Question 1

Which of the following is best characterized as a public good?

Accepted Answer

A) A public library 
B) A church 
C) Primary education 
D) Police protection 
A) A public library 
B) A church 
C) Primary education 
D) Police protection

Question 2

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

Accepted Answer

A) inoculation against a contagious disease 
B) a streetlight 
C) garbage collection 
D) Internet access 
A) inoculation against a contagious disease 
B) a streetlight 
C) garbage collection 
D) Internet access

Question 3

Medicare is an example of a third-party payment for medical services that

Accepted Answer

A) causes providers to supply less of medical services than they would without the payment. 
B) causes buyers to consume more of medical services than they would without the payment. 
C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. 
D) causes the price of medical services to rise for the consumer once the payment is provided. 
A) causes providers to supply less of medical services than they would without the payment. 
B) causes buyers to consume more of medical services than they would without the payment. 
C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. 
D) causes the price of medical services to rise for the consumer once the payment is provided.

Question 4

Explain why economists consider it to be one of the economic functions of government to provide a legal system.

Accepted Answer

A market economy relies heavily on contr

Question 5

Which of the following is NOT an example of a negative externality?

Accepted Answer

A) Inoculation against disease 
B) Pollution 
C) Playing a boom box loudly in a crowded park 
D) Rush hour traffic 
A) Inoculation against disease 
B) Pollution 
C) Playing a boom box loudly in a crowded park 
D) Rush hour traffic

Question 6

A government agency charged with enforcing antitrust laws is

Accepted Answer

A) the Federal Reserve Board. 
B) the National Labor Relations Board. 
C) the Council of Economic Advisors. 
D) the Federal Trade Commission. 
A) the Federal Reserve Board. 
B) the National Labor Relations Board. 
C) the Council of Economic Advisors. 
D) the Federal Trade Commission.

Question 7

If a corporation were forced to absorb the cost of a spillover from the production of a good, this would likely cause the supply curve for the good to

Accepted Answer

A) shift out. 
B) shift to the left. 
C) shift to the right. 
D) None of the above are correct. 
A) shift out. 
B) shift to the left. 
C) shift to the right. 
D) None of the above are correct.

Question 8

-The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account,

Accepted Answer

A) the demand curve will be too far to the left. 
B) the supply curve will be too far to the left. 
C) the demand curve will be too far to the right. 
D) the supply curve will be too far to the right. 
A) the demand curve will be too far to the left. 
B) the supply curve will be too far to the left. 
C) the demand curve will be too far to the right. 
D) the supply curve will be too far to the right.

Question 9

-Graphically, the presence of an external cost that is ignored by producers can be shown as

Accepted Answer

A) a market supply curve to the left of the market supply curve for where the producers have to pay for the external cost. 
B) a market supply curve to the right of the market supply curve for which the producers have to pay for the external cost. 
C) a market supply curve the same as the market supply curve for which the producers have to pay for the external cost. 
D) the absence of a market supply curve. 
A) a market supply curve to the left of the market supply curve for where the producers have to pay for the external cost. 
B) a market supply curve to the right of the market supply curve for which the producers have to pay for the external cost. 
C) a market supply curve the same as the market supply curve for which the producers have to pay for the external cost. 
D) the absence of a market supply curve.

Question 10

Graphically, the effect of a government subsidy on a good is shown as

Accepted Answer

A) a leftward shift of the market demand curve. 
B) a rightward shift of the market demand curve. 
C) a downward movement along the market demand curve. 
D) no change to the market demand curve. 
A) a leftward shift of the market demand curve. 
B) a rightward shift of the market demand curve. 
C) a downward movement along the market demand curve. 
D) no change to the market demand curve.

Question 11

-In the above figure, the total dollar amount of the Medicare subsidies provided by the government is equal to

Accepted Answer

A) the difference between   and   multiplied by   . 
B) the difference between   and   multiplied by   . 
C) the difference between   and   multiplied by   . 
D) the difference between   and   multiplied by   . 
A) the difference between   and   multiplied by   . 
B) the difference between   and   multiplied by   . 
C) the difference between   and   multiplied by   . 
D) the difference between   and   multiplied by   .

Question 12

An example of a public good is

Accepted Answer

A) software produced by Microsoft. 
B) housing subsidies. 
C) the car I own. 
D) the fire department. 
A) software produced by Microsoft. 
B) housing subsidies. 
C) the car I own. 
D) the fire department.

Question 13

When a paper producer pollutes the air, economists argue that there is

Accepted Answer

A) efficiency, if production is at its maximum level. 
B) a positive externality. 
C) an external cost. 
D) a cost paid solely by the firm. 
A) efficiency, if production is at its maximum level. 
B) a positive externality. 
C) an external cost. 
D) a cost paid solely by the firm.

Question 14

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. An external benefit exists. This will lead to a(n)

Accepted Answer

A) underproduction equal to   minus   . 
B) overproduction equal to   minus   . 
C) underproduction equal to   minus   . 
D) overproduction equal to   minus   . 
A) underproduction equal to   minus   . 
B) overproduction equal to   minus   . 
C) underproduction equal to   minus   . 
D) overproduction equal to   minus   .

Question 15

The economic role of the legal system might best be described as

Accepted Answer

A) promoting the productive efficiency of competitive markets. 
B) identifying and producing public goods. 
C) establishing the "rules of the game" and acting as a referee when disputes arise among market participants. 
D) identifying and producing merit goods. 
A) promoting the productive efficiency of competitive markets. 
B) identifying and producing public goods. 
C) establishing the "rules of the game" and acting as a referee when disputes arise among market participants. 
D) identifying and producing merit goods.

Question 16

Which of the following does NOT describe the intended purpose of the antitrust laws of the United States?

Accepted Answer

A) To promote competition within the economic system 
B) To reduce the power of monopolies 
C) To prohibit certain economic activities that promote trade 
D) To restrict the formation of monopolies 
A) To promote competition within the economic system 
B) To reduce the power of monopolies 
C) To prohibit certain economic activities that promote trade 
D) To restrict the formation of monopolies

Question 17

-Refer to the above figure. An external cost exists. The amount of that cost is represented by

Accepted Answer

A)    . 
B)    . 
C) the vertical distance between point A and the supply curve S1. 
D) the distance between C and A. 
A)    . 
B)    . 
C) the vertical distance between point A and the supply curve S1. 
D) the distance between C and A.

Question 18

Which of the following statements is NOT true about the price system?

Accepted Answer

A) The price system allows resources to flow from low-valued uses to high-valued uses. 
B) The price system encourages the production of public goods. 
C) Individuals have freedom to purchase what they want. 
D) The price system allows for economic efficiency. 
A) The price system allows resources to flow from low-valued uses to high-valued uses. 
B) The price system encourages the production of public goods. 
C) Individuals have freedom to purchase what they want. 
D) The price system allows for economic efficiency.

Question 19

Federal antitrust laws in the United States are intended to

Accepted Answer

A) promote competition by prohibiting monopolies. 
B) increase corporate earnings. 
C) create new monopolies. 
D) create only government-owned monopolies. 
A) promote competition by prohibiting monopolies. 
B) increase corporate earnings. 
C) create new monopolies. 
D) create only government-owned monopolies.

Question 20

Which of the following statements is true about the difference between a public and private good?

Accepted Answer

A) Both public and private goods are owned by individuals but public goods can be shared while private goods cannot be shared. 
B) The government produces private goods while corporations produce public goods. 
C) Consumption of a private good by one person reduces the amount available for others while the consumption of a public good does not reduce the amount available for others. 
D) Resources are used to produce private goods but are not used to produce public goods. 
A) Both public and private goods are owned by individuals but public goods can be shared while private goods cannot be shared. 
B) The government produces private goods while corporations produce public goods. 
C) Consumption of a private good by one person reduces the amount available for others while the consumption of a public good does not reduce the amount available for others. 
D) Resources are used to produce private goods but are not used to produce public goods.

Exam 5: Public Spending and Public Choice

Which of the following is best characterized as a public good?

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

Medicare is an example of a third-party payment for medical services that

Explain why economists consider it to be one of the economic functions of government to provide a legal system.

Which of the following is NOT an example of a negative externality?

A government agency charged with enforcing antitrust laws is

If a corporation were forced to absorb the cost of a spillover from the production of a good, this would likely cause the supply curve for the good to

-The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account,

-Graphically, the presence of an external cost that is ignored by producers can be shown as

Graphically, the effect of a government subsidy on a good is shown as

-In the above figure, the total dollar amount of the Medicare subsidies provided by the government is equal to

An example of a public good is

When a paper producer pollutes the air, economists argue that there is

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. An external benefit exists. This will lead to a(n)

The economic role of the legal system might best be described as

Which of the following does NOT describe the intended purpose of the antitrust laws of the United States?

-Refer to the above figure. An external cost exists. The amount of that cost is represented by

Which of the following statements is NOT true about the price system?

Federal antitrust laws in the United States are intended to

Which of the following statements is true about the difference between a public and private good?

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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