Chapter 3

Question 1

As more women entered the workforce:

Answer 1

household income increased and less production occurred in the home.

Question 2

What do economists view as the overall goal of a household?

Answer 2

Maximize utility.

Question 3

Over two-thirds of US personal income comes from:

Answer 3

labor earnings.

Question 4

A major advantage of a firm is its ability to:

Answer 4

to reduce transaction costs, promote division of labor, reduce transportation costs, and use expensive technology.

Question 5

Firms are assumed to:

Answer 5

maximize profits.

Question 6

Which is the most important form of business organization in terms of sales?

Answer 6

Corporation

Question 7

Transfer payments are:

Answer 7

cash transfers like welfare benefits and social security.

Question 8

The role of government is to:

Answer 8

all of these choices.

Question 9

Part of the reason for taxation is to redistribute income to those with lower incomes.

Answer 9

True

Question 10

The merchandise trade balance is the difference between the value of exported goods and imported goods.

Answer 10

True

Question 11

The price of one currency in terms of another is referred to as the:

Answer 11

exchange rate.

Question 12

Households ________, and ________.

Answer 12

supply labor, capital, land, and entrepreneurial ability to resource markets; demand goods and services from product markets

Question 13

Two key differences in households today relative to those in the 19th century are that households today have ________ and ________.

Answer 13

increased household reliance on markets for goods and services; higher rates of female employment outside the home

Question 14

Economists use the term “utility” to refer to the usefulness of a good or service, and so consequently aesthetic products like art, music, and vacations have no utility

Answer 14

False

Question 15

Which of the following represents the most valuable resource sold by most households?

Answer 15

Labor

Question 16

Which of the following best describes the percentage of personal income that households spend on consumption, as opposed to savings or taxes

Answer 16

80 percent

Question 17

Before the modern manufacturing firm evolved during the Industrial Revolution in Great Britain, entrepreneurs “put out” production to rural households in what came to be known as the cottage industry system.

Answer 17

True

Question 18

A sole proprietorship has ________, whereas a partnership has ________.

Answer 18

a single owner receiving the firm’s profit and bearing unlimited liability; multiple owners sharing the firm’s profit and bearing unlimited liability

Question 19

Advantages of the corporate structure for a firm include which of the following?

Answer 19

None of these choices are correct

Question 20

Corporations make up ________ percent of all U.S. businesses, and corporate sales make up ________ of all business sales.

Answer 20

20; 89

Question 21

As a market-based society, non-profit firms are illegal in the U.S.

Answer 21

False

Question 22

An externality is a cost or a benefit that falls on third parties and is therefore ignored by the two parties to a market transaction.

Answer 22

True

Question 23

Public goods feature rivalry in consumption, meaning that what is consumed by one is no longer available to someone else. In addition, consumption of public goods can easily be limited to paying customers

Answer 23

False

Question 24

Which of the following best describes a market failure (or market failures) that provide(s) an economic rationale for government intervention in markets?

Answer 24

All of these answers are correct.

Question 25

Which of the following is an example of regressive taxation, in which the percentage of income paid in taxes decreases as income increases?

Answer 25

U.S. payroll taxes for Social Security

Question 26

International trade occurs because the ________ cost of producing specific goods varies across countries.

Answer 26

opportunity

Question 27

The balance of payments system is the accounting record of all economic transactions between US residents and residents in the rest of the world.

Answer 27

True

Question 28

If one British pound can be exchanged for US $2.06 currently, how much currency would a British citizen need to purchase a dinner in New York that cost US $78.95?

Answer 28

38.33 pounds

Question 29

One form of trade protection that restricts the amount of imports of a particular good is called a(n):

Answer 29

quota.