Question 1

If external benefits are taken into account in the market

Accepted Answer

A)  the demand curve would shift to the left. 
B)  the supply curve would shift to the left. 
C)  the demand curve would shift to the right. 
D)  the supply curve would become vertical. 
A)  the demand curve would shift to the left. 
B)  the supply curve would shift to the left. 
C)  the demand curve would shift to the right. 
D)  the supply curve would become vertical.

Question 2

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 3

A government-inhibited good is one that

Accepted Answer

A)  the political process has determined is socially undesirable. 
B)  the political process has determined is socially desirable. 
C)  freely competitive markets have determined is socially desirable. 
D)  we want to encourage the consumption of. 
A)  the political process has determined is socially undesirable. 
B)  the political process has determined is socially desirable. 
C)  freely competitive markets have determined is socially desirable. 
D)  we want to encourage the consumption of.

Question 4

When the price system fails to generate an efficient allocation of resources

Accepted Answer

A)  the market will always correct it. 
B)  consumers will spend less. 
C)  business will produce more. 
D)  too few or too many goods will be produced. 
A)  the market will always correct it. 
B)  consumers will spend less. 
C)  business will produce more. 
D)  too few or too many goods will be produced.

Question 5

A government-inhibited good is a good which

Accepted Answer

A)  is not subject to the principle of mutual exclusivity. 
B)  the political process has deemed socially undesirable. 
C)  can be consumed by one individual without affecting the consumption of another individual. 
D)  the political process has deemed socially desirable. 
A)  is not subject to the principle of mutual exclusivity. 
B)  the political process has deemed socially undesirable. 
C)  can be consumed by one individual without affecting the consumption of another individual. 
D)  the political process has deemed socially desirable.

Question 6

When misallocation of resources for production of a good results in spillover effects on third parties, there is a

Accepted Answer

A)  market failure. 
B)  government failure. 
C)  legislative failure. 
D)  productive failure. 
A)  market failure. 
B)  government failure. 
C)  legislative failure. 
D)  productive failure.

Question 7

Public goods

Accepted Answer

A)  are overproduced by unrestrained markets. 
B)  are simply private goods that the government provides. 
C)  cannot be consumed by more than one person without the degradation of the value of the good. 
D)  can be consumed by more than one person without degradation of the value of the good. 
A)  are overproduced by unrestrained markets. 
B)  are simply private goods that the government provides. 
C)  cannot be consumed by more than one person without the degradation of the value of the good. 
D)  can be consumed by more than one person without degradation of the value of the good.

Question 8

Public education is priced below market price largely as a result of

Accepted Answer

A)  government subsidy programs. 
B)  under-funded public education. 
C)  rising test scores by students. 
D)  taxpayers who contribute little to the funding of public education. 
A)  government subsidy programs. 
B)  under-funded public education. 
C)  rising test scores by students. 
D)  taxpayers who contribute little to the funding of public education.

Question 9

The legal system in the United States tends

Accepted Answer

A)  to support monopolies. 
B)  to actively discourage unionization. 
C)  to discourage the entry of new firms into industries. 
D)  to promote competition. 
A)  to support monopolies. 
B)  to actively discourage unionization. 
C)  to discourage the entry of new firms into industries. 
D)  to promote competition.

Question 10

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.

Question 11

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 12

The difference between a private good and a public good is that

Accepted Answer

A)  private goods are government-sponsored goods while public goods are government-inhibited goods. 
B)  externalities are always created in the production process but not in the production of public goods. 
C)  private goods make us happy while public goods do not. 
D)  the exclusion principle applies to a private good but not to a public good. 
A)  private goods are government-sponsored goods while public goods are government-inhibited goods. 
B)  externalities are always created in the production process but not in the production of public goods. 
C)  private goods make us happy while public goods do not. 
D)  the exclusion principle applies to a private good but not to a public good.

Question 13

What effect have Medicare subsidies had on the consumption of medical services?

Accepted Answer

A)  The consumption of medical services has been unaffected, because people don't consider the financial cost when seeking services related to their health. 
B)  The consumption of medical services has been unaffected, because government restrictions have prevented patients from seeking a level of care above and beyond what they would choose if they had to pay for medical treatment out of pocket. 
C)  The consumption of medical services has increased because Medicare subsidies give people the incentive to seek more care than they would otherwise. 
D)  The effect cannot be measured because it is difficult to quantify the amount of resources devoted to our health care system. 
A)  The consumption of medical services has been unaffected, because people don't consider the financial cost when seeking services related to their health. 
B)  The consumption of medical services has been unaffected, because government restrictions have prevented patients from seeking a level of care above and beyond what they would choose if they had to pay for medical treatment out of pocket. 
C)  The consumption of medical services has increased because Medicare subsidies give people the incentive to seek more care than they would otherwise. 
D)  The effect cannot be measured because it is difficult to quantify the amount of resources devoted to our health care system.

Question 14

-If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded.
II) decrease in the out-of-pocket price paid by consumers.
III) increase in the quantity supplied by producers.

Accepted Answer

A)  I only 
B)  both I and II only 
C)  both II and III only 
D)  I, II, and III 
A)  I only 
B)  both I and II only 
C)  both II and III only 
D)  I, II, and III

Question 15

Measures of student performance have not increased even though per-pupil government subsidies have increased because

Accepted Answer

A)  there is a need for more funds to be spent. 
B)  we have declining enrollment in public schools. 
C)  parents and children value the last unit of educational services received more than the cost. 
D)  parents and children value the last unit of educational services received less than the cost. 
A)  there is a need for more funds to be spent. 
B)  we have declining enrollment in public schools. 
C)  parents and children value the last unit of educational services received more than the cost. 
D)  parents and children value the last unit of educational services received less than the cost.

Question 16

The No-Good Company produces goods that provide damages to society-at-large. If consumers of No-Good's products fail to take external benefits into account

Accepted Answer

A)  the demand curve will be too far to the left. 
B)  the supply curve will be too far to the left. 
C)  the demand curve will be too far to the right. 
D)  the supply curve will be too far to the right. 
A)  the demand curve will be too far to the left. 
B)  the supply curve will be too far to the left. 
C)  the demand curve will be too far to the right. 
D)  the supply curve will be too far to the right.

Question 17

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 18

A result of a positive externality in the production of a good is that

Accepted Answer

A)  the price system will over-allocate resources to the production of that good or service. 
B)  the price system will under-allocate resources to the production of that good or service. 
C)  the market supply will be too high. 
D)  the market demand will be too high. 
A)  the price system will over-allocate resources to the production of that good or service. 
B)  the price system will under-allocate resources to the production of that good or service. 
C)  the market supply will be too high. 
D)  the market demand will be too high.

Question 19

-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. The perceived price on the part of consumers is

Accepted Answer

A)  Ps. 
B)  P0. 
C)  Pd. 
D)  undetermined without more information. 
A)  Ps. 
B)  P0. 
C)  Pd. 
D)  undetermined without more information.

Question 20

If production of an item results in negative external costs, then

Accepted Answer

A)  the market price is below the socially preferred price that reflects the external costs. 
B)  the market price is above the socially preferred price that reflects the external costs. 
C)  market forces will always correct the problem. 
D)  the market quantity is too low from society's point of view. 
A)  the market price is below the socially preferred price that reflects the external costs. 
B)  the market price is above the socially preferred price that reflects the external costs. 
C)  market forces will always correct the problem. 
D)  the market quantity is too low from society's point of view.

Exam 5: Public Spending and Public Choice

If external benefits are taken into account in the market

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

A government-inhibited good is one that

When the price system fails to generate an efficient allocation of resources

A government-inhibited good is a good which

When misallocation of resources for production of a good results in spillover effects on third parties, there is a

Public goods

Public education is priced below market price largely as a result of

The legal system in the United States tends

The current Medicare system is designed so that it actually encourages

The economic functions of government include

The difference between a private good and a public good is that

What effect have Medicare subsidies had on the consumption of medical services?

-If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded. II) decrease in the out-of-pocket price paid by consumers. III) increase in the quantity supplied by producers.

Measures of student performance have not increased even though per-pupil government subsidies have increased because

The No-Good Company produces goods that provide damages to society-at-large. If consumers of No-Good's products fail to take external benefits into account

Public goods are characterized by the free-rider problem because

A result of a positive externality in the production of a good is that

-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. The perceived price on the part of consumers is

If production of an item results in negative external costs, then

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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