Question 1

Inoculations of children against infectious diseases are

Accepted Answer

A) an example of an external benefit. 
B) an example of an external cost. 
C) dangerous for society. 
D) an example of a public good. 
A) an example of an external benefit. 
B) an example of an external cost. 
C) dangerous for society. 
D) an example of a public good.

Question 2

The incentive structure is a

Accepted Answer

A) system of rewards and punishments that individuals consider when making decisions. 
B) system determined by the federal government that gives certain states more federal funds. 
C) system of infrastructure in the United States that improves commerce. 
D) system of checks and balances in the government. 
A) system of rewards and punishments that individuals consider when making decisions. 
B) system determined by the federal government that gives certain states more federal funds. 
C) system of infrastructure in the United States that improves commerce. 
D) system of checks and balances in the government.

Question 3

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

Accepted Answer

A) There is an increase in injuries to pedestrians caused by accidents resulting from electronic billboards distracting drivers. 
B) The opening of a new shopping mall increases the business of nearby restaurants. 
C) A consumer pays a higher price than another consumer does for the same product. 
D) Consumers pay a sales tax in addition to the price of a product. 
A) There is an increase in injuries to pedestrians caused by accidents resulting from electronic billboards distracting drivers. 
B) The opening of a new shopping mall increases the business of nearby restaurants. 
C) A consumer pays a higher price than another consumer does for the same product. 
D) Consumers pay a sales tax in addition to the price of a product.

Question 4

Public goods are basically

Accepted Answer

A) rival in consumption. 
B) nonrival in consumption. 
C) depletable in consumption. 
D) nondepletable in consumption. 
A) rival in consumption. 
B) nonrival in consumption. 
C) depletable in consumption. 
D) nondepletable in consumption.

Question 5

Public goods are characterized by the free-rider problem because

Accepted Answer

A) no one can be excluded from the benefits of public goods once they are produced. 
B) public goods are usually things that people really do not want to consume. 
C) public goods are characterized by the principle of rival consumption. 
D) public goods can easily be subdivided into small units. 
A) no one can be excluded from the benefits of public goods once they are produced. 
B) public goods are usually things that people really do not want to consume. 
C) public goods are characterized by the principle of rival consumption. 
D) public goods can easily be subdivided into small units.

Question 6

A shift from SS1U1B11S1U1B0 to SS1U1B12S1U1B0 reflects the change that happens when a negative externality is taken into account.A shift from DS1U1B11S1U1B0 to DS1U1B12S1U1B0 reflects the change that happens when a positive externality is taken into account.
-Refer to the above figures.An external cost exists.This will lead to a(n)

Accepted Answer

A) underproduction equal to $\mathrm { Q } _ { 1 }$ minus
$\mathrm { Q } _ { 2 }$ . 
B) overproduction equal to $\mathrm { Q } _ { 4 }$ minus
$\mathrm { Q } _ { 3 }$ . 
C) underproduction equal to $\mathrm { Q } _ { 4 }$ minus
$\mathrm { Q } _ { 3 }$ . 
D) overproduction equal to $\mathrm { Q } _ { 1 }$ minus
$\mathrm { Q } _ { 2 }$ . 
A) underproduction equal to $\mathrm { Q } _ { 1 }$ minus
$\mathrm { Q } _ { 2 }$ . 
B) overproduction equal to $\mathrm { Q } _ { 4 }$ minus
$\mathrm { Q } _ { 3 }$ . 
C) underproduction equal to $\mathrm { Q } _ { 4 }$ minus
$\mathrm { Q } _ { 3 }$ . 
D) overproduction equal to $\mathrm { Q } _ { 1 }$ minus
$\mathrm { Q } _ { 2 }$ .

Question 7

An example of a negative externality created in the market system would be

Accepted Answer

A) poverty. 
B) unemployment. 
C) an increased number of bird flu patients. 
D) water pollution. 
A) poverty. 
B) unemployment. 
C) an increased number of bird flu patients. 
D) water pollution.

Question 8

Public goods face the

Accepted Answer

A) principle of rival consumption. 
B) free-rider problem. 
C) law of overproduction. 
D) exclusion principle. 
A) principle of rival consumption. 
B) free-rider problem. 
C) law of overproduction. 
D) exclusion principle.

Question 9

To correct for negative externalities,the government

Accepted Answer

A) should allow the price system do the correction. 
B) can impose a tax. 
C) can provide a subsidy to consumers. 
D) should create a public good. 
A) should allow the price system do the correction. 
B) can impose a tax. 
C) can provide a subsidy to consumers. 
D) should create a public good.

Question 10

Which of the following is an example of a public good?

Accepted Answer

A) Amtrak rail transport services 
B) Services of the U.S.Post Office 
C) The provision of medical care 
D) The provision of national defense 
A) Amtrak rail transport services 
B) Services of the U.S.Post Office 
C) The provision of medical care 
D) The provision of national defense

Question 11

-Refer to the above figure.An external cost exists.The amount of that cost is represented by

Accepted Answer

A)  $P _ { 2 }$ . 
B)  $\mathrm { Q } _ { 1 }$ . 
C) the vertical distance between point A and the supply curve S1. 
D) the distance between C and A. 
A)  $P _ { 2 }$ . 
B)  $\mathrm { Q } _ { 1 }$ . 
C) the vertical distance between point A and the supply curve S1. 
D) the distance between C and A.

Question 12

When the production of one good spills benefits over to third parties,the government should consider all of the following EXCEPT

Accepted Answer

A) subsidizing the consumption of the good. 
B) subsidizing the production of the good. 
C) creating tax incentives to encourage more consumption. 
D) taxing the production or consumption of the good. 
A) subsidizing the consumption of the good. 
B) subsidizing the production of the good. 
C) creating tax incentives to encourage more consumption. 
D) taxing the production or consumption of the good.

Question 13

A friend of yours receives a government voucher for an apartment in a public housing project.This apartment represents

Accepted Answer

A) a government-sponsored good. 
B) the free-rider problem. 
C) a public good. 
D) the drop-in-the-bucket problem. 
A) a government-sponsored good. 
B) the free-rider problem. 
C) a public good. 
D) the drop-in-the-bucket problem.

Question 14

The purpose of antitrust legislation is

Accepted Answer

A) to reduce unemployment. 
B) to reduce the power of monopoly. 
C) to increase the power of monopoly. 
D) to maximize employment for a given price level. 
A) to reduce unemployment. 
B) to reduce the power of monopoly. 
C) to increase the power of monopoly. 
D) to maximize employment for a given price level.

Question 15

The theory of public choice

Accepted Answer

A) is the theory of how government decides on what military hardware to purchase. 
B) considers government decision-making efficient. 
C) is the study of collective decision making. 
D) is the study of how negative externalities can be reduced. 
A) is the theory of how government decides on what military hardware to purchase. 
B) considers government decision-making efficient. 
C) is the study of collective decision making. 
D) is the study of how negative externalities can be reduced.

Question 16

Market failures include all of the following EXCEPT

Accepted Answer

A) equalization of quantity supplied and quantity demanded 
B) public goods 
C) positive externalities 
D) negative externalities 
A) equalization of quantity supplied and quantity demanded 
B) public goods 
C) positive externalities 
D) negative externalities

Question 17

The free-rider problem is

Accepted Answer

A) the use of private goods in one state by residents of another state. 
B) the incentive that people have to avoid paying for a public good. 
C) the incentive that people have once they are receiving welfare to keep getting welfare. 
D) that people cannot be forced to accept public goods. 
A) the use of private goods in one state by residents of another state. 
B) the incentive that people have to avoid paying for a public good. 
C) the incentive that people have once they are receiving welfare to keep getting welfare. 
D) that people cannot be forced to accept public goods.

Question 18

Market failures

Accepted Answer

A) prevent the price system from attaining economic efficiency. 
B) result in quantities and prices that are socially desirable. 
C) strengthen economic efficiency by forcing unprofitable firms to close. 
D) weaken the argument for government intervention in the economy. 
A) prevent the price system from attaining economic efficiency. 
B) result in quantities and prices that are socially desirable. 
C) strengthen economic efficiency by forcing unprofitable firms to close. 
D) weaken the argument for government intervention in the economy.

Question 19

Market failure occurs when

Accepted Answer

A) a good is too expensive for the market to provide. 
B) an unrestrained market economy leads to too few or too many resources going to a specific economic activity. 
C) one good is superior to another and drives it out of the market. 
D) the stock market experiences a very large loss. 
A) a good is too expensive for the market to provide. 
B) an unrestrained market economy leads to too few or too many resources going to a specific economic activity. 
C) one good is superior to another and drives it out of the market. 
D) the stock market experiences a very large loss.

Question 20

The current Medicare system is designed so that it actually encourages

Accepted Answer

A) cost reductions. 
B) higher costs of medical services. 
C) higher costs only for surgeries. 
D) lower drug costs for recipients. 
A) cost reductions. 
B) higher costs of medical services. 
C) higher costs only for surgeries. 
D) lower drug costs for recipients.

Exam 4: Public Spending and Public Choice

Inoculations of children against infectious diseases are

The incentive structure is a

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

Public goods are basically

Public goods are characterized by the free-rider problem because

A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account.A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account. -Refer to the above figures.An external cost exists.This will lead to a(n)

An example of a negative externality created in the market system would be

Public goods face the

To correct for negative externalities,the government

Which of the following is an example of a public good?

-Refer to the above figure.An external cost exists.The amount of that cost is represented by

When the production of one good spills benefits over to third parties,the government should consider all of the following EXCEPT

A friend of yours receives a government voucher for an apartment in a public housing project.This apartment represents

The purpose of antitrust legislation is

The theory of public choice

Market failures include all of the following EXCEPT

The free-rider problem is

Market failures

Market failure occurs when

The current Medicare system is designed so that it actually encourages

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

A shift from S₁ to S₂ reflects the change that happens when a negative externality is taken into account.A shift from D₁ to D₂ reflects the change that happens when a positive externality is taken into account. -Refer to the above figures.An external cost exists.This will lead to a(n)