib's income is his salary; Amal's is personal interest income.
C) Both Habib and Amal receive proprietor's income.
D) Both Habib and Amal receive wage or salary income.
E) Habib's income is his salary, and Amal's income is proprietor's income.

Question 34

Which of the following is an example of an in-kind transfer?

A) welfare payments
B) most Social Security benefits
C) unemployment compensation payments
D) food stamps
E) charitable contributions

Question 35

Which of the following is an example of a durable good?

A) a strawberry muffin
B) a cherry pie
C) a newspaper
D) a handheld calculator
E) a pencil

Question 36

Household income is not spent on _____.

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

Question 37

Cash or in-kind benefits given to individuals by the government are known as _______

A) interest.
B) dividends.
C) wages.
D) transfer payments.
E) charitable contributions.

Question 38

Which of the following is an example of a durable good?

A) food cooked at home
B) food eaten at a restaurant
C) gasoline
D) binoculars
E) motor oil

Question 39

Households supply four basic types of resources. They include all of the following except _____

A) natural resources.
B) goods and services.
C) capital.
D) entrepreneurial ability.
E) labor.

Question 40

The statement "households maximize utility" means that households _____

A) try to be as useful as possible to the economy.
B) are only interested in maximizing their earnings.
C) are assumed to buy useful things before they buy luxuries.
D) are only interested in acquiring material wealth.
E) are assumed to do what they think will most increase their satisfaction.

Question 41

A firm with a single owner who has the right to all profits but who also bears unlimited liability for the firm's losses and debts is known as a(n) ______

A) sole proprietorship.
B) partnership.
C) firm.
D) nonprofit organization.
E) producer cooperative.

Question 42

Which of the following comprises less than a third of the for-profit businesses in the United States as measured by the sheer number of firms?

A) small retail businesses
B) small service operations
C) part-time home-based businesses
D) small farms
E) multinational corporations

Question 43

A firm with multiple owners who share the profits and bear unlimited liability for the firm's losses and debts is known as a(n) ______

A) sole proprietorship.
B) partnership.
C) corporation.
D) nonprofit organization.
E) producer cooperatives.

Question 44

One disadvantage of a sole proprietorship as a form of business organization is that ______

A) sole proprietorships cannot lower the transaction costs associated with contracting with resource owners.
B) sole proprietorships are less efficient than corporations, because they are less specialized in production.
C) owners of sole proprietorships can lose all their personal assets if the business is sued or fails.
D) owners of sole proprietorships generally find it difficult to negotiate separation agreements with the other partners in the firm.
E) owners of sole proprietorships generally have very little control over how they operate their businesses.

Question 45

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

A) Worker productivity increased.
B) Factories became larger.
C) Direct supervision of labor decreased.
D) Division of labor increased.
E) Fewer stages of production were organized in the household.

Question 46

The largest portion of personal income is spent on _____

A) taxes.
B) durable goods.
C) nondurable goods.
D) services.
E) savings.

Question 47

Which of the following occurred during the Industrial Revolution?

A) Production became less reliant on highly specialized equipment.
B) A less efficient division of labor was promoted.
C) The use of machines in factory production increased.
D) The transaction costs of contracting with individual resource owners increased.
E) Technological development decreased the productivity of most workers.

Question 48

Economic units formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale are known as _____

A) sole proprietorships.
B) partnerships.
C) firms.
D) nonprofit organizations.
E) producer cooperatives.

Question 49

Which of the following is true of sole proprietorships in the United States?

A) They are the most important form of business organization in terms of their numbers.
B) They are responsible for a large portion of the total production of goods and services in the U.S. economy.
C) They offer the owners less personal liability than the other forms of business organization.
D) There are no opportunity costs involved in operating such firms.
E) Such firms employ only one individual.

Question 50

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

A) corporation.
B) partnership.
C) sole proprietorship.
D) nonprofit organization.
E) consumer cooperative.

Question 51

Profit equals ______

A) revenue - cost.
B) revenue - liabilities.
C) revenue - dividends.
D) revenue + opportunity cost.
E) revenue - retained earnings.

Question 52

The largest portion of U.S. personal income in 2012 was spent on _____

A) taxes.
B) savings.
C) services.
D) durable goods.
E) nondurable goods.

Question 53

Suppose you own a proprietorship that is in serious financial difficulty. The assets of the company are $100,000, but liabilities are $175,000. You also own stock in General Motors worth $200,000. If you file for bankruptcy, what amount of personal assets do you stand to lose?

A) $100,000
B) $75,000
C) $200,000
D) $275,000
E) $375,000

Question 54

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

A) sole proprietorship
B) partnership
C) corporation
D) nonprofit organization
E) producer cooperatives

Question 55

The development of large-scale factory production that promoted a more efficient division of labor, allowed for the direct supervision of production, reduced transportation costs, and facilitated the use of big machinery is known as _____

A) the Information Revolution.
B) the Innovation Revolution.
C) the Manufacturing Revolution.
D) the Industrial Revolution.
E) the Agricultural Revolution.

Question 56

Brian is the sole proprietor of Long Voyage Software, which generates maps for nature trails. 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?

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 to the customer, Brian will have to pay none of it.
E) If $5,000,000 is awarded to the customer, Brian will personally be responsible for paying all of it.

Question 57

A cottage industry is one that _____

A) produces rural housing.
B) takes advantage of division of labor.
C) uses highly specialized resources in a complex production process.
D) produces cottage cheese.
E) carries out production in workers' homes.

Question 58

An advantage of a sole proprietorship is ______

A) its ability to pool resources.
B) its limited liability.
C) double tax exemption of the firm's earnings.
D) the ease of organization.
E) the ease of raising funds.

Question 59

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

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 60

______ equals sales revenue minus the cost of production.

A) Income
B) Profit
C) Dividends
D) Revenue
E) Cost

Question 61

Stockholders' shares in the profits of a corporation ______

A) increase in proportion to their years of stock ownership.
B) increase in proportion to their ownership of stock.
C) does not depend on the number of shares owned.
D) increase only if they participate in management decisions.
E) increase only if they attend stockholders' meetings.

Question 62

Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales in 2012?

A) partnerships, sole proprietorships, corporations
B) sole proprietorships, partnerships, corporations
C) sole proprietorships, corporations, partnerships
D) corporations, partnerships, sole proprietorships
E) partnerships, corporations, sole proprietorships

Question 63

Which of the following is most likely to be a partnership?

A) Uncle Mort's Red Wrigglers
B) The accounting firm of Hope and Williams
C) General Motors
D) The Boston Symphony Orchestra
E) The U.S. Post Office

Question 64

One thing that is not true about cooperatives is that they ______

A) provide raw materials to rural households that turn them into finished products.
B) pool resources to buy and sell more efficiently.
C) try to minimize costs.
D) operate with limited liability of members.
E) enjoy tax-exempt status.

Question 65

A realized capital gain is:

A) the difference between the price of a share of stock and the amount the investor paid for it, including the broker's fee.
B) the difference between the original value of a piece of equipment and its depreciated value.
C) an increase in the net worth of a sole proprietorship or partnership.
D) an increase in the market value of a share of stock held by an individual.
E) the difference between the selling price and the purchase price of a share of stock.

Question 66

Which of the following forms of business organizations was the least common in the United States in 2012?

A) sole proprietorship
B) partnership
C) corporation
D) nonprofit organization
E) conglomerate

Question 67

Which of the following is an example of a business operated by a consumer cooperative?

A) a grocery store
B) an apartment building
C) Sunkist, a farm cooperative owned and operated by citrus growers
D) a health plan
E) an electric-power facility

Question 68

Which of the following have their profits taxed twice?

A) sole proprietorship
B) partnership
C) corporation
D) nonprofit institutions
E) S corporations

Question 69

A legal entity owned by stockholders whose liability is limited to the value of their stock ownership is known as a(n) ______

A) sole proprietorship.
B) partnership.
C) corporation.
D) nonprofit organization.
E) producer cooperative.

Question 70

Which of the following is a difference between a corporation and a sole proprietorship?

A) The owner of a corporation has unlimited liability, while the owner of a sole proprietorship has limited liability.
B) The owner of a corporation faces difficulty in raising startup money, while the owner of a sole proprietorship does not.
C) A corporation makes zero economic profit in the long run, while a sole proprietorship makes positive economic profits in the long run.
D) Corporate income is taxed twice, while income from a sole proprietorship is taxed only once.
E) A corporation faces vulnerability in the case of the death of an owner, while a sole proprietorship does not.

Question 71

All of the following are advantages of partnerships except one. Which of the following is the exception?

A) They are relatively easy to start.
B) Their profits are taxed only once as personal income.
C) Their liability is limited by each partner's share of the business.
D) They offer a greater opportunity for specialization by the owners.
E) They enable continuation of the firm if one partner dies.

Question 72

Scott and Clark spend $50,000 each to form a law partnership. On the first day, someone trips over a potted plant in their lobby and sues them for $400,000. Which of the following is true?

A) If a $400,000 judgment is passed against the partnership, then each partner will have to pay $50,000.
B) If a $400,000 judgment is passed against the partnership, and if Clark cannot afford to pay any of it, then Scott is liable for $400,000.
C) Scott's liability is limited to $300,000 if she owns three-quarters of the firm.
D) Each individual partner cannot be sued for more than $200,000.
E) The partner who put the potted plant in the office is personally responsible for the damages.

Question 73

Nonprofit, or not-for-profit, firms:

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 74

Which of the following categories includes the largest number of firms in the United States?

A) sole proprietorship
B) partnership
C) corporation
D) producer cooperatives
E) consumer cooperatives

Question 75

The Salvation Army is an example of a(n) ______

A) military organization.
B) not-for-profit organization.
C) partnership.
D) S corporation.
E) U.S. government agency.

Question 76

The corporate form of business organization ______

A) is chosen by more firms than any other form of organization in the United States.
B) refers to a structure where owners have limited liability.
C) generates less than half of the output in the U.S. economy.
D) combines the limited liability of the partnership with the personal control of the sole proprietorship.
E) is the least complex form of business organization.

Question 77

Which of the following forms of business organization accounted for the largest proportion of business sales in the United States in 2012?

A) sole proprietorship
B) partnership
C) corporation
D) nonprofit organization
E) conglomerate

Question 78

Suppose you form a legal partnership with your best friend and she purchases consulting services for a $100,000 fee. Your business is broke, and you never wanted the consultants to work for you-only your partner did. You are legally liable for ______

A) $25,000.
B) all of the $100,000.
C) an amount that is equivalent to the proportion of the business you own.
D) only the amount equal to the assets of the business.
E) $50,000.

Question 79

Owners of corporations are referred to most frequently as ______

A) entrepreneurs.
B) lienholders.
C) limited partners.
D) managers.
E) stockholders.

Question 80

You own stock worth an estimated $1 million in LPL Corp. In addition, you have personal assets worth another $2 million. Suppose LPL Corp. becomes insolvent, with debts exceeding assets by $15 million. Your personal wealth will decline by:

A) $0.
B) $1 million.
C) $1.5 million.
D) $3 million.
E) your proportion of the total outstanding stock shares times $15 million.