Zane’s Vanes is a service that restores old weather vanes. Zane has just spent $125
purchasing a 1920s era weather vane which he expects to restore and sell for $500 once
the work is completed. After having spent $125, Zane realizes that he will need to spend
an additional $200 on materials to complete the restoration. Alternatively, he can sell
the weather vane without restoring it for $200. What should he do?
A) He should sell the weather vane now to make the most profit.
B) It does not matter what he does; he is going to take a loss on the project.
C) He should finish the restoration and then sell the weather vane.
D) He should sell the weather vane back to the party he purchased it from and cut his
losses.
What are the two types of taxes that working individuals pay on their earnings?
A) individual income tax and sales tax
B) payroll tax and sales tax
C) individual income tax and social insurance taxes
D) property tax and payroll tax
Which of the following is an example of a factor that a firm’s owners and managers can
control in making the firm successful?
A) the ability to produce the product at a lower cost
B) changing consumer tastes
C) a rise in the price of a key input, for example, a rise in the price of oil leads to higher
energy costs
D) the number of competitors in the market
The Congressional Budget Office estimates that the additional taxes and fees enacted
under the ACA will not even cover half of the true cost of the ACA.
If the federal government’s expenditures are less than its tax revenues, then
A) a budget surplus results.
B) a budget deficit results.
C) the budget is balanced.
D) No conclusion can be drawn here regarding the budget surplus or deficit without
information regarding government purchases versus other outlays.
Which of the following is a common mistake made by consumers?
A) taking into account the implicit costs of an activity
B) ignoring sunk costs
C) being overly optimistic about their future behavior
D) being overly pessimistic about their future behavior
Twenty-seven countries in Europe have formed the European Union (EU). After the EU
was formed it
A) eliminated all tariffs among its member countries.
B) completed a trade treaty (NAFTA) that reduced tariff rates between the EU and
North American countries.
C) greatly decreased imports and exports among its member countries.
D) barred imports of 747 jumbo jets by its member countries; all EU countries must
now buy jets from Airbus, a European company.
Southwest Airlines wants to raise $20 million to finance the renovation of their
corporate offices, and the company wishes to raise the funds through direct finance.
Which of the following methods could it use?
A) It could issue $20 million in stocks.
B) It could sell $20 million in bonds.
C) It could borrow $20 million from a bank.
D) It could choose either A or B.
Policymakers focus on marginal tax rate changes when making changes in the tax code
because the marginal tax rate
A) determines how tax revenue will change as national income increases.
B) affects people’s willingness to work, save, and invest.
C) always equals the average tax rate which is harder to measure.
D) determines how much revenue the government will have to spend.
When calculating GDP, the Bureau of Economic Analysis releases its “advanced
estimate” of a quarter’s GDP approximately
A) three months before the quarter has ended.
B) one month after the quarter has ended.
C) three months after the quarter has ended.
D) one year after the quarter has ended.
Table 20-4
Assume the market basket for the consumer price index has two products : meat and
potatoes – with the following values in 2006 and 2013 for price and quantity: The
Consumer Price Index for 2013 equals
A) 125.
B) 129.
C) 135.
D) 141.
Table 18-9
Table 18-9 shows the income tax brackets and tax rates for single taxpayers in
Monrovia. Calculate the income tax paid by Sylvia, a single taxpayer with an income of
$70,000.
A) $21,000
B) $15,740
C) $15,400
D) $13,475
Using the Taylor rule, if the current inflation rate equals the target inflation rate and real
GDP is greater than potential GDP, then the federal funds target rate ________ the sum
of the current inflation rate plus the real equilibrium federal funds rate.
A) will be greater than
B) will be less than
C) will be the same as
D) may be greater than or less than