Question 1

Is there any common characteristic shared by government-inhibited goods and government-sponsored goods? Explain briefly.

Accepted Answer

Government-inhibited and government-spon

Question 2

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

Accepted Answer

A) A bread company emits a wonderful aroma in the air that makes people smile. 
B) The neighbor's wind chimes interfere with your sleep. 
C) A firm fires 500 people. 
D) Cancer-causing chemicals are dumped into the drinking water supply of a city. 
A) A bread company emits a wonderful aroma in the air that makes people smile. 
B) The neighbor's wind chimes interfere with your sleep. 
C) A firm fires 500 people. 
D) Cancer-causing chemicals are dumped into the drinking water supply of a city.

Question 3

Public goods are characterized by the free-rider problem because

Accepted Answer

A) no one can be excluded from the benefits of public goods once they are produced. 
B) public goods are usually things that people really do not want to consume. 
C) public goods are characterized by the principle of rival consumption. 
D) public goods can easily be subdivided into small units. 
A) no one can be excluded from the benefits of public goods once they are produced. 
B) public goods are usually things that people really do not want to consume. 
C) public goods are characterized by the principle of rival consumption. 
D) public goods can easily be subdivided into small units.

Question 4

An externality is

Accepted Answer

A) a third-party benefit or cost that is associated with the production of a good. 
B) when external forces such as war or flood affect the market. 
C) government intervention in the markets. 
D) transaction costs. 
A) a third-party benefit or cost that is associated with the production of a good. 
B) when external forces such as war or flood affect the market. 
C) government intervention in the markets. 
D) transaction costs.

Question 5

A government-inhibited good is one that

Accepted Answer

A) the political process has determined is socially undesirable. 
B) the political process has determined is socially desirable. 
C) freely competitive markets have determined is socially desirable. 
D) we want to encourage the consumption of. 
A) the political process has determined is socially undesirable. 
B) the political process has determined is socially desirable. 
C) freely competitive markets have determined is socially desirable. 
D) we want to encourage the consumption of.

Question 6

Which of the following statements is NOT true of external benefits?

Accepted Answer

A) External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B) External benefits lead to a price in the market that is too high. 
C) External benefits lead to too few of the goods that have the external benefit being produced. 
D) External benefits are a good thing for the allocation of resources because people are getting something at no cost. 
A) External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B) External benefits lead to a price in the market that is too high. 
C) External benefits lead to too few of the goods that have the external benefit being produced. 
D) External benefits are a good thing for the allocation of resources because people are getting something at no cost.

Question 7

Market failure means that

Accepted Answer

A) the strike organized by unionized employees fails to achieve its goal. 
B) too many outdated products are offered for sale in the local supermarket. 
C) there is overallocation or underallocation of resources to certain economic activity. 
D) an unexpectedly harsh winter shuts down a factory. 
A) the strike organized by unionized employees fails to achieve its goal. 
B) too many outdated products are offered for sale in the local supermarket. 
C) there is overallocation or underallocation of resources to certain economic activity. 
D) an unexpectedly harsh winter shuts down a factory.

Question 8

An example of third parties in the market of automobiles is

Accepted Answer

A) a pedestrian that is affected by the polluted air from automobiles. 
B) a producer of automobiles. 
C) a consumer of automobiles. 
D) None of the above belongs to third parties. 
A) a pedestrian that is affected by the polluted air from automobiles. 
B) a producer of automobiles. 
C) a consumer of automobiles. 
D) None of the above belongs to third parties.

Question 9

Which of the following is a major reason why the Medicare program is in such financial trouble?

Accepted Answer

A) Workers are not paying enough into the program. 
B) The government set reimbursement rates too high. 
C) Because medical services are subsidized by the government, both consumption by the elderly and the cost of services have increased. 
D) There is a shortage of medical school applicants. 
A) Workers are not paying enough into the program. 
B) The government set reimbursement rates too high. 
C) Because medical services are subsidized by the government, both consumption by the elderly and the cost of services have increased. 
D) There is a shortage of medical school applicants.

Question 10

Medicare and Social Security are examples of

Accepted Answer

A) transfer payment programs. 
B) public goods. 
C) programs that do not respond to rational economic incentives. 
D) the efficient allocation of resources under a free market system. 
A) transfer payment programs. 
B) public goods. 
C) programs that do not respond to rational economic incentives. 
D) the efficient allocation of resources under a free market system.

Question 11

Which of the following often involves positive external benefits?

Accepted Answer

A) Water pollution 
B) Drunken driving 
C) Inoculation programs 
D) Tobacco smoking 
A) Water pollution 
B) Drunken driving 
C) Inoculation programs 
D) Tobacco smoking

Question 12

Which of the following is an example of a positive externality?

Accepted Answer

A) A neighbor's flower garden that you enjoy seeing 
B) Traffic congestion 
C) An increased supply of chocolate lowers chocolate prices for all consumers 
D) Pollution 
A) A neighbor's flower garden that you enjoy seeing 
B) Traffic congestion 
C) An increased supply of chocolate lowers chocolate prices for all consumers 
D) Pollution

Question 13

Government payment of a per-unit subsidy for medical care causes

Accepted Answer

A) the market supply curve to shift upward. 
B) the market demand curve to shift downward. 
C) a reduction in the price that providers of medical care receive for each unit of care provided. 
D) an increase in the quantity of medical care demanded above the quantity demanded in the absence of the subsidy. 
A) the market supply curve to shift upward. 
B) the market demand curve to shift downward. 
C) a reduction in the price that providers of medical care receive for each unit of care provided. 
D) an increase in the quantity of medical care demanded above the quantity demanded in the absence of the subsidy.

Question 14

The government's policy of reducing payments for physicians' services has generated a relative

Accepted Answer

A) increase in the number of physicians in the program. 
B) reduction in the number of physicians in the program. 
C) reduction in the demand for medical services. 
D) increase in the income of the physicians remaining in the program. 
A) increase in the number of physicians in the program. 
B) reduction in the number of physicians in the program. 
C) reduction in the demand for medical services. 
D) increase in the income of the physicians remaining in the program.

Question 15

Which of the following statements about public education is TRUE?

Accepted Answer

A) Over the last 40 years, there has been an increase in spending for public education, while there has not been a significant increase in performance. 
B) Over the last 40 years, there has been a decrease in public spending for public education, while there has not been a significant increase in performance. 
C) Most of the increases in public spending on public education have gone into programs that have increased student learning. 
D) Over the last 40 years there has been no decline in any of the measures of student performance in public education. 
A) Over the last 40 years, there has been an increase in spending for public education, while there has not been a significant increase in performance. 
B) Over the last 40 years, there has been a decrease in public spending for public education, while there has not been a significant increase in performance. 
C) Most of the increases in public spending on public education have gone into programs that have increased student learning. 
D) Over the last 40 years there has been no decline in any of the measures of student performance in public education.

Question 16

Market failures

Accepted Answer

A) are usually caused by government interference in the economy. 
B) prevent the price system from attaining economic efficiency. 
C) encourage people to purchase more of a good than they really want. 
D) encourage businesses to produce more of a good than they really want to. 
A) are usually caused by government interference in the economy. 
B) prevent the price system from attaining economic efficiency. 
C) encourage people to purchase more of a good than they really want. 
D) encourage businesses to produce more of a good than they really want to.

Question 17

An example of an in-kind transfer is

Accepted Answer

A) national defense. 
B) Social Security. 
C) low-cost public housing. 
D) Unemployment benefits. 
A) national defense. 
B) Social Security. 
C) low-cost public housing. 
D) Unemployment benefits.

Question 18

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. A negative externality exists that has not been corrected. Price and quantity will be

Accepted Answer

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

Question 19

An effluent fee is a

Accepted Answer

A) subsidy given to the producer of a positive externality. 
B) charge to a polluter that gives the right to discharge pollution into the air. 
C) fine imposed on a polluter for dumping illegal pollution. 
D) charge for a public good. 
A) subsidy given to the producer of a positive externality. 
B) charge to a polluter that gives the right to discharge pollution into the air. 
C) fine imposed on a polluter for dumping illegal pollution. 
D) charge for a public good.

Question 20

A result of a positive externality in the production of a good is that

Accepted Answer

A) the price system will over-allocate resources to the production of that good or service. 
B) the price system will under-allocate resources to the production of that good or service. 
C) the market supply will be too high. 
D) the market demand will be too high. 
A) the price system will over-allocate resources to the production of that good or service. 
B) the price system will under-allocate resources to the production of that good or service. 
C) the market supply will be too high. 
D) the market demand will be too high.

Is there any common characteristic shared by government-inhibited goods and government-sponsored goods? Explain briefly.

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

Public goods are characterized by the free-rider problem because

An externality is

A government-inhibited good is one that

Which of the following statements is NOT true of external benefits?

Market failure means that

An example of third parties in the market of automobiles is

Which of the following is a major reason why the Medicare program is in such financial trouble?

Medicare and Social Security are examples of

Which of the following often involves positive external benefits?

Which of the following is an example of a positive externality?

Government payment of a per-unit subsidy for medical care causes

The government's policy of reducing payments for physicians' services has generated a relative

Which of the following statements about public education is TRUE?

Market failures

An example of an in-kind transfer is

An effluent fee is a

A result of a positive externality in the production of a good is 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

Exam 5: Public Spending and Public Choice

Is there any common characteristic shared by government-inhibited goods and government-sponsored goods? Explain briefly.

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

Public goods are characterized by the free-rider problem because

An externality is

A government-inhibited good is one that

Which of the following statements is NOT true of external benefits?

Market failure means that

An example of third parties in the market of automobiles is

Which of the following is a major reason why the Medicare program is in such financial trouble?

Medicare and Social Security are examples of

Which of the following often involves positive external benefits?

Which of the following is an example of a positive externality?

Government payment of a per-unit subsidy for medical care causes

The government's policy of reducing payments for physicians' services has generated a relative

Which of the following statements about public education is TRUE?

Market failures

An example of an in-kind transfer is

An effluent fee is a

A result of a positive externality in the production of a good is 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