Question 1

Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government.

Accepted Answer

Medicare reduces the price that the elde

Question 2

Public schools

Accepted Answer

A) allow students to get an education without incurring any opportunity cost. 
B) provide education at a price below the market price. 
C) provide education at a price above the market price. 
D) have done a better job of educating their students in science,math,reading,and writing as the subsidies they receive have increased over the years. 
A) allow students to get an education without incurring any opportunity cost. 
B) provide education at a price below the market price. 
C) provide education at a price above the market price. 
D) have done a better job of educating their students in science,math,reading,and writing as the subsidies they receive have increased over the years.

Question 3

How do public goods differ from private goods?

Accepted Answer

A private good is characterized by the p

Question 4

What is market failure? How can the government correct market failure?

Accepted Answer

Market failure is a situation in which t

Question 5

By subsidizing the provision of public education,the government

Accepted Answer

A) generates an increase in the quantity of educational services demanded. 
B) pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C) pushes the per-unit price that producers of educational services receive above the market clearing price. 
D) All of the above 
A) generates an increase in the quantity of educational services demanded. 
B) pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C) pushes the per-unit price that producers of educational services receive above the market clearing price. 
D) All of the above

Question 6

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

Accepted Answer

A) an technologically inefficient market 
B) a market failure 
C) a laissez-faire market 
D) an external market 
A) an technologically inefficient market 
B) a market failure 
C) a laissez-faire market 
D) an external market

Question 7

The political functions of government differ from the economic functions of government in that

Accepted Answer

A) the political functions relate to income distribution while the economic functions relate to the way exchange is carried out. 
B) the political functions are performed at the federal government while the economic functions are at the state and local government levels. 
C) the political functions involve elections and the court systems while the economic functions involve taxation and transfers. 
D) the President deals with the economic functions while Congress deals with the political functions. 
A) the political functions relate to income distribution while the economic functions relate to the way exchange is carried out. 
B) the political functions are performed at the federal government while the economic functions are at the state and local government levels. 
C) the political functions involve elections and the court systems while the economic functions involve taxation and transfers. 
D) the President deals with the economic functions while Congress deals with the political functions.

Question 8

The government might provide a subsidy when

Accepted Answer

A) a negative externality exists. 
B) an effluent fee has been unsuccessful. 
C) it wants to increase the amount of a good consumed. 
D) it wants to transform a negative externality into a positive externality. 
A) a negative externality exists. 
B) an effluent fee has been unsuccessful. 
C) it wants to increase the amount of a good consumed. 
D) it wants to transform a negative externality into a positive externality.

Question 9

Briefly explain the similarities and differences of decision making by the market sector and the public sector.

Accepted Answer

The similarities of the two sectors incl

Question 10

The difference between a private good and a public good is that

Accepted Answer

A) private goods are government-sponsored goods while public goods are government-inhibited goods. 
B) externalities are always created in the production process but not in the production of public goods. 
C) private goods make us happy while public goods do not. 
D) the exclusion principle applies to a private good but not to a public good. 
A) private goods are government-sponsored goods while public goods are government-inhibited goods. 
B) externalities are always created in the production process but not in the production of public goods. 
C) private goods make us happy while public goods do not. 
D) the exclusion principle applies to a private good but not to a public good.

Question 11

What happens in public schools when government funds subsidize education?

Accepted Answer

A) There is a shortage of schools. 
B) The quality of education rises. 
C) The cost of providing the education is less than what the student pays. 
D) The cost of providing the education is more than what the students pays. 
A) There is a shortage of schools. 
B) The quality of education rises. 
C) The cost of providing the education is less than what the student pays. 
D) The cost of providing the education is more than what the students pays.

Question 12

If a government determines that the provision of services by museums should be encouraged,then this means that the government has judged museum displays to be a(n)

Accepted Answer

A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good. 
A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good.

Question 13

In the U.S.economy,which of the following is NOT a generally accepted economic function of government?

Accepted Answer

A) Providing public goods 
B) Distributing consumer goods 
C) Ensuring economy-wide stability 
D) Promoting competition in the marketplace 
A) Providing public goods 
B) Distributing consumer goods 
C) Ensuring economy-wide stability 
D) Promoting competition in the marketplace

Question 14

When government intervenes in the production process because external benefits exist,it typically attempts

Accepted Answer

A) to impose a tax on each unit produced. 
B) to shift the industry's demand curve to the left. 
C) to shift the industry's demand curve to the right. 
D) to shift the industry's supply curve to the left. 
A) to impose a tax on each unit produced. 
B) to shift the industry's demand curve to the left. 
C) to shift the industry's demand curve to the right. 
D) to shift the industry's supply curve to the left.

Question 15

Whether an externality is positive or negative,it is always

Accepted Answer

A) evaluated by the Supreme Court of the United States. 
B) evaluated by the government. 
C) evaluated by the impact on the third party. 
D) judged by the profitability of the firm producing the product. 
A) evaluated by the Supreme Court of the United States. 
B) evaluated by the government. 
C) evaluated by the impact on the third party. 
D) judged by the profitability of the firm producing the product.

Question 16

If the government pays a per-unit subsidy to the producer of a service,we would expect to see a(n)
I.increase in the quantity demanded.
II.decrease in the out-of-pocket price paid by consumers.
III.increase in the quantity supplied by producers.

Accepted Answer

A) I only 
B) both I and II only 
C) both II and III only 
D) I,II,and III 
A) I only 
B) both I and II only 
C) both II and III only 
D) I,II,and III

Question 17

In graphical form,the presence of an external benefit that is ignored by consumers can be shown as

Accepted Answer

A) a market demand curve to the left of the market demand curve for which the consumers take the external benefit into account. 
B) a market demand curve to the right of the market demand curve for which the consumers take the external benefit into account. 
C) a market demand curve the same as the market demand curve for which the consumers take the external benefit into account. 
D) the absence of a market demand curve. 
A) a market demand curve to the left of the market demand curve for which the consumers take the external benefit into account. 
B) a market demand curve to the right of the market demand curve for which the consumers take the external benefit into account. 
C) a market demand curve the same as the market demand curve for which the consumers take the external benefit into account. 
D) the absence of a market demand curve.

Question 18

What type of policy does the government adopt in dealing with government-inhibited goods?

Accepted Answer

A) It subsidizes their consumption. 
B) It subsidizes their production. 
C) It provides them as public goods. 
D) It taxes,regulates,or prohibits their use. 
A) It subsidizes their consumption. 
B) It subsidizes their production. 
C) It provides them as public goods. 
D) It taxes,regulates,or prohibits their use.

Question 19

Which of the following might be a method that the government could use to promote the production of a good that generates positive externalities?

Accepted Answer

A) subsidies 
B) regulations 
C) financing additional production 
D) All of the above are correct. 
A) subsidies 
B) regulations 
C) financing additional production 
D) All of the above are correct.

Question 20

The "principle of rival consumption" applies to which of the following?

Accepted Answer

A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good 
A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good

Exam 4: Public Spending and Public Choice

Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government.

Public schools

How do public goods differ from private goods?

What is market failure? How can the government correct market failure?

By subsidizing the provision of public education,the government

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

The political functions of government differ from the economic functions of government in that

The government might provide a subsidy when

Briefly explain the similarities and differences of decision making by the market sector and the public sector.

The difference between a private good and a public good is that

What happens in public schools when government funds subsidize education?

If a government determines that the provision of services by museums should be encouraged,then this means that the government has judged museum displays to be a(n)

In the U.S.economy,which of the following is NOT a generally accepted economic function of government?

When government intervenes in the production process because external benefits exist,it typically attempts

Whether an externality is positive or negative,it is always

If the government pays a per-unit subsidy to the producer of a service,we would expect to see a(n) I.increase in the quantity demanded. II.decrease in the out-of-pocket price paid by consumers. III.increase in the quantity supplied by producers.

In graphical form,the presence of an external benefit that is ignored by consumers can be shown as

What type of policy does the government adopt in dealing with government-inhibited goods?

Which of the following might be a method that the government could use to promote the production of a good that generates positive externalities?

The "principle of rival consumption" applies to which of the following?

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

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