Question 1

The political functions of government differ from the economic functions of government in that

Accepted Answer

A) the political functions relate to income distribution while the economic functions relate to the way exchange is carried out. 
B) the political functions are performed at the federal government while the economic functions are at the state and local government levels. 
C) the political functions involve elections and the court systems while the economic functions involve taxation and transfers. 
D) the President deals with the economic functions while Congress deals with the political functions. 
A) the political functions relate to income distribution while the economic functions relate to the way exchange is carried out. 
B) the political functions are performed at the federal government while the economic functions are at the state and local government levels. 
C) the political functions involve elections and the court systems while the economic functions involve taxation and transfers. 
D) the President deals with the economic functions while Congress deals with the political functions.

Question 2

What happens in public schools when government funds subsidize education?

Accepted Answer

A) There is a shortage of schools. 
B) The quality of education rises. 
C) The cost of providing the education is less than what the student pays. 
D) The cost of providing the education is more than what the students pays. 
A) There is a shortage of schools. 
B) The quality of education rises. 
C) The cost of providing the education is less than what the student pays. 
D) The cost of providing the education is more than what the students pays.

Question 3

Which one of the following is NOT a characteristic of public goods?

Accepted Answer

A) They are indivisible. 
B) It is difficult to charge people on the basis of how much they use. 
C) Public goods can be used by increasing numbers of people at no additional cost. 
D) Public goods are subject to the principle of rival consumption. 
A) They are indivisible. 
B) It is difficult to charge people on the basis of how much they use. 
C) Public goods can be used by increasing numbers of people at no additional cost. 
D) Public goods are subject to the principle of rival consumption.

Question 4

Recipients of Medicare tend to demand a greater quantity of low-value, high-cost services because

Accepted Answer

A) the services are readily available. 
B) recipients are coerced into demanding such services. 
C) the government mandates that they demand such services. 
D) the services are heavily subsidized. 
A) the services are readily available. 
B) recipients are coerced into demanding such services. 
C) the government mandates that they demand such services. 
D) the services are heavily subsidized.

Question 5

What are the key characteristics of a public good?

Accepted Answer

A public good is not subject to the prin

Question 6

A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account.
-Refer to the above figures. Externalities exist in both panels. After correcting for the externalities the prices should be

Accepted Answer

A)    and   . 
B)    and   . 
C)    and   . 
D)    and   . 
A)    and   . 
B)    and   . 
C)    and   . 
D)    and   .

Question 7

A fundamental reason that governments provide public goods is

Accepted Answer

A) the free-rider problem. 
B) negative externalities are part of the production process. 
C) public goods are merit goods. 
D) they are perfectly divisible. 
A) the free-rider problem. 
B) negative externalities are part of the production process. 
C) public goods are merit goods. 
D) they are perfectly divisible.

Question 8

Establishing rules for voter registration is an example of a(n)

Accepted Answer

A) economic function of government. 
B) political function of government. 
C) public good. 
D) transfer payment. 
A) economic function of government. 
B) political function of government. 
C) public good. 
D) transfer payment.

Question 9

How does a government-sponsored good differ from a public good?

Accepted Answer

A public good is characterized by the fa

Question 10

What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?

Accepted Answer

A positive externality leads to the equi

Question 11

Explain why an external cost leads to an over-allocation of resources to the production of a good.

Accepted Answer

An external cost is the cost associated

Question 12

When the price system fails to generate an efficient allocation of resources,

Accepted Answer

A) the market will always correct it. 
B) consumers will spend less. 
C) business will produce more. 
D) too few or too many goods will be produced. 
A) the market will always correct it. 
B) consumers will spend less. 
C) business will produce more. 
D) too few or too many goods will be produced.

Question 13

An externality can best be defined as

Accepted Answer

A) a party not directly involved in a transaction. 
B) a consequence of a transaction that spills over to affect third parties. 
C) a right of an owner to use and exchange property. 
D) a cost associated with the production of one more unit of output. 
A) a party not directly involved in a transaction. 
B) a consequence of a transaction that spills over to affect third parties. 
C) a right of an owner to use and exchange property. 
D) a cost associated with the production of one more unit of output.

Question 14

The government tries to protect the competitive economic system by passing and enforcing

Accepted Answer

A) price controls. 
B) tariff legislation. 
C) antitrust laws. 
D) building codes and zoning laws. 
A) price controls. 
B) tariff legislation. 
C) antitrust laws. 
D) building codes and zoning laws.

Question 15

The major economic effect of Medicare subsidies is

Accepted Answer

A) that the number of physicians has decreased since compensation is low. 
B) to increase the price of medical services and reduce the quantity demanded. 
C) to increase the price of medical services and increase the quantity demanded. 
D) to lower the price of medical services and reduce the quantity demanded. 
A) that the number of physicians has decreased since compensation is low. 
B) to increase the price of medical services and reduce the quantity demanded. 
C) to increase the price of medical services and increase the quantity demanded. 
D) to lower the price of medical services and reduce the quantity demanded.

Question 16

Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government.

Accepted Answer

Medicare reduces the price that the elde

Question 17

Public education is priced below market price largely as a result of

Accepted Answer

A) government subsidy programs. 
B) under-funded public education. 
C) rising test scores by students. 
D) taxpayers who contribute little to the funding of public education. 
A) government subsidy programs. 
B) under-funded public education. 
C) rising test scores by students. 
D) taxpayers who contribute little to the funding of public education.

Question 18

A government-inhibited good is a good which

Accepted Answer

A) is not subject to the principle of mutual exclusivity. 
B) the political process has deemed socially undesirable. 
C) can be consumed by one individual without affecting the consumption of another individual. 
D) the political process has deemed socially desirable. 
A) is not subject to the principle of mutual exclusivity. 
B) the political process has deemed socially undesirable. 
C) can be consumed by one individual without affecting the consumption of another individual. 
D) the political process has deemed socially desirable.

Question 19

What is the free-rider problem, and how is it related to public goods?

Accepted Answer

The free-rider problem arises from the e

Question 20

The market and public sector are similar in that

Accepted Answer

A) there is competition amongst the participants in both sectors. 
B) the resources used in both sectors are scarce. 
C) the participants in both sectors react to incentives. 
D) All of the above are true. 
A) there is competition amongst the participants in both sectors. 
B) the resources used in both sectors are scarce. 
C) the participants in both sectors react to incentives. 
D) All of the above are true.

The political functions of government differ from the economic functions of government in that

What happens in public schools when government funds subsidize education?

Which one of the following is NOT a characteristic of public goods?

Recipients of Medicare tend to demand a greater quantity of low-value, high-cost services because

What are the key characteristics of a public good?

A fundamental reason that governments provide public goods is

Establishing rules for voter registration is an example of a(n)

How does a government-sponsored good differ from a public good?

What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?

Explain why an external cost leads to an over-allocation of resources to the production of a good.

When the price system fails to generate an efficient allocation of resources,

An externality can best be defined as

The government tries to protect the competitive economic system by passing and enforcing

The major economic effect of Medicare subsidies is

Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government.

Public education is priced below market price largely as a result of

A government-inhibited good is a good which

What is the free-rider problem, and how is it related to public goods?

The market and public sector are similar in that

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 5: Public Spending and Public Choice

The political functions of government differ from the economic functions of government in that

What happens in public schools when government funds subsidize education?

Which one of the following is NOT a characteristic of public goods?

Recipients of Medicare tend to demand a greater quantity of low-value, high-cost services because

What are the key characteristics of a public good?

A fundamental reason that governments provide public goods is

Establishing rules for voter registration is an example of a(n)

How does a government-sponsored good differ from a public good?

What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?

Explain why an external cost leads to an over-allocation of resources to the production of a good.

When the price system fails to generate an efficient allocation of resources,

An externality can best be defined as

The government tries to protect the competitive economic system by passing and enforcing

The major economic effect of Medicare subsidies is

Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government.

Public education is priced below market price largely as a result of

A government-inhibited good is a good which

What is the free-rider problem, and how is it related to public goods?

The market and public sector are similar in that

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters