Question 1

Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?

Accepted Answer

A) The incentive system for individuals to perform efficiently are vastly different. 
B) The workers themselves are really quite different types of people. 
C) In both sectors individuals will try to maximize their own individual gains over the gains of others. 
D) Costs and resources are vastly different in each sector. 
A) The incentive system for individuals to perform efficiently are vastly different. 
B) The workers themselves are really quite different types of people. 
C) In both sectors individuals will try to maximize their own individual gains over the gains of others. 
D) Costs and resources are vastly different in each sector.

Question 2

Public goods are

Accepted Answer

A) any goods or services produced by the government. 
B) provided to additional users at no additional cost. 
C) provided only by the capitalistic system. 
D) provided only by the communist system. 
A) any goods or services produced by the government. 
B) provided to additional users at no additional cost. 
C) provided only by the capitalistic system. 
D) provided only by the communist system.

Question 3

Which of the following is an example of a negative externality?

Accepted Answer

A) A person buys a car that is a lemon 
B) A worker is injured on the job 
C) A new restaurant's success causes another to go out of business 
D) A new hotel ruins the view of the ocean for a few homeowners 
A) A person buys a car that is a lemon 
B) A worker is injured on the job 
C) A new restaurant's success causes another to go out of business 
D) A new hotel ruins the view of the ocean for a few homeowners

Question 4

Which of the following would be considered an economic function of government?

Accepted Answer

A) providing a legal system 
B) promoting competition 
C) providing public goods 
D) All of the above are correct. 
A) providing a legal system 
B) promoting competition 
C) providing public goods 
D) All of the above are correct.

Question 5

To correct for positive externalities the government

Accepted Answer

A) should allow the price system to do the correction. 
B) can impose a tax. 
C) can give a subsidy. 
D) should create a public good. 
A) should allow the price system to do the correction. 
B) can impose a tax. 
C) can give a subsidy. 
D) should create a public good.

Question 6

A government-inhibited 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 7

Medicare is an example of a third-party payment for medical services that

Accepted Answer

A) causes providers to supply less of medical services than they would without the payment. 
B) causes buyers to consume more of medical services than they would without the payment. 
C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. 
D) causes the price of medical services to rise for the consumer once the payment is provided. 
A) causes providers to supply less of medical services than they would without the payment. 
B) causes buyers to consume more of medical services than they would without the payment. 
C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. 
D) causes the price of medical services to rise for the consumer once the payment is provided.

Question 8

Which one of the following is NOT a characteristic of public goods?

Accepted Answer

A) They are indivisible. 
B) It is difficult to charge people on the basis of how much they use. 
C) Public goods can be used by increasing numbers of people at no additional cost. 
D) Public goods are subject to the principle of rival consumption. 
A) They are indivisible. 
B) It is difficult to charge people on the basis of how much they use. 
C) Public goods can be used by increasing numbers of people at no additional cost. 
D) Public goods are subject to the principle of rival consumption.

Question 9

According to your text,which of the following represents the largest component of federal spending?

Accepted Answer

A) Education 
B) Social Security 
C) Medicare 
D) National Defense 
A) Education 
B) Social Security 
C) Medicare 
D) National Defense

Question 10

When government intervenes in the production process because external benefits exist,it typically attempts

Accepted Answer

A) to impose a tax on each unit produced. 
B) to shift the industry's demand curve to the left. 
C) to shift the industry's demand curve to the right. 
D) to shift the industry's supply curve to the left. 
A) to impose a tax on each unit produced. 
B) to shift the industry's demand curve to the left. 
C) to shift the industry's demand curve to the right. 
D) to shift the industry's supply curve to the left.

Question 11

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 12

To an economist,a free rider is a person who

Accepted Answer

A) uses private goods without paying for them. 
B) benefits from consuming public goods without paying for them. 
C) consumes demerit goods. 
D) uses the public transportation system without paying for it. 
A) uses private goods without paying for them. 
B) benefits from consuming public goods without paying for them. 
C) consumes demerit goods. 
D) uses the public transportation system without paying for it.

Question 13

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as

Accepted Answer

A) transfer payments. 
B) government-sponsored payments. 
C) government-inhibited payments. 
D) black market payments. 
A) transfer payments. 
B) government-sponsored payments. 
C) government-inhibited payments. 
D) black market payments.

Question 14

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   minus   . 
B) overproduction equal to   minus   . 
C) underproduction equal to   minus   . 
D) overproduction equal to   minus   . 
A) underproduction equal to   minus   . 
B) overproduction equal to   minus   . 
C) underproduction equal to   minus   . 
D) overproduction equal to   minus   .

Question 15

External costs can be defined as

Accepted Answer

A) the cost associated with private production,but partially borne by society. 
B) the sum of all private production costs. 
C) the cost of running the federal government. 
D) the cost of providing all public goods and services. 
A) the cost associated with private production,but partially borne by society. 
B) the sum of all private production costs. 
C) the cost of running the federal government. 
D) the cost of providing all public goods and services.

Question 16

The purpose of an effluent fee imposed on a firm is

Accepted Answer

A) to increase output of its product by increasing the resources allocated to production. 
B) to increase output of its product by reducing the resources allocated to production. 
C) to reduce output by increasing production costs thereby reducing resources used. 
D) none of the above 
A) to increase output of its product by increasing the resources allocated to production. 
B) to increase output of its product by reducing the resources allocated to production. 
C) to reduce output by increasing production costs thereby reducing resources used. 
D) none of the above

Question 17

U.S.antitrust laws view monopolies as undesirable because

Accepted Answer

A) monopolies restrain trade and promote inefficiencies. 
B) monopolies create inferior products. 
C) monopolies produce only capital goods. 
D) monopolies produce only cheap,low quality goods. 
A) monopolies restrain trade and promote inefficiencies. 
B) monopolies create inferior products. 
C) monopolies produce only capital goods. 
D) monopolies produce only cheap,low quality goods.

Question 18

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 19

Refer to the above figure.In the absence of a subsidy,

Accepted Answer

A) Qd would be demanded and   would be supplied. 
B) the price Pd would be charged and quantity   demanded. 
C) the quantity Qo and price Po would prevail in the market. 
D) None of the above is correct. 
A) Qd would be demanded and   would be supplied. 
B) the price Pd would be charged and quantity   demanded. 
C) the quantity Qo and price Po would prevail in the market. 
D) None of the above is correct.

Question 20

What is the assumption underlying public-choice theory?

Accepted Answer

A) Elected officials believe in cooperating with one another and they seek to avoid competition among themselves. 
B) The costs and benefits of being efficient are the same whether one is in the private sector or in the public sector. 
C) Individuals act within the political process to improve their own individual well-being. 
D) Resources in the public sector are not scarce. 
A) Elected officials believe in cooperating with one another and they seek to avoid competition among themselves. 
B) The costs and benefits of being efficient are the same whether one is in the private sector or in the public sector. 
C) Individuals act within the political process to improve their own individual well-being. 
D) Resources in the public sector are not scarce.

Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?

Public goods are

Which of the following is an example of a negative externality?

Which of the following would be considered an economic function of government?

To correct for positive externalities the government

A government-inhibited good is often

Medicare is an example of a third-party payment for medical services that

Which one of the following is NOT a characteristic of public goods?

According to your text,which of the following represents the largest component of federal spending?

When government intervenes in the production process because external benefits exist,it typically attempts

Private goods are goods

To an economist,a free rider is a person who

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as

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)

External costs can be defined as

The purpose of an effluent fee imposed on a firm is

U.S.antitrust laws view monopolies as undesirable because

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

Refer to the above figure.In the absence of a subsidy,

What is the assumption underlying public-choice theory?

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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 5: Public Spending and Public Choice

Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?

Public goods are

Which of the following is an example of a negative externality?

Which of the following would be considered an economic function of government?

To correct for positive externalities the government

A government-inhibited good is often

Medicare is an example of a third-party payment for medical services that

Which one of the following is NOT a characteristic of public goods?

According to your text,which of the following represents the largest component of federal spending?

When government intervenes in the production process because external benefits exist,it typically attempts

Private goods are goods

To an economist,a free rider is a person who

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as

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)

External costs can be defined as

The purpose of an effluent fee imposed on a firm is

U.S.antitrust laws view monopolies as undesirable because

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

Refer to the above figure.In the absence of a subsidy,

What is the assumption underlying public-choice theory?

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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters