test #3

The average tax rate is the: A. Sum of all individual tax rates B. Tax rate paid by middle-income households C. Total tax paid divided by a comparison base D. Increase in taxes as a percentage of an increase in income

C. Total tax paid divided by a comparison base

In the market for loanable funds: A. an increase in available bank lending will increase the interest rate. B. a decrease in saving will reduce the interest rate. C. an increase in borrowing for investment will increase the interest rate. D. a decrease in government borrowing will increase the interest rate.

C. an increase in borrowing for investment will increase the interest rate.

Property rights for fish from the open ocean: A. do not exist. B. are established by the United Nations. C. exist once the fish are sold at market. D. exist once the fish are caught.

D. exist once the fish are caught.

Which of the following is not a source of loanable funds? A. the saving of households B. business saving C. commercial bank lending D. government budget deficits

D. government budget deficits

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1), (2), and (3), land rent will be: A. $100 per acre. B. $200 per acre. C. $300 per acre. D. $400 per acre.

A. $100 per acre.

The crowding model of discrimination suggests that: A. women and selected minorities are systematically excluded from high-paying occupations and crowded into low-paying occupations, decreasing their wages and reducing domestic output. B. employers having high discrimination coefficients will be crowded out by nondiscriminating employers in the long run. C. firms will base hiring decisions on group averages, rather than on individual characteristics and productivity. D. occupational segregation is largely the result of freely made rational choices of women and minorities.

A. women and selected minorities are systematically excluded from high-paying occupations and crowded into low-paying occupations, decreasing their wages and reducing domestic output.

If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is: A. $1.40 B. $2.00 C. $2.25 D. $6.00

C. $2.25

Which of the following statements is correct? A. The price support program hastened the exodus of resources from agriculture. B. The main beneficiaries of government price support assistance were the very low-income farmers. C. If the demand for agricultural products is inelastic, a relatively small decrease in supply will increase gross farm incomes. D. There is a misallocation of resources in rural America because of absolute and relative increases in the size of the farm population.

C. If the demand for agricultural products is inelastic, a relatively small decrease in supply will increase gross farm incomes.

Economic profits are not payments received for: A. Taking uninsurable risks B. Making product or production innovations C. Ownership of large stocks of capital resources D. Exercising monopoly power

C. Ownership of large stocks of capital resources

Interest rates are the payments needed to entice individuals to: A. Accept insurable risk B. Accept uninsurable risk C. Sacrifice their present consumption D. Sacrifice their future consumption

C. Sacrifice their present consumption

Which of the following is considered a renewable natural resource? A. Natural gas. B. Copper. C. Solar power. D. Coal.

C. Solar power.

Which of the following arguments contends that certain industries need to be protected in the interest of national security? A. The increased domestic employment argument. B. The cheap foreign labor argument. C. The diversification-for-stability argument. D. The military self-sufficiency argument.

C. The diversification-for-stability argument.

The demand for most agricultural products is: A. elastic with respect to price but inelastic with respect to income. B. inelastic with respect to price but elastic with respect to income. C. elastic with respect to both price and income. D. inelastic with respect to both price and income.

D. inelastic with respect to both price and income.

The total amount of U.S. tax revenue needed to finance the public sector: A. has been a declining percentage of the domestic output in this century. B. equals about 40 percent of domestic output. C. equals about 15 percent of domestic output. D. is larger today, as a percentage of total output, than in 1960.

D. is larger today, as a percentage of total output, than in 1960.

The Lorenz curve: A. plots graphically the poverty rate over time. B. is located closer to the diagonal today than it was in 1975. C. plots graphically the distribution of income. D. is located farther from the diagonal when income is defined to include the value of noncash transfers.

D. is located farther from the diagonal when income is defined to include the value of noncash transfers.

If the interest rate is 15%, what is the future of value of $10,000 two years from now? A. $13,225 B. $225 C. $13,000 D. $7,576

A. $13,225

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is: A. 1/4 pound. B. 4 pounds. C. $.25. D. $1.00.

A. 1/4 pound.

Which of the following is considered a renewable natural resource? A. Aquifers B. Coal C. Petroleum D. Iron

A. Aquifers

A major distinction between government purchases and government transfer payments is that: A. Government purchases divert resources from private uses to public uses while transfer payments do not B. Transfer payments divert resources from private uses to public uses while government purchases do not C. Government purchases have to be approved by Congress while transfer payments do not D. Government purchases of goods and services have increased more rapidly during the past twenty years than have transfer payments

A. Government purchases divert resources from private uses to public uses while transfer payments do not

Pure economic rent is the price of a resource with a perfectly: A. Inelastic supply schedule B. Elastic supply schedule C. Elastic demand schedule D. Inelastic demand schedule

A. Inelastic supply schedule

The replacement rate is the birthrate necessary to: A. Keep a population from decreasing B. Keep an able-bodied workforce C. Maintain the productivity level D. Maintain the standard of living

A. Keep a population from decreasing

Which of the following would, other things equal, increase the demand for U.S. farm products? A. Poorer crops abroad. B. Appreciation of the U.S. dollar. C. Deteriorating trade relations with China and Russia. D. Increases in foreign tariffs on imported farm products.

A. Poorer crops abroad.

The sum of the squared values of market shares in an industry is referred to as: A. The Herfindahl index B. A concentration ratio C. An interlocking directorate D. The rule of reason

A. The Herfindahl index

If the price elasticity of supply is 0 and the market demand curve is downward sloping: A. The producer bears the full burden of a per unit tax upon the good B. The consumer bears the full burden of a per unit tax upon the good C. The economic incidence of a per unit tax upon the good is borne by the consumer and the producer D. Although the economic incidence is uncertain, a per unit tax upon the good will shift the supply curve leftward

A. The producer bears the full burden of a per unit tax upon the good

Which of the following taxes is most likely to be shifted? A. a general sales tax B. a flat-rate state income tax C. a progressive Federal income tax D. a property tax on an owner-occupied residence

A. a general sales tax

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy should: A. accept the raise because his after-tax income will rise by $1,500. B. reject the raise because his after-tax income will fall by $3,000. C. reject the raise because his after-tax income will fall by $4,500. D. reject the raise because his after-tax income will fall by $6,000.

A. accept the raise because his after-tax income will rise by $1,500.

The demand for loanable funds is downsloping: A. because businesses find that more investments are profitable at low interest rates than at high interest rates. B. because households are willing to save more at high interest rates than at low interest rates. C. only when the nominal interest rate exceeds the real interest rate. D. because the amount of profitable business investment varies directly with the interest rate.

A. because businesses find that more investments are profitable at low interest rates than at high interest rates.

Some economists advocate taxes on land because such taxes: A. do not affect the supply of land. B. increase the supply of land. C. improve the allocation of land by shifting it from low-productivity to high-productivity uses. D. have a positive incentive function.

A. do not affect the supply of land.

Tariffs: A. may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). B. are also called import quotas. C. are excise taxes on goods exported abroad. D. are per-unit subsidies designed to promote exports.

A. may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).

If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B: A. mutually advantageous specialization and trade between A and B may still be possible. B. we can conclude that A is an industrially advanced economy and B is a developing economy. C. it will necessarily be advantageous for B to import both X and Y from A. D. then there is no possible basis for mutually advantageous specialization and trade between A and B.

A. mutually advantageous specialization and trade between A and B may still be possible.

Interest is the: A. price paid for the use of money. B. opportunity cost of time. C. expectation of a future return on investment. D. reward for consuming rather than saving.

A. price paid for the use of money.

Acreage allotment programs were designed to: A. reduce the supply of agricultural products. B. make the demand for farm products more price elastic. C. bolster the demand for agricultural commodities. D. accelerate the movement of human resources out of farming.

A. reduce the supply of agricultural products.

A profit-maximizing company should extract a non-renewable resource in the present up to the quantity where the: A. selling price of the resource equals the extraction cost plus the user cost of the resource. B. selling price of the resource equals the total cost plus the user cost of the resource. C. selling price of the resource equals the extraction cost of the resource. D. extraction cost of the resource equals the user cost of the resource.

A. selling price of the resource equals the extraction cost plus the user cost of the resource.

"Present value" refers to the: A. value today of a specific amount of money to be received in the future. B. current value of money held in a bank account. C. amount to which some current amount of money will grow over time. D. interest rate specified when a loan contract is signed.

A. value today of a specific amount of money to be received in the future.

The largest single share of all income earned by Americans consists of: A. wages and salaries. B. interest. C. rents. D. corporate profits.

A. wages and salaries.

If the prices paid by farmers increase and the prices received by farmers decrease, then the parity ratio: A. will necessarily decrease. B. will necessarily increase. C. may either increase or decrease. D. will be unaffected.

A. will necessarily decrease.

According to U.S. Census Bureau data, approximately how many illegal immigrants are estimated to be living continuously in the United States? A. 5 million. B. 11 million. C. 23 million. D. 30 million.

B. 11 million.

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are: A. 14 percent and 20 percent, respectively. B. 14 percent on both loans. C. 18.8 percent on both loans. D. 1.4 percent and 11.8 percent, respectively.

B. 14 percent on both loans.

Since 1900, the relative share of income paid to American resource suppliers as corporate profits, interest, and rent has been about: A. 10 percent B. 20 percent C. 50 percent D. 80 percent

B. 20 percent

If in a certain year the indices of prices received and paid by farmers were 115 and 142 respectively, the parity ratio (in percentage terms) would be: A. 123. B. 81. C. 69. D. 27.

B. 81.

The Federal personal income tax is based on the: A. Benefits-received principle of taxation B. Ability-to-pay principle of taxation C. Law of comparative advantage D. Fallacy of limited decisions

B. Ability-to-pay principle of taxation

Which of the following arguments is not generally made to justify farm subsidies? A. The "family farm" is an American institution that should be protected and nurtured. B. Agribusiness firms need subsidies to achieve economies of scale. C. Farmers sell their output in purely competitive markets but must buy inputs from imperfectly competitive firms. D. Farmers cannot fully insure themselves against the risks unusual to farming, such as floods, droughts, and pests.

B. Agribusiness firms need subsidies to achieve economies of scale.

Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that: A. the terms of trade will be 3X equals 1Y. B. Alpha should specialize in Y and Beta in X. C. Alpha should specialize in X and Beta in Y. D. there is no basis for mutually beneficial specialization and trade.

B. Alpha should specialize in Y and Beta in X.

In his Essay on the Principles of Population, Thomas Malthus argued that: A. Human living standards could permanently rise above subsistence levels, so that populations would grow exponentially B. Any temporary increase in living standards would cause people to have more children, and thus increase the population C. As the population increased, the standard of living would be maintained by greater productivity D. As economic efficiency declined, standards of living would first rise and then eventually decline

B. Any temporary increase in living standards would cause people to have more children, and thus increase the population

Adding the economic activities of government to the circular flow model shows that: A. Government spending creates inflation B. Government purchases of goods and services, taxes, and transfer payments affect how resources are allocated C. The Federal government has to borrow funds from households in order to pay salaries to public officials and members of the armed forces D. The economic functions of government are shared equally among Federal, state, and local governments

B. Government purchases of goods and services, taxes, and transfer payments affect how resources are allocated

An increase in interest rates: A. Raises the present value of a future amount B. Lowers the present value of a future amount C. Lowers the future value of a present amount D. Has no effect on present or future amount

B. Lowers the present value of a future amount

Which of the following is not an important source of revenue for the federal government? A. Corporate income taxes. B. Property taxes. C. Payroll taxes. D. Personal income taxes.

B. Property taxes.

Other things being equal, an increase in the U.S. rate of inflation is likely to cause an increase in the: A. Quantity of exports B. Quantity of imports C. Demand for U.S. dollars D. International value of the U.S. dollar

B. Quantity of imports

The 1968 prediction of Paul Ehrlich proved to be wrong because population growth: A. Slowed dramatically as standards of living decreased B. Slowed dramatically as standards of living increased C. Rose dramatically as standards of living decreased D. Rose dramatically as standards of living increased

B. Slowed dramatically as standards of living increased

Government purchases and transfer payments: A. differ because the latter absorb resources while the former do not. B. differ because the former absorb resources while the latter do not. C. are alike because both are more inflationary than private spending. D. are alike because both absorb resources.

B. differ because the former absorb resources while the latter do not.

Usury laws: A. allocate funds from low-productivity to high-productivity investments. B. establish a legal ceiling on interest rates. C. make more funds available to low-income borrowers. D. create a surplus of loanable funds.

B. establish a legal ceiling on interest rates.

The antitrust laws are based on the: A. creative destruction view of competition. B. idea that competition leads to greater economic efficiency than does a monopoly. C. view that nonprice competition should be strictly regulated by government. D. view that all negative externalities should be eliminated by government action.

B. idea that competition leads to greater economic efficiency than does a monopoly.

In the theory of comparative advantage, a good should be produced in that nation where: A. the production possibilities line lies further to the right than the trading possibilities line. B. its cost is least in terms of alternative goods that might otherwise be produced. C. its absolute cost in terms of real resources used is least. D. its absolute money cost of production is least.

B. its cost is least in terms of alternative goods that might otherwise be produced.

Tying agreements: A. establish common boards of directors for previously competing firms. B. obligate a purchaser of product X to also buy product Y from the same seller. C. allow manufacturers to specify the retail prices of their products. D. prohibit firms from selling their products outside of specified geographic areas.

B. obligate a purchaser of product X to also buy product Y from the same seller.

The rent paid for the pasture land used to graze cattle would increase if: A. the productivity of the land increased. B. people decided to consume more beef. C. oil deposits were discovered on the land. D. any of the above occurred.

B. people decided to consume more beef.

Population will necessarily fall if the: A. birthrate exceeds the replacement rate. B. replacement rate exceeds the birthrate. C. birthrate exceeds the total fertility rate. D. total fertility rate exceeds the birthrate.

B. replacement rate exceeds the birthrate.

The demand for farmland will increase if: A. the demand for food decreases. B. technological advances make land more productive. C. the price of farm labor increases and the output effect exceeds the substitution effect. D. the supply of farmland increases.

B. technological advances make land more productive.

Which of the following best describes the main problem faced by farms in the long run? A. Lagging technology has decreased the productivity of farmers and therefore resulted in low farm prices and incomes. B. The highly inelastic nature of agricultural demand has caused small year-to-year fluctuations in farm output to result in highly unstable farm incomes. C. The supply of farm products has increased relative to the demand for them, and, because demand is inelastic, farm prices and incomes have therefore declined. D. The demand for farm products has increased relative to their supply, but the highly elastic nature of agricultural demand has caused these shifts to result in declining farm incomes.

C. The supply of farm products has increased relative to the demand for them, and, because demand is inelastic, farm prices and incomes have therefore declined.

The marginal tax rate is: A. the difference between the total tax rate and the average tax rate. B. the percentage of total income paid as taxes. C. change in taxes/change in taxable income. D. total taxes/total taxable income.

C. change in taxes/change in taxable income.

The basic argument for income inequality is that: A. the very rich establish consumption patterns that are desirable for the rest of society to emulate. B. the rich buy luxury goods that soon become affordable to everyone else because of economies of scale. C. income inequality is essential to maintain incentives to produce. D. inequality undermines incentives and tends to reduce the size of the national income.

C. income inequality is essential to maintain incentives to produce.

Income mobility: A. contributes to greater wealth inequality in the United States. B. is less in the United States than in most developing nations. C. is the movement of individuals and households from one income quintile to another over time. D. makes lifetime income inequality among income receivers in the United States greater than income inequality in any single year.

C. is the movement of individuals and households from one income quintile to another over time.

Statistical discrimination refers to: A. the crowding of women or minorities into low-paying occupations. B. significant differences in average levels of earnings by gender, race, and ethnicity, after accounting for nondiscriminatory factors. C. making individual hiring decisions on the basis of the characteristics of the group to which a person belongs, rather than on his or her personal characteristics and productivity. D. the 50-percent unexplained residual in studies that try to account for wage differences by gender, race, and ethnic origin.

C. making individual hiring decisions on the basis of the characteristics of the group to which a person belongs, rather than on his or her personal characteristics and productivity.

For an employer biased against African Americans, the discrimination coefficient d: A. will decrease if the employer becomes more prejudiced against African Americans. B. must equal the actual ratio of African-American to white wage rates. C. measures the amount an employer is willing to pay to hire a white over hiring an African-American worker. D. varies inversely with the actual African-American-white wage ratio.

C. measures the amount an employer is willing to pay to hire a white over hiring an African-American worker.

The equality-efficiency trade-off refers to: A. the conflict between risk averters and risk takers. B. the willingness of Congress to abandon existing welfare programs in favor of a comprehensive plan to increase education and training for low-income persons. C. possible conflicts between the goals of economic efficiency and greater income equality. D. the difference between the goals of income equality and equality of economic opportunity.

C. possible conflicts between the goals of economic efficiency and greater income equality.

An employer is prejudiced, prefers to hire white rather than Hispanic workers, and is willing to pay higher wages to obtain white workers. This illustrates: A. reverse discrimination. B. the crowding model. C. the taste-for-discrimination model. D. statistical discrimination.

C. the taste-for-discrimination model.

The incidence of a tax pertains to: A. the degree to which it alters the distribution of income. B. how easy it is to evade the tax. C. who actually bears the burden of a tax. D. the progressiveness or regressiveness of tax rates.

C. who actually bears the burden of a tax.

If the dollar depreciates relative to the Russian ruble, the ruble: A. will be less expensive to Americans. B. may either appreciate or depreciate relative to the dollar. C. will appreciate relative to the dollar. D. will depreciate relative to the dollar.

C. will appreciate relative to the dollar.

The Gini ratio of income inequality ranges between: A. 0 and 10,000. B. 1 and 10. C. 1 and +1. D. 0 and 1.

D. 0 and 1.

Kara is considering migrating to another country. Which of the following represents a cost she will face if she decides to move? A. Financial expenditures to transport herself and her belongings to her new country. B. The income she currently earns in her home country. C. The application fee for a green card. D. All of these.

D. All of these.

Entrepreneurs normally do all of the following except: A. Take the initiative in combining other resources to produce goods or services B. Make the basic, nonroutine policy decisions for their organization C. Bear the risks involved in introducing new product or production innovations D. Avoid accepting risks associated with a business

D. Avoid accepting risks associated with a business

41. A market in which a single seller is required for efficient production is called a(n): A. Regulated industry B. Competitive market C. Oligopoly D. Natural monopoly

D. Natural monopoly

Refer to the diagram pertaining to two nations and a specific product. The equilibrium world price occurs at: A. F. B. J. C. G. D. None.

D. None.

Federal government's greatest source of tax revenue is: A. Payroll taxes. B. Corporate income taxes. C. Excise taxes. D. Personal income taxes.

D. Personal income taxes.

If government levies a tax or fee on hunting licenses and uses the resulting revenue for wildlife stocking programs, this would be an example of: A. A progressive tax B. A regressive tax C. The ability-to-pay principle of taxation D. The benefits-received principle of taxation

D. The benefits-received principle of taxation

What is the relationship between living standards and birthrates? A. The relationship is negative at low levels of income, but becomes increasingly positive as incomes rise. B. They are unrelated. C. The relationship is positive (directly related). D. The relationship is negative (inversely related).

D. The relationship is negative (inversely related).

Present consumption supported by large trade deficits may come at the expense of: A. permanent debt to foreign interests. B. permanent foreign ownership of formerly U.S. owned assets. C. large sacrifices of future consumption. D. all of these.

D. all of these.

Refer to the diagram where curves (a) through (e) are Lorenz curves for five different countries. Income is equally distributed in: A. none of the countries shown. B. country b. C. countries a and e. D. country a.

D. country a.

The addition of government to the circular-flow model illustrates that government: A. purchases resources in the resource market. B. provides services to businesses and households. C. purchases goods in the product market. D. does all of these.

D. does all of these.

"Backflows" occur when: A. two countries send immigrants to each other in approximately equal numbers. B. physical capital flows into a country that has lost labor due to migration. C. immigrants send financial payments back to family in their country of origin. D. migrants return to their home country.

D. migrants return to their home country.

Mining of "conflict diamonds" tends to: A. be more profitable as warring factions are willing to pay more for the diamonds. B. occur at a slower pace than would maximize the long-term stream of profits because war increases extraction costs. C. occur at a pace slower than would maximize the long-term stream of profits since the war disrupts production. D. occur at a pace faster than would maximize the long-term stream of profits since warring factions extract diamonds as quickly as possible due to fears that they may soon lose control of the diamond mines.

D. occur at a pace faster than would maximize the long-term stream of profits since warring factions extract diamonds as quickly as possible due to fears that they may soon lose control of the diamond mines.

The "rule of reason" indicated that: A. if less than four firms account for three-fourths of an industry's sales, the industry is in violation of the Sherman Act. B. social regulation should not be enforced unreasonably so that costs exceed benefits. C. the mere possession of monopoly power is a violation of the antitrust laws. D. only contracts and combinations that unreasonably restrain trade violate the antitrust laws.

D. only contracts and combinations that unreasonably restrain trade violate the antitrust laws.

Alternative fuels become more economically viable as: A. the demand for oil decreases. B. subsidies for alternative fuels are removed. C. oil exploration and drilling technology improve. D. the price of oil rises.

D. the price of oil rises.

Alternative fuels become more economically viable as: A. the demand for oil decreases. B. subsidies for alternative fuels are removed. C. oil exploration and drilling technology improve. D. the price of oil rises.

D. the price of oil rises.

Economic or pure rent is: A. a payment made for the use of housing, factory buildings, or capital goods. B. a payment for resources used in the production of "free goods." C. a payment for the use of those resources whose supply is perfectly elastic. D. the price paid for the use of land and other nonreproducible resources.

D. the price paid for the use of land and other nonreproducible resources.

Landowners will not receive any rent so long as: A. there is any tax on land. B. the supply and demand curves for land intersect. C. the supply curve of land is perfectly inelastic. D. the supply curve lies entirely to the right of the demand curve.

D. the supply curve lies entirely to the right of the demand curve.