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Unformatted text preview: University of Southern California Econ 203, Principles of Microeconomics Sample Midterm 2 1. The personal distribution of income refers to the: A) division of income between personal taxes, consumption expenditures, and saving. B) division of income on the basis of industry sources, for example, agriculture, transportation, and mining. C) distribution of income to basic resource classes, that is, wages, rents, interest, and profits. D) way income is distributed among specific households or spending units. 2. In economics, a business establishment that owns one or more plants is called a(n): A) industry. B) shop. C) conglomerate. D) firm. 3. The separation of ownership and control in a corporation means that: A) hired managers play a larger role in determining company policy than do a corporation's legal owners. B) the ownership of corporations is becoming increasingly concentrated in the hands of a few common stockholders. C) a firm's board of directors has no power over hired managers. D) stockholders have lost their voting privileges. 4. In a competitive market: A) spillover benefits will always exceed spillover costs. B) resources will be misallocated if government does not properly adjust demand and supply for large spillover costs and benefits. C) resources will be allocated efficiently only if spillover benefits equal spillover costs. D) an efficient allocation of resources is realized even where there are large spillover costs and benefits. 5. A market externality refers to: A) economic costs and benefits of market activities that go to those who are not directly involved in the market transaction. B) the impact of legal and institutional forces on market behavior. C) any unanticipated change in market price or output. D) any noneconomic force, for example, political disruption of the flow of Middle East oil, which has market effects. Page 1 Use the following to answer question 6: Rivalry Nonrivalry Excludability A B Nonexcludability C D 6. Refer to the above matrix. A public good is characterized by combination: A) A. B) B. C) C. D) D. 7. In performing its stabilization function, it may be appropriate for the nation's central bank (the Federal Reserve in the United States) to take actions to: A) increase taxes to reduce inflation. B) increase interest rates to reduce inflation. C) reduce government spending to reduce inflation. D) increase subsidies to businesses to reduce unemployment. 8. Government transfer payments: A) have been virtually eliminated by Federal revenue sharing. B) have virtually no effect on the distribution of income. C) make the distribution of income less equal. D) make the distribution of income less unequal. Use the following to answer question 9: The following data represent a personal income tax schedule. Answer the next question(s) on the basis of this information....
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This note was uploaded on 10/28/2007 for the course ECON 203 taught by Professor Al-sabea during the Fall '05 term at USC.
- Fall '05