Question 1

The government sometimes provides public goods because

Accepted Answer

A) private markets would not produce any of the goods. 
B) private markets would not produce the efficient quantity of the goods. 
C) private markets would charge too high a price for the goods. 
D) the government produces public goods more efficiently than private markets can. 
A) private markets would not produce any of the goods. 
B) private markets would not produce the efficient quantity of the goods. 
C) private markets would charge too high a price for the goods. 
D) the government produces public goods more efficiently than private markets can.

Question 2

Sam lives next to The Party Pub and its outdoor "beer garden" that features live music. An economics major, Sam considers this a positive externality. Dave, another economics student, lives next to The Party Pub too, but he considers the music a negative externality. Which student, if either, is correct? Why?

Accepted Answer

Both students are correct if they are ac

Question 3

If it is impossible or very costly to exclude nonpaying customers from receiving a good, the good is considered to be

Accepted Answer

A) freeware. 
B) nonexcludable. 
C) a common good. 
D) a receiving good. 
A) freeware. 
B) nonexcludable. 
C) a common good. 
D) a receiving good.

Question 4

Which of the following is a source of information that helps consumers acquire information about the quality of a good or service?

Accepted Answer

A) brand names 
B) franchising 
C) consumer ratings magazines 
D) all of the above 
A) brand names 
B) franchising 
C) consumer ratings magazines 
D) all of the above

Question 5

A hilly, public golf course is often used by sledders in the winter. One of the sledders was quoted as saying, "This is public property, so we have just as much a right to be on these hills as anyone else. Besides, when it snows, golfers can't use the course anyway. Sledding doesn't harm anything." Is he correct? Why or why not?

Accepted Answer

Sledding can inflict external costs to g

Question 6

The maintenance of a framework of security and order through the establishment and enforcement of rules under which people can interact peacefully with one another and be secure in their person and property is known as the

Accepted Answer

A) productive function of government. 
B) protective function of government. 
C) transfer function of government. 
D) illegitimate function of government. 
A) productive function of government. 
B) protective function of government. 
C) transfer function of government. 
D) illegitimate function of government.

Question 7

A free-rider problem exists when a good that has the following characteristic?

Accepted Answer

A) Rivalry in consumption. 
B) Elastic demand. 
C) Inelastic demand. 
D) Nonexcludable. 
A) Rivalry in consumption. 
B) Elastic demand. 
C) Inelastic demand. 
D) Nonexcludable.

Question 8

"Government failure" is present when

Accepted Answer

A) constitutional restrictions block government action that is favored by the majority of voters. 
B) political decision-makers try to serve the general public rather than their personal interest. 
C) the structure of incentives encourages political decision-makers to undertake actions that conflict with the efficient allocation of resources. 
D) the political decision-makers are motivated by something other than good intentions; if they have good intentions, political action will allocate resources efficiently. 
A) constitutional restrictions block government action that is favored by the majority of voters. 
B) political decision-makers try to serve the general public rather than their personal interest. 
C) the structure of incentives encourages political decision-makers to undertake actions that conflict with the efficient allocation of resources. 
D) the political decision-makers are motivated by something other than good intentions; if they have good intentions, political action will allocate resources efficiently.

Question 9

Markets fail to allocate resources efficiently when

Accepted Answer

A) prices fluctuate. 
B) people who have property rights abuse their privileges. 
C) property rights are poorly enforced or not well established. 
D) the government refuses to intervene in private markets. 
A) prices fluctuate. 
B) people who have property rights abuse their privileges. 
C) property rights are poorly enforced or not well established. 
D) the government refuses to intervene in private markets.

Question 10

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

Accepted Answer

A) a government-run health care system 
B) the Walt Disney World amusement park 
C) national defense 
D) long-distance telephone service 
A) a government-run health care system 
B) the Walt Disney World amusement park 
C) national defense 
D) long-distance telephone service

Question 11

Which of the following is a true statement regarding why the government produces public goods?

Accepted Answer

A) Public goods are valued highly by some but not by the majority. 
B) Because of the electoral system, the public sector tends towards producing those goods that help politicians get elected. 
C) Some goods should be produced whether they are economically efficient or not. 
D) Because it is difficult to exclude those who do not pay for public goods. 
A) Public goods are valued highly by some but not by the majority. 
B) Because of the electoral system, the public sector tends towards producing those goods that help politicians get elected. 
C) Some goods should be produced whether they are economically efficient or not. 
D) Because it is difficult to exclude those who do not pay for public goods.

Question 12

Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?

Accepted Answer

A) The efficient price would be higher than $49. 
B) The efficient price would be lower than $49. 
C) The efficient price would also be $49. 
D) The efficient output would be less than 800 units. 
A) The efficient price would be higher than $49. 
B) The efficient price would be lower than $49. 
C) The efficient price would also be $49. 
D) The efficient output would be less than 800 units.

Question 13

There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the

Accepted Answer

A) protection of the rights of individuals to their person and property and the provision of goods that cannot easily be provided through markets. 
B) redistribution of income from some individuals to others and the waging of war to expand the nation's territory. 
C) production of postal services and cable television. 
D) taxation of goods that are generally considered immoral or bad and the regulation of large corporations. 
A) protection of the rights of individuals to their person and property and the provision of goods that cannot easily be provided through markets. 
B) redistribution of income from some individuals to others and the waging of war to expand the nation's territory. 
C) production of postal services and cable television. 
D) taxation of goods that are generally considered immoral or bad and the regulation of large corporations.

Question 14

Which of the following is most consistent with the idea that if it's worth doing, it's worth doing imperfectly?

Accepted Answer

A) When Mia cleaned her apartment, she didn't clean under the refrigerator. 
B) Mason is so disorganized that he spends 15 minutes every day trying to find his glasses. 
C) The senator stated, "No price is too high to save a life!" 
D) Ford's new policy is to make every car completely safe. 
A) When Mia cleaned her apartment, she didn't clean under the refrigerator. 
B) Mason is so disorganized that he spends 15 minutes every day trying to find his glasses. 
C) The senator stated, "No price is too high to save a life!" 
D) Ford's new policy is to make every car completely safe.

Question 15

Externalities cause the market mechanism to allocate goods and resources inefficiently because

Accepted Answer

A) nonconsenting third parties are generally not hurt by externalities. 
B) producers and consumers ignore signals given by the competitive market. 
C) prices are always higher than they should be. 
D) competitive markets fail to give producers and consumers correct price signals. 
A) nonconsenting third parties are generally not hurt by externalities. 
B) producers and consumers ignore signals given by the competitive market. 
C) prices are always higher than they should be. 
D) competitive markets fail to give producers and consumers correct price signals.

Question 16

From the standpoint of economic efficiency, markets tend to provide

Accepted Answer

A) less of a public good than would be efficient. 
B) more of a public good than would be efficient. 
C) exactly the amount of a public good that is efficient. 
D) none of the above. 
A) less of a public good than would be efficient. 
B) more of a public good than would be efficient. 
C) exactly the amount of a public good that is efficient. 
D) none of the above.

Question 17

Relative to a competitive situation, if a market lacks competition, economic theory suggests that

Accepted Answer

A) output will be lower and price higher. 
B) output will be higher and price lower. 
C) both output and price will be higher. 
D) both output and price will be lower. 
A) output will be lower and price higher. 
B) output will be higher and price lower. 
C) both output and price will be higher. 
D) both output and price will be lower.

Question 18

If education creates external benefits,

Accepted Answer

A) actual market outcomes provide less than the efficient quantity of education. 
B) actual market outcomes provide more than the efficient quantity of education. 
C) actual market outcomes provide a higher price than the efficient price of education. 
D) the government should impose a depletion tax. 
A) actual market outcomes provide less than the efficient quantity of education. 
B) actual market outcomes provide more than the efficient quantity of education. 
C) actual market outcomes provide a higher price than the efficient price of education. 
D) the government should impose a depletion tax.

Question 19

What are the two distinguishing characteristics of a public good?

Accepted Answer

A) nonrivalry in consumption and nonexcludability 
B) indivisibility in production and excludability of nonpaying customers 
C) provision by government and funding through taxation 
D) mass production and comparative advantage 
A) nonrivalry in consumption and nonexcludability 
B) indivisibility in production and excludability of nonpaying customers 
C) provision by government and funding through taxation 
D) mass production and comparative advantage

Question 20

An item purchased often by the same buyer is known as a

Accepted Answer

A) frequent transaction good. 
B) repeat-purchase item. 
C) free rider good. 
D) public good. 
A) frequent transaction good. 
B) repeat-purchase item. 
C) free rider good. 
D) public good.

The government sometimes provides public goods because

If it is impossible or very costly to exclude nonpaying customers from receiving a good, the good is considered to be

Which of the following is a source of information that helps consumers acquire information about the quality of a good or service?

The maintenance of a framework of security and order through the establishment and enforcement of rules under which people can interact peacefully with one another and be secure in their person and property is known as the

A free-rider problem exists when a good that has the following characteristic?

"Government failure" is present when

Markets fail to allocate resources efficiently when

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

Which of the following is a true statement regarding why the government produces public goods?

Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?

There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the

Which of the following is most consistent with the idea that if it's worth doing, it's worth doing imperfectly?

Externalities cause the market mechanism to allocate goods and resources inefficiently because

From the standpoint of economic efficiency, markets tend to provide

Relative to a competitive situation, if a market lacks competition, economic theory suggests that

If education creates external benefits,

What are the two distinguishing characteristics of a public good?

An item purchased often by the same buyer is known as a

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 5: Difficult Cases for the Market, and the Role of Government

The government sometimes provides public goods because

If it is impossible or very costly to exclude nonpaying customers from receiving a good, the good is considered to be

Which of the following is a source of information that helps consumers acquire information about the quality of a good or service?

The maintenance of a framework of security and order through the establishment and enforcement of rules under which people can interact peacefully with one another and be secure in their person and property is known as the

A free-rider problem exists when a good that has the following characteristic?

"Government failure" is present when

Markets fail to allocate resources efficiently when

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

Which of the following is a true statement regarding why the government produces public goods?

Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?

There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the

Which of the following is most consistent with the idea that if it's worth doing, it's worth doing imperfectly?

Externalities cause the market mechanism to allocate goods and resources inefficiently because

From the standpoint of economic efficiency, markets tend to provide

Relative to a competitive situation, if a market lacks competition, economic theory suggests that

If education creates external benefits,

What are the two distinguishing characteristics of a public good?

An item purchased often by the same buyer is known as a

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters