Question 1

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 2

When a paper producer pollutes the air, economists argue that there is

Accepted Answer

A)  efficiency, if production is at its maximum level. 
B)  a positive externality. 
C)  an external cost. 
D)  a cost paid solely by the firm. 
A)  efficiency, if production is at its maximum level. 
B)  a positive externality. 
C)  an external cost. 
D)  a cost paid solely by the firm.

Question 3

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 4

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 benefit exists. This will lead to a(n)

Accepted Answer

A)  underproduction equal to Q1 minus Q2. 
B)  overproduction equal to Q4 minus Q3. 
C)  underproduction equal to Q4 minus Q3. 
D)  overproduction equal to Q1 minus Q2. 
A)  underproduction equal to Q1 minus Q2. 
B)  overproduction equal to Q4 minus Q3. 
C)  underproduction equal to Q4 minus Q3. 
D)  overproduction equal to Q1 minus Q2.

Question 5

The legal system provided by the government is necessary for the smooth working of markets because

Accepted Answer

A)  it keeps criminals off of the streets. 
B)  it defines and protects property rights. 
C)  it is set up in the U.S. constitution. 
D)  it ensures that producers maximize their profits. 
A)  it keeps criminals off of the streets. 
B)  it defines and protects property rights. 
C)  it is set up in the U.S. constitution. 
D)  it ensures that producers maximize their profits.

Question 6

-In the above figure, the total dollar amount of the Medicare subsidies provided by the government is equal to

Accepted Answer

A)  the difference between Ps and P0 multiplied by QM. 
B)  the difference between Ps and Pd multiplied by QM. 
C)  the difference between P0 and Pd multiplied by Qd. 
D)  the difference between Ps and Pd multiplied by Q0. 
A)  the difference between Ps and P0 multiplied by QM. 
B)  the difference between Ps and Pd multiplied by QM. 
C)  the difference between P0 and Pd multiplied by Qd. 
D)  the difference between Ps and Pd multiplied by Q0.

Question 7

Suppose that one firm produces a product that results in negative external costs to society. This information suggests that

Accepted Answer

A)  resources are under-allocated to the firm. 
B)  the equilibrium market price of the product includes the external costs borne by society. 
C)  resources are over-allocated to the firm. 
D)  at the market price, quantity demanded is less than quantity supplied. 
A)  resources are under-allocated to the firm. 
B)  the equilibrium market price of the product includes the external costs borne by society. 
C)  resources are over-allocated to the firm. 
D)  at the market price, quantity demanded is less than quantity supplied.

Question 8

Government payment of a per-unit subsidy for health care services causes

Accepted Answer

A)  the health care market supply curve to shift upward. 
B)  the health care market demand curve to shift downward. 
C)  a reduction in the price that health care service providers receive for each unit of care provided. 
D)  an increase in the quantity of health care services demanded above the quantity demanded in the absence of the subsidy. 
A)  the health care market supply curve to shift upward. 
B)  the health care market demand curve to shift downward. 
C)  a reduction in the price that health care service providers receive for each unit of care provided. 
D)  an increase in the quantity of health care services demanded above the quantity demanded in the absence of the subsidy.

Question 9

An externality can best be defined as

Accepted Answer

A)  a party not directly involved in a transaction. 
B)  a consequence of a transaction that spills over to affect third parties. 
C)  a right of an owner to use and exchange property. 
D)  a cost associated with the production of one more unit of output. 
A)  a party not directly involved in a transaction. 
B)  a consequence of a transaction that spills over to affect third parties. 
C)  a right of an owner to use and exchange property. 
D)  a cost associated with the production of one more unit of output.

Question 10

When state and local governments provide public schools with a per-unit subsidy to provide educational services, the price that the schools providing these services receive is

Accepted Answer

A)  less than the price that consumers pay to receive educational services. 
B)  less than the amount of the per-unit subsidy that the schools receive. 
C)  greater than the market clearing price without the subsidy. 
D)  equal to zero. 
A)  less than the price that consumers pay to receive educational services. 
B)  less than the amount of the per-unit subsidy that the schools receive. 
C)  greater than the market clearing price without the subsidy. 
D)  equal to zero.

Question 11

Public elementary and high school education in the United States is provided

Accepted Answer

A)  as a free good. 
B)  as a subsidized good. 
C)  at the market clearing price. 
D)  in an amount less than the equilibrium quantity. 
A)  as a free good. 
B)  as a subsidized good. 
C)  at the market clearing price. 
D)  in an amount less than the equilibrium quantity.

Question 12

A homeless family is given a government subsidy for an apartment in an affordable housing project. The apartment

Accepted Answer

A)  is not subject to the principle of rival consumption. 
B)  is not a public good. 
C)  has widespread benefits and concentrated costs. 
D)  is subject to the free-rider problem. 
A)  is not subject to the principle of rival consumption. 
B)  is not a public good. 
C)  has widespread benefits and concentrated costs. 
D)  is subject to the free-rider problem.

Question 13

Fred receives $14,000 per year from the federal government because he is disabled. This is a

Accepted Answer

A)  demerit good. 
B)  transfer payment. 
C)  non-rival good. 
D)  free rider problem. 
A)  demerit good. 
B)  transfer payment. 
C)  non-rival good. 
D)  free rider problem.

Question 14

When does a subsidy that benefits consumers result in a more efficient allocation of a resource?

Accepted Answer

A)  when the good being produced or consumed is not scarce 
B)  when the good being produced or consumed generates a negative externality 
C)  when the good being produced or consumed generates a positive externality 
D)  when the equilibrium price of the good is one that consumers don't like 
A)  when the good being produced or consumed is not scarce 
B)  when the good being produced or consumed generates a negative externality 
C)  when the good being produced or consumed generates a positive externality 
D)  when the equilibrium price of the good is one that consumers don't like

Question 15

Explain why ensuring economic stability is an economics function of government?

Accepted Answer

Our economy sometimes faces the problems

Question 16

-Refer to the above figure. The market equilibrium quantity is Q1. Point Q2 represents the optimal amount of production. The government can achieve the optimal outcome by

Accepted Answer

A)  setting the price at P3. 
B)  providing a per-unit subsidy to consumers equal to P3 - P1. 
C)  providing a per-unit subsidy to consumers equal to P2 - P1. 
D)  establishing a tax equal to P2 - P1 per unit of the good sold. 
A)  setting the price at P3. 
B)  providing a per-unit subsidy to consumers equal to P3 - P1. 
C)  providing a per-unit subsidy to consumers equal to P2 - P1. 
D)  establishing a tax equal to P2 - P1 per unit of the good sold.

Question 17

Which law specifically mandated the federal government's responsibility for economy-wide stability?

Accepted Answer

A)  the Employment Act of 1946 
B)  the Sherman Act of 1890 
C)  the Glass-Steagall Act of 1933 
D)  the Volcker Act of 1960 
A)  the Employment Act of 1946 
B)  the Sherman Act of 1890 
C)  the Glass-Steagall Act of 1933 
D)  the Volcker Act of 1960

Question 18

The economic functions of the government deal with

Accepted Answer

A)  discouraging smoking in youths. 
B)  making sure supply equal demand. 
C)  promoting economic efficiency. 
D)  excess demand. 
A)  discouraging smoking in youths. 
B)  making sure supply equal demand. 
C)  promoting economic efficiency. 
D)  excess demand.

Question 19

Graphically, the effect of a government subsidy on a good is shown as

Accepted Answer

A)  a leftward shift of the market demand curve. 
B)  a rightward shift of the market demand curve. 
C)  a downward movement along the market demand curve. 
D)  no change to the market demand curve. 
A)  a leftward shift of the market demand curve. 
B)  a rightward shift of the market demand curve. 
C)  a downward movement along the market demand curve. 
D)  no change to the market demand curve.

Question 20

If the production of ukuleles creates a negative externality that is NOT corrected for by the government, the equilibrium quantity of ukuleles is

Accepted Answer

A)  higher than optimal. 
B)  lower than optimal. 
C)  efficient. 
D)  at a optimal level. 
A)  higher than optimal. 
B)  lower than optimal. 
C)  efficient. 
D)  at a optimal level.

Exam 5: Public Spending and Public Choice

Private goods are goods

When a paper producer pollutes the air, economists argue that there is

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

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 benefit exists. This will lead to a(n)

The legal system provided by the government is necessary for the smooth working of markets because

-In the above figure, the total dollar amount of the Medicare subsidies provided by the government is equal to

Suppose that one firm produces a product that results in negative external costs to society. This information suggests that

Government payment of a per-unit subsidy for health care services causes

An externality can best be defined as

When state and local governments provide public schools with a per-unit subsidy to provide educational services, the price that the schools providing these services receive is

Public elementary and high school education in the United States is provided

A homeless family is given a government subsidy for an apartment in an affordable housing project. The apartment

Fred receives $14,000 per year from the federal government because he is disabled. This is a

When does a subsidy that benefits consumers result in a more efficient allocation of a resource?

Explain why ensuring economic stability is an economics function of government?

-Refer to the above figure. The market equilibrium quantity is Q1. Point Q2 represents the optimal amount of production. The government can achieve the optimal outcome by

Which law specifically mandated the federal government's responsibility for economy-wide stability?

The economic functions of the government deal with

Graphically, the effect of a government subsidy on a good is shown as

If the production of ukuleles creates a negative externality that is NOT corrected for by the government, the equilibrium quantity of ukuleles is

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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