Question 1

The government's policy of reducing payments for physicians' services has generated a relative

Accepted Answer

A)  increase in the number of physicians in the program. 
B)  reduction in the number of physicians in the program. 
C)  reduction in the demand for medical services. 
D)  increase in the income of the physicians remaining in the program. 
A)  increase in the number of physicians in the program. 
B)  reduction in the number of physicians in the program. 
C)  reduction in the demand for medical services. 
D)  increase in the income of the physicians remaining in the program.

Question 2

When a Canadian citizen enjoys military protection in Canada without contributing to the cost of Canada's defense budget, then

Accepted Answer

A)  this Canadian citizen is a free rider. 
B)  Canada is a free rider. 
C)  this citizen receives no benefits if Canada is attacked. 
D)  Canada's defense budget will run out of funds. 
A)  this Canadian citizen is a free rider. 
B)  Canada is a free rider. 
C)  this citizen receives no benefits if Canada is attacked. 
D)  Canada's defense budget will run out of funds.

Question 3

Suppose a valley periodically floods. A dam can be built in the river that would prevent the flooding. Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

Accepted Answer

The dam would be indivisible since it mu

Question 4

Which of the following is FALSE about public-sector decision making?

Accepted Answer

A)  Decisions are based on majority rule. 
B)  The price charged to consumers is often less than its full opportunity cost. 
C)  Decisions involve no opportunity cost. 
D)  Incentives play a role in decision making. 
A)  Decisions are based on majority rule. 
B)  The price charged to consumers is often less than its full opportunity cost. 
C)  Decisions involve no opportunity cost. 
D)  Incentives play a role in decision making.

Question 5

When government intervenes in the production process because external costs exist, it typically attempts to shift the industry's

Accepted Answer

A)  demand curve to the right. 
B)  demand curve to the left. 
C)  supply curve to the right. 
D)  supply curve to the left. 
A)  demand curve to the right. 
B)  demand curve to the left. 
C)  supply curve to the right. 
D)  supply curve to the left.

Question 6

The difference between the economic and political functions of government is that

Accepted Answer

A)  the economic function is concerned with the Federal Taxation system while the political function is not. 
B)  the economic function is concerned with correcting for market failures while the political function is not. 
C)  the economic function is concerned with the reallocation of income while the political function is not. 
D)  the economic function encourages merit goods while the political function discourages demerit goods. 
A)  the economic function is concerned with the Federal Taxation system while the political function is not. 
B)  the economic function is concerned with correcting for market failures while the political function is not. 
C)  the economic function is concerned with the reallocation of income while the political function is not. 
D)  the economic function encourages merit goods while the political function discourages demerit goods.

Question 7

A price system is considered to be efficient when

Accepted Answer

A)  it fails to have the goods that consumers want. 
B)  an underground market develops. 
C)  all resources are allocated to the highest-valued uses. 
D)  firms produce more than what consumers want. 
A)  it fails to have the goods that consumers want. 
B)  an underground market develops. 
C)  all resources are allocated to the highest-valued uses. 
D)  firms produce more than what consumers want.

Question 8

Under present U.S. law, marijuana is an example of

Accepted Answer

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

Question 9

One major characteristic of the price system is that

Accepted Answer

A)  consumers together are the ones who ultimately decide what is produced. 
B)  individual sellers ultimately decide what is produced in the market. 
C)  competition among sellers is reduced. 
D)  all exchanges are regulated by the government. 
A)  consumers together are the ones who ultimately decide what is produced. 
B)  individual sellers ultimately decide what is produced in the market. 
C)  competition among sellers is reduced. 
D)  all exchanges are regulated by the government.

Question 10

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 11

A subsidy is sometimes used by government to correct the problems associated with

Accepted Answer

A)  negative externalities. 
B)  positive externalities. 
C)  internal benefits. 
D)  external benefits. 
A)  negative externalities. 
B)  positive externalities. 
C)  internal benefits. 
D)  external benefits.

Question 12

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

Accepted Answer

A)  flood control 
B)  post office 
C)  health care 
D)  welfare 
A)  flood control 
B)  post office 
C)  health care 
D)  welfare

Question 13

-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 14

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 15

How have some patients been harmed by Medicare reimbursement caps?

Accepted Answer

A)  They have been discharged from the hospital too soon, so that the hospital can cut costs. 
B)  They have been kept in the hospital too long, so that the hospital can get a higher reimbursement amount. 
C)  They have had to undergo unnecessary procedures, so that the hospital can get a higher reimbursement amount. 
D)  They have had to wait too long for essential procedures. 
A)  They have been discharged from the hospital too soon, so that the hospital can cut costs. 
B)  They have been kept in the hospital too long, so that the hospital can get a higher reimbursement amount. 
C)  They have had to undergo unnecessary procedures, so that the hospital can get a higher reimbursement amount. 
D)  They have had to wait too long for essential procedures.

Question 16

Is there any common characteristic shared by government-inhibited goods and government-sponsored goods? Explain briefly.

Accepted Answer

Government-inhibited and government-spon

Question 17

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 18

The economic role of the legal system might best be described as

Accepted Answer

A)  promoting the productive efficiency of competitive markets. 
B)  identifying and producing public goods. 
C)  establishing the "rules of the game" and acting as a referee when disputes arise among market participants. 
D)  identifying and producing merit goods. 
A)  promoting the productive efficiency of competitive markets. 
B)  identifying and producing public goods. 
C)  establishing the "rules of the game" and acting as a referee when disputes arise among market participants. 
D)  identifying and producing merit goods.

Question 19

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 20

What are the voting rules followed by the political system as opposed to the market system?

Accepted Answer

In the political system, one person gets

Exam 5: Public Spending and Public Choice

The government's policy of reducing payments for physicians' services has generated a relative

When a Canadian citizen enjoys military protection in Canada without contributing to the cost of Canada's defense budget, then

Suppose a valley periodically floods. A dam can be built in the river that would prevent the flooding. Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

Which of the following is FALSE about public-sector decision making?

When government intervenes in the production process because external costs exist, it typically attempts to shift the industry's

The difference between the economic and political functions of government is that

A price system is considered to be efficient when

Under present U.S. law, marijuana is an example of

One major characteristic of the price system is that

A public museum is an example of a

A subsidy is sometimes used by government to correct the problems associated with

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

-The government might provide a subsidy when

Whether an externality is positive or negative, it is always

How have some patients been harmed by Medicare reimbursement caps?

Is there any common characteristic shared by government-inhibited goods and government-sponsored goods? Explain briefly.

The incentive structure is a

The economic role of the legal system might best be described as

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

What are the voting rules followed by the political system as opposed to the market system?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

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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