Question 1

As a share of total national income,government spending generally has

Accepted Answer

A) been constant over the last fifty years. 
B) increased over the last fifty years. 
C) decreased over the last fifty years. 
D) increased until ten years ago,and then decreased steadily. 
A) been constant over the last fifty years. 
B) increased over the last fifty years. 
C) decreased over the last fifty years. 
D) increased until ten years ago,and then decreased steadily.

Question 2

When positive externalities exist,the private market equilibrium represents a

Accepted Answer

A) market price which is too low and a market quantity which is too low. 
B) market price which is too low and a market quantity which is too high. 
C) market price which is too high and a market quantity which is too low. 
D) market price which is too high and a market quantity which is too high. 
A) market price which is too low and a market quantity which is too low. 
B) market price which is too low and a market quantity which is too high. 
C) market price which is too high and a market quantity which is too low. 
D) market price which is too high and a market quantity which is too high.

Question 3

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 4

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

Accepted Answer

A) an technologically inefficient market 
B) a market failure 
C) a laissez-faire market 
D) an external market 
A) an technologically inefficient market 
B) a market failure 
C) a laissez-faire market 
D) an external market

Question 5

What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?

Accepted Answer

A positive externality leads to the equi

Question 6

When a good causes positive external benefits to accrue to third parties,an unfettered market will

Accepted Answer

A) under-allocate resources to the good causing the benefit. 
B) over-allocate resources to the good causing the benefit. 
C) cause the equilibrium quantity,established before the benefit is taken into account,to be produced more efficiently. 
D) eliminate such goods. 
A) under-allocate resources to the good causing the benefit. 
B) over-allocate resources to the good causing the benefit. 
C) cause the equilibrium quantity,established before the benefit is taken into account,to be produced more efficiently. 
D) eliminate such goods.

Question 7

Suppose a valley periodically floods.A dam can be built in the river that would prevent the flooding.Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

Accepted Answer

The dam would be indivisible since it mu

Question 8

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.

Question 9

To correct for negative externalities,the government

Accepted Answer

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

Question 10

According to the textbook,what are the two key political functions of government in a market economy?

Accepted Answer

The two functions of governmen

Question 11

Explain what market failure is.How does market failure relate to the price system? How does market failure relate to the role of government?

Accepted Answer

Market failure is a situation in which a

Question 12

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.If a positive externality that existed becomes corrected,price and quantity will become

Accepted Answer

A)    and   . 
B)    and   . 
C)    and   . 
D)    and   . 
A)    and   . 
B)    and   . 
C)    and   . 
D)    and   .

Question 13

The purpose of antitrust legislation is

Accepted Answer

A) to reduce unemployment. 
B) to reduce the power of monopoly. 
C) to increase the power of monopoly. 
D) to maximize employment for a given price level. 
A) to reduce unemployment. 
B) to reduce the power of monopoly. 
C) to increase the power of monopoly. 
D) to maximize employment for a given price level.

Question 14

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 15

If U.S.consumers increase their spending on hybrid cars by 60 percent,and 60 percent more hybrid cars are produced,this is known as the

Accepted Answer

A) majority rule. 
B) proportional rule. 
C) government rule. 
D) profit rule. 
A) majority rule. 
B) proportional rule. 
C) government rule. 
D) profit rule.

Question 16

Providing public goods is a(n)

Accepted Answer

A) economic function of government. 
B) political function of government. 
C) economic and political function of government. 
D) price system function. 
A) economic function of government. 
B) political function of government. 
C) economic and political function of government. 
D) price system function.

Question 17

An important assumption in the theory of public choice is that

Accepted Answer

A) individuals will act within the political process to maximize their individual well-being. 
B) individuals will act within the political process to maximize their collective well-being. 
C) individuals will only operate outside the political process when their well-being is involved. 
D) scarcity does not exist in the government sector. 
A) individuals will act within the political process to maximize their individual well-being. 
B) individuals will act within the political process to maximize their collective well-being. 
C) individuals will only operate outside the political process when their well-being is involved. 
D) scarcity does not exist in the government sector.

Question 18

Which of the following is TRUE about the political and market systems of voting?

Accepted Answer

A) The political voting system functions according to proportional rule,while the market voting system functions according to majority rule. 
B) The political voting system functions according to majority rule,while the market voting system functions according to proportional rule. 
C) The political voting system functions according to minority rule,while the market voting system functions according to majority rule. 
D) The political system and the market system are identical. 
A) The political voting system functions according to proportional rule,while the market voting system functions according to majority rule. 
B) The political voting system functions according to majority rule,while the market voting system functions according to proportional rule. 
C) The political voting system functions according to minority rule,while the market voting system functions according to majority rule. 
D) The political system and the market system are identical.

Question 19

Whether an externality is positive or negative,it is always

Accepted Answer

A) evaluated by the Supreme Court of the United States. 
B) evaluated by the government. 
C) evaluated by the impact on the third party. 
D) judged by the profitability of the firm producing the product. 
A) evaluated by the Supreme Court of the United States. 
B) evaluated by the government. 
C) evaluated by the impact on the third party. 
D) judged by the profitability of the firm producing the product.

Question 20

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.

As a share of total national income,government spending generally has

When positive externalities exist,the private market equilibrium represents a

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

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?

When a good causes positive external benefits to accrue to third parties,an unfettered market will

Suppose a valley periodically floods.A dam can be built in the river that would prevent the flooding.Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

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

To correct for negative externalities,the government

According to the textbook,what are the two key political functions of government in a market economy?

Explain what market failure is.How does market failure relate to the price system? How does market failure relate to the role of government?

The purpose of antitrust legislation is

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

If U.S.consumers increase their spending on hybrid cars by 60 percent,and 60 percent more hybrid cars are produced,this is known as the

Providing public goods is a(n)

An important assumption in the theory of public choice is that

Which of the following is TRUE about the political and market systems of voting?

Whether an externality is positive or negative,it is always

An externality can best be defined as

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

As a share of total national income,government spending generally has

When positive externalities exist,the private market equilibrium represents a

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

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?

When a good causes positive external benefits to accrue to third parties,an unfettered market will

Suppose a valley periodically floods.A dam can be built in the river that would prevent the flooding.Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

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

To correct for negative externalities,the government

According to the textbook,what are the two key political functions of government in a market economy?

Explain what market failure is.How does market failure relate to the price system? How does market failure relate to the role of government?

The purpose of antitrust legislation is

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

If U.S.consumers increase their spending on hybrid cars by 60 percent,and 60 percent more hybrid cars are produced,this is known as the

Providing public goods is a(n)

An important assumption in the theory of public choice is that

Which of the following is TRUE about the political and market systems of voting?

Whether an externality is positive or negative,it is always

An externality can best be defined as

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