Question 1

If public subsidies for education were eliminated, what would you expect as an outcome in the market for educational services?

Accepted Answer

A) More students would enroll in school. 
B) The price students pay to attend school would equal the value of an additional unit of education consumed. 
C) There would be no correlation between the price students pay and the cost of providing the educational services. 
D) The quality of education would deteriorate. 
A) More students would enroll in school. 
B) The price students pay to attend school would equal the value of an additional unit of education consumed. 
C) There would be no correlation between the price students pay and the cost of providing the educational services. 
D) The quality of education would deteriorate.

Question 2

The price system will allocate resources efficiently except when

Accepted Answer

A) consumers decide they want more of a good. 
B) no externalities exist. 
C) farmers decide to produce more corn. 
D) market failures exist. 
A) consumers decide they want more of a good. 
B) no externalities exist. 
C) farmers decide to produce more corn. 
D) market failures exist.

Question 3

"Second-hand" smoke, an often cited disadvantage of allowing smoking in restaurants, is referred to in economics as a(n)

Accepted Answer

A) capital good. 
B) externality. 
C) economic cost. 
D) negative investment. 
A) capital good. 
B) externality. 
C) economic cost. 
D) negative investment.

Question 4

Explain why ensuring economic stability is an economics function of government?

Accepted Answer

Our economy sometimes faces the problems

Question 5

If external benefits are taken into account in the market,

Accepted Answer

A) the demand curve would shift to the left. 
B) the supply curve would shift to the left. 
C) the demand curve would shift to the right. 
D) the supply curve would become vertical. 
A) the demand curve would shift to the left. 
B) the supply curve would shift to the left. 
C) the demand curve would shift to the right. 
D) the supply curve would become vertical.

Question 6

The purpose of antitrust legislation is

Accepted Answer

A) to reduce unemployment. 
B) to reduce the power of monopoly. 
C) to increase the power of monopoly. 
D) to maximize employment for a given price level. 
A) to reduce unemployment. 
B) to reduce the power of monopoly. 
C) to increase the power of monopoly. 
D) to maximize employment for a given price level.

Question 7

Government can correct for negative externalities by

Accepted Answer

A) decreasing taxes. 
B) increasing taxes or regulation. 
C) allowing the market system to correct the problem. 
D) decreasing the costs to those responsible for the externality. 
A) decreasing taxes. 
B) increasing taxes or regulation. 
C) allowing the market system to correct the problem. 
D) decreasing the costs to those responsible for the externality.

Question 8

A paint firm has just announced that it will be building a new plant in a small town that is currently experiencing a high level of unemployment. The new plant will create 500 new jobs in the area and will occupy unused land at the edge of town. The plant will also dump some harmful chemicals into the town's river. From an economic standpoint this dumping of chemicals

Accepted Answer

A) is unimportant since the firm is reducing the unemployment in the region. 
B) creates a negative externality. 
C) is the production of a public good. 
D) creates a positive externality. 
A) is unimportant since the firm is reducing the unemployment in the region. 
B) creates a negative externality. 
C) is the production of a public good. 
D) creates a positive externality.

Question 9

A government-inhibited good is one that

Accepted Answer

A) cannot be individually consumed. 
B) would be underproduced by the private market. 
C) should be subsidized to correct the market failure and productive inefficiency. 
D) has been deemed socially undesirable via the political process. 
A) cannot be individually consumed. 
B) would be underproduced by the private market. 
C) should be subsidized to correct the market failure and productive inefficiency. 
D) has been deemed socially undesirable via the political process.

Question 10

The U.S. legal system mainly engages in activities that

Accepted Answer

A) are dedicated to producing private goods. 
B) focus on income redistribution. 
C) involve defining and protecting property rights. 
D) focus on producing public goods. 
A) are dedicated to producing private goods. 
B) focus on income redistribution. 
C) involve defining and protecting property rights. 
D) focus on producing public goods.

Question 11

One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be

Accepted Answer

A) left alone. 
B) taxed. 
C) subsidized. 
D) banned. 
A) left alone. 
B) taxed. 
C) subsidized. 
D) banned.

Question 12

Medicare

Accepted Answer

A) subsidizes the care of older people, which gives them NO incentive to consume more medical services. 
B) subsidizes the care of older people, which gives them an incentive to consume more medical services. 
C) subsidizes the care of young people, which gives them an incentive to consume less medical services. 
D) subsidizes the care of middle aged people, which gives them an incentive to consume more medical services. 
A) subsidizes the care of older people, which gives them NO incentive to consume more medical services. 
B) subsidizes the care of older people, which gives them an incentive to consume more medical services. 
C) subsidizes the care of young people, which gives them an incentive to consume less medical services. 
D) subsidizes the care of middle aged people, which gives them an incentive to consume more medical services.

Question 13

Which of the following checks issued by the government represents a transfer payment?

Accepted Answer

A) The federal government pays a defense contractor for development of a missile system. 
B) The federal government pays a retiree her Social Security benefits. 
C) The state of Oregon pays a construction firm for its work in repairing a state highway. 
D) The state of Illinois pays groundskeepers at the state capitol building their weekly wages. 
A) The federal government pays a defense contractor for development of a missile system. 
B) The federal government pays a retiree her Social Security benefits. 
C) The state of Oregon pays a construction firm for its work in repairing a state highway. 
D) The state of Illinois pays groundskeepers at the state capitol building their weekly wages.

Question 14

Which of the following statements is true of external costs?

Accepted Answer

A) External costs should not be corrected since people will bear the costs whether they are corrected or not. 
B) There are no good ways to correct for the external costs. 
C) When external costs exist, the price of the good will be deceptively low leading to an overallocation of resources. 
D) External costs should only be corrected for if the correction will not increase the market price. 
A) External costs should not be corrected since people will bear the costs whether they are corrected or not. 
B) There are no good ways to correct for the external costs. 
C) When external costs exist, the price of the good will be deceptively low leading to an overallocation of resources. 
D) External costs should only be corrected for if the correction will not increase the market price.

Question 15

To correct for negative externalities, the government

Accepted Answer

A) should allow the price system do the correction. 
B) can impose a tax. 
C) can provide a subsidy to consumers. 
D) should create a public good. 
A) should allow the price system do the correction. 
B) can impose a tax. 
C) can provide a subsidy to consumers. 
D) should create a public good.

Question 16

What is an effluent fee? Graphically, show how an effluent fee can correct an externality.

Accepted Answer

@#IMG-DLM& An effluent fee is a charge to a pollut

Question 17

An example of a negative externality created in the market system would be

Accepted Answer

A) poverty. 
B) unemployment. 
C) an increased number of bird flu patients. 
D) water pollution. 
A) poverty. 
B) unemployment. 
C) an increased number of bird flu patients. 
D) water pollution.

Question 18

Which of the following is a government-inhibited good?

Accepted Answer

A) A lighthouse 
B) National defense 
C) Public education 
D) Cocaine 
A) A lighthouse 
B) National defense 
C) Public education 
D) Cocaine

Question 19

A government-inhibited good is often

Accepted Answer

A) produced by the government. 
B) subsidized. 
C) taxed. 
D) advertised. 
A) produced by the government. 
B) subsidized. 
C) taxed. 
D) advertised.

Question 20

To correct for positive externalities the government

Accepted Answer

A) should allow the price system to do the correction. 
B) can impose a tax. 
C) can give a subsidy. 
D) should create a public good. 
A) should allow the price system to do the correction. 
B) can impose a tax. 
C) can give a subsidy. 
D) should create a public good.

If public subsidies for education were eliminated, what would you expect as an outcome in the market for educational services?

The price system will allocate resources efficiently except when

"Second-hand" smoke, an often cited disadvantage of allowing smoking in restaurants, is referred to in economics as a(n)

Explain why ensuring economic stability is an economics function of government?

If external benefits are taken into account in the market,

The purpose of antitrust legislation is

Government can correct for negative externalities by

A government-inhibited good is one that

The U.S. legal system mainly engages in activities that

One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be

Medicare

Which of the following checks issued by the government represents a transfer payment?

Which of the following statements is true of external costs?

To correct for negative externalities, the government

What is an effluent fee? Graphically, show how an effluent fee can correct an externality.

An example of a negative externality created in the market system would be

Which of the following is a government-inhibited good?

A government-inhibited good is often

To correct for positive externalities the government

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

Exam 5: Public Spending and Public Choice

If public subsidies for education were eliminated, what would you expect as an outcome in the market for educational services?

The price system will allocate resources efficiently except when

"Second-hand" smoke, an often cited disadvantage of allowing smoking in restaurants, is referred to in economics as a(n)

Explain why ensuring economic stability is an economics function of government?

If external benefits are taken into account in the market,

The purpose of antitrust legislation is

Government can correct for negative externalities by

A government-inhibited good is one that

The U.S. legal system mainly engages in activities that

One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be

Medicare

Which of the following checks issued by the government represents a transfer payment?

Which of the following statements is true of external costs?

To correct for negative externalities, the government

What is an effluent fee? Graphically, show how an effluent fee can correct an externality.

An example of a negative externality created in the market system would be

Which of the following is a government-inhibited good?

A government-inhibited good is often

To correct for positive externalities the government

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