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Quiz 2
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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
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
3
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
4
Creditors can sue a corporation as a legal entity but cannot sue the stockholders as individuals.
A)True
B)False
5
The largest component of federal spending is:
A)national defense
B)health and education
C)income security
D)interest on the public debt
6
Which of the following taxes is progressive?
A)The federal income tax
B)State sales taxes
C)Gasoline excise taxes
D)Property taxes
7
In the U.S., most businesses are _____, while most sales are accounted for by _____.
A)sole proprietorships; partnerships
B)partnerships; corporations
C)sole proprietorships; corporations
D)corporations; sole proprietorships
8
External benefits 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
9
Suppose total taxes paid on a $1000 income are $100; total taxes paid on $2000 income are $250. For incomes between $1000 and $2000, the:
A)average tax rate declines as income increases
B)marginal tax rate is falling
C)average tax rate is 15%
D)marginal tax rate is 15%
10
A tax is progressive if:
A)total tax increases as income increases
B)the marginal tax rate is constant
C)the average tax rate increases as income increases
D)the average tax rate exceeds the marginal tax rate





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