Question 1

Which of the following is NOT related to the government's political function of income redistribution?

Accepted Answer

A) Providing money transfer payments 
B) Excise tax on gasoline 
C) Social Security 
D) In-kind transfers 
A) Providing money transfer payments 
B) Excise tax on gasoline 
C) Social Security 
D) In-kind transfers

Question 2

Under present U.S. law, cocaine is an example of

Accepted Answer

A) a government-sponsored good. 
B) a capital good. 
C) a public good. 
D) a government-inhibited good. 
A) a government-sponsored good. 
B) a capital good. 
C) a public good. 
D) a government-inhibited good.

Question 3

When a business produces a product that creates external costs,

Accepted Answer

A) the company produces a level of output larger than would be produced without the external cost. 
B) the company produces a level of output smaller than would be produced without the external cost. 
C) the company produces a level of output which would be the same as it would produce without the external cost. 
D) the market provides the efficient level of output even with the existence of the external cost. 
A) the company produces a level of output larger than would be produced without the external cost. 
B) the company produces a level of output smaller than would be produced without the external cost. 
C) the company produces a level of output which would be the same as it would produce without the external cost. 
D) the market provides the efficient level of output even with the existence of the external cost.

Question 4

Which of the following is an example of the free-rider problem?

Accepted Answer

A) A neighbor who refuses to help pay for a street light that is intended to help reduce crime 
B) A student who refuses to buy a college catalog 
C) A law enforcement officer who receives a uniform from the police department 
D) A fast food employee who is provided food at work 
A) A neighbor who refuses to help pay for a street light that is intended to help reduce crime 
B) A student who refuses to buy a college catalog 
C) A law enforcement officer who receives a uniform from the police department 
D) A fast food employee who is provided food at work

Question 5

Federal antitrust laws in the United States are enforced

Accepted Answer

A) solely by the Federal Trade Commission. 
B) solely by the Department of Justice. 
C) by the Department of Justice and by the Federal Trade Commission. 
D) by the Department of Commerce. 
A) solely by the Federal Trade Commission. 
B) solely by the Department of Justice. 
C) by the Department of Justice and by the Federal Trade Commission. 
D) by the Department of Commerce.

Question 6

Private goods are goods

Accepted Answer

A) that carry a price. 
B) for which price is greater than zero. 
C) for which the more one person has the less is available for someone else. 
D) that are produced by the government. 
A) that carry a price. 
B) for which price is greater than zero. 
C) for which the more one person has the less is available for someone else. 
D) that are produced by the government.

Question 7

An example of a transfer payment is

Accepted Answer

A) the President's salary. 
B) unemployment insurance benefits. 
C) a payment to a defense contractor. 
D) court costs paid by the defendants in a law suit. 
A) the President's salary. 
B) unemployment insurance benefits. 
C) a payment to a defense contractor. 
D) court costs paid by the defendants in a law suit.

Question 8

A payment that is made by the government for which no goods or services are given in return is known as

Accepted Answer

A) a public good. 
B) a transfer payment. 
C) a negative externality. 
D) a free rider. 
A) a public good. 
B) a transfer payment. 
C) a negative externality. 
D) a free rider.

Question 9

Public schools

Accepted Answer

A) allow students to get an education without incurring any opportunity cost. 
B) provide education at a price below the market price. 
C) provide education at a price above the market price. 
D) have done a better job of educating their students in science, math, reading, and writing as the subsidies they receive have increased over the years. 
A) allow students to get an education without incurring any opportunity cost. 
B) provide education at a price below the market price. 
C) provide education at a price above the market price. 
D) have done a better job of educating their students in science, math, reading, and writing as the subsidies they receive have increased over the years.

Question 10

Which of the following is TRUE about the political and market systems of voting?

Accepted Answer

A) The political voting system functions according to proportional rule, while the market voting system functions according to majority rule. 
B) The political voting system functions according to majority rule, while the market voting system functions according to proportional rule. 
C) The political voting system functions according to minority rule, while the market voting system functions according to majority rule. 
D) The political system and the market system are identical. 
A) The political voting system functions according to proportional rule, while the market voting system functions according to majority rule. 
B) The political voting system functions according to majority rule, while the market voting system functions according to proportional rule. 
C) The political voting system functions according to minority rule, while the market voting system functions according to majority rule. 
D) The political system and the market system are identical.

Question 11

Government outlays include all of the following EXCEPT

Accepted Answer

A) dividend payments. 
B) spending on the military. 
C) electricity for the Capital Building. 
D) letterhead stationery. 
A) dividend payments. 
B) spending on the military. 
C) electricity for the Capital Building. 
D) letterhead stationery.

Question 12

Why are public goods provided by the government, rather than by the private sector?

Accepted Answer

A) because they are large-scale projects that require the kind of financing only governments can generate through the issuance of bonds 
B) because it would be difficult for a private sector firm to make a profit providing a public good, since consumers who benefit would not have to pay for it 
C) because no one really benefits from public goods 
D) because private sector firms do not have the foresight to plan for public goods 
A) because they are large-scale projects that require the kind of financing only governments can generate through the issuance of bonds 
B) because it would be difficult for a private sector firm to make a profit providing a public good, since consumers who benefit would not have to pay for it 
C) because no one really benefits from public goods 
D) because private sector firms do not have the foresight to plan for public goods

Question 13

Ms. Smith is given a voucher for an apartment in a public housing project. The apartment

Accepted Answer

A) is not subject to the principle of rival consumption. 
B) is not a public good. 
C) has widespread benefits and concentrated costs. 
D) is subject to the exclusion principle. 
A) is not subject to the principle of rival consumption. 
B) is not a public good. 
C) has widespread benefits and concentrated costs. 
D) is subject to the exclusion principle.

Question 14

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

Accepted Answer

A) competition. 
B) excessive competition. 
C) destructive competition. 
D) a market failure. 
A) competition. 
B) excessive competition. 
C) destructive competition. 
D) a market failure.

Question 15

The "principle of rival consumption" applies to which of the following?

Accepted Answer

A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good 
A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good

Question 16

What are the voting rules followed by the political system as opposed to the market system?

Accepted Answer

In the political system, one person gets

Question 17

Suppose a valley periodically floods. A dam can be built in the river that would prevent the flooding. Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

Accepted Answer

The dam would be indivisible since it mu

Question 18

A fundamental aspect of public goods is that they

Accepted Answer

A) are just like private goods EXCEPT that everybody wants to consume the same amount. 
B) have positive externalities. 
C) are characterized by the principle of rival consumption. 
D) can be consumed jointly by many people simultaneously. 
A) are just like private goods EXCEPT that everybody wants to consume the same amount. 
B) have positive externalities. 
C) are characterized by the principle of rival consumption. 
D) can be consumed jointly by many people simultaneously.

Question 19

Public goods

Accepted Answer

A) are overproduced by unrestrained markets. 
B) are simply private goods that the government provides. 
C) cannot be consumed by more than one person without the degradation of the value of the good. 
D) can be consumed by more than one person without degradation of the value of the good. 
A) are overproduced by unrestrained markets. 
B) are simply private goods that the government provides. 
C) cannot be consumed by more than one person without the degradation of the value of the good. 
D) can be consumed by more than one person without degradation of the value of the good.

Question 20

When state and local governments provide public schools with a per-unit subsidy to provide educational services, the price that the schools providing these services receive is

Accepted Answer

A) less than the price that consumers pay to receive educational services. 
B) less than the amount of the per-unit subsidy that the schools receive. 
C) greater than the market clearing price without the subsidy. 
D) equal to zero. 
A) less than the price that consumers pay to receive educational services. 
B) less than the amount of the per-unit subsidy that the schools receive. 
C) greater than the market clearing price without the subsidy. 
D) equal to zero.

Exam 5: Public Spending and Public Choice

Which of the following is NOT related to the government's political function of income redistribution?

Under present U.S. law, cocaine is an example of

When a business produces a product that creates external costs,

Which of the following is an example of the free-rider problem?

Federal antitrust laws in the United States are enforced

Private goods are goods

An example of a transfer payment is

A payment that is made by the government for which no goods or services are given in return is known as

Public schools

Which of the following is TRUE about the political and market systems of voting?

Government outlays include all of the following EXCEPT

Why are public goods provided by the government, rather than by the private sector?

Ms. Smith is given a voucher for an apartment in a public housing project. The apartment

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

The "principle of rival consumption" applies to which of the following?

What are the voting rules followed by the political system as opposed to the market system?

Suppose a valley periodically floods. A dam can be built in the river that would prevent the flooding. Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

A fundamental aspect of public goods is that they

Public goods

When state and local governments provide public schools with a per-unit subsidy to provide educational services, the price that the schools providing these services receive is

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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