Question 1

Rents represent earnings that

Accepted Answer

A) exceed marginal cost 
B) are less than marginal revenue product 
C) are less than what producers would require to supply products 
D) exceed opportunity revenue 
E) exceed opportunity cost 
A) exceed marginal cost 
B) are less than marginal revenue product 
C) are less than what producers would require to supply products 
D) exceed opportunity revenue 
E) exceed opportunity cost E

Question 2

A tax on productive activity tends to

Accepted Answer

A) increase formal market activity because it decreases prices 
B) decrease formal market activity because it increases work incentives 
C) decrease formal market activity because it lowers the return on such activity 
D) decrease activity in the underground economy because people are afraid of being connected with tax fraud 
E) increase activity in the underground economy because people are afraid of being connected with tax fraud 
A) increase formal market activity because it decreases prices 
B) decrease formal market activity because it increases work incentives 
C) decrease formal market activity because it lowers the return on such activity 
D) decrease activity in the underground economy because people are afraid of being connected with tax fraud 
E) increase activity in the underground economy because people are afraid of being connected with tax fraud C

Question 3

Filing a fraudulent income tax return that understates income or overstates deductions is known as

Accepted Answer

A) tax evasion 
B) logrolling 
C) tax avoidance 
D) rent seeking 
E) profiteering 
A) tax evasion 
B) logrolling 
C) tax avoidance 
D) rent seeking 
E) profiteering A

Question 4

If a citizen decides he has had enough of big government and launches a personal campaign to expose big spenders in Congress,

Accepted Answer

A) he is likely to have his taxes reduced dramatically 
B) his taxes are not likely to fall very much 
C) he will be thrown in jail 
D) he is likely to get elected by other voters 
E) he will get the support of many special-interest groups 
A) he is likely to have his taxes reduced dramatically 
B) his taxes are not likely to fall very much 
C) he will be thrown in jail 
D) he is likely to get elected by other voters 
E) he will get the support of many special-interest groups

Question 5

Competing-interest legislation is characterized by

Accepted Answer

A) concentrated costs and concentrated benefits 
B) concentrated benefits and widespread costs 
C) widespread benefits and widespread costs 
D) widespread benefits and concentrated costs 
E) zero costs 
A) concentrated costs and concentrated benefits 
B) concentrated benefits and widespread costs 
C) widespread benefits and widespread costs 
D) widespread benefits and concentrated costs 
E) zero costs

Question 6

Rent seeking

Accepted Answer

A) is the attempt to find apartments in a rent-controlled city 
B) only makes sense in a monopolistically competitive industry 
C) is a zero-sum game because the public's loss is the rent seeker's gain 
D) is the expenditure of resources to obtain favorable treatment from government 
E) occurs because of cyclical majority 
A) is the attempt to find apartments in a rent-controlled city 
B) only makes sense in a monopolistically competitive industry 
C) is a zero-sum game because the public's loss is the rent seeker's gain 
D) is the expenditure of resources to obtain favorable treatment from government 
E) occurs because of cyclical majority

Question 7

Activities that go unreported to the government in order to avoid paying taxes or because the activity is illegal are known collectively as the

Accepted Answer

A) non-profit sector 
B) federal sector 
C) illegal economy 
D) special-interest category 
E) underground economy 
A) non-profit sector 
B) federal sector 
C) illegal economy 
D) special-interest category 
E) underground economy

Question 8

If the quality or quantity of a particular public service is very difficult to monitor, government is more likely to

Accepted Answer

A) produce the service itself 
B) contract with private firms to supply the service 
C) take over private corporations to produce the service 
D) refuse to provide the service 
E) raise the price to consumers of the service 
A) produce the service itself 
B) contract with private firms to supply the service 
C) take over private corporations to produce the service 
D) refuse to provide the service 
E) raise the price to consumers of the service

Question 9

Relative to private firms, we should expect public bureaus to be

Accepted Answer

A) smaller 
B) more cost-efficient 
C) less responsive to consumer demand 
D) more concerned with adopting new technologies 
E) more in tune with consumer desires 
A) smaller 
B) more cost-efficient 
C) less responsive to consumer demand 
D) more concerned with adopting new technologies 
E) more in tune with consumer desires

Question 10

Officials have estimated the size of the U.S.underground economy to be approximately

Accepted Answer

A) 6 to 8 percent of GDP 
B) about $5 trillion 
C) 50 percent of GDP 
D) $60-80 billion 
E) about $1 trillion 
A) 6 to 8 percent of GDP 
B) about $5 trillion 
C) 50 percent of GDP 
D) $60-80 billion 
E) about $1 trillion

Question 11

Exhibit 16-5   Exhibit 16-5 represents the market for leaf tobacco.In the absence of any government intervention, how much consumer surplus would there be?

Accepted Answer

A) $500 
B) $1, 000 
C) $1, 500 
D) $2, 000 
E) $2, 500 
A) $500 
B) $1, 000 
C) $1, 500 
D) $2, 000 
E) $2, 500

Question 12

If a market is initially operating competitively and then the government imposes a price floor above the equilibrium price,

Accepted Answer

A) there will be more resources will be devoted to the production of this product 
B) quantity demanded will rise 
C) producer surplus will fall in the short run 
D) imposition of the floor is probably a positive-sum game 
E) consumer surplus will fall 
A) there will be more resources will be devoted to the production of this product 
B) quantity demanded will rise 
C) producer surplus will fall in the short run 
D) imposition of the floor is probably a positive-sum game 
E) consumer surplus will fall

Question 13

A payment over and above that necessary to call forth a resource is called

Accepted Answer

A) profit 
B) rent 
C) taxes 
D) salary 
E) welfare 
A) profit 
B) rent 
C) taxes 
D) salary 
E) welfare

Question 14

The hiring of a brilliant tax lawyer by a firm that wants to find tax loopholes

Accepted Answer

A) encourages economic efficiency by moving resources away from the government into the private sector 
B) encourages economic efficiency only if the firm's profit increases 
C) is an example of economic inefficiency caused by devoting resources to wealth redistribution rather than to production 
D) involves the firm in a zero-sum game against other firms 
E) involves the firm in a zero-sum game against the government 
A) encourages economic efficiency by moving resources away from the government into the private sector 
B) encourages economic efficiency only if the firm's profit increases 
C) is an example of economic inefficiency caused by devoting resources to wealth redistribution rather than to production 
D) involves the firm in a zero-sum game against other firms 
E) involves the firm in a zero-sum game against the government

Question 15

The purpose of a political action committee is

Accepted Answer

A) to help elect officials sympathetic to its members' special interests 
B) to help elect officials who will enact fair legislation 
C) to raise money for public interest groups 
D) to exchange trade secrets 
E) to allow special-interest groups to be elected 
A) to help elect officials sympathetic to its members' special interests 
B) to help elect officials who will enact fair legislation 
C) to raise money for public interest groups 
D) to exchange trade secrets 
E) to allow special-interest groups to be elected

Question 16

An example of competing-interest legislation is

Accepted Answer

A) a quota that limits imports of steel to the United States 
B) a subsidy to cigarette producers 
C) tax breaks for auto manufacturers 
D) a new bridge in Arizona funded by general tax revenues 
E) public education subsidies 
A) a quota that limits imports of steel to the United States 
B) a subsidy to cigarette producers 
C) tax breaks for auto manufacturers 
D) a new bridge in Arizona funded by general tax revenues 
E) public education subsidies

Question 17

Exhibit 16-5   Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.How much consumer surplus would be gained in the face of this price support?

Accepted Answer

A) $900 
B) $975 
C) $1050 
D) $1125 
E) $1200 
A) $900 
B) $975 
C) $1050 
D) $1125 
E) $1200

Question 18

Exhibit 16-5   Exhibit 16-5 represents the market for leaf tobacco.In the absence of any government intervention what would the quantity of leaf tobacco bought and sold be?

Accepted Answer

A) 3, 000 pounds 
B) 4, 000 pounds 
C) 5, 000 pounds 
D) 6, 000 pounds 
E) 7, 000 pounds 
A) 3, 000 pounds 
B) 4, 000 pounds 
C) 5, 000 pounds 
D) 6, 000 pounds 
E) 7, 000 pounds

Question 19

Rationality implies that in order to get what they want, people will spend the most time and effort

Accepted Answer

A) making private market decisions 
B) getting politically involved 
C) investigating political candidates' platforms 
D) debating social issues 
E) writing to Congress 
A) making private market decisions 
B) getting politically involved 
C) investigating political candidates' platforms 
D) debating social issues 
E) writing to Congress

Question 20

Exhibit 16-1   Consider Exhibit 16-1.Triangle abc represents the consumer surplus inthe face of the price support.

Accepted Answer

A) True 
 B)False

Exam 16: Public Goods and Public Choice

Rents represent earnings that

A tax on productive activity tends to

Filing a fraudulent income tax return that understates income or overstates deductions is known as

If a citizen decides he has had enough of big government and launches a personal campaign to expose big spenders in Congress,

Competing-interest legislation is characterized by

Rent seeking

Activities that go unreported to the government in order to avoid paying taxes or because the activity is illegal are known collectively as the

If the quality or quantity of a particular public service is very difficult to monitor, government is more likely to

Relative to private firms, we should expect public bureaus to be

Officials have estimated the size of the U.S.underground economy to be approximately

Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.In the absence of any government intervention, how much consumer surplus would there be?

If a market is initially operating competitively and then the government imposes a price floor above the equilibrium price,

A payment over and above that necessary to call forth a resource is called

The hiring of a brilliant tax lawyer by a firm that wants to find tax loopholes

The purpose of a political action committee is

An example of competing-interest legislation is

Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.How much consumer surplus would be gained in the face of this price support?

Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.In the absence of any government intervention what would the quantity of leaf tobacco bought and sold be?

Rationality implies that in order to get what they want, people will spend the most time and effort

Exhibit 16-1 Consider Exhibit 16-1.Triangle abc represents the consumer surplus inthe face of the price support.

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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