For each of the following, choose True or False

1. Microeconomics is economics on a national and global scale. This is FALSE. Microeconomics is the study of how individuals and businesses make decisions. Macroeconomics, on the other hand, is the study of economics on the global scale.

2. A shareholder cannot lose more money than he or she invests in a business. This is TRUE. Unless a shareholder is also a partner in the business, only their initial investment can be lost.

3. One of the major advantages of a partnership is an unlimited liability. This is FALSE because unlimited liability is a major disadvantage. This is because with unlimited liability, an individuals personal assets are also at risk in addition to their business assets.

4. Increased competition in the marketplace tends to result in lower prices and better products for consumers. This is TRUE. Competition pushes price to equilibrium, where prices are lower and quantities are higher relative to markets with little or no competition.

5. All unemployed Americans are eligible to receive Medicare. This is FALSE because Medicare eligibility is based on age (65+), not income of employment status.

6. When a company has no competitors it is considered a monopoly. This is TRUE. By definition, a monopoly is a market with only one seller.

7. According to the benefit principle, more taxes should be paid by those who have more money. By definition, this is TRUE.

8. A 6% sales tax that all consumers must pay on goods purchased is an example of a graduated tax. This is FALSE. A graduated tax is one that increases as the taxable amount increases. This example refers to a flat tax.

9. A depression becomes a recession when the economy continues in a downward spiral. This is FALSE because the opposite is true. A recession can turn into a recession, but not vice versa.

10. Inflation reduces the purchasing power of consumers. This is TRUE because with higher prices, you can't buy as much with a fixed amount of income.