Question 1

Which of the following is NOT an example of a negative externality?

Accepted Answer

A) Inoculation against disease 
B) Pollution 
C) Playing a boom box loudly in a crowded park 
D) Rush hour traffic 
A) Inoculation against disease 
B) Pollution 
C) Playing a boom box loudly in a crowded park 
D) Rush hour traffic

Question 2

Which of the following is a political function of government but is not a central economic function?

Accepted Answer

A) Determining who has a right to vote 
B) Determining government-sponsored and government-inhibited goods 
C) Providing a legal system to adjudicate property rights 
D) Redistributing income from some individuals to others 
A) Determining who has a right to vote 
B) Determining government-sponsored and government-inhibited goods 
C) Providing a legal system to adjudicate property rights 
D) Redistributing income from some individuals to others

Question 3

Which of the following might be a method that the government could use to correct a negative externality?

Accepted Answer

A) an effluent fee on waste from the production of goods that create negative externalities 
B) government subsidies to producers of goods that create negative externalities 
C) financing additional production of goods that create negative externalities 
D) encouraging overallocation of resources of production of goods that create negative externalities 
A) an effluent fee on waste from the production of goods that create negative externalities 
B) government subsidies to producers of goods that create negative externalities 
C) financing additional production of goods that create negative externalities 
D) encouraging overallocation of resources of production of goods that create negative externalities

Question 4

Which of the following is NOT an economic function of government?

Accepted Answer

A) Providing a legal system 
B) Ensuring economic stability 
C) Providing government-inhibited goods 
D) Promoting competition 
A) Providing a legal system 
B) Ensuring economic stability 
C) Providing government-inhibited goods 
D) Promoting competition

Question 5

When there are too few or too many resources going to an economic activity,

Accepted Answer

A) a public good exists. 
B) a market failure exists. 
C) a regressive tax is in place. 
D) a free-rider problem exists. 
A) a public good exists. 
B) a market failure exists. 
C) a regressive tax is in place. 
D) a free-rider problem exists.

Question 6

Which of the following is NOT an example of a transfer payment?

Accepted Answer

A) unemployment compensation 
B) food stamps 
C) government salaries 
D) Social Security benefits 
A) unemployment compensation 
B) food stamps 
C) government salaries 
D) Social Security benefits

Question 7

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 8

Market failures take place when

Accepted Answer

A) a market fails to have the goods that consumers want. 
B) an underground market develops. 
C) market transactions lead to underproduction or overproduction of a good. 
D) producers stop production. 
A) a market fails to have the goods that consumers want. 
B) an underground market develops. 
C) market transactions lead to underproduction or overproduction of a good. 
D) producers stop production.

Question 9

Graphically,the effects of an external cost can be shown as

Accepted Answer

A) a leftward shift of the market demand curve. 
B) a leftward shift of the market supply curve. 
C) a downward movement along the market demand curve. 
D) a rightward shift of the market supply curve. 
A) a leftward shift of the market demand curve. 
B) a leftward shift of the market supply curve. 
C) a downward movement along the market demand curve. 
D) a rightward shift of the market supply curve.

Question 10

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 11

Suppose that the market price of good X equals the firm's cost of producing that good,but it does not reflect any costs imposed on society.Which of the following is FALSE?

Accepted Answer

A) The good is priced too low. 
B) An external benefit is associated with good X. 
C) Resources are over-allocated in the production of good X. 
D) Too much of good X is being produced. 
A) The good is priced too low. 
B) An external benefit is associated with good X. 
C) Resources are over-allocated in the production of good X. 
D) Too much of good X is being produced.

Question 12

All of the following are ways that the government can correct for positive externalities EXCEPT

Accepted Answer

A) by subsidizing the consumption of the good. 
B) producing the good itself. 
C) by regulation. 
D) by assessing an effluent fee. 
A) by subsidizing the consumption of the good. 
B) producing the good itself. 
C) by regulation. 
D) by assessing an effluent fee.

Question 13

The non-exclusion principle means

Accepted Answer

A) no one can be excluded from the benefits of a public good,even if the person does not pay for it. 
B) no one can be excluded from the benefits of a private good,even if only one person pays for it. 
C) no one who pays for a public good can be excluded from receiving the benefits of a public good. 
D) people who do not pay for a public good can be excluded from receiving its benefits. 
A) no one can be excluded from the benefits of a public good,even if the person does not pay for it. 
B) no one can be excluded from the benefits of a private good,even if only one person pays for it. 
C) no one who pays for a public good can be excluded from receiving the benefits of a public good. 
D) people who do not pay for a public good can be excluded from receiving its benefits.

Question 14

My brother decides to leave his empty soda can on someone's lawn.This is an example of a

Accepted Answer

A) public good. 
B) positive externality. 
C) neutral externality. 
D) negative externality. 
A) public good. 
B) positive externality. 
C) neutral externality. 
D) negative externality.

Question 15

Public schools

Accepted Answer

A) allow students to get an education without incurring any opportunity cost. 
B) provide education at a price below the market price. 
C) provide education at a price above the market price. 
D) have done a better job of educating their students in science,math,reading,and writing as the subsidies they receive have increased over the years. 
A) allow students to get an education without incurring any opportunity cost. 
B) provide education at a price below the market price. 
C) provide education at a price above the market price. 
D) have done a better job of educating their students in science,math,reading,and writing as the subsidies they receive have increased over the years.

Question 16

An example of a transfer payment is

Accepted Answer

A) the President's salary. 
B) unemployment insurance benefits. 
C) a payment to a defense contractor. 
D) court costs paid by the defendants in a law suit. 
A) the President's salary. 
B) unemployment insurance benefits. 
C) a payment to a defense contractor. 
D) court costs paid by the defendants in a law suit.

Question 17

The major economic effect of Medicare subsidies is

Accepted Answer

A) that the number of physicians has decreased since compensation is low. 
B) to increase the price of medical services and reduce the quantity demanded. 
C) to increase the price of medical services and increase the quantity demanded. 
D) to lower the price of medical services and reduce the quantity demanded. 
A) that the number of physicians has decreased since compensation is low. 
B) to increase the price of medical services and reduce the quantity demanded. 
C) to increase the price of medical services and increase the quantity demanded. 
D) to lower the price of medical services and reduce the quantity demanded.

Question 18

List and explain the four key assumptions in the theory of public choice.

Accepted Answer

The key assumptions in the theory of pub

Question 19

Government spending as a percent of national income

Accepted Answer

A) peaked during the Reagan administration. 
B) peaked during World War II. 
C) has been steadily climbing since 1850. 
D) has been almost constant this century. 
A) peaked during the Reagan administration. 
B) peaked during World War II. 
C) has been steadily climbing since 1850. 
D) has been almost constant this century.

Which of the following is NOT an example of a negative externality?

Which of the following is a political function of government but is not a central economic function?

Which of the following might be a method that the government could use to correct a negative externality?

Which of the following is NOT an economic function of government?

When there are too few or too many resources going to an economic activity,

Which of the following is NOT an example of a transfer payment?

If external benefits are taken into account in the market,

Market failures take place when

Graphically,the effects of an external cost can be shown as

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

Suppose that the market price of good X equals the firm's cost of producing that good,but it does not reflect any costs imposed on society.Which of the following is FALSE?

All of the following are ways that the government can correct for positive externalities EXCEPT

The non-exclusion principle means

My brother decides to leave his empty soda can on someone's lawn.This is an example of a

Public schools

An example of a transfer payment is

The major economic effect of Medicare subsidies is

List and explain the four key assumptions in the theory of public choice.

Government spending as a percent of national income

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 is NOT an example of a negative externality?

Which of the following is a political function of government but is not a central economic function?

Which of the following might be a method that the government could use to correct a negative externality?

Which of the following is NOT an economic function of government?

When there are too few or too many resources going to an economic activity,

Which of the following is NOT an example of a transfer payment?

If external benefits are taken into account in the market,

Market failures take place when

Graphically,the effects of an external cost can be shown as

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

Suppose that the market price of good X equals the firm's cost of producing that good,but it does not reflect any costs imposed on society.Which of the following is FALSE?

All of the following are ways that the government can correct for positive externalities EXCEPT

The non-exclusion principle means

My brother decides to leave his empty soda can on someone's lawn.This is an example of a

Public schools

An example of a transfer payment is

The major economic effect of Medicare subsidies is

List and explain the four key assumptions in the theory of public choice.

Government spending as a percent of national income

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