Question 1

The study of government expenditure and tax policy and the impacts of these policies on the economy is called:

Accepted Answer

A)  federal choice. 
B)  federal deficit. 
C)  public finance. 
D)  public debt. 
A)  federal choice. 
B)  federal deficit. 
C)  public finance. 
D)  public debt. C

Question 2

In the case of public goods:

Accepted Answer

A)  the role of government is to stay out of the picture and let the market provide them. 
B)  government could produce the goods. 
C)  government would never pay private firms to produce them. 
D)  there is no incentive to be a free rider. 
A)  the role of government is to stay out of the picture and let the market provide them. 
B)  government could produce the goods. 
C)  government would never pay private firms to produce them. 
D)  there is no incentive to be a free rider. B

Question 3

In the Case in Point on Externalities, Irrationality, and Smoking, economists Gruber and Mullainathan determined that people with a propensity to smoke:

Accepted Answer

A)  did not act in a manner consistent with bounded willpower or time inconsistency. 
B)  had constant utility as excise taxes increased because of perfectly inelastic demand. 
C)  would have higher utility as a result of higher excise taxes. 
D)  would gain more utility as a result of lower excise taxes. 
A)  did not act in a manner consistent with bounded willpower or time inconsistency. 
B)  had constant utility as excise taxes increased because of perfectly inelastic demand. 
C)  would have higher utility as a result of higher excise taxes. 
D)  would gain more utility as a result of lower excise taxes. C

Question 4

A progressive tax is one that takes:

Accepted Answer

A)  a fixed percentage of income. 
B)  a lower percentage of income as income rises. 
C)  a higher percentage of income as income rises. 
D)  higher percentage of income as income falls. 
A)  a fixed percentage of income. 
B)  a lower percentage of income as income rises. 
C)  a higher percentage of income as income rises. 
D)  higher percentage of income as income falls.

Question 5

Paying a tax of $20 on an income of $100, a tax of $15 on an income of $200, and a tax of $12 on an income of $300 is an example of a:

Accepted Answer

A)  constant-rate tax. 
B)  proportional tax. 
C)  progressive tax. 
D)  regressive tax. 
A)  constant-rate tax. 
B)  proportional tax. 
C)  progressive tax. 
D)  regressive tax.

Question 6

Use the following to answer question(s): Correcting for Market Failure: Imperfect Competition
  
-(Exhibit: Correcting for Market Failure: Imperfect Competition) If the government intervenes to induce the imperfectly competitive firm shown in this exhibit to produce at the efficient level of output, the net gain will be area:

Accepted Answer

A)  RUVW minus VNM. 
B)  TUV. 
C)  NVM. 
D)  WVMZ. 
A)  RUVW minus VNM. 
B)  TUV. 
C)  NVM. 
D)  WVMZ.

Question 7

A cost that is imposed when an action by one agent harms another, outside of any market exchange, is a(n):

Accepted Answer

A)  regulation. 
B)  marginal cost. 
C)  market price. 
D)  external cost. 
A)  regulation. 
B)  marginal cost. 
C)  market price. 
D)  external cost.

Question 8

Taxes paid on the purchase of most consumption goods would fall into the category of:

Accepted Answer

A)  personal income tax. 
B)  property tax. 
C)  sales tax. 
D)  excise tax. 
A)  personal income tax. 
B)  property tax. 
C)  sales tax. 
D)  excise tax.

Question 9

Economist Herbert Simon suggested that individuals possess limited abilities and limited time for processing information resulting in sub-optimal problem solving and bounded rationality.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer question(s): Market Failure
  
-(Exhibit: Market Failure) A competitive market, free of market failures, will achieve an equilibrium price _______ and an equilibrium quantity _______ .

Accepted Answer

A)  A; E 
B)  A; G 
C)  B; F 
D)  C; E 
A)  A; E 
B)  A; G 
C)  B; F 
D)  C; E

Question 11

In their effect, sales taxes are considered to be:

Accepted Answer

A)  proportional. 
B)  progressive 
C)  degressive. 
D)  regressive. 
A)  proportional. 
B)  progressive 
C)  degressive. 
D)  regressive.

Question 12

In analyzing the impact of a progressive tax system, economists focus on the ________ tax rate.

Accepted Answer

A)  average 
B)  opportunity 
C)  total 
D)  marginal 
A)  average 
B)  opportunity 
C)  total 
D)  marginal

Question 13

Use the following to answer question(s): Tax Incidence
  
-(Exhibit: Tax Incidence) All other things unchanged, when a good or service is characterized by a relatively inelastic demand, as shown in Panel _______ , the greater share of the burden of an excise tax imposed on it (shown by the tax wedge in each panel), is borne by _______ .

Accepted Answer

A)  (c); buyers 
B)  (c); sellers 
C)  (d); sellers 
D)  (d); buyers 
A)  (c); buyers 
B)  (c); sellers 
C)  (d); sellers 
D)  (d); buyers

Question 14

If the marginal benefit received from a good is greater than the marginal opportunity cost of production, then:

Accepted Answer

A)  society's well-being can be improved if production increases. 
B)  society's well-being can be improved if production decreases. 
C)  society's well-being cannot be improved by changing production. 
D)  the market is producing too much of the good. 
A)  society's well-being can be improved if production increases. 
B)  society's well-being can be improved if production decreases. 
C)  society's well-being cannot be improved by changing production. 
D)  the market is producing too much of the good.

Question 15

Annual taxes paid on a home would fall into the category of:

Accepted Answer

A)  personal income tax. 
B)  corporate income tax. 
C)  sales tax. 
D)  property tax. 
A)  personal income tax. 
B)  corporate income tax. 
C)  sales tax. 
D)  property tax.

Question 16

Public choice theory _______ the notion that people in the public sector seek to ________ social welfare.

Accepted Answer

A)  accepts; maximize 
B)  accepts; minimize 
C)  rejects; maximize 
D)  doesn't consider; maximize 
A)  accepts; maximize 
B)  accepts; minimize 
C)  rejects; maximize 
D)  doesn't consider; maximize

Question 17

Use the following to answer question(s): Correcting for Market Failure: A Public Good
  
-(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.The efficient price would be _______ and the efficient output would be _______ , which suggests the implementation of a government _______.

Accepted Answer

A)  lower; greater; tax 
B)  P₁; W; subsidy 
C)  higher; greater; subsidy 
D)  P₂; Q; subsidy 
A)  lower; greater; tax 
B)  P₁; W; subsidy 
C)  higher; greater; subsidy 
D)  P₂; Q; subsidy

Question 18

Firms that supply a good in an imperfectly competitive private market will produce more of a good than is efficient.

Accepted Answer

A) True 
 B)False

Question 19

Determining whether the burden of taxes falls on consumers, workers, or owners of other factors of production is:

Accepted Answer

A)  tax incidence analysis. 
B)  government spending theory. 
C)  public interest theory. 
D)  public choice theory. 
A)  tax incidence analysis. 
B)  government spending theory. 
C)  public interest theory. 
D)  public choice theory.

Question 20

Use the following to answer question(s): Tax Incidence
  
-(Exhibit: Tax Incidence) All other things unchanged, when a good or service is characterized by a relatively elastic supply, as shown in Panel _______ , the greater share of the burden of an excise tax imposed on it (shown by the tax wedge in each panel) is borne by _______.

Accepted Answer

A)  (a); buyers 
B)  (b); sellers 
C)  (b); buyers 
D)  (a); sellers 
A)  (a); buyers 
B)  (b); sellers 
C)  (b); buyers 
D)  (a); sellers

The study of government expenditure and tax policy and the impacts of these policies on the economy is called:

In the case of public goods:

In the Case in Point on Externalities, Irrationality, and Smoking, economists Gruber and Mullainathan determined that people with a propensity to smoke:

A progressive tax is one that takes:

Paying a tax of $20 on an income of $100, a tax of $15 on an income of $200, and a tax of $12 on an income of $300 is an example of a:

A cost that is imposed when an action by one agent harms another, outside of any market exchange, is a(n):

Taxes paid on the purchase of most consumption goods would fall into the category of:

Economist Herbert Simon suggested that individuals possess limited abilities and limited time for processing information resulting in sub-optimal problem solving and bounded rationality.

Use the following to answer question(s): Market Failure -(Exhibit: Market Failure) A competitive market, free of market failures, will achieve an equilibrium price _ and an equilibrium quantity _ .

In their effect, sales taxes are considered to be:

In analyzing the impact of a progressive tax system, economists focus on the ________ tax rate.

If the marginal benefit received from a good is greater than the marginal opportunity cost of production, then:

Annual taxes paid on a home would fall into the category of:

Public choice theory _ the notion that people in the public sector seek to __ social welfare.

Firms that supply a good in an imperfectly competitive private market will produce more of a good than is efficient.

Determining whether the burden of taxes falls on consumers, workers, or owners of other factors of production is:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 15: Public Finance and Public Choice

The study of government expenditure and tax policy and the impacts of these policies on the economy is called:

In the case of public goods:

In the Case in Point on Externalities, Irrationality, and Smoking, economists Gruber and Mullainathan determined that people with a propensity to smoke:

A progressive tax is one that takes:

Paying a tax of $20 on an income of $100, a tax of $15 on an income of $200, and a tax of $12 on an income of $300 is an example of a:

A cost that is imposed when an action by one agent harms another, outside of any market exchange, is a(n):

Taxes paid on the purchase of most consumption goods would fall into the category of:

Economist Herbert Simon suggested that individuals possess limited abilities and limited time for processing information resulting in sub-optimal problem solving and bounded rationality.

Use the following to answer question(s): Market Failure -(Exhibit: Market Failure) A competitive market, free of market failures, will achieve an equilibrium price _______ and an equilibrium quantity _______ .

In their effect, sales taxes are considered to be:

In analyzing the impact of a progressive tax system, economists focus on the ________ tax rate.

If the marginal benefit received from a good is greater than the marginal opportunity cost of production, then:

Annual taxes paid on a home would fall into the category of:

Public choice theory _______ the notion that people in the public sector seek to ________ social welfare.

Firms that supply a good in an imperfectly competitive private market will produce more of a good than is efficient.

Determining whether the burden of taxes falls on consumers, workers, or owners of other factors of production is:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Use the following to answer question(s): Market Failure -(Exhibit: Market Failure) A competitive market, free of market failures, will achieve an equilibrium price _ and an equilibrium quantity _ .

Public choice theory _ the notion that people in the public sector seek to __ social welfare.