Question 1

-In a free market system, competition generates economic efficiency only when

Accepted Answer

A)  individuals take into account the full opportunity cost of their actions. 
B)  consumers are motivated by a sense of the greater good, not their own self-interest. 
C)  firms are motivated by a sense of the greater good, not their desire for profit. 
D)  economic decisions are taken out the hands of individuals and placed in the hands of government officials. 
A)  individuals take into account the full opportunity cost of their actions. 
B)  consumers are motivated by a sense of the greater good, not their own self-interest. 
C)  firms are motivated by a sense of the greater good, not their desire for profit. 
D)  economic decisions are taken out the hands of individuals and placed in the hands of government officials.

Question 2

In public education, the value of the services provided is

Accepted Answer

A)  greater than the value that parents and students place on the services. 
B)  equal to the value that parents and students place on the services. 
C)  less than the value that parents and students place on the services. 
D)  zero since they are a public good. 
A)  greater than the value that parents and students place on the services. 
B)  equal to the value that parents and students place on the services. 
C)  less than the value that parents and students place on the services. 
D)  zero since they are a public good.

Question 3

Which of the following statements is NOT true of external benefits?

Accepted Answer

A)  External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B)  External benefits lead to a price in the market that is too high. 
C)  External benefits lead to too few of the goods that have the external benefit being produced. 
D)  External benefits are a good thing for the allocation of resources because people are getting something at no cost. 
A)  External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B)  External benefits lead to a price in the market that is too high. 
C)  External benefits lead to too few of the goods that have the external benefit being produced. 
D)  External benefits are a good thing for the allocation of resources because people are getting something at no cost.

Question 4

The amount of government spending on education per public school student has ________ since 1960, and the achievement level of students has generally ________ since that time.

Accepted Answer

A)  increased; increased 
B)  decreased; decreased 
C)  increased; decreased 
D)  decreased; increased 
A)  increased; increased 
B)  decreased; decreased 
C)  increased; decreased 
D)  decreased; increased

Question 5

How do public goods differ from private goods?

Accepted Answer

A private good is characterized by the p

Question 6

An example of a market failure is

Accepted Answer

A)  a firm is dumping toxic waste that is making people sick. 
B)  when not everyone who wants to see a major league football game can. 
C)  when there is an increase in gasoline demand and a shortage develops. 
D)  when the market prices of some vehicles are too high for some buyers. 
A)  a firm is dumping toxic waste that is making people sick. 
B)  when not everyone who wants to see a major league football game can. 
C)  when there is an increase in gasoline demand and a shortage develops. 
D)  when the market prices of some vehicles are too high for some buyers.

Question 7

If public subsidies for education were eliminated, what would you expect as an outcome in the market for educational services?

Accepted Answer

A)  More students would enroll in school. 
B)  The price students pay to attend school would equal the value of an additional unit of education consumed. 
C)  There would be no correlation between the price students pay and the cost of providing the educational services. 
D)  The quality of education would deteriorate. 
A)  More students would enroll in school. 
B)  The price students pay to attend school would equal the value of an additional unit of education consumed. 
C)  There would be no correlation between the price students pay and the cost of providing the educational services. 
D)  The quality of education would deteriorate.

Question 8

The market and public sector are similar in that

Accepted Answer

A)  there is competition among the participants in both sectors. 
B)  the resources used in both sectors are scarce. 
C)  the participants in both sectors react to incentives. 
D)  All of the above are true. 
A)  there is competition among the participants in both sectors. 
B)  the resources used in both sectors are scarce. 
C)  the participants in both sectors react to incentives. 
D)  All of the above are true.

Question 9

The funds that polluters pay that gives them the right to discharge into the air or water a certain amount of pollution are

Accepted Answer

A)  special subsidies. 
B)  regulation fees. 
C)  external costs. 
D)  effluent fees. 
A)  special subsidies. 
B)  regulation fees. 
C)  external costs. 
D)  effluent fees.

Question 10

Compared with the market clearing price of a health care service covered by Medicare, the Medicare program pays a ________ price to health care providers and charges a ________ price to consumers.

Accepted Answer

A)  lower, lower 
B)  lower, higher 
C)  higher, lower 
D)  higher, higher 
A)  lower, lower 
B)  lower, higher 
C)  higher, lower 
D)  higher, higher

Question 11

Which of the following is a government-inhibited good?

Accepted Answer

A)  tobacco 
B)  red wine 
C)  public education 
D)  cocaine 
A)  tobacco 
B)  red wine 
C)  public education 
D)  cocaine

Question 12

An effluent fee is a

Accepted Answer

A)  subsidy given to the producer of a positive externality. 
B)  charge to a polluter that gives the right to discharge pollution into the air. 
C)  fine imposed on a polluter for dumping illegal pollution. 
D)  charge for a public good. 
A)  subsidy given to the producer of a positive externality. 
B)  charge to a polluter that gives the right to discharge pollution into the air. 
C)  fine imposed on a polluter for dumping illegal pollution. 
D)  charge for a public good.

Question 13

Society is likely to over-allocate resources to produce goods that

Accepted Answer

A)  are public goods. 
B)  are merit goods. 
C)  generate positive externalities. 
D)  generate negative externalities. 
A)  are public goods. 
B)  are merit goods. 
C)  generate positive externalities. 
D)  generate negative externalities.

Question 14

When market failures occur

Accepted Answer

A)  the invisible hand will correct for the market failures. 
B)  the price system will correct the market failures. 
C)  buyers and sellers will correct the market failures. 
D)  the government can step in to correct the market failures. 
A)  the invisible hand will correct for the market failures. 
B)  the price system will correct the market failures. 
C)  buyers and sellers will correct the market failures. 
D)  the government can step in to correct the market failures.

Question 15

If the production of a product results in significant external costs, an appropriate government policy might be to

Accepted Answer

A)  subsidize the production of the good. 
B)  tax producers and thus shift the supply curve to the left. 
C)  tax consumers' incomes and thus shift the demand curve to the left. 
D)  subsidize consumers since the good is being under-consumed. 
A)  subsidize the production of the good. 
B)  tax producers and thus shift the supply curve to the left. 
C)  tax consumers' incomes and thus shift the demand curve to the left. 
D)  subsidize consumers since the good is being under-consumed.

Question 16

The largest spending category for state governments is

Accepted Answer

A)  welfare. 
B)  health care. 
C)  education. 
D)  highway construction. 
A)  welfare. 
B)  health care. 
C)  education. 
D)  highway construction.

Question 17

Which of the following will LEAST likely generate positive external effects to society?

Accepted Answer

A)  education 
B)  a novel 
C)  health care 
D)  requiring drivers to undergo a test for alcohol consumption 
A)  education 
B)  a novel 
C)  health care 
D)  requiring drivers to undergo a test for alcohol consumption

Question 18

A government-sponsored good is often

Accepted Answer

A)  produced by the government. 
B)  subsidized. 
C)  taxed. 
D)  advertised. 
A)  produced by the government. 
B)  subsidized. 
C)  taxed. 
D)  advertised.

Question 19

Which of the following is a transfer payment? I. Social Security
II) Unemployment benefits

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 20

Economically speaking, the design of Medicare

Accepted Answer

A)  encourages the consumption of medical services. 
B)  discourages the consumption of medical services. 
C)  helps to decrease the cost of care to non-Medicare patients. 
D)  discourages the provision of medical services. 
A)  encourages the consumption of medical services. 
B)  discourages the consumption of medical services. 
C)  helps to decrease the cost of care to non-Medicare patients. 
D)  discourages the provision of medical services.

Exam 5: Public Spending and Public Choice

-In a free market system, competition generates economic efficiency only when

In public education, the value of the services provided is

Which of the following statements is NOT true of external benefits?

The amount of government spending on education per public school student has ________ since 1960, and the achievement level of students has generally ________ since that time.

How do public goods differ from private goods?

An example of a market failure is

If public subsidies for education were eliminated, what would you expect as an outcome in the market for educational services?

The market and public sector are similar in that

The funds that polluters pay that gives them the right to discharge into the air or water a certain amount of pollution are

Compared with the market clearing price of a health care service covered by Medicare, the Medicare program pays a ________ price to health care providers and charges a ________ price to consumers.

Which of the following is a government-inhibited good?

An effluent fee is a

Society is likely to over-allocate resources to produce goods that

When market failures occur

If the production of a product results in significant external costs, an appropriate government policy might be to

The largest spending category for state governments is

Which of the following will LEAST likely generate positive external effects to society?

A government-sponsored good is often

Which of the following is a transfer payment? I. Social Security II) Unemployment benefits

Economically speaking, the design of Medicare

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

Filters

The amount of government spending on education per public school student has since 1960, and the achievement level of students has generally since that time.

Compared with the market clearing price of a health care service covered by Medicare, the Medicare program pays a price to health care providers and charges a price to consumers.