Question 1

Free riders are not a problem in the market for a private good because

Accepted Answer

A)  non-payers can be excluded from consuming the good. 
B)  the good is a rival good. 
C)  the good can be produced only at a positive marginal cost. 
D)  the free rider will not get caught. 
A)  non-payers can be excluded from consuming the good. 
B)  the good is a rival good. 
C)  the good can be produced only at a positive marginal cost. 
D)  the free rider will not get caught.

Question 2

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium output will be

Accepted Answer

A)  1,000 units. 
B)  2,000 units. 
C)  3,000 units. 
D)  4,000 units. 
A)  1,000 units. 
B)  2,000 units. 
C)  3,000 units. 
D)  4,000 units.

Question 3

When government action leads to inefficiency, it is known as

Accepted Answer

A)  government failure. 
B)  government as usual. 
C)  lack of government trust. 
D)  politics. 
A)  government failure. 
B)  government as usual. 
C)  lack of government trust. 
D)  politics.

Question 4

The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to ________.

Accepted Answer

A)  marginal external cost 
B)  marginal external benefit 
C)  external cost 
D)  external benefit 
A)  marginal external cost 
B)  marginal external benefit 
C)  external cost 
D)  external benefit

Question 5

The concept of externalities means that subsidizing education can be justified on the grounds that as a student becomes better educated, the student will

Accepted Answer

A)  earn a higher income. 
B)  enhance the lives of people around the student. 
C)  make contributions to the student's alma mater. 
D)  none of the above 
A)  earn a higher income. 
B)  enhance the lives of people around the student. 
C)  make contributions to the student's alma mater. 
D)  none of the above

Question 6

Cable television is an example of a public good.

Accepted Answer

A) True 
 B)False

Question 7

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

Accepted Answer

A)  the price and marginal private benefit 
B)  the economically efficient output 
C)  the price and the marginal social benefit 
D)  the size of the deadweight loss 
A)  the price and marginal private benefit 
B)  the economically efficient output 
C)  the price and the marginal social benefit 
D)  the size of the deadweight loss

Question 8

Rational ignorance suggests that voters will

Accepted Answer

A)  be ignorant about all issues. 
B)  be ignorant about issues that are of no special interest to them. 
C)  pursue information on all issues before voting. 
D)  avoid voting if they have no information. 
A)  be ignorant about all issues. 
B)  be ignorant about issues that are of no special interest to them. 
C)  pursue information on all issues before voting. 
D)  avoid voting if they have no information.

Question 9

-Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room are a public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. If the marginal cost of a lamp is 13, what is the efficient number of lamps for the roommates to purchase?

Accepted Answer

A)  2 
B)  5 
C)  0 
D)  1 
A)  2 
B)  5 
C)  0 
D)  1

Question 10

If the consumption of a good decreases the quantity available for another person, the good is rival.

Accepted Answer

A) True 
 B)False

Question 11

-The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is

Accepted Answer

A)  $20,000 per year. 
B)  $16,000 per year. 
C)  $12,000 per year. 
D)  $14,000 per year. 
A)  $20,000 per year. 
B)  $16,000 per year. 
C)  $12,000 per year. 
D)  $14,000 per year.

Question 12

What are the two features of a public good?

Accepted Answer

A)  nonrival and excludable 
B)  nonrival and nonexcludable 
C)  rival and excludable 
D)  rival and nonexcludable 
A)  nonrival and excludable 
B)  nonrival and nonexcludable 
C)  rival and excludable 
D)  rival and nonexcludable

Question 13

Which of the following would most likely be a public good?

Accepted Answer

A)  Sirius Satellite Radio is accessed through a subscription 
B)  iTunes sells songs through their website 
C)  a Mariah Carey CD 
D)  Michigan Radio is the state's most listened-to public radio service 
A)  Sirius Satellite Radio is accessed through a subscription 
B)  iTunes sells songs through their website 
C)  a Mariah Carey CD 
D)  Michigan Radio is the state's most listened-to public radio service

Question 14

When individuals make decisions about how much schooling to obtain, they

Accepted Answer

A)  do not take account of the personal benefits that it creates. 
B)  do not take account of the external benefits that it creates. 
C)  overvalue the personal benefits that it creates. 
D)  overvalue the external benefits that it creates. 
A)  do not take account of the personal benefits that it creates. 
B)  do not take account of the external benefits that it creates. 
C)  overvalue the personal benefits that it creates. 
D)  overvalue the external benefits that it creates.

Question 15

The political market place requires all EXCEPT

Accepted Answer

A)  diplomats. 
B)  firms. 
C)  voters. 
D)  politicians. 
A)  diplomats. 
B)  firms. 
C)  voters. 
D)  politicians.

Question 16

The principle of minimum differentiation

Accepted Answer

A)  results in political parties proposing very similar or possibly identical policies. 
B)  refers to the tendency of competitors to make themselves different in order appeal to the maximum number of clients or voters. 
C)  explains why Burger King, Wendy's, and other fast food restaurants tend to locate far away from each other. 
D)  None of the above answers are correct. 
A)  results in political parties proposing very similar or possibly identical policies. 
B)  refers to the tendency of competitors to make themselves different in order appeal to the maximum number of clients or voters. 
C)  explains why Burger King, Wendy's, and other fast food restaurants tend to locate far away from each other. 
D)  None of the above answers are correct.

Question 17

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

Accepted Answer

The statement is False. Extern

Question 18

Which of the following is the BEST example a public good?

Accepted Answer

A)  a parking space 
B)  a car 
C)  a stop sign 
D)  a toll road 
A)  a parking space 
B)  a car 
C)  a stop sign 
D)  a toll road

Question 19

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good

Accepted Answer

A)  is zero. 
B)  equals the marginal social benefit. 
C)  equals the marginal social cost. 
D)  equals the marginal private cost. 
A)  is zero. 
B)  equals the marginal social benefit. 
C)  equals the marginal social cost. 
D)  equals the marginal private cost.

Question 20

-The above figure shows the marginal benefits and marginal costs of a college education. If a voucher for $5,000 is given to the students, then colleges charge tuition of

Accepted Answer

A)  $0. 
B)  $5,000. 
C)  $10,000. 
D)  $15,000. 
A)  $0. 
B)  $5,000. 
C)  $10,000. 
D)  $15,000.

Exam 16: Public Choices and Public Goods

Free riders are not a problem in the market for a private good because

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium output will be

When government action leads to inefficiency, it is known as

The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to ________.

The concept of externalities means that subsidizing education can be justified on the grounds that as a student becomes better educated, the student will

Cable television is an example of a public good.

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

Rational ignorance suggests that voters will

If the consumption of a good decreases the quantity available for another person, the good is rival.

-The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is

What are the two features of a public good?

Which of the following would most likely be a public good?

When individuals make decisions about how much schooling to obtain, they

The political market place requires all EXCEPT

The principle of minimum differentiation

"External benefits lead to overproduction so that more than the efficient quantity is produced." Is the previous statement true or false?

Which of the following is the BEST example a public good?

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good

-The above figure shows the marginal benefits and marginal costs of a college education. If a voucher for $5,000 is given to the students, then colleges charge tuition of

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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