Question 1

Which of the following statements is NOT true of external benefits?

Accepted Answer

A) External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B) External benefits lead to a price in the market that is too high. 
C) External benefits lead to too few of the goods that have the external benefit being produced. 
D) External benefits are a good thing for the allocation of resources because people are getting something at no cost. 
A) External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B) External benefits lead to a price in the market that is too high. 
C) External benefits lead to too few of the goods that have the external benefit being produced. 
D) External benefits are a good thing for the allocation of resources because people are getting something at no cost.

Question 2

The economic functions of government include

Accepted Answer

A) determining prices. 
B) setting wages in the public sector. 
C) protecting property rights. 
D) welfare. 
A) determining prices. 
B) setting wages in the public sector. 
C) protecting property rights. 
D) welfare.

Question 3

The legal system in the United States tends

Accepted Answer

A) to support monopolies. 
B) to actively discourage unionization. 
C) to discourage the entry of new firms into industries. 
D) to promote competition. 
A) to support monopolies. 
B) to actively discourage unionization. 
C) to discourage the entry of new firms into industries. 
D) to promote competition.

Question 4

Scarcity

Accepted Answer

A) affects both market and public sector decision making. 
B) affects market,but not public sector decision making. 
C) affects public sector,but not market decision making. 
D) is really not an issue in such a wealthy nation as the United States. 
A) affects both market and public sector decision making. 
B) affects market,but not public sector decision making. 
C) affects public sector,but not market decision making. 
D) is really not an issue in such a wealthy nation as the United States.

Question 5

A political function of government is to

Accepted Answer

A) encourage the consumption of government-sponsored goods. 
B) provide public goods. 
C) correct for externalities. 
D) encourage the workings of the price system. 
A) encourage the consumption of government-sponsored goods. 
B) provide public goods. 
C) correct for externalities. 
D) encourage the workings of the price system.

Question 6

If the production of ukuleles creates a negative externality that is not corrected for by the government,the equilibrium quantity of ukuleles is

Accepted Answer

A) higher than optimal. 
B) lower than optimal. 
C) efficient. 
D) at a optimal level. 
A) higher than optimal. 
B) lower than optimal. 
C) efficient. 
D) at a optimal level.

Question 7

Medicare subsidies will cause people to

Accepted Answer

A) perceive the price they pay per unit of medical services to be lower than the price received by the provider. 
B) perceive the price they pay per unit of medical services to be higher than the price received by the provider. 
C) perceive the price they pay per unit of medical services to be exactly equal to the price received by the provider. 
D) demand fewer services. 
A) perceive the price they pay per unit of medical services to be lower than the price received by the provider. 
B) perceive the price they pay per unit of medical services to be higher than the price received by the provider. 
C) perceive the price they pay per unit of medical services to be exactly equal to the price received by the provider. 
D) demand fewer services.

Question 8

A negative externality such as pollution can be corrected by

Accepted Answer

A) a subsidy to producers. 
B) a tax on producers. 
C) a subsidy to consumers. 
D) a stimulus to production. 
A) a subsidy to producers. 
B) a tax on producers. 
C) a subsidy to consumers. 
D) a stimulus to production.

Question 9

Medicare and Social Security are examples of

Accepted Answer

A) transfer payment programs. 
B) public goods. 
C) programs that do not respond to rational economic incentives. 
D) the efficient allocation of resources under a free market system. 
A) transfer payment programs. 
B) public goods. 
C) programs that do not respond to rational economic incentives. 
D) the efficient allocation of resources under a free market system.

Question 10

The funding of public education is

Accepted Answer

A) a private program. 
B) a subsidy program. 
C) done by voluntary contributions. 
D) provided by Social Security. 
A) a private program. 
B) a subsidy program. 
C) done by voluntary contributions. 
D) provided by Social Security.

Question 11

Public goods

Accepted Answer

A) are overproduced by unrestrained markets. 
B) are simply private goods that the government provides. 
C) cannot be consumed by more than one person without the degradation of the value of the good. 
D) can be consumed by more than one person without degradation of the value of the good. 
A) are overproduced by unrestrained markets. 
B) are simply private goods that the government provides. 
C) cannot be consumed by more than one person without the degradation of the value of the good. 
D) can be consumed by more than one person without degradation of the value of the good.

Question 12

Public goods are characterized by the free-rider problem because

Accepted Answer

A) no one can be excluded from the benefits of public goods once they are produced. 
B) public goods are usually things that people really do not want to consume. 
C) public goods are characterized by the principle of rival consumption. 
D) public goods can easily be subdivided into small units. 
A) no one can be excluded from the benefits of public goods once they are produced. 
B) public goods are usually things that people really do not want to consume. 
C) public goods are characterized by the principle of rival consumption. 
D) public goods can easily be subdivided into small units.

Question 13

The economic role of the legal system might best be described as

Accepted Answer

A) promoting the productive efficiency of competitive markets. 
B) identifying and producing public goods. 
C) establishing the "rules of the game" and acting as a referee when disputes arise among market participants. 
D) identifying and producing merit goods. 
A) promoting the productive efficiency of competitive markets. 
B) identifying and producing public goods. 
C) establishing the "rules of the game" and acting as a referee when disputes arise among market participants. 
D) identifying and producing merit goods.

Question 14

The free-rider problem plagues public goods because

Accepted Answer

A) public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society. 
B) once public goods are produced it is not possible to exclude anyone from consuming these goods. 
C) the government can refuse to serve a citizen. 
D) the public doesn't care about public goods. 
A) public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society. 
B) once public goods are produced it is not possible to exclude anyone from consuming these goods. 
C) the government can refuse to serve a citizen. 
D) the public doesn't care about public goods.

Question 15

Compared with the market clearing price of a health care service covered by Medicare,the Medicare program pays a ________ price to health care providers and charges a ________ price to consumers.

Accepted Answer

A) lower,lower 
B) lower,higher 
C) higher,lower 
D) higher,higher 
A) lower,lower 
B) lower,higher 
C) higher,lower 
D) higher,higher

Question 16

The "principle of rival consumption" applies to which of the following?

Accepted Answer

A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good 
A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good

Question 17

By subsidizing the provision of public education,the government

Accepted Answer

A) generates an increase in the quantity of educational services demanded. 
B) pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C) pushes the per-unit price that producers of educational services receive above the market clearing price. 
D) All of the above 
A) generates an increase in the quantity of educational services demanded. 
B) pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C) pushes the per-unit price that producers of educational services receive above the market clearing price. 
D) All of the above

Question 18

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

Accepted Answer

A) the economic functions are carried out by the federal government,while the political functions are carried out by state and local governments. 
B) the economic functions include policies that affect income redistribution,while the political functions involve things that affect the way exchange is carried out. 
C) the economic functions involve things that affect the way exchange is carried out while the political functions include policies that affect income redistribution. 
D) the economic functions are carried out by state and local governments,while the political functions are carried out by the federal government. 
A) the economic functions are carried out by the federal government,while the political functions are carried out by state and local governments. 
B) the economic functions include policies that affect income redistribution,while the political functions involve things that affect the way exchange is carried out. 
C) the economic functions involve things that affect the way exchange is carried out while the political functions include policies that affect income redistribution. 
D) the economic functions are carried out by state and local governments,while the political functions are carried out by the federal government.

Question 19

According to your text,one reason for flat or falling achievement scores even in the face of substantially higher education subsidies may be that

Accepted Answer

A) the additional funds are being siphoned off by dishonest school board members. 
B) some of the funds are going to social services rather than to enhance learning activities. 
C) students are so unmotivated that no amount of spending will ever improve scores. 
D) most parents do not support the schools or their children's educational activities. 
A) the additional funds are being siphoned off by dishonest school board members. 
B) some of the funds are going to social services rather than to enhance learning activities. 
C) students are so unmotivated that no amount of spending will ever improve scores. 
D) most parents do not support the schools or their children's educational activities.

Question 20

All of the following are major sources for financing public education EXCEPT

Accepted Answer

A) income taxes. 
B) sales taxes. 
C) property taxes. 
D) government fees. 
A) income taxes. 
B) sales taxes. 
C) property taxes. 
D) government fees.

Which of the following statements is NOT true of external benefits?

The economic functions of government include

The legal system in the United States tends

Scarcity

A political function of government is to

If the production of ukuleles creates a negative externality that is not corrected for by the government,the equilibrium quantity of ukuleles is

Medicare subsidies will cause people to

A negative externality such as pollution can be corrected by

Medicare and Social Security are examples of

The funding of public education is

Public goods

Public goods are characterized by the free-rider problem because

The economic role of the legal system might best be described as

The free-rider problem plagues public goods because

Compared with the market clearing price of a health care service covered by Medicare,the Medicare program pays a price to health care providers and charges a price to consumers.

The "principle of rival consumption" applies to which of the following?

By subsidizing the provision of public education,the government

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

According to your text,one reason for flat or falling achievement scores even in the face of substantially higher education subsidies may be that

All of the following are major sources for financing public education EXCEPT

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 statements is NOT true of external benefits?

The economic functions of government include

The legal system in the United States tends

Scarcity

A political function of government is to

If the production of ukuleles creates a negative externality that is not corrected for by the government,the equilibrium quantity of ukuleles is

Medicare subsidies will cause people to

A negative externality such as pollution can be corrected by

Medicare and Social Security are examples of

The funding of public education is

Public goods

Public goods are characterized by the free-rider problem because

The economic role of the legal system might best be described as

The free-rider problem plagues public goods because

Compared with the market clearing price of a health care service covered by Medicare,the Medicare program pays a ________ price to health care providers and charges a ________ price to consumers.

The "principle of rival consumption" applies to which of the following?

By subsidizing the provision of public education,the government

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

According to your text,one reason for flat or falling achievement scores even in the face of substantially higher education subsidies may be that

All of the following are major sources for financing public education EXCEPT

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

Compared with the market clearing price of a health care service covered by Medicare,the Medicare program pays a price to health care providers and charges a price to consumers.