If a tax is proportional, the average tax rate
a. remains the same as income rises.
b. rises as income rises.
c. falls as income rises.
d. falls as income falls.
A market transaction causes an externality if someone
a. directly involved in the transaction receives uncompensated benefits or costs from it.
b. not directly involved in the transaction receives uncompensated benefits or costs
from it.
c. directly involved in the transaction seeks legal assistance to ensure that the
transaction is carried out.
d. not directly involved in the transaction interferes in it by imposing regulations or
product standards.
There is statistical evidence that managers’ salaries are tied most closely to
a. profits at the profit-maximizing output.
b. sales volume.
c. cost per unit at minimum-cost output.
d. the closeness of output to the point where MR = MC.
The metaphor used to describe the working of the price system to achieve efficiency in
a free market is
a. Occam’s razor.
b. the prisoner’s dilemma.
c. the invisible hand.
d. the benefit principle.
Centrally planned economies are able to cope with environmental pollution issuesmuch
better than capitalist countries.
a. True
b. False
High opportunity costs go hand in hand with high money costs in a properly
functioning economy.
a. True
b. False
Direct controls often require long legal proceedings before they can be effective.
a. True
b. False
Suppose that the rate of interest increases. What will happen to the discounted present
value of an investment?
a. It will increase.
b. It will decrease.
c. It will remain unchanged.
d. It depends on the magnitude of the change.
Speculators play a role in the economy similar to that played by
a. farmers.
b. investment banks.
c. insurance companies.
d. stockbrokers.
In 2012, the median income of U.S. families was about $86,000.
a. True
b. False
Figure 18-1
According to the graph in Figure 18-1, the tax is which of the following?
a. 400
b. 600
c. 1,000
d. 200
The statement ‘saccharine causes cancer” is not a theory; it is a hypothesis.
a. True
b. False
The selection of particular products’ production processes
a. determines the output of other products made with those inputs at the same time.
b. is part of the distribution problem in an economy.
c. is accomplished without regard to profit in a laissez-faire economy.
d. depends upon plans for distribution of the products.
For most industrial nations, health-care costs have increased faster than the rate of
inflation.
a. True
b. False
For which of the following is there no such thing as a “price?”
a. labor
b. land
c. entrepreneurship
d. none of the above
According to the “law” of demand, we would expect
a. the demand curve to be negatively sloped.
b. the demand curve to be positively sloped.
c. the total quantity demanded by the market to move in the same direction as price.
d. marginal utility to increase as quantity demanded increases.