Economics (McConnell), 18th Edition

Chapter 4: The U.S. Economy: Private and Public Sectors

Quiz

1
A typical household uses the largest share of its total income for:
A)personal consumption expenditures
B)combined income, payroll, sales, and property taxes
C)personal saving
D)food
2
Refer to the following:
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The tax represented in the table above is:
A)regressive
B)proportional
C)progressive
D)optimal
3
Considering average state-level spending and revenue:
A)most spending is for police and fire protection
B)most spending is for health care and hospital administration
C)the largest source of revenue is taxes on income
D)the largest sources of revenue are sales and excise taxes
4
Refer to the following, in which solid arrows are real flows and broken arrows are monetary flows.

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Flow 3 might represent:
A)federal government bond purchases
B)wages paid to chemists at the Environmental Protection Agency
C)tax refunds from filing federal income taxes
D)federal disability payments
5
In a corporation, one primary principal–agent relationship is exemplified by:
A)owner–stockholder
B)stockholder–manager
C)hourly worker–salaried employee
D)bond holder–stockholder
6
Good X is characterized by nonrivalry and nonexcludability; good Y is characterized by neither. If both are economically desirable, then:
A)both can be efficiently provided by private firms
B)X can be efficiently provided by private firms but Y must be financed through taxes
C)Y can be efficiently provided by private firms but X must be financed through taxes
D)both must be financed through taxes
7
Positive externalities are most likely to be found in the production of:
A)illegal drugs
B)DVD recording devices
C)milk and dairy products
D)secondary education
8
Regarding the functional distribution of income in the U.S., which of the following constitutes about 70% of total income?
A)The top 20% of households
B)Consumption spending
C)Business profits
D)Wages and salaries
9
If your income increases from $40,000 per year to $41,000 per year and your tax increases from $1000 to $1050, the marginal tax rate is:
A)$50
B)2.5%
C)5%
D)10%
10
Bees from a keeper's hive can pollinate fruit trees for many surrounding orchards. Therefore, the production of honey:
A)generates a positive externality and should be encouraged through subsidies
B)generates a positive externality, however resources are correctly allocated in this market
C)generates a negative externality and should be discouraged through taxes
D)needs no government interaction. Beekeepers reap all private benefits
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