Saturday, July 30, 2011

Learning curve effects can be incorporated

ACCOUNTING

Multiple Choice

Learning curve effects can be incorporated

a. into performance evaluations.

b. into production schedules.

c. when using costs to price products.

d. into all of the above.

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1. To complete the first setup on a new machine took an employee 200 minutes

ACCOUNTING

Multiple Choice

To complete the first setup on a new machine took an employee 200 minutes. Using an 80% incremental unit-time learning model indicates that the second setup on the new machine is expected to take

a. 160 minutes.

b. 120 minutes.

c. 80 minutes.

d. 60 minutes.

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To complete the first setup on a new machine took an employee 200 minutes

ACCOUNTING

Multiple Choice

To complete the first setup on a new machine took an employee 200 minutes. Using an 80% cumulative average-time learning curve indicates that the second setup on the new machine is expected to take

a. 160 minutes.

b. 120 minutes.

c. 80 minutes.

d. 60 minutes.

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An experience curve

ACCOUNTING

Multiple Choice

An experience curve

a. is a narrower application of the learning curve.

b. measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases.

c. only measures the decline in labor-hours per unit as units produced increases.

d. measures the increase in cost per unit as productivity increases.

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A learning curve is a function

ACCOUNTING

Multiple Choice

A learning curve is a function

a. that measures the decline in labor-hours per unit due to workers becoming better at a job.

b. that increases at a greater rate as workers become more familiar with their tasks.

c. where unit costs increase as productivity increases.

d. that is linear.

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A step variable-cost function

ACCOUNTING

Multiple Choice

A step variable-cost function

a. is fixed over the long run, but not over the short run.

b. is often approximated with a continuous variable-cost function.

c. remains the same over a wide range of activity.

d. example includes adding additional warehouse space.

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A step fixed-cost function

ACCOUNTING

Multiple Choice

A step fixed-cost function

a. is fixed over the short run, but not over the long run.

b. is often approximated with a continuous variable-cost function.

c. remains the same over a narrow range of activity.

d. example includes setup costs.

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Examples of nonlinear cost functions include all EXCEPT

ACCOUNTING

Multiple Choice

Examples of nonlinear cost functions include all EXCEPT

a. step variable-cost functions.

b. step fixed-cost functions.

c. learning curves.

d. mixed cost functions.

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Over the short run, a nonlinear cost function would MOST likely result from all EXCEPT

ACCOUNTING

Multiple Choice

Over the short run, a nonlinear cost function would MOST likely result from all EXCEPT

a. quantity discounts for each additional 10,000 parts purchased.

b. purchasing another $250,000 printing machine to double production.

c. hiring a third production supervisor.

d. incurring greater total utility costs for each machine-hour of operation.

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When using activity-based costing all of the following are true EXCEPT that

ACCOUNTING

Multiple Choice

When using activity-based costing all of the following are true EXCEPT that

a. all cost drivers should be output unit-level cost drivers.

b. there are a great number and variety of cost drivers and cost pools.

c. industrial engineering, conference, and regression analysis can be used to estimate slope coefficients.

d. the more cost pools, the greater the chance of estimation error.

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The smaller the residual term

ACCOUNTING

Multiple Choice

The smaller the residual term

a. the stronger the relationship between the cost driver and costs.

b. the weaker the relationship between the cost driver and costs.

c. the steeper the slope of the cost function.

d. the gentler the slope of the cost function.

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A steeply sloped regression line indicates

ACCOUNTING

Multiple Choice

A steeply sloped regression line indicates

a. a strong relationship between the cost driver and costs.

b. a greater proportion of fixed costs than variable costs.

c. an economically plausible relationship exists.

d. management should cut costs.

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Goodness-of-fit measures how well the predicted values in a cost estimating equation

ACCOUNTING

Multiple Choice

Goodness-of-fit measures how well the predicted values in a cost estimating equation

a. match the cost driver.

b. determine the level of activity.

c. match the actual cost observations.

d. rely on the independent variable.

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If machine maintenance is scheduled at a time when production is at a low level then

ACCOUNTING

Multiple Choice

If machine maintenance is scheduled at a time when production is at a low level then

a. low production is the cost driver of high repair costs.

b. an understanding of operations is needed to determine an appropriate cost driver.

c. low production should be avoided since it is the cause of machine maintenance.

d. machine maintenance cannot be accurately predicted.

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A cost function with a lower slope coefficient than a year ago could indicate that

ACCOUNTING

Multiple Choice

A cost function with a lower slope coefficient than a year ago could indicate that

a. total variable costs have decreased.

b. new cost-cutting initiatives are beneficial.

c. production has decreased.

d. rental costs have decreased.

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A cost function with a lower constant than a year ago could indicate all EXCEPT

ACCOUNTING

Multiple Choice

A cost function with a lower constant than a year ago could indicate all EXCEPT

a. last year’s cost function was inaccurate.

b. a new operations manager is being effective.

c. the sales commission percentage has decreased.

d. insurance premiums have decreased.

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An inaccurate cost function with a constant that is estimated too high may MOST likely result in

ACCOUNTING

Multiple Choice

An inaccurate cost function with a constant that is estimated too high may MOST likely result in

a. evaluating a weak manager as providing strong performance.

b. promoting a product that is actually less profitable than
budgeted

c. predicting total costs that are too low

d. replicating processes that are truly cost saving

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What is the estimated total cost at an operating level of 2,850 hours?

ACCOUNTING

Multiple Choice

The Gangwere Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Gangwere Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.



Month Cost Hours

January $40,000 3,500

February 24,400 2,000

March 31,280 2,450

April 36,400 3,000

May 44,160 3,900

June 42,400 3,740



What is the estimated total cost at an operating level of 2,850 hours?

a. $25,692

b. $33,240

c. $32,016

d. $34,736

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2. How is the cost function stated?

ACCOUNTING

Multiple Choice

The Gangwere Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Gangwere Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.



Month Cost Hours

January $40,000 3,500

February 24,400 2,000

March 31,280 2,450

April 36,400 3,000

May 44,160 3,900

June 42,400 3,740



How is the cost function stated?

a. y = $26,672 + $1.84X

b. y = $21,360 + $1.52X

c. y = $10,112 + $8.64X

d. y = $3,600 + $10.40X

Click here for the SOLUTION

Thursday, July 21, 2011

If a state government finances treatment facilities for alcoholics out of revenues from a tax on liquor, it is

ECONOMICS

Multiple Choice

If a state government finances treatment facilities for alcoholics out of revenues from a tax on liquor, it is

a.basing its taxation on ability to pay

b.levying a proportional tax

c.able to afford fewer treatment facilities when liquor sales decrease

d.discouraging alcoholics from seeking treatment at government facilities

e.providing a service that the private sector cannot provide

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Taxes collected on the basis of the benefits-received principle

ECONOMICS

Multiple Choice

Taxes collected on the basis of the benefits-received principle

a.provide the states with their main sources of revenue

b.tend to redistribute income from rich to poor

c.collect the same total amount from each individual

d.connect the revenue side of the budget with the spending side of the budget

e.make it possible for government to spend money on activities that markets can't provide

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Which of the following taxes is based on the benefits-received principle?

ECONOMICS

Multiple Choice

Which of the following taxes is based on the benefits-received principle?

a.corporate income taxes

b.personal income taxes

c.property taxes

d.gasoline excise taxes

e.user fees that collect the same amount from each person

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Which of the following taxes is based on the ability-to-pay principle?

ECONOMICS

Multiple Choice

Which of the following taxes is based on the ability-to-pay principle?

a.tolls on a bridge

b.income taxes

c.gasoline excise taxes

d.property taxes

e.user fees that collect the same amount from each person

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Which of the following is not based on the benefits-received principle of taxation?

ECONOMICS

Multiple Choice

Which of the following is not based on the benefits-received principle of taxation?

a.charging a fee for use of public golf courses

b.differences between residential and out-of-state college tuition

c.the excise tax on gasoline

d.toll booths on a highway

e.charging a fee per bag to haul away garbage

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Which of the following taxes is most clearly based on the benefits-received principle of taxation?

ECONOMICS

Multiple Choice

Which of the following taxes is most clearly based on the benefits-received principle of taxation?

a.corporate income tax

b.gsoline tax

c.personal income tax

d.payroll tax

e.value added tax

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Which of the following is a justification for taxes?

ECONOMICS

Multiple Choice

Which of the following is a justification for taxes?

a.the ability-to-pay principle

b.the progressive tax principle

c.the proportional tax principle

d.the regressive tax principle

e.the desire of the government to spend more funds

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Gasoline taxes illustrate the benefits-received principle of taxation

ECONOMICS

Multiple Choice

Gasoline taxes illustrate the benefits-received principle of taxation

a.True

b.False

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Federal individual income taxes illustrate the ability-to-pay principle of taxation

ECONOMICS

Multiple Choice

Federal individual income taxes illustrate the ability-to-pay principle of taxation

a.True

b.False

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Under a regressive income tax system, individuals with higher incomes pay higher marginal tax rates

ECONOMICS

Multiple Choice

Under a regressive income tax system, individuals with higher incomes pay higher marginal tax rates

a.True

b.False

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The personal income tax is based on the benefits-received principle of taxation

ECONOMICS

Multiple Choice

The personal income tax is based on the benefits-received principle of taxation

a.True

b.False

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The excise tax on gasoline is based on the ability-to-pay principle of taxation

ECONOMICS

Multiple Choice

The excise tax on gasoline is based on the ability-to-pay principle of taxation

a.True

b.False

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The largest source of federal government revenue is

ECONOMICS

Multiple Choice

The largest source of federal government revenue is

a.corporate income taxes

b.individual income taxes

c.payroll taxes

d.sales and excise taxes

e.tariffs on imported goods and other customs fees and duties

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The second largest source of tax revenue for the federal government is

ECONOMICS

Multiple Choice

The second largest source of tax revenue for the federal government is

a.payroll taxes

b.the personal income tax

c.the corporate income tax

d.excise taxes

e.the sales tax

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Which of the following accounts for the largest source of revenue for the federal government?

ECONOMICS

Multiple Choice

Which of the following accounts for the largest source of revenue for the federal government?

a.sales tax

b.federal property tax

c.personal income tax

d.corporate income tax

e.borrowing

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The main source of revenue for the U.S. federal government is

ECONOMICS

Multiple Choice

The main source of revenue for the U.S. federal government is

a.personal income taxes

b.corporate income taxes

c.sales taxes

d.borrowing on financial markets

e.revenue from the sale of government goods and services

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The primary source of revenue for local governments is the property tax

ECONOMICS

Multiple Choice

The primary source of revenue for local governments is the property tax

a.True

b.False

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Revenue for the state governments in the United States comes primarily from income taxes

ECONOMICS

Multiple Choice

Revenue for the state governments in the United States comes primarily from income taxes

a.True

b.False

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What part of federal government spending has grown the most slowly in recent decades?

ECONOMICS

Multiple Choice

What part of federal government spending has grown the most slowly in recent decades?

a.national defense

b.welfare

c.interest on the national debt

d.social security and medicare

e.all other forms of federal government spending

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What part of federal government spending has grown the most rapidly in recent years?

ECONOMICS

Multiple Choice

What part of federal government spending has grown the most rapidly in recent years?

a.national defense

b.welfare

c.interest on the national debt

d.social security and Medicare

e.all other forms of federal government spending

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In the United States, all levels of government together spend about

ECONOMICS

Multiple Choice

In the United States, all levels of government together spend about

a.one out of every three dollars paid for finished goods and services

b.half of the dollars paid for defense spending

c.the same amount as private citizens and corporations

d.one out of every three dollars paid for education

e.80 percent of their budgets on transfer payments

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Since 1930, U.S. government spending as a percent of GDP has

ECONOMICS

Multiple Choice

Since 1930, U.S. government spending as a percent of GDP has

a.increased

b.decreased

c.stayed the same

d.showed no particular trend

e.increased by the same percent each year

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Gross Domestic Product is the value of all

ECONOMICS

Multiple Choice

Gross Domestic Product is the value of all

a.goods and services produced during a particular year

b.goods and services sold during a particular year

c.final goods and services sold during a particular year

d.final goods and services produced during a particular year

e.final goods and services produced and sold during a particular year

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Gross Domestic Product is the market value of

ECONOMICS

Multiple Choice

Gross Domestic Product is the market value of

a.all exchanges made during the course of a year

b.all final goods produced during the course of a year

c.all monetary transactions during the course of a year

d.all the goods produced during the course of a year over and above what is required to maintain the population and the stock of capital

e.all final goods sold during the course of a year

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In recent years, redistribution has been the fastest growing category of federal government outlays

ECONOMICS

Multiple Choice

In recent years, redistribution has been the fastest growing category of federal government outlays

a.True

b.False

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When the government sells something it produces,

ECONOMICS

Multiple Choice

When the government sells something it produces,

a.revenue received must be greater than cost to justify government production

b.revenue received must equal cost because government is a nonprofit organization

c.the price does not always reflect the cost of producing the good

d.the price charged is an accurate measure of the benefits generated

e.it prices the good the same way a natural monopolist would

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Wednesday, July 20, 2011

Market activity differs from government activity because

ECONOMICS

Multiple Choice

Market activity differs from government activity because

a.markets generally force prices to below-cost levels

b.governments never charge for the services they provide

c.markets do not use voluntary exchange mechanisms

d.markets provide a direct link between benefits and costs

e.governments have strong incentives to keep costs under strict control

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Government policies are coercive, whereas markets are not

ECONOMICS

Multiple Choice

Government policies are coercive, whereas markets are not. This implies that

a.government activity will always be less efficient than market activity

b.households cannot maximize utility if they consume any government goods and services

c.market transactions result in an equal number of gainers and losers

d.self-interest and public interest are always in conflict

e.government can provide some goods and services when private markets fail to do so

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A common assumption that economists make about the behavior of elected officials is that they try to

ECONOMICS

Multiple Choice

A common assumption that economists make about the behavior of elected officials is that they try to

a.maximize the size of their government salaries

b.maximize the size of their control over the budget process

c.maximize the number of votes they receive in the next election

d.minimize the government's expenditures in order to balance the budget

e.conform to the wishes of special interest groups so that the government behaves as a single, consistent decision maker

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Of the three levels of government in the United States,

ECONOMICS

Multiple Choice

Of the three levels of government in the United States,

a.only the federal government provides public goods

b.only the federal government has the power to tax

c.local governments are primarily responsible for primary and secondary education

d.the federal government is primarily responsible for higher education

e.state governments are primarily responsible for economic stability

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Which of the following is true about government activity in the United States?

ECONOMICS

Multiple Choice

Which of the following is true about government activity in the United States?

a.Macroeconomic policy is handled mainly at the state level.

b.Higher education is handled mainly at the national level.

c.Primary and secondary education is handled mainly at the local level.

d.Primary and secondary education is handled mainly at the national level.

e.Police and fire protection are handled mainly at the state level.

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Goods and services produced by the government are sold at prices that are set to recover production costs

ECONOMICS

Multiple Choice

Goods and services produced by the government are sold at prices that are set to recover production costs

a.True

b.False

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Most economists assume that the goal of elected officials is to promote the public interest

ECONOMICS

Multiple Choice

Most economists assume that the goal of elected officials is to promote the public interest

a.True

b.False

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When the social cost of production is greater than the private cost, we have a

ECONOMICS

Multiple Choice

When the social cost of production is greater than the private cost, we have a

a.positive externality

b.negative externality

c.public good

d.private good

e.positive spillover

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Which of the following is not a goal of government programs?

ECONOMICS

Multiple Choice

Which of the following is not a goal of government programs?

a.to enforce private property rights

b.to prohibit natural monopolies

c.to reduce pollution

d.to transfer money from higher-income households to the poorest households

e.to maintain price stability

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Which of the following is not a function of government?

ECONOMICS

Multiple Choice

Which of the following is not a function of government?

a.promotion of competition

b.stabilization to achieve the macroeconomic goals

c.redistribution of income through taxation and transfer payments

d.production of public goods

e.providing the economy's private goods

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The difference between fiscal policy and monetary policy is that

ECONOMICS

Multiple Choice

The difference between fiscal policy and monetary policy is that

a.fiscal policy is macroeconomic policy and monetary policy is microeconomic policy

b.monetary policy is macroeconomic policy and fiscal policy is microeconomic policy

c.fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods

d.monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing

e.fiscal policy involves the promotion of competition and monetary policy involves collecting money to pay for taxes

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The term "fiscal policy" refers to

ECONOMICS

Multiple Choice

The term "fiscal policy" refers to

a.the amount of physical output produced by firms

b.the means by which government policy makes firms more productive

c.the avenue by which government influences credit markets

d.spending and taxing by governments

e.a tool of government that works in the opposite direction of monetary policy

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Which of the following is not a government transfer program?

ECONOMICS

Multiple Choice

Which of the following is not a government transfer program?

a.unemployment compensation

b.Social Security

c.food stamps

d.Medicare

e.movement of soldiers to a different military base

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Determining the most socially desirable level of income equality or inequality

ECONOMICS

Multiple Choice

Determining the most socially desirable level of income equality or inequality

a.is done through markets, rather than by the government

b.is done directly by firms

c.involves normative economics

d.involves evaluation of public goods

e.involves evaluation of all externalities, both positive and negative

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An example of a positive externality is

ECONOMICS

Multiple Choice

An example of a positive externality is

a.pollution because it affects people not directly involved with producing it

b.a homeowner's maintenance of a beautiful lawn because this creates a benefit for neighbors

c.creating a monopoly

d.driving a car that emits pollution

e.cigarette smoking because this imposes an indirect cost on people around the smoker

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Which of the following would not be considered a role of the government?

ECONOMICS

Multiple Choice

Which of the following would not be considered a role of the government?

a.promoting competition

b.providing public goods

c.providing externalities

d.regulating natural monopolies

e.safeguarding private property and enforcing contracts

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Externalities are defined as

ECONOMICS

Multiple Choice

Externalities are defined as

a.any transaction external to the firm

b.costs or benefits that fall on third parties

c.policies that firms undertake to sell products outside the country

d.managers' dealings with stockholders outside the firm

e.costs of maintaining plant and equipment to avoid the scrutiny of external auditors

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What is the rationale for government provision of education?

ECONOMICS

Multiple Choice

What is the rationale for government provision of education?

a.Not all incomes are equal, but everyone has the right to education regardless of wealth.

b.Potential students consider only their personal benefits gained from education, but the rest of society benefits, too.

c.No education would be provided in the absence of government provision because everyone would consume it without paying.

d.The cost of providing education for the entire public is too large.

e.The government can provide education at a much lower cost than the private sector.

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Some people have argued that government should provide only those goods that we would truly define as public goods

ECONOMICS

Multiple Choice

Some people have argued that government should provide only those goods that we would truly define as public goods. If so, which of the following should government produce?

a.National Defense

b.day-care centers for children of working mothers

c.mail delivery

d.unemployment benefits

e.subsidies for agricultural products

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Which of the following is true of public goods?

ECONOMICS

Multiple Choice

Which of the following is true of public goods?

a.The market mechanism helps to signal the quantity that is demanded by the public.

b.Payment for consumption is efficiently provided by market prices.

c.Consumption by one person does not preclude consumption of the same good by another person.

d.The public sector is guided to produce the correct quantity by market prices.

e.Voluntary contributions will be sufficient to finance the production of public goods.

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The funds to pay for police protection are usually raised through taxation because

ECONOMICS

Multiple Choice

The funds to pay for police protection are usually raised through taxation because

a.police protection would be hard to provide exclusively to those who voluntarily pay for it

b.people would not voluntarily pay salaries to officials who might arrest them

c.police protection is a basic necessity

d.goods financed through taxation can be guaranteed to all who pay for it

e.the government believes that those who receive the benefits from the service should pay for it

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Which of the following is a defining characteristic of a public good?

ECONOMICS

Multiple Choice

Which of the following is a defining characteristic of a public good?

a.It is produced and distributed by the government.

b.
The decision to produce it is made by the public through the voting process.

c.It is produced and distributed by private firms according to government regulations.

d.It is freely available to everyone once it is produced.

e.It is purchased by one government agency from another government agency.

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Natural monopolies occur when

ECONOMICS

Multiple Choice

Natural monopolies occur when

a.government antitrust laws are too weak or not enforced

b.negative externalities are present

c.firms collude to set prices and divide the market among themselves

d.one firm can service the market more cheaply than two or more firms can

e.a public good is produced by a private firm

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Government antitrust laws were designed to

ECONOMICS

Multiple Choice

Government antitrust laws were designed to

a.encourage the production of public goods

b.prevent natural monopolies

c.prevent collusion among firms

d.regulate natural monopolies

e.correct the outcomes of positive and negative externalities in private markets

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Which of the following is a reason why government is a participant in a market-oriented economy?

ECONOMICS

Multiple Choice

Which of the following is a reason why government is a participant in a market-oriented economy?

a.to enforce contracts and protect private property

b.to promote collusion

c.to promote the growth of natural monopolies

d.to provide more inequality in the distribution of income

e.all of the above

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Contracts are enforced by

ECONOMICS

Multiple Choice

Contracts are enforced by

a.the firms that make the contracts through buy-out clauses

b.law firms that specialize in contract enforcement

c.corporations specializing in contract writing and enforcement

d.the government through the judicial system

e.both households and firms through customer relations departments

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It is difficult to exclude individuals from the use of public goods and services

ECONOMICS

Multiple Choice

It is difficult to exclude individuals from the use of public goods and services

a.True

b.False

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When externalities are present, market prices do not reflect all the social costs or benefits of the activity

ECONOMICS

Multiple Choice

When externalities are present, market prices do not reflect all the social costs or benefits of the activity

a.True

b.False

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A public good is available to all regardless of who pays for it and who does not

ECONOMICS

Multiple Choice

A public good is available to all regardless of who pays for it and who does not

a.True

b.False

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To serve the public interest, government sometimes promotes competition by breaking up natural monopolies

ECONOMICS

Multiple Choice

To serve the public interest, government sometimes promotes competition by breaking up natural monopolies

a.True

b.False

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Two important roles of government in the economy are to safeguard private property and enforce contracts

ECONOMICS

Multiple Choice

Two important roles of government in the economy are to safeguard private property and enforce contracts

a.True

b.False

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You are more likely to hire your teenage child to cut your lawn than a landscaping firm

ECONOMICS

Multiple Choice

You are more likely to hire your teenage child to cut your lawn than a landscaping firm

a.since the teenager is paid each time when she finishes and the landscaping firm bills your credit card each month

b.if the teenager has a lower opportunity cost of cutting the lawn than the landscaping firm does

c.because the teenager is less likely to have the specialized tools necessary to complete the job quickly

d.due to the bounded rationality of the diversified landscaping firm

e.when it does not take a substantial amount of time and effort to find a reputable landscaping firm to do the job

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You are more likely to do-it-yourself than hire a plumber to repair a leaky drain pipe

ECONOMICS

Multiple Choice

You are more likely to do-it-yourself than hire a plumber to repair a leaky drain pipe

a.as the tax rate on your earned income dramatically decreases

b.if the opportunity cost of your time decreases

c.the less knowledge and experience in plumbing repair work that you possess

d.if you already own the specialized tools required to complete the repair work

e.as the transaction cost of the do-it-yourself repair work increases

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Friday, July 15, 2011

You are more likely to hire a plumber to repair a leaky drain pipe

ECONOMICS

Multiple Choice

You are more likely to hire a plumber to repair a leaky drain pipe

a.as the tax rate on your earned income rises

b.if you already own the specialized tools required to complete the plumbing repair work

c.following an increase in the opportunity cost of your time

d.the more knowledge and experience in plumbing repair work that you possess

e.as the transaction cost of entering into a plumbing contract increases due to government regulations

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5. Household production is more likely to occur when

ECONOMICS

Multiple Choice

Household production is more likely to occur when

a.it requires many specialized resources

b.technology makes it easier than market production

c.tax avoidance is undesirable

d.less control over the final product is desirable

e.the opportunity cost of household production is high

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Which of the following is not a reason why some production continues in households?

ECONOMICS

Multiple Choice

Which of the following is not a reason why some production continues in households?

a.Some household production requires many specialized resources

b.The opportunity cost of household production has decreased over time

c.Household production avoids taxes

d.There have been important technological advances in household production

e.Some households prefer the ability to control production

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4. Household production is more likely to occur when

ECONOMICS

Multiple Choice

Household production is more likely to occur when

a.it requires many specialized resources

b.technology makes it more costly than market production

c.tax avoidance is desirable

d.less control over the final product is desirable

e.the opportunity cost of household production is high

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3. Household production is more likely to occur when

ECONOMICS

Multiple Choice

Household production is more likely to occur when

a.it requires few specialized resources

b.technology makes it more costly than market production

c.tax avoidance is undesirable

d.less control over the final product is desirable

e.the opportunity cost of household production is high

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Despite specialization and comparative advantage, household production still exists because for some households

ECONOMICS

Multiple Choice

Despite specialization and comparative advantage, household production still exists because for some households

a.the opportunity cost of production at home is greater than the cost of purchasing the good in the market

b.production at home is less costly than purchasing the good in the market

c.the value of home production exceeds the sunk cost of home production

d.the value of home production is ignored

e.food and clothing expenditures represent a small portion of their total budget

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2. Household production is more likely to occur when

ECONOMICS

Multiple Choice

Household production is more likely to occur when

a.it requires many specialized resources

b.technology makes it more costly than market production

c.
tax avoidance is undesirable

d.less control over the final product is desirable

e.the opportunity cost of household work is relatively small

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Household production is more likely to occur when

ECONOMICS

Multiple Choice

Household production is more likely to occur when

a.it requires many specialized resources

b.technology makes it more costly than market production

c.tax avoidance is undesirable

d.more control over the final product is desirable

e.all of the above

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Household production increases when there is a stronger desire to avoid taxation

ECONOMICS

Multiple Choice

Household production increases when there is a stronger desire to avoid taxation

a.True

b.False

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Household production still exists because it often requires fewer specialized resources than market production does

ECONOMICS

Multiple Choice

Household production still exists because it often requires fewer specialized resources than market production does

a.True

b.False

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Which of the following is not a not-for-profit institution?

ECONOMICS

Multiple Choice

Which of the following is not a not-for-profit institution?

a.Columbia Broadcasting System (CBS)

b.American Red Cross

c.Salvation Army

d.a public library

e.a typical college or university

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The Salvation Army is an example of a(n)

ECONOMICS

Multiple Choice

The Salvation Army is an example of a(n)

a.military organization

b.not-for-profit organization

c.partnership

d.S-corporation

e.U.S. government agency

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Nonprofit, or not-for-profit, firms

ECONOMICS

Multiple Choice

Nonprofit, or not-for-profit, firms

a.maximize revenue instead of profit

b.minimize cost rather than maximize profit

c.often pursue goals other than profit maximization

d.pursue profit as their main goal despite their name

e.have no incentive to produce efficiently

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Which of the following have their profits taxed twice?

ECONOMICS

Multiple Choice

Which of the following have their profits taxed twice?

a.sole proprietorships

b.partnerships

c.corporations

d.nonprofit institutions

e.S-corporations

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Which category includes the largest number of firms?

ECONOMICS

Multiple Choice

Which category includes the largest number of firms?

a.sole proprietorship

b.partnership

c.corporation

d.S-corporation

e.limited partnerships

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In terms of total sales, the dominant form of business firm in the U.S. economy is the

ECONOMICS

Multiple Choice

In terms of total sales, the dominant form of business firm in the U.S. economy is the

a.corporation

b.sole proprietorship

c.partnership

d.nonprofit organization

e.limited partnership corporation

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Which form of business organization accounts for the largest proportion of business sales in the United States?

ECONOMICS

Multiple Choice

Which form of business organization accounts for the largest proportion of business sales in the United States?

a.sole proprietorship

b.partnership

c.corporation

d.nonprofit organization

e.conglomerate

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A realized capital gain is

ECONOMICS

Multiple Choice

A realized capital gain is

a.the difference between the price of a share of stock and what the investor paid for it (i.e., the broker's fee)

b.the difference between the original value of a piece of equipment and its depreciated value

c.an increase in the net worth of a sole proprietorship or partnership

d.an increase in the market value of a share of stock held by an individual

e.the difference between the selling price and the purchase price of a share of stock

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Which of the following is a disadvantage of the corporation compared to the sole proprietorship?

ECONOMICS

Multiple Choice

Which of the following is a disadvantage of the corporation compared to the sole proprietorship?

a.limited liability

b.difficulty raising start-up money

c.lack of profitability

d.corporate income is taxed twice

e.corporations are more vulnerable in the case of the death of an owner

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The primary reason why individuals are willing to pay entrepreneurs to organize production is

ECONOMICS

Multiple Choice

The primary reason why individuals are willing to pay entrepreneurs to organize production is

a.that they have to guarantee that the entrepreneur will make a profit

b.they avoid taxation when activities are organized by someone else

c.that it is better for businesses to pay taxes than individuals

d.that it reduces transaction costs

e.that entrepreneurs are more vulnerable in the case of the owner

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You own stock worth an estimated $1 million in the LPL corporation

ECONOMICS

Multiple Choice

You own stock worth an estimated $1 million in the LPL corporation. In addition, you have personal assets worth another $2 million. LPL becomes insolvent, with debts exceeding assets by $15 million. Your personal wealth will decline by

a.$0

b.$1 million

c.$1.5 million

d.$3 million

e.your proportion of the total outstanding stock shares times $15 million

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The corporate form of business organization

ECONOMICS

Multiple Choice

The corporate form of business organization

a.is chosen by more firms than any other form of organization in the United States

b.gives firm owners limited liability

c.generates less than half of the output in the U.S. economy

d.combines the limited liability of the partnership with the personal control of the sole proprietorship

e.is the least complex form of business organization

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Stockholders share in the profits of a corporation

ECONOMICS

Multiple Choice

Stockholders share in the profits of a corporation

a.in proportion to their years of stock ownership

b.in proportion to their ownership of stock

c.equally regardless of number of shares owned

d.only if they participate in firm management decisions

e.only if they attend stockholders' meetings

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Often trade will not occur because

ECONOMICS

Multiple Choice

Often trade will not occur because

a.transaction costs are too high

b.neither party has an opportunity cost

c.the benefits to one party just equal the losses to the other party

d.no one expects to gain from the trade

e.the profits of the firm are excessive

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Owners of corporations are referred to most frequently as

ECONOMICS

Multiple Choice

Owners of corporations are referred to most frequently as

a.entrepreneurs

b.lien holders

c.limited partners

d.managers

e.stockholders

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Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales?

ECONOMICS

Multiple Choice

Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales?

a.partnerships, sole proprietorships, corporations

b.sole proprietorships, partnerships, corporations

c.sole proprietorships, corporations, partnerships

d.corporations, partnerships, sole proprietorships

e.partnerships, corporations, sole proprietorships

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Which form of business organization is the least common in the United States?

ECONOMICS

Multiple Choice

Which form of business organization is the least common in the United States?

a.sole proprietorship

b.partnership

c.corporation

d.nonprofit organization

e.conglomerate

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Suppose you form a legal partnership with your best friend, and she purchases consulting services calling for a $100,000 fee

ECONOMICS

Multiple Choice

Suppose you form a legal partnership with your best friend, and she purchases consulting services calling for a $100,000 fee. Your business is broke, and you never wanted the consultants to work for you -- only your partner did. For how much of this debt are you legally liable?

a.none of it

b.all of the $100,000

c.the proportion reflected by the proportion of the business owned

d.only an amount equal to the assets of the business

e.$50,000

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Messitt and McNulty spend $50,000 each to form a law partnership

ECONOMICS

Multiple Choice

Messitt and McNulty spend $50,000 each to form a law partnership. On the first day someone trips over a potted plant in their lobby and sues them for $400,000. Which of the following is true?

a.If a $400,000 judgment is against the partnership, then each partner will have to pay $200,000.

b.If a $400,000 judgment is against the partnership and if McNulty cannot afford to pay any of it, then Messitt is liable for $400,000.

c.Messitt's liability is limited to $300,000 because she owns three quarters of the firm.

d.Each individual partner cannot be sued for more than $200,000.

e.Only McNulty is personally responsible for the damages because he was the one who put the potted plant in the office.

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All of the following are advantages of partnerships except one

ECONOMICS

Multiple Choice

All of the following are advantages of partnerships except one. Which is the exception?

a.they are relatively easy to start

b.their profits are taxed once as personal income

c.their liability is limited by each partner's share of the business

d.a greater opportunity for specialization by the owners

e.a continuation of the firm if one partner dies

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Which of the following is most likely to be a partnership?

ECONOMICS

Multiple Choice

Which of the following is most likely to be a partnership?

a.Uncle Mort's Red Wrigglers

b.the accounting firm of Hope and Williams

c.General Motors

d.the Boston Symphony Orchestra

e.the U.S. Post Office

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In terms of the numbers of firms in the U.S. economy, the most common type of firm is the

ECONOMICS

Multiple Choice

In terms of the numbers of firms in the U.S. economy, the most common type of firm is the

a.corporation

b.partnership

c.sole proprietorship

d.nonprofit organization

e.limited partnership corporation

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Which of the following is true about sole proprietorship in the United States?

ECONOMICS

Multiple Choice

Which of the following is true about sole proprietorship in the United States?

a.It is the most common form of business organization.

b.It is responsible for a large portion of total production of goods and services.

c.It offers the owner the least personal liability of any form of business organization.

d.There is no opportunity cost to operating the business.

e.Only one individual can work in such a firm.

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Which form of business organization is the most common in the United States?

ECONOMICS

Multiple Choice

Which form of business organization is the most common in the United States?

a.sole proprietorship

b.partnership

c.corporation

d.nonprofit organization

e.S-corporation

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Suppose you own a proprietorship that is in serious financial difficulty

ECONOMICS

Multiple Choice

Suppose you own a proprietorship that is in serious financial difficulty. The assets of the company are $100,000, but liabilities are $175,000. You also have, however, stock in General Motors worth $200,000. If you file bankruptcy, what amount of personal assets do you stand to lose?

a.$100,000

b.$75,000

c.$200,000

d.$275,000

e.$375,000

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Brian is the sole proprietor owner of Long Voyage Software, which generates maps for wilderness trips

ECONOMICS

Multiple Choice

Brian is the sole proprietor owner of Long Voyage Software, which generates maps for wilderness trips. He started the business with an initial investment of $80,000. A faulty map caused one customer to get hopelessly lost. After her rescue and recuperation, she sued Long Voyage for $5,000,000. Which of the following is true?

a.The customer can be awarded only $80,000--what the firm has available to pay.

b.The customer can be awarded $5,000,000 but can get only $80,000.

c.The customer can be awarded $5,000,000, but Brian personally won't have to pay more than $80,000.

d.If $5,000,000 is awarded, Brian will have to pay none of it.

e.If $5,000,000 is awarded, Brian is personally responsible for paying all of it.

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One disadvantage of a sole proprietorship as a form of business organization is that

ECONOMICS

Multiple Choice

One disadvantage of a sole proprietorship as a form of business organization is that

a.sole proprietorships cannot lower the transaction costs associated with contracting with resource owners

b.sole proprietorships are less efficient than corporations, because they are less specialized in production

c.owners of sole proprietorships can lose all their personal assets if the business is sued or fails

d.owners of sole proprietorships generally find it difficult to negotiate separation agreements with the other partners in the firm

e.owners of sole proprietorships generally have very little control over how they operate their businesses

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Which of the following is an advantage of a sole proprietorship?

ECONOMICS

Multiple Choice

Which of the following is an advantage of a sole proprietorship?

a.the ability to pool resources

b.limited liability

c.double tax exemption of the firm's earnings

d.ease of organization

e.ease of raising funds

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Which of the following is a major advantage of the sole proprietorship?

ECONOMICS

Multiple Choice

Which of the following is a major advantage of the sole proprietorship?

a.separation of ownership and control

b.limited liability for business debt

c.transferability of ownership and firm continuity over time

d.ease of start-up

e.ease of obtaining financing

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A major disadvantage of the corporate form of business is limited liability

ECONOMICS

Multiple Choice

A major disadvantage of the corporate form of business is limited liability

a.True

b.False

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The least common form of business organization in the United States is the partnership

ECONOMICS

Multiple Choice

The least common form of business organization in the United States is the partnership

a.True

b.False

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The most common form of business organization in the United States is the sole proprietorship

ECONOMICS

Multiple Choice

The most common form of business organization in the United States is the sole proprietorship

a.True

b.False

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A disadvantage of the corporate form of business organization is that corporate income is taxed twice

ECONOMICS

Multiple Choice

A disadvantage of the corporate form of business organization is that corporate income is taxed twice

a.True

b.False

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A major advantage of the corporate form of business organization is the limited personal liability of the owners

ECONOMICS

Multiple Choice

A major advantage of the corporate form of business organization is the limited personal liability of the owners

a.True

b.False

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The partnership is the least common form of business organization in the United States

ECONOMICS

Multiple Choice

The partnership is the least common form of business organization in the United States

a.True

b.False

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A large number of businesses are organized as sole proprietorships because it is easy for them to acquire large sums of financing

ECONOMICS

Multiple Choice

A large number of businesses are organized as sole proprietorships because it is easy for them to acquire large sums of financing

a.True

b.False

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Sole proprietorships produce more goods and services than does any other form of business organization

ECONOMICS

Multiple Choice

Sole proprietorships produce more goods and services than does any other form of business organization

a.True

b.False

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2. Which of the following did not occur during the Industrial Revolution?

ECONOMICS

Multiple Choice

Which of the following did not occur during the Industrial Revolution?

a.Production became more reliant on highly specialized equipment.

b.A more efficient division of labor was promoted.

c.Workers bore much of the costs of production.

d.The transaction costs of contracting with individual resource owners were reduced.

e.Technological development increased the productivity of most workers.

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Which of the following did not occur during the Industrial Revolution?

ECONOMICS

Multiple Choice

Which of the following did not occur during the Industrial Revolution?

a.worker productivity increased

b.factories became larger

c.direct supervision of labor decreased

d.division of labor increased

e.fewer stages of production were organized in the household

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A cottage industry is one that

ECONOMICS

Multiple Choice

A cottage industry is one that

a.produces rural housing

b.takes advantage of the division of labor

c.uses highly specialized resources in a complex production process

d.produces cottage cheese

e.carries out production in workers' homes

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