Exam 15: Public Finance and Public Choice

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 intervenes to correct for the external cost, there will be a(n)________ in _______ of _______ .

The field of economics that draws on psychology and neuroscience to understand how and why individuals make decisions is known as:

An example of a transfer payment is:

An example of a government purchase is:

In imperfectly competitive product markets, a consumer faces prices that equal marginal costs.

Over the past three decades, the amount of means-tested transfer payments in the United States has been:

The theory that assumes that government workers and politicians seek to maximize their own utility is called public choice theory.

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 intervenes to correct for the external cost, there will be a ________ of _______ .

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 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 _______ .

The primary source of government revenue is:

Suppose that Peanuts 'R' Us acquires ownership of all peanut butter processing plants in the country.This will most likely lead to the market failure of:

Governments engage in transfer payments in order to:

The assumption that individuals in the public sector make choices that maximize their own utility is characteristic of the _______ approach to studying public sector choice.

Public choice theory argues that individuals _______ their _______ when they ________ .

A condition necessary for a market to achieve economic efficiency is that the market:

The burden of a tax that is imposed on a good is said to fall on consumers if:

A public good is a good for which exclusion is prohibitively costly.

A proportional tax is one that takes a fixed percentage of income.

Tax incidence analysis seeks to determine:

The _______ principle implies that people with _______ should pay more taxes.