Question 1

Public goods face the

Accepted Answer

A) principle of rival consumption. 
B) free-rider problem. 
C) law of overproduction. 
D) exclusion principle. 
A) principle of rival consumption. 
B) free-rider problem. 
C) law of overproduction. 
D) exclusion principle.

Question 2

A characteristic of a public good is that a public good is provided

Accepted Answer

A) to some businesses, but not to others. 
B) only in some states. 
C) to low income residents in some states. 
D) to many individuals at no additional cost. 
A) to some businesses, but not to others. 
B) only in some states. 
C) to low income residents in some states. 
D) to many individuals at no additional cost.

Question 3

The purpose of an effluent fee is to

Accepted Answer

A) reduce the amount produced of a good and to raise the market price. 
B) correct for pollution while keeping the price of the good the same as before the correction. 
C) reward people producing externalities. 
D) encourage producers to keep the quantity produced the same while lowering the price. 
A) reduce the amount produced of a good and to raise the market price. 
B) correct for pollution while keeping the price of the good the same as before the correction. 
C) reward people producing externalities. 
D) encourage producers to keep the quantity produced the same while lowering the price.

Question 4

What effect have Medicare subsidies had on the consumption of medical services?

Accepted Answer

A) The consumption of medical services has been unaffected, because people don't consider the financial cost when seeking services related to their health. 
B) The consumption of medical services has been unaffected, because government restrictions have prevented patients from seeking a level of care above and beyond what they would choose if they had to pay for medical treatment out of pocket. 
C) The consumption of medical services has increased because Medicare subsidies give people the incentive to seek more care than they would otherwise. 
D) The effect cannot be measured because it is difficult to quantify the amount of resources devoted to our health care system. 
A) The consumption of medical services has been unaffected, because people don't consider the financial cost when seeking services related to their health. 
B) The consumption of medical services has been unaffected, because government restrictions have prevented patients from seeking a level of care above and beyond what they would choose if they had to pay for medical treatment out of pocket. 
C) The consumption of medical services has increased because Medicare subsidies give people the incentive to seek more care than they would otherwise. 
D) The effect cannot be measured because it is difficult to quantify the amount of resources devoted to our health care system.

Question 5

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

Accepted Answer

An external benefit is the benefit assoc

Question 6

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

Accepted Answer

A) higher than optimal. 
B) lower than optimal. 
C) efficient. 
D) at a optimal level. 
A) higher than optimal. 
B) lower than optimal. 
C) efficient. 
D) at a optimal level.

Question 7

Measures of student performance have not increased even though per-pupil government subsidies have increased because

Accepted Answer

A) there is a need for more funds to be spent. 
B) we have declining enrollment in public schools. 
C) parents and children value the last unit of educational services received more than the cost. 
D) parents and children value the last unit of educational services received less than the cost. 
A) there is a need for more funds to be spent. 
B) we have declining enrollment in public schools. 
C) parents and children value the last unit of educational services received more than the cost. 
D) parents and children value the last unit of educational services received less than the cost.

Question 8

How does the government carry out income redistribution?

Accepted Answer

Income redistribution can be carried out

Question 9

Public elementary and high school education in the United States is provided

Accepted Answer

A) as a free good. 
B) as a subsidized good. 
C) at the market clearing price. 
D) in an amount less than the equilibrium quantity. 
A) as a free good. 
B) as a subsidized good. 
C) at the market clearing price. 
D) in an amount less than the equilibrium quantity.

Question 10

Which of the following statements is TRUE?

Accepted Answer

A) Government spending as a percent of total national income has continuously decreased since the 1950s. 
B) Transfer payments are money payments made by the government for which no goods or services are currently received. 
C) Education is the largest category of federal government expenditures. 
D) Transfers in kind include Welfare, Social Security, and unemployment insurance benefits. 
A) Government spending as a percent of total national income has continuously decreased since the 1950s. 
B) Transfer payments are money payments made by the government for which no goods or services are currently received. 
C) Education is the largest category of federal government expenditures. 
D) Transfers in kind include Welfare, Social Security, and unemployment insurance benefits.

Question 11

Which of the following might be considered a positive externality?

Accepted Answer

A) the pollination of an orange grove due to bees kept by a nearby beekeeper 
B) individuals who did not get the flu, yet did not receive a flu shot when those around them did receive the shot 
C) better fishing resulting from increased lake temperatures generated by the nearby power plant 
D) All of the above are correct. 
A) the pollination of an orange grove due to bees kept by a nearby beekeeper 
B) individuals who did not get the flu, yet did not receive a flu shot when those around them did receive the shot 
C) better fishing resulting from increased lake temperatures generated by the nearby power plant 
D) All of the above are correct.

Question 12

The goal of Medicare is to

Accepted Answer

A) help the poor and indigent pay their hospital bills. 
B) prevent poverty in urban cities. 
C) subsidize medical expenses for the elderly. 
D) subsidize costs incurred by doctors. 
A) help the poor and indigent pay their hospital bills. 
B) prevent poverty in urban cities. 
C) subsidize medical expenses for the elderly. 
D) subsidize costs incurred by doctors.

Question 13

When costs spill over to third parties, there is a(n)

Accepted Answer

A) cost overrun 
B) excessive competition. 
C) negative externality. 
D) government subsidy. 
A) cost overrun 
B) excessive competition. 
C) negative externality. 
D) government subsidy.

Question 14

The provision of a legal system is an important economic function of the government because

Accepted Answer

A) lawyers and judges tend to be high-income people. 
B) people need to feel safe when they go to work. 
C) the legal system affects how exchange takes place through its enforcement of contracts. 
D) the legal system affects the distribution of income through its awarding of damages in accident claims. 
A) lawyers and judges tend to be high-income people. 
B) people need to feel safe when they go to work. 
C) the legal system affects how exchange takes place through its enforcement of contracts. 
D) the legal system affects the distribution of income through its awarding of damages in accident claims.

Question 15

Which of the following is a benefit of the price system?

Accepted Answer

A) The existence of positive externalities. 
B) The production of public goods. 
C) Consumers have what they want since politicians and business managers decide what is to be produced. 
D) The freedom of consumers to decide what they want to purchase. 
A) The existence of positive externalities. 
B) The production of public goods. 
C) Consumers have what they want since politicians and business managers decide what is to be produced. 
D) The freedom of consumers to decide what they want to purchase.

Question 16

Examples of transfers-in-kind include

Accepted Answer

A) tax rebates on both the federal and state levels. 
B) taxes on alcohol and tobacco. 
C) food stamps and public housing. 
D) political advertising. 
A) tax rebates on both the federal and state levels. 
B) taxes on alcohol and tobacco. 
C) food stamps and public housing. 
D) political advertising.

Question 17

What are the three goals of the Employment Act of 1946?

Accepted Answer

A) Keep the peace, improve public education, and protect the environment 
B) Improve the education system, provide more job training, and expand the number of government jobs 
C) Full employment, price stability, and economic growth 
D) Full employment, better schools, and lower income taxes 
A) Keep the peace, improve public education, and protect the environment 
B) Improve the education system, provide more job training, and expand the number of government jobs 
C) Full employment, price stability, and economic growth 
D) Full employment, better schools, and lower income taxes

Question 18

An effluent fee is more effective when imposed on

Accepted Answer

A) the firm or producer of the product which generates pollution. 
B) the consumer of the product. 
C) neither the producer nor the consumer of the product. 
D) the supplier of the raw material used by the firm. 
A) the firm or producer of the product which generates pollution. 
B) the consumer of the product. 
C) neither the producer nor the consumer of the product. 
D) the supplier of the raw material used by the firm.

Question 19

The opportunity cost of providing a public good to an additional individual is

Accepted Answer

A) infinite. 
B) zero. 
C) impossible to determine. 
D) high because of the exclusion principle. 
A) infinite. 
B) zero. 
C) impossible to determine. 
D) high because of the exclusion principle.

Question 20

Which of the following is NOT an economic function of the U.S. government?

Accepted Answer

A) Promoting competition 
B) Providing public goods 
C) Promoting price stability 
D) Encouraging production of government-inhibited goods 
A) Promoting competition 
B) Providing public goods 
C) Promoting price stability 
D) Encouraging production of government-inhibited goods

Exam 5: Public Spending and Public Choice

Public goods face the

A characteristic of a public good is that a public good is provided

The purpose of an effluent fee is to

What effect have Medicare subsidies had on the consumption of medical services?

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

Measures of student performance have not increased even though per-pupil government subsidies have increased because

How does the government carry out income redistribution?

Public elementary and high school education in the United States is provided

Which of the following statements is TRUE?

Which of the following might be considered a positive externality?

The goal of Medicare is to

When costs spill over to third parties, there is a(n)

The provision of a legal system is an important economic function of the government because

Which of the following is a benefit of the price system?

Examples of transfers-in-kind include

What are the three goals of the Employment Act of 1946?

An effluent fee is more effective when imposed on

The opportunity cost of providing a public good to an additional individual is

Which of the following is NOT an economic function of the U.S. 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