Question 1

A good or service that is characterized by nonrivalry in consumption and nonexcludability is called a(n)

Accepted Answer

A) free good. 
B) economic good. 
C) public good. 
D) private good. 
E) noneconomic good. 
A) free good. 
B) economic good. 
C) public good. 
D) private good. 
E) noneconomic good. C

Question 2

Explain how research and development may yield external effects.

Accepted Answer

The firm that engages in the research receives only part of the benefits from the product or services that the research enables. Other firms or individuals might be able to take advantage of the research without compensating the firm that performed the research.

Question 3

As with public goods, it is important that a cost-benefit analysis be used when

Accepted Answer

A) considering externalities. 
B) defining private property rights. 
C) considering nonexcludable goods. 
D) considering luxury goods. 
E) considering nonrivalrous goods. 
A) considering externalities. 
B) defining private property rights. 
C) considering nonexcludable goods. 
D) considering luxury goods. 
E) considering nonrivalrous goods. A

Question 4

The median voter is the one who

Accepted Answer

A) has a median intellect. 
B) never votes. 
C) cannot make up his or her mind. 
D) always sits on the fence on major issues. 
E) stands in the middle of political preferences. 
A) has a median intellect. 
B) never votes. 
C) cannot make up his or her mind. 
D) always sits on the fence on major issues. 
E) stands in the middle of political preferences.

Question 5

Under a command and control restriction, firms that polluted more than a certain amount could

Accepted Answer

A) free-ride. 
B) be boycotted by consumers. 
C) seek a private remedy. 
D) be arrested. 
E) be fined. 
A) free-ride. 
B) be boycotted by consumers. 
C) seek a private remedy. 
D) be arrested. 
E) be fined.

Question 6

Marginal external benefit equals

Accepted Answer

A) marginal social benefit plus marginal private benefit. 
B) marginal social benefit minus marginal private benefit. 
C) marginal social benefit times marginal private benefit. 
D) total social benefit minus total private benefit. 
E) total social benefit plus total private benefit. 
A) marginal social benefit plus marginal private benefit. 
B) marginal social benefit minus marginal private benefit. 
C) marginal social benefit times marginal private benefit. 
D) total social benefit minus total private benefit. 
E) total social benefit plus total private benefit.

Question 7

A command and control restriction could

Accepted Answer

A) raise prices but not output. 
B) make it illegal to pollute over a certain amount. 
C) lower transactions costs for a private remedy. 
D) force two parties to bargain with each other to resolve an externality. 
E) create a private remedy for a pollution problem. 
A) raise prices but not output. 
B) make it illegal to pollute over a certain amount. 
C) lower transactions costs for a private remedy. 
D) force two parties to bargain with each other to resolve an externality. 
E) create a private remedy for a pollution problem.

Question 8

Marginal private cost refers to the marginal cost of production as viewed by society as a whole.

Accepted Answer

A) True 
 B)False

Question 9

Real-world negotiations are time-consuming in many cases, and may require skilled and expensive lawyers.

Accepted Answer

A) True 
 B)False

Question 10

It is hoped that productive efficiency will result from giving citizens vouchers rather than providing services through government agencies.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is least likely to involve a positive externality?

Accepted Answer

A) A can of soda 
B) Research 
C) A university 
D) An interstate highway 
E) A hospital 
A) A can of soda 
B) Research 
C) A university 
D) An interstate highway 
E) A hospital

Question 12

Once a station broadcasts an unscrambled radio program over the airwaves,

Accepted Answer

A) everyone is willing to pay a market price for it. 
B) only one listener can tune in at a time. 
C) the station can collect revenues easily from listeners. 
D) anyone can tune in to it. 
E) the program becomes a private good. 
A) everyone is willing to pay a market price for it. 
B) only one listener can tune in at a time. 
C) the station can collect revenues easily from listeners. 
D) anyone can tune in to it. 
E) the program becomes a private good.

Question 13

The most significant disadvantage of command and control methods in the environmental area is that they

Accepted Answer

A) ignore transactions costs. 
B) do not allow firms to find other, cheaper ways to reduce pollution. 
C) allow firms to seek private remedies. 
D) are not effective. 
E) provide incentives for firm free-riding. 
A) ignore transactions costs. 
B) do not allow firms to find other, cheaper ways to reduce pollution. 
C) allow firms to seek private remedies. 
D) are not effective. 
E) provide incentives for firm free-riding.

Question 14

The assumption of public choice models is that every individual, including individuals in government, acts in his or her own self-interest.

Accepted Answer

A) True 
 B)False

Question 15

Competitive markets generate an efficient level of production when externalities exist.

Accepted Answer

A) True 
 B)False

Question 16

Tradable permits would not work in reducing global warming problems.

Accepted Answer

A) True 
 B)False

Question 17

The government provides all public goods.

Accepted Answer

A) True 
 B)False

Question 18

In reality, it is more difficult to correct externality problems by using command and control than by using taxes.

Accepted Answer

A) True 
 B)False

Question 19

It is easy to measure the benefits of government-provided services.

Accepted Answer

A) True 
 B)False

Question 20

Many people argue that the surest way to reduce world pollution is to

Accepted Answer

A) use global command and control methods. 
B) reduce the resources available to poorer nations. 
C) develop the less-developed economies of the world. 
D) impose global emission taxes. 
E) reduce consumption in nonindustrialized nations. 
A) use global command and control methods. 
B) reduce the resources available to poorer nations. 
C) develop the less-developed economies of the world. 
D) impose global emission taxes. 
E) reduce consumption in nonindustrialized nations.

Exam 15: Public Goods, Externalities, and Government Behavior

A good or service that is characterized by nonrivalry in consumption and nonexcludability is called a(n)

Explain how research and development may yield external effects.

As with public goods, it is important that a cost-benefit analysis be used when

The median voter is the one who

Under a command and control restriction, firms that polluted more than a certain amount could

Marginal external benefit equals

A command and control restriction could

Marginal private cost refers to the marginal cost of production as viewed by society as a whole.

Real-world negotiations are time-consuming in many cases, and may require skilled and expensive lawyers.

It is hoped that productive efficiency will result from giving citizens vouchers rather than providing services through government agencies.

Which of the following is least likely to involve a positive externality?

Once a station broadcasts an unscrambled radio program over the airwaves,

The most significant disadvantage of command and control methods in the environmental area is that they

The assumption of public choice models is that every individual, including individuals in government, acts in his or her own self-interest.

Competitive markets generate an efficient level of production when externalities exist.

Tradable permits would not work in reducing global warming problems.

The government provides all public goods.

In reality, it is more difficult to correct externality problems by using command and control than by using taxes.

It is easy to measure the benefits of government-provided services.

Many people argue that the surest way to reduce world pollution is to

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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