Question 1

The biggest government-produced item that serves the economy as a whole is

Accepted Answer

A) the postal service. 
B) police protection. 
C) national defense. 
D) education. 
E) highways. 
A) the postal service. 
B) police protection. 
C) national defense. 
D) education. 
E) highways. D

Question 2

One form of government intervention to solve externalities is

Accepted Answer

A) internality remedies. 
B) Coase remedies. 
C) command and control. 
D) tradable permits. 
E) deregulation. 
A) internality remedies. 
B) Coase remedies. 
C) command and control. 
D) tradable permits. 
E) deregulation. C

Question 3

In any democratic voting scheme,inefficiencies resulting from the constant changes in voters' priorities are unavoidable.This principle is called the

Accepted Answer

A) median voter theorem. 
B) vote cycling theorem. 
C) convergence of positions hypothesis. 
D) Arrow impossibility theorem. 
E) voting paradox phenomenon. 
A) median voter theorem. 
B) vote cycling theorem. 
C) convergence of positions hypothesis. 
D) Arrow impossibility theorem. 
E) voting paradox phenomenon. D

Question 4

When a negative externality exists in the production of a good,

Accepted Answer

A) an appropriate policy would result in an increase in the output of the good. 
B) an appropriate policy would result in a decrease in the price of the good. 
C) a tax on the production of that good could correct for the externality. 
D) government could correct the externality by shifting the good's supply curve to the right. 
E) subsidizing the production of the good could correct for the externality. 
A) an appropriate policy would result in an increase in the output of the good. 
B) an appropriate policy would result in a decrease in the price of the good. 
C) a tax on the production of that good could correct for the externality. 
D) government could correct the externality by shifting the good's supply curve to the right. 
E) subsidizing the production of the good could correct for the externality.

Question 5

With tradable permits,the total amount of pollution in the economy is

Accepted Answer

A) the total amount of permits issued,and is controlled. 
B) less than the total amount of permits issued,and is controlled. 
C) more than the total amount of permits issued,and is not controlled. 
D) the total amount of permits issued but is not controlled. 
E) zero. 
A) the total amount of permits issued,and is controlled. 
B) less than the total amount of permits issued,and is controlled. 
C) more than the total amount of permits issued,and is not controlled. 
D) the total amount of permits issued but is not controlled. 
E) zero.

Question 6

Tradable permits are a new idea but are likely to be an increasingly common method of reducing pollution in the future.

Accepted Answer

A) True 
 B)False

Question 7

Describe how the RECLAIM tradable permit program works.

Accepted Answer

RECLAIM controls total emissions,is flex

Question 8

Internalizing a negative externality causes market supply to increase.

Accepted Answer

A) True 
 B)False

Question 9

Tradable permits work well in the case of

Accepted Answer

A) sulfur dioxide emissions. 
B) global warming. 
C) air pollution in cities. 
D) ocean oil spills. 
E) water pollution in rivers. 
A) sulfur dioxide emissions. 
B) global warming. 
C) air pollution in cities. 
D) ocean oil spills. 
E) water pollution in rivers.

Question 10

What is a free-rider problem and how does the government deal with this type of problem?

Accepted Answer

A free-rider problem arises when those w

Question 11

A government-granted license to pollute that can be bought and sold is called a(n)

Accepted Answer

A) tradable permit. 
B) emission right. 
C) transactions right. 
D) command and control. 
E) tax. 
A) tradable permit. 
B) emission right. 
C) transactions right. 
D) command and control. 
E) tax.

Question 12

A public good is any good produced by the government.

Accepted Answer

A) True 
 B)False

Question 13

The role of government in tradable permit markets is to control how firms buy and sell the permits.

Accepted Answer

A) True 
 B)False

Question 14

Many want to reform government by providing market-based incentives that aim to

Accepted Answer

A) promote greed. 
B) redistribute wealth. 
C) make government efficient. 
D) make government larger. 
E) undermine markets. 
A) promote greed. 
B) redistribute wealth. 
C) make government efficient. 
D) make government larger. 
E) undermine markets.

Question 15

Agencies such as the Environmental Protection Agency widely use

Accepted Answer

A) assignments of property rights to internalize externalities. 
B) user fees. 
C) command and control methods. 
D) cost-benefit remedies. 
E) private remedies. 
A) assignments of property rights to internalize externalities. 
B) user fees. 
C) command and control methods. 
D) cost-benefit remedies. 
E) private remedies.

Question 16

When transactions costs are high or free-rider problems exist,a private remedy for an externality may be feasible.

Accepted Answer

A) True 
 B)False

Question 17

The cost of buying or selling in a market,including search,bargaining,and writing contracts,is called the

Accepted Answer

A) public cost. 
B) transactions cost. 
C) private cost. 
D) remedy cost. 
E) user cost. 
A) public cost. 
B) transactions cost. 
C) private cost. 
D) remedy cost. 
E) user cost.

Question 18

The private market is said to underproduce a good that causes a negative externality.

Accepted Answer

A) True 
 B)False

Question 19

As with public goods,it is important that a cost-benefit analysis be used when

Accepted Answer

A) considering externalities. 
B) defining private property rights. 
C) considering nonexcludable goods. 
D) considering luxury goods. 
E) considering nonrivalrous goods. 
A) considering externalities. 
B) defining private property rights. 
C) considering nonexcludable goods. 
D) considering luxury goods. 
E) considering nonrivalrous goods.

Question 20

An externality is the effect that occurs when the production or consumption of a good directly affects a third party.

Accepted Answer

A) True 
 B)False

Exam 15: Public Goods, externalities, and Government Behavior

The biggest government-produced item that serves the economy as a whole is

One form of government intervention to solve externalities is

In any democratic voting scheme,inefficiencies resulting from the constant changes in voters' priorities are unavoidable.This principle is called the

When a negative externality exists in the production of a good,

With tradable permits,the total amount of pollution in the economy is

Tradable permits are a new idea but are likely to be an increasingly common method of reducing pollution in the future.

Describe how the RECLAIM tradable permit program works.

Internalizing a negative externality causes market supply to increase.

Tradable permits work well in the case of

What is a free-rider problem and how does the government deal with this type of problem?

A government-granted license to pollute that can be bought and sold is called a(n)

A public good is any good produced by the government.

The role of government in tradable permit markets is to control how firms buy and sell the permits.

Many want to reform government by providing market-based incentives that aim to

Agencies such as the Environmental Protection Agency widely use

When transactions costs are high or free-rider problems exist,a private remedy for an externality may be feasible.

The cost of buying or selling in a market,including search,bargaining,and writing contracts,is called the

The private market is said to underproduce a good that causes a negative externality.

As with public goods,it is important that a cost-benefit analysis be used when

An externality is the effect that occurs when the production or consumption of a good directly affects a third party.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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