Question 1

A fundamental reason that governments provide public goods is

Accepted Answer

A) the free-rider problem. 
B) negative externalities are part of the production process. 
C) public goods are merit goods. 
D) they are perfectly divisible. 
A) the free-rider problem. 
B) negative externalities are part of the production process. 
C) public goods are merit goods. 
D) they are perfectly divisible.

Question 2

A firm that produces chemical solvents creates some air pollution because of the emissions from its manufacturing facilities.A tax is imposed on the firm,equal to the costs of environmental damage caused by a unit of the emissions.What is the result?

Accepted Answer

A) The quantity of chemical solvents produced now will be the efficient amount. 
B) Demand for the chemical solvents will increase. 
C) Demand for the chemical solvents will decrease. 
D) Consumers of the chemical solvents will be willing to pay the full amount of the tax,and so the quantity produced will be unaffected. 
A) The quantity of chemical solvents produced now will be the efficient amount. 
B) Demand for the chemical solvents will increase. 
C) Demand for the chemical solvents will decrease. 
D) Consumers of the chemical solvents will be willing to pay the full amount of the tax,and so the quantity produced will be unaffected.

Question 3

The opportunity cost of providing a public good to an additional individual is

Accepted Answer

A) infinite. 
B) zero. 
C) impossible to determine. 
D) high because of the exclusion principle. 
A) infinite. 
B) zero. 
C) impossible to determine. 
D) high because of the exclusion principle.

Question 4

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 5

What is an effluent fee? Graphically,show how an effluent fee can correct an externality.

Accepted Answer

@#IMG-DLM& An effluent fee is a charge to a pollut

Question 6

When there is an external cost,the unregulated market

Accepted Answer

A) overproduces the good or service. 
B) underproduces the good or service. 
C) reaches the most efficient solution. 
D) minimizes public welfare. 
A) overproduces the good or service. 
B) underproduces the good or service. 
C) reaches the most efficient solution. 
D) minimizes public welfare.

Question 7

A paint firm has just announced that it will be building a new plant in a small town that is currently experiencing a high level of unemployment.The new plant will create 500 new jobs in the area and will occupy unused land at the edge of town.The plant will also dump some harmful chemicals into the town's river.From an economic standpoint this dumping of chemicals

Accepted Answer

A) is unimportant since the firm is reducing the unemployment in the region. 
B) creates a negative externality. 
C) is the production of a public good. 
D) creates a positive externality. 
A) is unimportant since the firm is reducing the unemployment in the region. 
B) creates a negative externality. 
C) is the production of a public good. 
D) creates a positive externality.

Question 8

Which of the following types of goods is subject to the free-rider problem?

Accepted Answer

A) A private good 
B) A public good 
C) A product that creates a positive externality 
D) A product that creates a negative externality 
A) A private good 
B) A public good 
C) A product that creates a positive externality 
D) A product that creates a negative externality

Question 9

Medicare subsides will cause people to

Accepted Answer

A) consume less medical services than in the absence of the subsidies. 
B) consume more medical services than in the absence of the subsidies. 
C) consume the same amount medical services as they would if there were no subsidies. 
D) be sicker because of inferior care. 
A) consume less medical services than in the absence of the subsidies. 
B) consume more medical services than in the absence of the subsidies. 
C) consume the same amount medical services as they would if there were no subsidies. 
D) be sicker because of inferior care.

Question 10

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.Externalities exist in both panels.After correcting for the externalities the prices should be

Accepted Answer

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

Question 11

Briefly explain why government subsidies are a reason for the declining student performance in public education.

Accepted Answer

This is due to the incentive problems of

Question 12

If a government determines that the provision of services by museums should be encouraged,then this means that the government has judged museum displays to be a(n)

Accepted Answer

A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good. 
A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good.

Question 13

A difference between the market and the public sector is that

Accepted Answer

A) scarcity exists only in the market sector. 
B) government can use force,while the market does not. 
C) we can only vote in the public sector. 
D) the cost of private goods to society is zero. 
A) scarcity exists only in the market sector. 
B) government can use force,while the market does not. 
C) we can only vote in the public sector. 
D) the cost of private goods to society is zero.

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.A negative externality exists that has not been corrected.Price and quantity will be

Accepted Answer

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

Question 15

In the United States,which of the following is an example of a government-sponsored good?

Accepted Answer

A) Cable T.V. 
B) Concerts 
C) Cigarettes 
D) Coffee 
A) Cable T.V. 
B) Concerts 
C) Cigarettes 
D) Coffee

Question 16

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.Which of the panels would be consistent with the situation in which external benefits exist?

Accepted Answer

A) Panel 1 
B) Panel 2 
C) Panels 1 and 2 
D) Neither panels 
A) Panel 1 
B) Panel 2 
C) Panels 1 and 2 
D) Neither panels

Question 17

A government-inhibited good is one that

Accepted Answer

A) cannot be individually consumed. 
B) would be underproduced by the private market. 
C) should be subsidized to correct the market failure and productive inefficiency. 
D) has been deemed socially undesirable via the political process. 
A) cannot be individually consumed. 
B) would be underproduced by the private market. 
C) should be subsidized to correct the market failure and productive inefficiency. 
D) has been deemed socially undesirable via the political process.

Question 18

One characteristic of a public good is that it

Accepted Answer

A) is available for consumption by only a few individuals at any particular time. 
B) always eliminates the free-rider problem. 
C) can be consumed simultaneously by many individuals. 
D) can be easily subdivided into small units. 
A) is available for consumption by only a few individuals at any particular time. 
B) always eliminates the free-rider problem. 
C) can be consumed simultaneously by many individuals. 
D) can be easily subdivided into small units.

Question 19

If the government wishes to correct the existence of positive externality,it could

Accepted Answer

A) grant subsidies to consumers to stimulate demand. 
B) impose a tax on the producers to stimulate supply. 
C) impose taxes on consumers to stimulate demand. 
D) grant subsidies to producers to reduce supply. 
A) grant subsidies to consumers to stimulate demand. 
B) impose a tax on the producers to stimulate supply. 
C) impose taxes on consumers to stimulate demand. 
D) grant subsidies to producers to reduce supply.

Question 20

What are the three goals of the Employment Act of 1946?

Accepted Answer

A) Keep the peace,improve public education,and protect the environment 
B) Improve the education system,provide more job training,and expand the number of government jobs 
C) Full employment,price stability,and economic growth 
D) Full employment,better schools,and lower income taxes 
A) Keep the peace,improve public education,and protect the environment 
B) Improve the education system,provide more job training,and expand the number of government jobs 
C) Full employment,price stability,and economic growth 
D) Full employment,better schools,and lower income taxes

A fundamental reason that governments provide public goods is

A firm that produces chemical solvents creates some air pollution because of the emissions from its manufacturing facilities.A tax is imposed on the firm,equal to the costs of environmental damage caused by a unit of the emissions.What is the result?

The opportunity cost of providing a public good to an additional individual is

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

What is an effluent fee? Graphically,show how an effluent fee can correct an externality.

When there is an external cost,the unregulated market

Which of the following types of goods is subject to the free-rider problem?

Medicare subsides will cause people to

Briefly explain why government subsidies are a reason for the declining student performance in public education.

If a government determines that the provision of services by museums should be encouraged,then this means that the government has judged museum displays to be a(n)

A difference between the market and the public sector is that

In the United States,which of the following is an example of a government-sponsored good?

A government-inhibited good is one that

One characteristic of a public good is that it

If the government wishes to correct the existence of positive externality,it could

What are the three goals of the Employment Act of 1946?

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

A fundamental reason that governments provide public goods is

A firm that produces chemical solvents creates some air pollution because of the emissions from its manufacturing facilities.A tax is imposed on the firm,equal to the costs of environmental damage caused by a unit of the emissions.What is the result?

The opportunity cost of providing a public good to an additional individual is

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

What is an effluent fee? Graphically,show how an effluent fee can correct an externality.

When there is an external cost,the unregulated market

Which of the following types of goods is subject to the free-rider problem?

Medicare subsides will cause people to

Briefly explain why government subsidies are a reason for the declining student performance in public education.

If a government determines that the provision of services by museums should be encouraged,then this means that the government has judged museum displays to be a(n)

A difference between the market and the public sector is that

In the United States,which of the following is an example of a government-sponsored good?

A government-inhibited good is one that

One characteristic of a public good is that it

If the government wishes to correct the existence of positive externality,it could

What are the three goals of the Employment Act of 1946?

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