Review questions 4%2c 5

Review questions 4%2c 5 - 1 ECON 2010 Fall 2010 Review...

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1 ECON 2010 Fall 2010 Review questions 4, 5 1. The personal distribution of income refers to the: A. Apportioning of income according to basic resource classes, i.e., wages, rents, interest, and profits B. Division of income on the basis of industry sources, e.g., agriculture, manufacturing, mining, etc C. Division of the nation's money income among individual households D. Division of income between personal taxes, consumption, and saving 2. Which of the following is correct? A. A person who purchases a corporate bond is borrowing money from a corporation B. A person who purchases a corporate stock is buying ownership in the corporation C. A person who purchases a corporate bond is guaranteed to earn dividends from the stock D. A person who purchases a corporate stock gets the option to buy other shares at lower prices 3. One major advantage of limited liability is that it: A. Is not subject to a free-rider problem B. Is not subject to a principal-agent problem C. Has unlimited profit sharing among the firm's owners D. Shields the personal assets of owners from liability claims 4. The principal-agent problem in corporations arises from: A. The fact that the principal objective of most corporations is to make profits and not to contribute to charity B. A conflict of interest between corporate executives who manage the firm and stockholders who own the firm C. The view that workers are agents who are not considered to be the principal asset of the corporations for which they work D. A perspective that corporations are agents that represent the principal source of power for government and the national economy 5. What basic economic function is the Federal government performing when it takes policy actions to reduce unemployment? A. Regulating business B. Stabilizing the economy C. Redistributing income D. Providing a public good 6. A primary way that government redistributes income is through: A. Owning natural monopolies B. Providing positive externalities C. Making transfer payments D. Regulating business
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2 7. If government intervenes when negative externalities exist in an industry, it should attempt to shift the industry: A. Demand curve to the left B. Supply curve to the left C. Demand curve to the right D. Supply curve to the right 8. When externalities cause positive benefits to accrue to third parties, the market will: A. Underallocate resources to the production of the good B. Overallocate resources to the production of the good C. Respond by producing more of the good D. Increase the firm's revenues 9. Which is characteristic of a public good such as national defense? A. It is subject to rivalry B. It is subject to exclusion C. It is easy to charge people on the basis of how much they use D. It can benefit an increasing number of people at no additional cost 10. If the level of total spending in the private sector is too low to maintain full employment in an economy, then government is likely to improve the performance of the economy by:
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This note was uploaded on 12/05/2011 for the course ECON 2010 taught by Professor Staff during the Fall '08 term at Utah Valley University.

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Review questions 4%2c 5 - 1 ECON 2010 Fall 2010 Review...

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