Question 1

Which of the following would be of the greatest interest to public choice economists?

Accepted Answer

A)  free trade 
B)  rent-seeking behavior 
C)  unemployment 
D)  inflation 
A)  free trade 
B)  rent-seeking behavior 
C)  unemployment 
D)  inflation

Question 2

The models of market failure suggest that government intervention may ________ resource allocation but that the result _______ .

Accepted Answer

A)  improve; will clearly be achieved 
B)  improve; may not be achieved 
C)  diminish; cannot be achieved 
D)  diminish; may not be achieved 
A)  improve; will clearly be achieved 
B)  improve; may not be achieved 
C)  diminish; cannot be achieved 
D)  diminish; may not be achieved

Question 3

Economist Herbert Simon suggested that individuals possess _____ time and resources with which to process information making these individuals _____ to solve problems optimally resulting in _____.

Accepted Answer

A)  unlimited; able; complete rationality 
B)  limited; unable; bounded rationality 
C)  reasonable; able; adaptive rationality 
D)  limited; unable; adaptive rationality 
A)  unlimited; able; complete rationality 
B)  limited; unable; bounded rationality 
C)  reasonable; able; adaptive rationality 
D)  limited; unable; adaptive rationality

Question 4

An efficient allocation of resources may be achieved if decisionmakers are faced with all the benefits and all the costs of their decisions.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

Markets _______ in the _______ of resources.

Accepted Answer

A)  usually result; equal distribution 
B)  never fail; efficient allocation 
C)  sometimes result; inefficient allocation 
D)  can never be counted on; efficient 
A)  usually result; equal distribution 
B)  never fail; efficient allocation 
C)  sometimes result; inefficient allocation 
D)  can never be counted on; efficient

Question 7

All spending by government agencies is called:

Accepted Answer

A)  government expenditures. 
B)  government purchases. 
C)  government services. 
D)  government revenues. 
A)  government expenditures. 
B)  government purchases. 
C)  government services. 
D)  government revenues.

Question 8

Government payments to individuals in the form of grants rather than as payments for labor or other services are:

Accepted Answer

A)  government spending. 
B)  government purchases. 
C)  government transfers. 
D)  transfer payments. 
A)  government spending. 
B)  government purchases. 
C)  government transfers. 
D)  transfer payments.

Question 9

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.If the government intervenes to correct for market failure to provide the efficient level of a public good, the government will generate increased benefits of:

Accepted Answer

A)  RUVW. 
B)  RTVW. 
C)  WVKX. 
D)  TUV. 
A)  RUVW. 
B)  RTVW. 
C)  WVKX. 
D)  TUV.

Question 10

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 reduction in cost of :

Accepted Answer

A)  WTUR. 
B)  WTVR. 
C)  TUV 
D)  UV 
A)  WTUR. 
B)  WTVR. 
C)  TUV 
D)  UV

Question 11

When external costs are involved, too much is produced by unregulated private markets.

Accepted Answer

A) True 
 B)False

Question 12

All transfer payments in the United States are means-tested.

Accepted Answer

A) True 
 B)False

Question 13

Social Security payments to retired persons is an example of:

Accepted Answer

A)  government spending shortages, and they always lead to deficits. 
B)  a government purchase. 
C)  a transfer payment. 
D)  income measured by using the value-added approach. 
A)  government spending shortages, and they always lead to deficits. 
B)  a government purchase. 
C)  a transfer payment. 
D)  income measured by using the value-added approach.

Question 14

If the marginal benefit received from a good is less 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 little 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 little of the good.

Question 15

The best example of a good that has zero marginal cost to add another consumer is:

Accepted Answer

A)  clothing. 
B)  ice cream. 
C)  a fishery in the ocean. 
D)  national defense. 
A)  clothing. 
B)  ice cream. 
C)  a fishery in the ocean. 
D)  national defense.

Question 16

Transfer payments are considered to be:

Accepted Answer

A)  earned income. 
B)  immoral in the United States. 
C)  income for which no exchange of goods or service is necessary. 
D)  a minor percentage of GDP (usually less than 1 percent). 
A)  earned income. 
B)  immoral in the United States. 
C)  income for which no exchange of goods or service is necessary. 
D)  a minor percentage of GDP (usually less than 1 percent).

Question 17

Rational abstention may very well explain why a large percentage of the eligible population in the United States do not vote.

Accepted Answer

A) True 
 B)False

Question 18

Transfer payments are considered to be unearned income.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  demand curve must include the willingness to pay of all members of society who benefit from the good. 
B)  demand curve must exclude the willingness to pay of all members of society who benefit from the good. 
C)  demand curve must include all opportunity costs imposed on society for producing the good. 
D)  supply curve must include the willingness to pay of all members of society who benefit from the good. 
A)  demand curve must include the willingness to pay of all members of society who benefit from the good. 
B)  demand curve must exclude the willingness to pay of all members of society who benefit from the good. 
C)  demand curve must include all opportunity costs imposed on society for producing the good. 
D)  supply curve must include the willingness to pay of all members of society who benefit from the good.

Question 20

According to the text, a private economy may generate a distribution of income that is not considered to be satisfactory because:

Accepted Answer

A)  workers get paid their marginal products. 
B)  there is an unequal distribution of talent. 
C)  the government will take care of people who suffer handicaps. 
D)  perfectly competitive labor markets misallocate resources. 
A)  workers get paid their marginal products. 
B)  there is an unequal distribution of talent. 
C)  the government will take care of people who suffer handicaps. 
D)  perfectly competitive labor markets misallocate resources.

Which of the following would be of the greatest interest to public choice economists?

The models of market failure suggest that government intervention may __ resource allocation but that the result _ .

Economist Herbert Simon suggested that individuals possess ___ time and resources with which to process information making these individuals _ to solve problems optimally resulting in ___.

An efficient allocation of resources may be achieved if decisionmakers are faced with all the benefits and all the costs of their decisions.

Markets _ in the _ of resources.

All spending by government agencies is called:

Government payments to individuals in the form of grants rather than as payments for labor or other services are:

When external costs are involved, too much is produced by unregulated private markets.

All transfer payments in the United States are means-tested.

Social Security payments to retired persons is an example of:

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

The best example of a good that has zero marginal cost to add another consumer is:

Transfer payments are considered to be:

Rational abstention may very well explain why a large percentage of the eligible population in the United States do not vote.

Transfer payments are considered to be unearned income.

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

According to the text, a private economy may generate a distribution of income that is not considered to be satisfactory because:

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

Which of the following would be of the greatest interest to public choice economists?

The models of market failure suggest that government intervention may ________ resource allocation but that the result _______ .

Economist Herbert Simon suggested that individuals possess _____ time and resources with which to process information making these individuals _____ to solve problems optimally resulting in _____.

An efficient allocation of resources may be achieved if decisionmakers are faced with all the benefits and all the costs of their decisions.

Markets _______ in the _______ of resources.

All spending by government agencies is called:

Government payments to individuals in the form of grants rather than as payments for labor or other services are:

When external costs are involved, too much is produced by unregulated private markets.

All transfer payments in the United States are means-tested.

Social Security payments to retired persons is an example of:

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

The best example of a good that has zero marginal cost to add another consumer is:

Transfer payments are considered to be:

Rational abstention may very well explain why a large percentage of the eligible population in the United States do not vote.

Transfer payments are considered to be unearned income.

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

According to the text, a private economy may generate a distribution of income that is not considered to be satisfactory because:

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

The models of market failure suggest that government intervention may __ resource allocation but that the result _ .

Economist Herbert Simon suggested that individuals possess ___ time and resources with which to process information making these individuals _ to solve problems optimally resulting in ___.

Markets _ in the _ of resources.