Question 1

All of the following generate positive externalities EXCEPT

Accepted Answer

A) public health programs. 
B) lower marginal tax rates. 
C) requiring proof of inoculation before entering college. 
D) requiring proof of inoculation before entering elementary school. 
A) public health programs. 
B) lower marginal tax rates. 
C) requiring proof of inoculation before entering college. 
D) requiring proof of inoculation before entering elementary school.

Question 2

The purpose of an effluent fee imposed on a firm is

Accepted Answer

A) to increase output of its product by increasing the resources allocated to production. 
B) to increase output of its product by reducing the resources allocated to production. 
C) to reduce output by increasing production costs thereby reducing resources used. 
D) none of the above 
A) to increase output of its product by increasing the resources allocated to production. 
B) to increase output of its product by reducing the resources allocated to production. 
C) to reduce output by increasing production costs thereby reducing resources used. 
D) none of the above

Question 3

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

Accepted Answer

A) competition. 
B) excessive competition. 
C) destructive competition. 
D) a market failure. 
A) competition. 
B) excessive competition. 
C) destructive competition. 
D) a market failure.

Question 4

A fundamental aspect of public goods is that they

Accepted Answer

A) are just like private goods EXCEPT that everybody wants to consume the same amount. 
B) have positive externalities. 
C) are characterized by the principle of rival consumption. 
D) can be consumed jointly by many people simultaneously. 
A) are just like private goods EXCEPT that everybody wants to consume the same amount. 
B) have positive externalities. 
C) are characterized by the principle of rival consumption. 
D) can be consumed jointly by many people simultaneously.

Question 5

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

Accepted Answer

A) A person buys a car that is a lemon 
B) A worker is injured on the job 
C) A new restaurant's success causes another to go out of business 
D) A new hotel ruins the view of the ocean for a few homeowners 
A) A person buys a car that is a lemon 
B) A worker is injured on the job 
C) A new restaurant's success causes another to go out of business 
D) A new hotel ruins the view of the ocean for a few homeowners

Question 6

The provision of a legal system is an important economic function of the government because

Accepted Answer

A) lawyers and judges tend to be high-income people. 
B) people need to feel safe when they go to work. 
C) the legal system affects how exchange takes place through its enforcement of contracts. 
D) the legal system affects the distribution of income through its awarding of damages in accident claims. 
A) lawyers and judges tend to be high-income people. 
B) people need to feel safe when they go to work. 
C) the legal system affects how exchange takes place through its enforcement of contracts. 
D) the legal system affects the distribution of income through its awarding of damages in accident claims.

Question 7

Which of the following could best be categorized as a public good?

Accepted Answer

A) an apartment in a public housing project 
B) a pumpkin pie 
C) public fireworks 
D) a race track 
A) an apartment in a public housing project 
B) a pumpkin pie 
C) public fireworks 
D) a race track

Question 8

Examples of transfers-in-kind include

Accepted Answer

A) tax rebates on both the federal and state levels. 
B) taxes on alcohol and tobacco. 
C) food stamps and public housing. 
D) political advertising. 
A) tax rebates on both the federal and state levels. 
B) taxes on alcohol and tobacco. 
C) food stamps and public housing. 
D) political advertising.

Question 9

Which of the following is NOT a transfer payment?

Accepted Answer

A) Medicare 
B) Social Security retirement payments 
C) Social Security disability payments 
D) spending on national defense 
A) Medicare 
B) Social Security retirement payments 
C) Social Security disability payments 
D) spending on national defense

Question 10

If U.S.consumers increase their spending on hybrid cars by 60 percent,and 60 percent more hybrid cars are produced,this is known as the

Accepted Answer

A) majority rule. 
B) proportional rule. 
C) government rule. 
D) profit rule. 
A) majority rule. 
B) proportional rule. 
C) government rule. 
D) profit rule.

Question 11

Which of the following types of goods is subject to the free-rider problem?

Accepted Answer

A) A private good 
B) A public good 
C) A product that creates a positive externality 
D) A product that creates a negative externality 
A) A private good 
B) A public good 
C) A product that creates a positive externality 
D) A product that creates a negative externality

Question 12

The economic functions of government include

Accepted Answer

A) determining prices. 
B) setting wages in the public sector. 
C) protecting property rights. 
D) welfare. 
A) determining prices. 
B) setting wages in the public sector. 
C) protecting property rights. 
D) welfare.

Question 13

Which of the following leads to an underallocation of resources to a specific economic activity?

Accepted Answer

A) External costs 
B) External benefits 
C) Marginal costs 
D) Effluent benefits 
A) External costs 
B) External benefits 
C) Marginal costs 
D) Effluent benefits

Question 14

A situation in which the market system allocates too many resources to the production of a given activity is known as

Accepted Answer

A) market allocation. 
B) market failure. 
C) market efficiency. 
D) market breakdown. 
A) market allocation. 
B) market failure. 
C) market efficiency. 
D) market breakdown.

Question 15

All of the following illustrate how government can correct for positive externalities EXCEPT

Accepted Answer

A) subsidies. 
B) regulation. 
C) government financing and production. 
D) charging effluent fees. 
A) subsidies. 
B) regulation. 
C) government financing and production. 
D) charging effluent fees.

Question 16

When costs spill over to third parties,there is a(n)

Accepted Answer

A) cost overrun 
B) excessive competition. 
C) negative externality. 
D) government subsidy. 
A) cost overrun 
B) excessive competition. 
C) negative externality. 
D) government subsidy.

Question 17

A public museum is an example of a

Accepted Answer

A) government-sponsored good. 
B) public good. 
C) good which generates a positive externality. 
D) good which generates a negative externality. 
A) government-sponsored good. 
B) public good. 
C) good which generates a positive externality. 
D) good which generates a negative externality.

Question 18

An example of a transfer payment is

Accepted Answer

A) the President's salary. 
B) unemployment insurance benefits. 
C) a payment to a defense contractor. 
D) court costs paid by the defendants in a law suit. 
A) the President's salary. 
B) unemployment insurance benefits. 
C) a payment to a defense contractor. 
D) court costs paid by the defendants in a law suit.

Question 19

Which of the following does NOT involve transfers in kind?

Accepted Answer

A) Public housing 
B) Food stamps 
C) Medicare 
D) Salaries of government employees 
A) Public housing 
B) Food stamps 
C) Medicare 
D) Salaries of government employees

Question 20

Which of the following would be classified as a public good?

Accepted Answer

A) state lotteries 
B) telephone service 
C) cable TV programming 
D) national defense 
A) state lotteries 
B) telephone service 
C) cable TV programming 
D) national defense

Exam 4: Public Spending and Public Choice

All of the following generate positive externalities EXCEPT

The purpose of an effluent fee imposed on a firm is

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

A fundamental aspect of public goods is that they

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

The provision of a legal system is an important economic function of the government because

Which of the following could best be categorized as a public good?

Examples of transfers-in-kind include

Which of the following is NOT a transfer payment?

If U.S.consumers increase their spending on hybrid cars by 60 percent,and 60 percent more hybrid cars are produced,this is known as the

Which of the following types of goods is subject to the free-rider problem?

The economic functions of government include

Which of the following leads to an underallocation of resources to a specific economic activity?

A situation in which the market system allocates too many resources to the production of a given activity is known as

All of the following illustrate how government can correct for positive externalities EXCEPT

When costs spill over to third parties,there is a(n)

A public museum is an example of a

An example of a transfer payment is

Which of the following does NOT involve transfers in kind?

Which of the following would be classified as a public good?

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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