Question 1

-Refer to the above figure.An external cost exists.The amount of that cost is represented by

Accepted Answer

A)    . 
B)    . 
C) the vertical distance between point A and the supply curve S1. 
D) the distance between C and A. 
A)    . 
B)    . 
C) the vertical distance between point A and the supply curve S1. 
D) the distance between C and A.

Question 2

Recipients of Medicare tend to demand a greater quantity of low-value,high-cost services because

Accepted Answer

A) the services are readily available. 
B) recipients are coerced into demanding such services. 
C) the government mandates that they demand such services. 
D) the services are heavily subsidized. 
A) the services are readily available. 
B) recipients are coerced into demanding such services. 
C) the government mandates that they demand such services. 
D) the services are heavily subsidized.

Question 3

Which of the following does NOT describe the intended purpose of the antitrust laws of the United States?

Accepted Answer

A) To promote competition within the economic system 
B) To reduce the power of monopolies 
C) To prohibit certain economic activities that promote trade 
D) To restrict the formation of monopolies 
A) To promote competition within the economic system 
B) To reduce the power of monopolies 
C) To prohibit certain economic activities that promote trade 
D) To restrict the formation of monopolies

Question 4

The U.S.legal system mainly engages in activities that

Accepted Answer

A) are dedicated to producing private goods. 
B) focus on income redistribution. 
C) involve defining and protecting property rights. 
D) focus on producing public goods. 
A) are dedicated to producing private goods. 
B) focus on income redistribution. 
C) involve defining and protecting property rights. 
D) focus on producing public goods.

Question 5

Which of the following would be classified as a public good?

Accepted Answer

A) state lotteries 
B) telephone service 
C) cable TV programming 
D) national defense 
A) state lotteries 
B) telephone service 
C) cable TV programming 
D) national defense

Question 6

An example of a negative externality created in the market system would be

Accepted Answer

A) poverty. 
B) unemployment. 
C) an increased number of bird flu patients. 
D) water pollution. 
A) poverty. 
B) unemployment. 
C) an increased number of bird flu patients. 
D) water pollution.

Question 7

Society is likely to over-allocate resources to produce goods that

Accepted Answer

A) are public goods. 
B) are merit goods. 
C) generate positive externalities. 
D) generate negative externalities. 
A) are public goods. 
B) are merit goods. 
C) generate positive externalities. 
D) generate negative externalities.

Question 8

The distinguishing characteristic of a public good is

Accepted Answer

A) noncompetitive production. 
B) durability. 
C) exclusivity. 
D) nonrival consumption. 
A) noncompetitive production. 
B) durability. 
C) exclusivity. 
D) nonrival consumption.

Question 9

Under present U.S.law,cocaine is an example of

Accepted Answer

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

Question 10

The political functions of government differ from the economic functions of government in that

Accepted Answer

A) the political functions relate to income distribution while the economic functions relate to the way exchange is carried out. 
B) the political functions are performed at the federal government while the economic functions are at the state and local government levels. 
C) the political functions involve elections and the court systems while the economic functions involve taxation and transfers. 
D) the President deals with the economic functions while Congress deals with the political functions. 
A) the political functions relate to income distribution while the economic functions relate to the way exchange is carried out. 
B) the political functions are performed at the federal government while the economic functions are at the state and local government levels. 
C) the political functions involve elections and the court systems while the economic functions involve taxation and transfers. 
D) the President deals with the economic functions while Congress deals with the political functions.

Question 11

How does the government carry out income redistribution?

Accepted Answer

Income redistribution can be carried out

Question 12

Which of the following often involves positive external benefits?

Accepted Answer

A) Water pollution 
B) Drunken driving 
C) Inoculation programs 
D) Tobacco smoking 
A) Water pollution 
B) Drunken driving 
C) Inoculation programs 
D) Tobacco smoking

Question 13

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

Accepted Answer

A) competition. 
B) excessive competition. 
C) destructive competition. 
D) a market failure. 
A) competition. 
B) excessive competition. 
C) destructive competition. 
D) a market failure.

Question 14

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

Accepted Answer

A) Social Security 
B) Unemployment benefits 
C) Welfare 
D) Interest payments on government bonds 
A) Social Security 
B) Unemployment benefits 
C) Welfare 
D) Interest payments on government bonds

Question 15

The current Medicare system is designed so that it actually encourages

Accepted Answer

A) cost reductions. 
B) higher costs of medical services. 
C) higher costs only for surgeries. 
D) lower drug costs for recipients. 
A) cost reductions. 
B) higher costs of medical services. 
C) higher costs only for surgeries. 
D) lower drug costs for recipients.

Question 16

A possible solution to the problems of external benefits is

Accepted Answer

A) to tax those receiving the extra benefits. 
B) production of the good by government. 
C) effluent fees. 
D) to restrict the amount of the good through direct government regulation. 
A) to tax those receiving the extra benefits. 
B) production of the good by government. 
C) effluent fees. 
D) to restrict the amount of the good through direct government regulation.

Question 17

-Refer to the above figure.An external benefit exists.The amount of that benefit is represented by

Accepted Answer

A)    . 
B) the vertical distance between D1 and D2. 
C) the distance between G and F. 
D) P3. 
A)    . 
B) the vertical distance between D1 and D2. 
C) the distance between G and F. 
D) P3.

Question 18

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

Accepted Answer

An external benefit is the benefit assoc

Question 19

All of the following are economic functions of the government EXCEPT

Accepted Answer

A) providing a legal system. 
B) determining the wage rate for most jobs. 
C) promoting competition in the market. 
D) providing public goods. 
A) providing a legal system. 
B) determining the wage rate for most jobs. 
C) promoting competition in the market. 
D) providing public goods.

Question 20

Market failures

Accepted Answer

A) prevent the price system from attaining economic efficiency. 
B) result in quantities and prices that are socially desirable. 
C) strengthen economic efficiency by forcing unprofitable firms to close. 
D) weaken the argument for government intervention in the economy. 
A) prevent the price system from attaining economic efficiency. 
B) result in quantities and prices that are socially desirable. 
C) strengthen economic efficiency by forcing unprofitable firms to close. 
D) weaken the argument for government intervention in the economy.

-Refer to the above figure.An external cost exists.The amount of that cost is represented by

Recipients of Medicare tend to demand a greater quantity of low-value,high-cost services because

Which of the following does NOT describe the intended purpose of the antitrust laws of the United States?

The U.S.legal system mainly engages in activities that

Which of the following would be classified as a public good?

An example of a negative externality created in the market system would be

Society is likely to over-allocate resources to produce goods that

The distinguishing characteristic of a public good is

Under present U.S.law,cocaine is an example of

The political functions of government differ from the economic functions of government in that

How does the government carry out income redistribution?

Which of the following often involves positive external benefits?

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

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

The current Medicare system is designed so that it actually encourages

A possible solution to the problems of external benefits is

-Refer to the above figure.An external benefit exists.The amount of that benefit is represented by

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

All of the following are economic functions of the government EXCEPT

Market failures

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

-Refer to the above figure.An external cost exists.The amount of that cost is represented by

Recipients of Medicare tend to demand a greater quantity of low-value,high-cost services because

Which of the following does NOT describe the intended purpose of the antitrust laws of the United States?

The U.S.legal system mainly engages in activities that

Which of the following would be classified as a public good?

An example of a negative externality created in the market system would be

Society is likely to over-allocate resources to produce goods that

The distinguishing characteristic of a public good is

Under present U.S.law,cocaine is an example of

The political functions of government differ from the economic functions of government in that

How does the government carry out income redistribution?

Which of the following often involves positive external benefits?

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as

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

The current Medicare system is designed so that it actually encourages

A possible solution to the problems of external benefits is

-Refer to the above figure.An external benefit exists.The amount of that benefit is represented by

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

All of the following are economic functions of the government EXCEPT

Market failures

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