Question 1

In which of the following ways is the private market sector similar to the public sector in terms of decision making?

Accepted Answer

A) Prices determine the demand for goods and services in each sector. 
B) There is competition for scarce resource in both sectors. 
C) Both sectors may use a type of "force" if necessary. 
D) Votes by individual voters are basically equal in importance with dollars spent by individuals on goods. 
A) Prices determine the demand for goods and services in each sector. 
B) There is competition for scarce resource in both sectors. 
C) Both sectors may use a type of "force" if necessary. 
D) Votes by individual voters are basically equal in importance with dollars spent by individuals on goods.

Question 2

The theory of public choice

Accepted Answer

A) is the theory of how government decides on what military hardware to purchase. 
B) considers government decision-making efficient. 
C) is the study of collective decision making. 
D) is the study of how negative externalities can be reduced. 
A) is the theory of how government decides on what military hardware to purchase. 
B) considers government decision-making efficient. 
C) is the study of collective decision making. 
D) is the study of how negative externalities can be reduced.

Question 3

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 existed but has 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 4

If a nation's government determines that consumption of cigarettes should be discouraged,then this means that the government has judged cigarettes 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 5

When an Australian citizen enjoys military protection in Australia without contributing to the cost of Australia's defense budget,then

Accepted Answer

A) this citizen is a free rider. 
B) Australia is a free rider. 
C) this citizen receives no benefits if Australia is attacked. 
D) Australia's defense budget will run out of funds. 
A) this citizen is a free rider. 
B) Australia is a free rider. 
C) this citizen receives no benefits if Australia is attacked. 
D) Australia's defense budget will run out of funds.

Question 6

Which of the following is an example of a public good?

Accepted Answer

A) Flood control 
B) Post Office 
C) Health care 
D) Welfare 
A) Flood control 
B) Post Office 
C) Health care 
D) Welfare

Question 7

-In the above figure,market equilibrium at point E yields the quantity X.The quantity   is socially optimal amount.The government can achieve the optimal outcome by

Accepted Answer

A) setting the price at   . 
B) establishing a tax of   -   per unit of the good sold. 
C) establishing a tax of   -   per unit of the good sold. 
D) setting the price at   . 
A) setting the price at   . 
B) establishing a tax of   -   per unit of the good sold. 
C) establishing a tax of   -   per unit of the good sold. 
D) setting the price at   .

Question 8

An externality is

Accepted Answer

A) a third-party benefit or cost that is associated with the production of a good. 
B) when external forces such as war or flood affect the market. 
C) government intervention in the markets. 
D) transaction costs. 
A) a third-party benefit or cost that is associated with the production of a good. 
B) when external forces such as war or flood affect the market. 
C) government intervention in the markets. 
D) transaction costs.

Question 9

What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?

Accepted Answer

An externality is a cost or benefit of a

Question 10

Which of the following is NOT related to the government's political function of income redistribution?

Accepted Answer

A) Providing money transfer payments 
B) Excise tax on gasoline 
C) Social Security 
D) In-kind transfers 
A) Providing money transfer payments 
B) Excise tax on gasoline 
C) Social Security 
D) In-kind transfers

Question 11

A subsidy is sometimes used by the government to correct the problems associated with

Accepted Answer

A) negative externalities. 
B) positive externalities. 
C) public goods. 
D) monopolies. 
A) negative externalities. 
B) positive externalities. 
C) public goods. 
D) monopolies.

Question 12

An effluent fee is more effective when imposed on

Accepted Answer

A) the firm or producer of the product which generates pollution. 
B) the consumer of the product. 
C) neither the producer nor the consumer of the product. 
D) the supplier of the raw material used by the firm. 
A) the firm or producer of the product which generates pollution. 
B) the consumer of the product. 
C) neither the producer nor the consumer of the product. 
D) the supplier of the raw material used by the firm.

Question 13

Government payment of a per-unit subsidy for medical care causes the out-of-pocket price that consumers pay for care to be

Accepted Answer

A) less than the price that producers receive for providing care. 
B) greater than the price that producers receive for providing care. 
C) greater than the market clearing price without the subsidy. 
D) equal to zero. 
A) less than the price that producers receive for providing care. 
B) greater than the price that producers receive for providing care. 
C) greater than the market clearing price without the subsidy. 
D) equal to zero.

Question 14

In its most ideal form,a price system allows

Accepted Answer

A) firms to act in such a way that they eliminate scarcity. 
B) consumers to satisfy all their wants. 
C) resources to move from lower-valued uses to higher-valued uses through voluntary exchange. 
D) government policy makers to allocate resources to the uses which they consider to be in the best interests of society. 
A) firms to act in such a way that they eliminate scarcity. 
B) consumers to satisfy all their wants. 
C) resources to move from lower-valued uses to higher-valued uses through voluntary exchange. 
D) government policy makers to allocate resources to the uses which they consider to be in the best interests of society.

Question 15

A transfer payment is a payment

Accepted Answer

A) made by the government to its current workers. 
B) associated with items exported to other nations. 
C) for in-kind services provided to the government. 
D) for which no services or goods are rendered. 
A) made by the government to its current workers. 
B) associated with items exported to other nations. 
C) for in-kind services provided to the government. 
D) for which no services or goods are rendered.

Question 16

Explain why economists consider it to be one of the economic functions of government to provide a legal system.

Accepted Answer

A market economy relies heavily on contr

Question 17

Over the past 40 years,there has been an increase in spending on public education without a significant increase in student performance.One explanation given by economists on why student performance has not improved is that

Accepted Answer

A) not enough funds have been spent on public education. 
B) schools are providing high-priced services that are not valued by parents. 
C) the quantity of educational services has not increased beyond the pre-subsidy equilibrium. 
D) too much competition for educational services. 
A) not enough funds have been spent on public education. 
B) schools are providing high-priced services that are not valued by parents. 
C) the quantity of educational services has not increased beyond the pre-subsidy equilibrium. 
D) too much competition for educational services.

Question 18

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

Accepted Answer

A) A bread company emits a wonderful aroma in the air that makes people smile. 
B) The neighbor's wind chimes interfere with your sleep. 
C) A firm fires 500 people. 
D) Cancer-causing chemicals are dumped into the drinking water supply of a city. 
A) A bread company emits a wonderful aroma in the air that makes people smile. 
B) The neighbor's wind chimes interfere with your sleep. 
C) A firm fires 500 people. 
D) Cancer-causing chemicals are dumped into the drinking water supply of a city.

Question 19

The total amount that the U.S.government spends to support a covered type of health care service under the Medicare system equals

Accepted Answer

A) the per-unit subsidy provided to producers of that service times the quantity of the service demanded by consumers at a below-equilibrium out-of-pocket price of the service. 
B) the per-unit subsidy provided to producers of that service times the equilibrium quantity of the service demanded at the market clearing price that would arise in the absence of Medicare. 
C) the below-equilibrium,out-of-pocket price that consumers pay for the service times the quantity of the service provided by producers at that out-of-pocket price. 
D) the below-equilibrium,out-of-pocket price that consumers pay for the service times the quantity of the service demanded by consumers at that out-of-pocket price. 
A) the per-unit subsidy provided to producers of that service times the quantity of the service demanded by consumers at a below-equilibrium out-of-pocket price of the service. 
B) the per-unit subsidy provided to producers of that service times the equilibrium quantity of the service demanded at the market clearing price that would arise in the absence of Medicare. 
C) the below-equilibrium,out-of-pocket price that consumers pay for the service times the quantity of the service provided by producers at that out-of-pocket price. 
D) the below-equilibrium,out-of-pocket price that consumers pay for the service times the quantity of the service demanded by consumers at that out-of-pocket price.

Question 20

The principal feature of private goods is that

Accepted Answer

A) they cannot be rented or purchased. 
B) consumption by one person reduces the quantity available to others. 
C) no one can be excluded from consumption of the product. 
D) externality problems associated with their production are always negative. 
A) they cannot be rented or purchased. 
B) consumption by one person reduces the quantity available to others. 
C) no one can be excluded from consumption of the product. 
D) externality problems associated with their production are always negative.

In which of the following ways is the private market sector similar to the public sector in terms of decision making?

The theory of public choice

If a nation's government determines that consumption of cigarettes should be discouraged,then this means that the government has judged cigarettes to be a(n)

When an Australian citizen enjoys military protection in Australia without contributing to the cost of Australia's defense budget,then

Which of the following is an example of a public good?

-In the above figure,market equilibrium at point E yields the quantity X.The quantity is socially optimal amount.The government can achieve the optimal outcome by

An externality is

What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?

Which of the following is NOT related to the government's political function of income redistribution?

A subsidy is sometimes used by the government to correct the problems associated with

An effluent fee is more effective when imposed on

Government payment of a per-unit subsidy for medical care causes the out-of-pocket price that consumers pay for care to be

In its most ideal form,a price system allows

A transfer payment is a payment

Explain why economists consider it to be one of the economic functions of government to provide a legal system.

Over the past 40 years,there has been an increase in spending on public education without a significant increase in student performance.One explanation given by economists on why student performance has not improved is that

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

The total amount that the U.S.government spends to support a covered type of health care service under the Medicare system equals

The principal feature of private goods is that

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

In which of the following ways is the private market sector similar to the public sector in terms of decision making?

The theory of public choice

If a nation's government determines that consumption of cigarettes should be discouraged,then this means that the government has judged cigarettes to be a(n)

When an Australian citizen enjoys military protection in Australia without contributing to the cost of Australia's defense budget,then

Which of the following is an example of a public good?

-In the above figure,market equilibrium at point E yields the quantity X.The quantity is socially optimal amount.The government can achieve the optimal outcome by

An externality is

What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?

Which of the following is NOT related to the government's political function of income redistribution?

A subsidy is sometimes used by the government to correct the problems associated with

An effluent fee is more effective when imposed on

Government payment of a per-unit subsidy for medical care causes the out-of-pocket price that consumers pay for care to be

In its most ideal form,a price system allows

A transfer payment is a payment

Explain why economists consider it to be one of the economic functions of government to provide a legal system.

Over the past 40 years,there has been an increase in spending on public education without a significant increase in student performance.One explanation given by economists on why student performance has not improved is that

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

The total amount that the U.S.government spends to support a covered type of health care service under the Medicare system equals

The principal feature of private goods is that

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