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Practice_Ch4_ - Chapter 4 Practice Test The U.S Economy...

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Chapter 4 Practice Test The U.S. Economy: Private and Public Sectors 1. Refer to the following: Taxable income Total tax $ 0 $ 0 1000 300 2000 600 3000 900 4000 1200 5000 1500 The tax represented in the table above is: a. regressive b. proportional c. progressive d. optimal Answer: b Feedback: Total tax increases in direct proportion to income at a rate of 30%. 2. Production of good X creates substantial external costs in addition to private costs. Economic theory suggests X should be: 3. If a free market allocates too many resources to the production of some good, then: 4. “Tax Freedom Day” is:
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5. Which type of business organization provides limited liability to its owners? a. Sole proprietorship b. Partnership c. Corporation d. Principal company Answer: c Feedback: A corporation is a legal entity separate from its owners. This form limits the owners’ liability to the value of their investment in the company’s stock. 6. Refer to the following, in which solid arrows are real flows and broken arrows are monetary flows. Flow 3 might represent: 7. Legal business forms, listed in order from fewest to greatest in number, are comprised of: a. partnership, sole proprietor, corporation b. monopolist, oligopolist, competitor c. corporation, partnership, sole proprietor d. partnership, corporation, sole proprietor Answer: d
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