Econ Quiz questions
Refer to Figure 2-8. What is the opportunity cost of moving from point A to point B?
20 barrels
Based on this data, about how much of state and local expenditures comes from federal grants-in-aid?
25-30 percent
If the city builds 15 new roads, how many new schools can it build?
8
Why is the federal income tax a progressive tax?
A higher income pays a higher percentage in taxes
Which of the following is the most accurate statement about production possibilities?
An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
Which of the following is a major difference between a state's operating budget and its capital budget?
An operating budget must be balanced; a capital budget does not have to balance.
What is one reason the government has limited control over spending?
As more people qualify for an entitlement program, program spending increases.
The graph shows how many new schools and new roads a city could build using all of its factor resources. What does the current production possibilities curve show?
As the number of schools increases, the number of roads decreases.
The U.S. government's authority to tax comes mainly from the
Constitution
What is the difference between an estate tax and a gift tax?
Estate tax is paid on the money and property of someone who died; gift tax is paid on money or property given by one living person to another.
According to the Laffer Curve, if the government raises taxes from 50 percent to 75 percent of income, what will happen?
Government revenues will decrease.
What is one reason the government cannot control mandatory spending?
It cannot control the number of people eligible for benefits.
Why is a sales tax a regressive tax?
It is a higher percentage of income if you earn less money.
What economy theory was the basis of President Lyndon Johnson's Great Society program?
Keynesian economics
A farm grows corn and alfalfa. What would happen if the farm owner could not get enough workers to plant all the fields?
Less corn and alfalfa can be grown.
Little Guy Construction Company made $50,000 in taxable income one year. Big Buildings Construction Company made $20,000,000 in taxable income that year. How much would each company owe in corporate taxes if the tax rate were 15 percent on the first $100,000 of income and 35 percent on incomes over $100,000.
Little Guy: $7,500; Big Buildings $6,980,000
How do most states finance their capital budget?
Long term borrowing or sale of bonds
Chad's family lives below the poverty line. Both of his parents work at low-income jobs that do not provide health insurance. Which entitlement program offers healthcare for Chad?
Medicaid
Your pay stub from your job deducts money for FICA. What does this mean?
Money is being withheld to fund Social Security and Medicare.
What happens as production of one item switches to the production of another item?
More resources are needed.
What are two reasons Medicare costs are rising?
People are living longer, and medical technology is more expensive.
Which of the following best describes a means-tested program?
People who are paid more get fewer benefits.
Why does every decision involve trade-offs?
Resources are limited.
Why are goods and services scarce?
Resources used to produce them are limited.
Why are Social Security and Medicare spending expected to increase further in the near future?
The baby boomer generation will qualify for both programs.
Why is the federal government limited in how much it can change spending levels?
The bulk of the budget is entitlements and interest on the national debt.
Refer to Table 2-1. Which of the following statements accurately describes the production possibilities for Toyland?
The opportunity cost of an additional 100 dolls increases as more dolls are produced.
What happens to the percentage of an income that is taxed when income rises and the tax is a proportional one?
The percentage of tax stays the same.
Scarcity requires people to make choices. Why?
There are not enough resources to make everything we want.
Why do some people want to amend the Constitution to require a balanced budget?
They believe an amendment would force the government to be careful about spending.
What do you think the artist's main message is in this cartoon?
Today's fiscal policies will harm future generations.
Which of the following contributes to the crowding-out effect?
a federal budget deficit
The economic concept of guns or butter means that
a government must decide to produce more or less military or consumer goods.
The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This is an example of
a guns or butter issue.
A region's production possibilities curve might show underutilization of resources if the region experienced
a large flood
What is the production possibilities frontier or curve?
a line that shows how much can be made so resources are best used
Which of the following people is an entrepreneur?
a person who starts an all-organic cleaning supplies business that employs others
Refer to Figure 2-7. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?
an increase in the overall level of technology in the economy
Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?
an increase in the overall level of technology in the economy
A production possibilities curve shows the relationship between the production of
any two categories of goods.
What do Social Security taxes pay for?
benefits to older citizens
Which of the following is an example of changing physical capital?
building extra space in a factory
Which of the following is an example of using physical capital to save time and money?
building extra space in a factory to simplify production
In economics, capital refers to
buildings and machines used in the production process.
Any point on a country's production possibilities frontier represents a combination of two goods that an economy
can produce using all available resources and technology.
Which of the following are factors of production?
capital and land
A decision is made at the margin when each alternative considers
cost and benefit ranked in progressive units.
What information is needed to make a decision at the margin?
cost to produce each unit
What is the main job of the Office of Management and Budget?
create the federal budget
The main job of the Office of Management and Budget is to
create the federal budget based on the needs of various agencies.
What is one example of discretionary spending?
education
An economy that is producing the maximum amount of goods and services is considered
efficient
Who pays unemployment taxes?
employers
According to the cartoon, federal income tax lacks which quality of a good tax?
equity
Which of the following concepts is NOT illustrated by the production possibilities frontier?
equity
Which of the following is an example of classical economics?
free markets regulating themselves
What tax did the government create to keep people from giving away their money before they die?
gift tax
What is a means-tested entitlement?
gives lower or no benefits to people with higher incomes
The production possibilities frontier is a
graph that shows the various combinations of output the economy can possibly produce given the available resources and technology.
What can businesses deduct from income?
health benefits
Increasing the number of laborers in an economy generally causes a(n)
increase in the production possibilities curve.
Another term for factors of production is
inputs.
In most communities, the main source of funding for local public schools probably comes from
local property taxes.
When studying the effects of public policy changes, economists
may make different assumptions for the long run and the short run.
The law of increasing costs means that as production shifts from one item to another,
more and more resources are necessary to increase production of the second item.
Which of the following is a discretionary spending program?
national defense
On a production possibilities frontier, production is efficient if the production point is
on the frontier.
Your aunt is a state employee. Which part of the budget does her salary come from?
operating budget
Your aunt is a state employee. Her salary comes out of the state's
operating budget.
If you choose between two summer jobs, the one you do not choose is the ______ of your decision.
opportunity cost
The law of increasing costs means that when an economy increases the production of one item the
opportunity cost goes up.
Which would a company do to increase its human capital?
pay for employees' education
A factory building is an example of which factor of production?
physical capital
Unemployment would cause an economy to
produce inside its production possibilities frontier.
The line on a production possibilities curve showing the relative amounts of two types of goods produced using all resources is called the
production possibilities frontier.
Which of the following tax structures is least like the suggestion made by the IRS agent?
progressive tax
What are the main sources of revenue for local governments?
property taxes
Which of the following is an example of state spending?
public safety
Your receipt from a department store shows that you paid a 5 percent sales tax on sports equipment. What kind of tax is this?
regressive tax
All goods and services are scarce because
resources are limited.
What physical capital does a woodworker need?
saws and drills
Why does the federal government collect income taxes throughout the year as people earn wages?
so that the government can pay bills as they come due
Where does funding for most public universities come from?
state sales taxes and state income taxes
Funding for most public universities comes from
state sales taxes.
Which factors contributed to the federal government's return to deficit spending in the early 21st century?
tax cuts and the end of a stockmarket boom
Refer to Figure 2-5. The shift of the frontier from A to B was most likely caused by which of the following?
technological improvement in the production of batteries
What gives the U.S. government the right to collect taxes?
the U.S. Constitution
You bought two CDs with your last $30. What is the opportunity cost?
the movie with your friends that you now cannot afford
Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
the nation is not using all available resources or has inefficiencies.
The community of Desertville traditionally produces a large number of tires and a small amount of kiwi fruit. Kiwis are becoming increasingly popular, and Desertville has decided to expand kiwi cultivation and decrease tire manufacturing. According to the law of increasing costs,
the opportunity cost of producing kiwis will increase.
Production possibilities frontiers can shift outward if
there is an increase in technology.
If an economy is producing efficiently
there is no way to produce more of one good without producing less of the other.
Peter must decide if he should add one more dog to his dog-walking business. What is this decision an example of?
thinking at the margin
How do most states pay for their capital budget?
through long-term borrowing or the sale of bonds
What is the main purpose of federal taxes on tobacco and alcohol products?
to discourage the use of these products
Why does the government sometimes use an expansionary fiscal policy?
to encourage economic growth and create jobs
What happens when workers are laid off?
underutilization
Refer to Figure 2-6. The movement from point C to point D was most likely caused by
unemployment.
A company that makes baseball caps is underutilizing its resources. What should it do?
use resources better to make more caps
Factors of production are
used to produce goods and services.