Question 1

Consumers are sovereign when

Accepted Answer

A) prices are decided by sellers. 
B) they control the government. 
C) they can prevent market failure. 
D) they have the freedom to decide what they wish to purchase. 
A) prices are decided by sellers. 
B) they control the government. 
C) they can prevent market failure. 
D) they have the freedom to decide what they wish to purchase.

Question 2

Which of the following is NOT an economic function of government?

Accepted Answer

A) Providing a legal system 
B) Ensuring economic stability 
C) Providing government-inhibited goods 
D) Promoting competition 
A) Providing a legal system 
B) Ensuring economic stability 
C) Providing government-inhibited goods 
D) Promoting competition

Question 3

Which of the following types of goods is subject to the free-rider problem?

Accepted Answer

A) A private good 
B) A public good 
C) A product that creates a positive externality 
D) A product that creates a negative externality 
A) A private good 
B) A public good 
C) A product that creates a positive externality 
D) A product that creates a negative externality

Question 4

The amount of government spending on education per public school student has ________ since 1960, and the achievement level of students has generally ________ since that time.

Accepted Answer

A) increased; increased 
B) decreased; decreased 
C) increased; decreased 
D) decreased; increased 
A) increased; increased 
B) decreased; decreased 
C) increased; decreased 
D) decreased; increased

Question 5

Public goods are unlikely to be provided by the private sector because

Accepted Answer

A) the production of the good creates negative externalities. 
B) no one can be excluded from the consumption of the good. 
C) the consumption of the good creates negative externalities. 
D) the exclusion principle does not apply to public goods. 
A) the production of the good creates negative externalities. 
B) no one can be excluded from the consumption of the good. 
C) the consumption of the good creates negative externalities. 
D) the exclusion principle does not apply to public goods.

Question 6

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

Accepted Answer

A) something obtainable at a zero price 
B) a lower crime rate for a community in which residents receive more education 
C) increased purchases of landscaping services by a homeowner that boost a neighbor's property value 
D) a discount for consumers buying in large quantity 
A) something obtainable at a zero price 
B) a lower crime rate for a community in which residents receive more education 
C) increased purchases of landscaping services by a homeowner that boost a neighbor's property value 
D) a discount for consumers buying in large quantity

Question 7

List and explain the four key assumptions in the theory of public choice.

Accepted Answer

The key assumptions in the theory of pub

Question 8

How do public goods differ from private goods?

Accepted Answer

A private good is characterized by the p

Question 9

-Refer to the above figure. Medicare subsidies have increased the price of medical services to   . The perceived price on the part of consumers is

Accepted Answer

A)    . 
B)    . 
C)    . 
D) undetermined without more information. 
A)    . 
B)    . 
C)    . 
D) undetermined without more information.

Question 10

The theory of public choice suggests that

Accepted Answer

A) government agencies tend to be inefficient because the people running them do not understand the concept of opportunity cost. 
B) government agencies tend to be inefficient because they are subject to institutional arrangements in which managers do not have an incentive to be efficient. 
C) the goods provided by government, whether public or private goods, are not scarce. 
D) you can lower your tax bill if you are careful not to consume too many government resources, regardless of what your neighbors do. 
A) government agencies tend to be inefficient because the people running them do not understand the concept of opportunity cost. 
B) government agencies tend to be inefficient because they are subject to institutional arrangements in which managers do not have an incentive to be efficient. 
C) the goods provided by government, whether public or private goods, are not scarce. 
D) you can lower your tax bill if you are careful not to consume too many government resources, regardless of what your neighbors do.

Question 11

Market failures

Accepted Answer

A) prevent the price system from attaining economic efficiency. 
B) result in quantities and prices that are socially desirable. 
C) strengthen economic efficiency by forcing unprofitable firms to close. 
D) weaken the argument for government intervention in the economy. 
A) prevent the price system from attaining economic efficiency. 
B) result in quantities and prices that are socially desirable. 
C) strengthen economic efficiency by forcing unprofitable firms to close. 
D) weaken the argument for government intervention in the economy.

Question 12

A difference between the market and the public sector is that

Accepted Answer

A) scarcity exists only in the market sector. 
B) government can use force, while the market does not. 
C) we can only vote in the public sector. 
D) the cost of private goods to society is zero. 
A) scarcity exists only in the market sector. 
B) government can use force, while the market does not. 
C) we can only vote in the public sector. 
D) the cost of private goods to society is zero.

Question 13

The funds that polluters pay that gives them the right to discharge into the air or water a certain amount of pollution are

Accepted Answer

A) special subsidies. 
B) regulation fees. 
C) external costs. 
D) effluent fees. 
A) special subsidies. 
B) regulation fees. 
C) external costs. 
D) effluent fees.

Question 14

Briefly explain why government subsidies are a reason for the declining student performance in public education.

Accepted Answer

This is due to the incentive problems of

Question 15

The legal system in the United States tends

Accepted Answer

A) to support monopolies. 
B) to actively discourage unionization. 
C) to discourage the entry of new firms into industries. 
D) to promote competition. 
A) to support monopolies. 
B) to actively discourage unionization. 
C) to discourage the entry of new firms into industries. 
D) to promote competition.

Question 16

Explain what market failure is. How does market failure relate to the price system? How does market failure relate to the role of government?

Accepted Answer

Market failure is a situation in which a

Question 17

Which of the following would be classified as a public good?

Accepted Answer

A) state lotteries 
B) telephone service 
C) cable TV programming 
D) national defense 
A) state lotteries 
B) telephone service 
C) cable TV programming 
D) national defense

Question 18

Which of the following does NOT involve transfers in kind?

Accepted Answer

A) Public housing 
B) Food stamps 
C) Medicare 
D) Salaries of government employees 
A) Public housing 
B) Food stamps 
C) Medicare 
D) Salaries of government employees

Question 19

All of the following are characteristics of public goods EXCEPT

Accepted Answer

A) Public goods can be used by more people at no additional cost. 
B) The good can be consumed by everyone at the same time without reducing what is available for anyone else. 
C) The exclusion principle. 
D) The goods are perfectly divisible. 
A) Public goods can be used by more people at no additional cost. 
B) The good can be consumed by everyone at the same time without reducing what is available for anyone else. 
C) The exclusion principle. 
D) The goods are perfectly divisible.

Question 20

Which of the following types of goods would most likely be classified as a government-inhibited good?

Accepted Answer

A) heroin 
B) marijuana 
C) tobacco 
D) All of the above are correct. 
A) heroin 
B) marijuana 
C) tobacco 
D) All of the above are correct.

Exam 5: Public Spending and Public Choice

Consumers are sovereign when

Which of the following is NOT an economic function of government?

Which of the following types of goods is subject to the free-rider problem?

The amount of government spending on education per public school student has ________ since 1960, and the achievement level of students has generally ________ since that time.

Public goods are unlikely to be provided by the private sector because

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

List and explain the four key assumptions in the theory of public choice.

How do public goods differ from private goods?

-Refer to the above figure. Medicare subsidies have increased the price of medical services to . The perceived price on the part of consumers is

The theory of public choice suggests that

Market failures

A difference between the market and the public sector is that

The funds that polluters pay that gives them the right to discharge into the air or water a certain amount of pollution are

Briefly explain why government subsidies are a reason for the declining student performance in public education.

The legal system in the United States tends

Explain what market failure is. How does market failure relate to the price system? How does market failure relate to the role of government?

Which of the following would be classified as a public good?

Which of the following does NOT involve transfers in kind?

All of the following are characteristics of public goods EXCEPT

Which of the following types of goods would most likely be classified as a government-inhibited 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

Filters

The amount of government spending on education per public school student has since 1960, and the achievement level of students has generally since that time.