Question 1

When negative externalities exist,the private market equilibrium represents a

Accepted Answer

A) market price which is too low and a market quantity which is too low. 
B) market price which is too low and a market quantity which is too high. 
C) market price which is too high and a market quantity which is too low. 
D) market price which is too high and a market quantity which is too high. 
A) market price which is too low and a market quantity which is too low. 
B) market price which is too low and a market quantity which is too high. 
C) market price which is too high and a market quantity which is too low. 
D) market price which is too high and a market quantity which is too high.

Question 2

Pollution is caused by a market failure,in an industry in which there is

Accepted Answer

A) unemployment. 
B) an over-allocation of resources in production. 
C) excess demand. 
D) excessive cost borne by the firm. 
A) unemployment. 
B) an over-allocation of resources in production. 
C) excess demand. 
D) excessive cost borne by the firm.

Question 3

An important characteristic of private goods is

Accepted Answer

A) the nonexclusion principle. 
B) the principle of rival consumption. 
C) the principle of joint consumption. 
D) the principle of conspicuous consumption. 
A) the nonexclusion principle. 
B) the principle of rival consumption. 
C) the principle of joint consumption. 
D) the principle of conspicuous consumption.

Question 4

Which of the following is an example of a positive externality?

Accepted Answer

A) something obtainable at a zero price 
B) a lower crime rate for a community in which residents receive more education 
C) increased purchases of landscaping services by a homeowner that boost a neighbor's property value 
D) a discount for consumers buying in large quantity 
A) something obtainable at a zero price 
B) a lower crime rate for a community in which residents receive more education 
C) increased purchases of landscaping services by a homeowner that boost a neighbor's property value 
D) a discount for consumers buying in large quantity

Question 5

According to your text,which of the following represents the largest source of tax receipts for the Federal government?

Accepted Answer

A) sales taxes 
B) individual income taxes 
C) corporate income taxes 
D) property taxes 
A) sales taxes 
B) individual income taxes 
C) corporate income taxes 
D) property taxes

Question 6

A possible solution to the problems of external benefits is

Accepted Answer

A) to tax those receiving the extra benefits. 
B) production of the good by government. 
C) effluent fees. 
D) to restrict the amount of the good through direct government regulation. 
A) to tax those receiving the extra benefits. 
B) production of the good by government. 
C) effluent fees. 
D) to restrict the amount of the good through direct government regulation.

Question 7

The price system will allocate resources efficiently except when

Accepted Answer

A) consumers decide they want more of a good. 
B) no externalities exist. 
C) farmers decide to produce more corn. 
D) market failures exist. 
A) consumers decide they want more of a good. 
B) no externalities exist. 
C) farmers decide to produce more corn. 
D) market failures exist.

Question 8

The government tries to protect the competitive economic system by passing and enforcing

Accepted Answer

A) price controls. 
B) tariff legislation. 
C) antitrust laws. 
D) building codes and zoning laws. 
A) price controls. 
B) tariff legislation. 
C) antitrust laws. 
D) building codes and zoning laws.

Question 9

Private goods are goods

Accepted Answer

A) that carry a price. 
B) for which price is greater than zero. 
C) for which the more one person has the less is available for someone else. 
D) that are produced by the government. 
A) that carry a price. 
B) for which price is greater than zero. 
C) for which the more one person has the less is available for someone else. 
D) that are produced by the government.

Question 10

Graphically,the effects of an external cost can be shown as

Accepted Answer

A) a leftward shift of the market demand curve. 
B) a leftward shift of the market supply curve. 
C) a downward movement along the market demand curve. 
D) a rightward shift of the market supply curve. 
A) a leftward shift of the market demand curve. 
B) a leftward shift of the market supply curve. 
C) a downward movement along the market demand curve. 
D) a rightward shift of the market supply curve.

Question 11

All of the following are major sources for financing public education EXCEPT

Accepted Answer

A) income taxes. 
B) sales taxes. 
C) property taxes. 
D) government fees. 
A) income taxes. 
B) sales taxes. 
C) property taxes. 
D) government fees.

Question 12

Measures of student performance have not increased even though per-pupil government subsidies have increased because

Accepted Answer

A) there is a need for more funds to be spent. 
B) we have declining enrollment in public schools. 
C) parents and children value the last unit of educational services received more than the cost. 
D) parents and children value the last unit of educational services received less than the cost. 
A) there is a need for more funds to be spent. 
B) we have declining enrollment in public schools. 
C) parents and children value the last unit of educational services received more than the cost. 
D) parents and children value the last unit of educational services received less than the cost.

Question 13

An example of a public good is

Accepted Answer

A) software produced by Microsoft. 
B) housing subsidies. 
C) the car I own. 
D) the fire department. 
A) software produced by Microsoft. 
B) housing subsidies. 
C) the car I own. 
D) the fire department.

Question 14

Explain what market failure is.How does market failure relate to the price system? How does market failure relate to the role of government?

Accepted Answer

Market failure is a situation in which a

Question 15

The concept that Mr.Jones is going to enjoy the benefits of police protection even though he no longer pays taxes is called

Accepted Answer

A) the free-rider problem. 
B) the negative externality principle. 
C) the principle of rival consumption. 
D) the principle of anti-trust. 
A) the free-rider problem. 
B) the negative externality principle. 
C) the principle of rival consumption. 
D) the principle of anti-trust.

Question 16

Which of the following is an example of a positive externality?

Accepted Answer

A) A neighbor's flower garden that you enjoy seeing 
B) Traffic congestion 
C) An increased supply of chocolate lowers chocolate prices for all consumers 
D) Pollution 
A) A neighbor's flower garden that you enjoy seeing 
B) Traffic congestion 
C) An increased supply of chocolate lowers chocolate prices for all consumers 
D) Pollution

Question 17

A payment that is made by the government for which no goods or services are given in return is known as

Accepted Answer

A) a public good. 
B) a transfer payment. 
C) a negative externality. 
D) a free rider. 
A) a public good. 
B) a transfer payment. 
C) a negative externality. 
D) a free rider.

Question 18

Which one of the following is NOT a characteristic of public goods?

Accepted Answer

A) They are indivisible. 
B) It is difficult to charge people on the basis of how much they use. 
C) Public goods can be used by increasing numbers of people at no additional cost. 
D) Public goods are subject to the principle of rival consumption. 
A) They are indivisible. 
B) It is difficult to charge people on the basis of how much they use. 
C) Public goods can be used by increasing numbers of people at no additional cost. 
D) Public goods are subject to the principle of rival consumption.

Question 19

Which of the following would be considered an economic function of government?

Accepted Answer

A) providing a legal system 
B) promoting competition 
C) providing public goods 
D) All of the above are correct. 
A) providing a legal system 
B) promoting competition 
C) providing public goods 
D) All of the above are correct.

Question 20

Public goods are unlikely to be provided by the private sector because

Accepted Answer

A) the production of the good creates negative externalities. 
B) no one can be excluded from the consumption of the good. 
C) the consumption of the good creates negative externalities. 
D) the exclusion principle does not apply to public goods. 
A) the production of the good creates negative externalities. 
B) no one can be excluded from the consumption of the good. 
C) the consumption of the good creates negative externalities. 
D) the exclusion principle does not apply to public goods.

Exam 4: Public Spending and Public Choice

When negative externalities exist,the private market equilibrium represents a

Pollution is caused by a market failure,in an industry in which there is

An important characteristic of private goods is

Which of the following is an example of a positive externality?

According to your text,which of the following represents the largest source of tax receipts for the Federal government?

A possible solution to the problems of external benefits is

The price system will allocate resources efficiently except when

The government tries to protect the competitive economic system by passing and enforcing

Private goods are goods

Graphically,the effects of an external cost can be shown as

All of the following are major sources for financing public education EXCEPT

Measures of student performance have not increased even though per-pupil government subsidies have increased because

An example of a public good is

Explain what market failure is.How does market failure relate to the price system? How does market failure relate to the role of government?

The concept that Mr.Jones is going to enjoy the benefits of police protection even though he no longer pays taxes is called

Which of the following is an example of a positive externality?

A payment that is made by the government for which no goods or services are given in return is known as

Which one of the following is NOT a characteristic of public goods?

Which of the following would be considered an economic function of government?

Public goods are unlikely to be provided by the private sector because

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

Filters