Question 1

Government activities include(s):

Accepted Answer

A)  responding to market failure. 
B)  redistribution of incomes. 
C)  activities that encourage or discourage the consumption of some goods and services. 
D)  all of the above. 
A)  responding to market failure. 
B)  redistribution of incomes. 
C)  activities that encourage or discourage the consumption of some goods and services. 
D)  all of the above.

Question 2

The market failure of external cost is most likely to result if Peanuts 'R' Us:

Accepted Answer

A)  keeps secret a discovery that excessive consumption of peanut butter causes nearsightedness. 
B)  discards broken peanut shells on to an adjacent recreational area in the production of peanut butter. 
C)  is subject to performance standard regulations by the PBRC (Peanut Butter Regulatory Commission). 
D)  develops a new peanut butter processing machine that enhances competition. 
A)  keeps secret a discovery that excessive consumption of peanut butter causes nearsightedness. 
B)  discards broken peanut shells on to an adjacent recreational area in the production of peanut butter. 
C)  is subject to performance standard regulations by the PBRC (Peanut Butter Regulatory Commission). 
D)  develops a new peanut butter processing machine that enhances competition.

Question 3

If the marginal benefit received from a good is equal to 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 4

Purchases or the production of goods or services by government agencies are called:

Accepted Answer

A)  government purchases. 
B)  government transfers. 
C)  transfer payments. 
D)  public taxes. 
A)  government purchases. 
B)  government transfers. 
C)  transfer payments. 
D)  public taxes.

Question 5

If the purpose of taxation is to raise revenue, would it be better for the government to levy taxes on products whose demand is elastic or inelastic? Explain.Are there any other reasons why governments levy taxes? Explain.

Accepted Answer

If the purpose of taxation is to raise r

Question 6

Medicare is the largest transfer payment program in the U.S.

Accepted Answer

A) True 
 B)False

Question 7

An example of the benefits-received principle of taxation is a(n):

Accepted Answer

A)  gift tax. 
B)  cosmetics tax. 
C)  cigarette tax. 
D)  sewer tax. 
A)  gift tax. 
B)  cosmetics tax. 
C)  cigarette tax. 
D)  sewer tax.

Question 8

A distinguishing feature of public goods is that:

Accepted Answer

A)  the exclusion of consumers who don't pay for the goods is not possible. 
B)  the exclusion of consumers who don't pay for the goods is possible. 
C)  they create external benefits. 
D)  they may create external costs. 
A)  the exclusion of consumers who don't pay for the goods is not possible. 
B)  the exclusion of consumers who don't pay for the goods is possible. 
C)  they create external benefits. 
D)  they may create external costs.

Question 9

In the case of an external cost:

Accepted Answer

A)  the agent responsible for the cost must pay for the cost. 
B)  the government will always pay the cost. 
C)  the agent responsible for the external cost will produce too much of the good or service involved. 
D)  there is generally an offsetting social benefit. 
A)  the agent responsible for the cost must pay for the cost. 
B)  the government will always pay the cost. 
C)  the agent responsible for the external cost will produce too much of the good or service involved. 
D)  there is generally an offsetting social benefit.

Question 10

Behavioral economics suggest that individuals have bounded willpower and have a bias towards future consumption and future utility.

Accepted Answer

A) True 
 B)False

Question 11

The approach to government that assumes that the goal of government is to maximize welfare by seeking an efficient allocation of resources is called:

Accepted Answer

A)  public finance theory. 
B)  public choice theory. 
C)  public interest theory. 
D)  welfare theory. 
A)  public finance theory. 
B)  public choice theory. 
C)  public interest theory. 
D)  welfare theory.

Question 12

A tax that takes a ________ percentage of income as income _______ is a ________ tax.

Accepted Answer

A)  lower; rises; progressive 
B)  lower; rises; regressive 
C)  higher; rises; proportional 
D)  higher; falls; proportional 
A)  lower; rises; progressive 
B)  lower; rises; regressive 
C)  higher; rises; proportional 
D)  higher; falls; proportional

Question 13

The best example of a good for which exclusion is prohibitively costly is:

Accepted Answer

A)  a yard. 
B)  a house. 
C)  a bicycle. 
D)  national defense. 
A)  a yard. 
B)  a house. 
C)  a bicycle. 
D)  national defense.

Question 14

Use the following to answer question(s): Correcting for Market Failure: External Cost
  
-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit.If the government sector forces the private sector firms to face the external cost, the supply curve _______ from _______ to ________ .

Accepted Answer

A)  shifts right; S₂; S₁ 
B)  shifts left; S₁; S₂ 
C)  remains unchanged; S₁; S₁ 
D)  remains unchanged; S₂; S₂ 
A)  shifts right; S₂; S₁ 
B)  shifts left; S₁; S₂ 
C)  remains unchanged; S₁; S₁ 
D)  remains unchanged; S₂; S₂

Question 15

A transfer payment for which recipients qualify on the basis of income is:

Accepted Answer

A)  externality tested. 
B)  nonexternality tested. 
C)  means-tested. 
D)  non-means-tested. 
A)  externality tested. 
B)  nonexternality tested. 
C)  means-tested. 
D)  non-means-tested.

Question 16

A principle that suggests that people with more income or wealth should pay more taxes is the:

Accepted Answer

A)  ability-to-pay principle. 
B)  regressive tax principle. 
C)  progressive tax principle. 
D)  benefits-received principle. 
A)  ability-to-pay principle. 
B)  regressive tax principle. 
C)  progressive tax principle. 
D)  benefits-received principle.

Question 17

In order for government intervention in a situation of market failure to result in improved resource allocation, the government:

Accepted Answer

A)  needs the relevant information. 
B)  must have the proper goals. 
C)  may have to resist serious lobbying efforts. 
D)  All of the above are true. 
A)  needs the relevant information. 
B)  must have the proper goals. 
C)  may have to resist serious lobbying efforts. 
D)  All of the above are true.

Question 18

The property tax is a tax judged only according to the ability-to-pay principle.

Accepted Answer

A) True 
 B)False

Question 19

Public goods are efficiently provided if the price that consumers pay is:

Accepted Answer

A)  zero. 
B)  less than zero. 
C)  greater than zero but less than the marginal cost of production. 
D)  greater than the marginal cost of production. 
A)  zero. 
B)  less than zero. 
C)  greater than zero but less than the marginal cost of production. 
D)  greater than the marginal cost of production.

Question 20

Which of the following statements is true?

Accepted Answer

A)  U.S.government agencies produce or purchase nearly 40 percent of all goods and services produced in the nation each year. 
B)  The federal government is the largest single purchaser of goods and services in the world. 
C)  Public finance is involved with how individuals in the public sector make choices that maximize their utility. 
D)  In the United States, government purchases exceed government expenditures. 
A)  U.S.government agencies produce or purchase nearly 40 percent of all goods and services produced in the nation each year. 
B)  The federal government is the largest single purchaser of goods and services in the world. 
C)  Public finance is involved with how individuals in the public sector make choices that maximize their utility. 
D)  In the United States, government purchases exceed government expenditures.

Government activities include(s):

The market failure of external cost is most likely to result if Peanuts 'R' Us:

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

Purchases or the production of goods or services by government agencies are called:

If the purpose of taxation is to raise revenue, would it be better for the government to levy taxes on products whose demand is elastic or inelastic? Explain.Are there any other reasons why governments levy taxes? Explain.

Medicare is the largest transfer payment program in the U.S.

An example of the benefits-received principle of taxation is a(n):

A distinguishing feature of public goods is that:

In the case of an external cost:

Behavioral economics suggest that individuals have bounded willpower and have a bias towards future consumption and future utility.

The approach to government that assumes that the goal of government is to maximize welfare by seeking an efficient allocation of resources is called:

A tax that takes a ____ percentage of income as income _ is a ______ tax.

The best example of a good for which exclusion is prohibitively costly is:

A transfer payment for which recipients qualify on the basis of income is:

A principle that suggests that people with more income or wealth should pay more taxes is the:

In order for government intervention in a situation of market failure to result in improved resource allocation, the government:

The property tax is a tax judged only according to the ability-to-pay principle.

Public goods are efficiently provided if the price that consumers pay is:

Which of the following statements is true?

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

Government activities include(s):

The market failure of external cost is most likely to result if Peanuts 'R' Us:

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

Purchases or the production of goods or services by government agencies are called:

If the purpose of taxation is to raise revenue, would it be better for the government to levy taxes on products whose demand is elastic or inelastic? Explain.Are there any other reasons why governments levy taxes? Explain.

Medicare is the largest transfer payment program in the U.S.

An example of the benefits-received principle of taxation is a(n):

A distinguishing feature of public goods is that:

In the case of an external cost:

Behavioral economics suggest that individuals have bounded willpower and have a bias towards future consumption and future utility.

The approach to government that assumes that the goal of government is to maximize welfare by seeking an efficient allocation of resources is called:

A tax that takes a ________ percentage of income as income _______ is a ________ tax.

The best example of a good for which exclusion is prohibitively costly is:

A transfer payment for which recipients qualify on the basis of income is:

A principle that suggests that people with more income or wealth should pay more taxes is the:

In order for government intervention in a situation of market failure to result in improved resource allocation, the government:

The property tax is a tax judged only according to the ability-to-pay principle.

Public goods are efficiently provided if the price that consumers pay is:

Which of the following statements is true?

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

A tax that takes a ____ percentage of income as income _ is a ______ tax.