Question 1

"Second-hand" smoke,an often cited disadvantage of allowing smoking in restaurants,is referred to in economics as a(n)

Accepted Answer

A) capital good. 
B) externality. 
C) economic cost. 
D) negative investment. 
A) capital good. 
B) externality. 
C) economic cost. 
D) negative investment.

Question 2

What is market failure? How can the government correct market failure?

Accepted Answer

Market failure is a situation in which t

Question 3

Which of the following functions of government gives property owners the incentive to use their property efficiently?

Accepted Answer

A) making sure that courts are lenient on people who steal private property 
B) the protection of property rights 
C) the enforcement of antitrust legislation 
D) the financing of public goods 
A) making sure that courts are lenient on people who steal private property 
B) the protection of property rights 
C) the enforcement of antitrust legislation 
D) the financing of public goods

Question 4

Explain why ensuring economic stability is an economics function of government?

Accepted Answer

Our economy sometimes faces the problems

Question 5

Assume the production of a good gives rise to external benefits.The government may increase efficiency by

Accepted Answer

A) subsidizing consumption of the good. 
B) requiring all producers of the good to be licensed. 
C) taxing production of the good. 
D) imposing taxes on the good. 
A) subsidizing consumption of the good. 
B) requiring all producers of the good to be licensed. 
C) taxing production of the good. 
D) imposing taxes on the good.

Question 6

Which of the following statements is true about the difference between a public and private good?

Accepted Answer

A) Both public and private goods are owned by individuals but public goods can be shared while private goods cannot be shared. 
B) The government produces private goods while corporations produce public goods. 
C) Consumption of a private good by one person reduces the amount available for others while the consumption of a public good does not reduce the amount available for others. 
D) Resources are used to produce private goods but are not used to produce public goods. 
A) Both public and private goods are owned by individuals but public goods can be shared while private goods cannot be shared. 
B) The government produces private goods while corporations produce public goods. 
C) Consumption of a private good by one person reduces the amount available for others while the consumption of a public good does not reduce the amount available for others. 
D) Resources are used to produce private goods but are not used to produce public goods.

Question 7

The largest spending category for state governments is

Accepted Answer

A) welfare. 
B) health care. 
C) education. 
D) highway construction. 
A) welfare. 
B) health care. 
C) education. 
D) highway construction.

Question 8

Which of the following statements is true of external costs?

Accepted Answer

A) External costs should not be corrected since people will bear the costs whether they are corrected or not. 
B) There are no good ways to correct for the external costs. 
C) When external costs exist,the price of the good will be deceptively low leading to an overallocation of resources. 
D) External costs should only be corrected for if the correction will not increase the market price. 
A) External costs should not be corrected since people will bear the costs whether they are corrected or not. 
B) There are no good ways to correct for the external costs. 
C) When external costs exist,the price of the good will be deceptively low leading to an overallocation of resources. 
D) External costs should only be corrected for if the correction will not increase the market price.

Question 9

In the United States,the idea that the federal government should undertake actions to stabilize business activity

Accepted Answer

A) was established in the Declaration of Independence. 
B) is a relatively new idea that developed in the years during and after the Great Depression. 
C) has been around since the early 1700s. 
D) developed during World War I. 
A) was established in the Declaration of Independence. 
B) is a relatively new idea that developed in the years during and after the Great Depression. 
C) has been around since the early 1700s. 
D) developed during World War I.

Question 10

A friend of yours receives a government voucher for an apartment in a public housing project.This apartment represents

Accepted Answer

A) a government-sponsored good. 
B) the free-rider problem. 
C) a public good. 
D) the drop-in-the-bucket problem. 
A) a government-sponsored good. 
B) the free-rider problem. 
C) a public good. 
D) the drop-in-the-bucket problem.

Question 11

A situation in which a benefit or a cost associated with an economic activity spills over to third parties is called

Accepted Answer

A) a public good. 
B) a merit good. 
C) an externality. 
D) the free-rider problem. 
A) a public good. 
B) a merit good. 
C) an externality. 
D) the free-rider problem.

Question 12

Public education is priced below market price largely as a result of

Accepted Answer

A) government subsidy programs. 
B) under-funded public education. 
C) rising test scores by students. 
D) taxpayers who contribute little to the funding of public education. 
A) government subsidy programs. 
B) under-funded public education. 
C) rising test scores by students. 
D) taxpayers who contribute little to the funding of public education.

Question 13

Federal antitrust laws in the United States are intended to

Accepted Answer

A) promote competition by prohibiting monopolies. 
B) increase corporate earnings. 
C) create new monopolies. 
D) create only government-owned monopolies. 
A) promote competition by prohibiting monopolies. 
B) increase corporate earnings. 
C) create new monopolies. 
D) create only government-owned monopolies.

Question 14

The government tries to protect the competitive economic system by passing and enforcing

Accepted Answer

A) price controls. 
B) tariff legislation. 
C) antitrust laws. 
D) building codes and zoning laws. 
A) price controls. 
B) tariff legislation. 
C) antitrust laws. 
D) building codes and zoning laws.

Question 15

Why are public goods provided by the government,rather than by the private sector?

Accepted Answer

A) because they are large-scale projects that require the kind of financing only governments can generate through the issuance of bonds 
B) because it would be difficult for a private sector firm to make a profit providing a public good,since consumers who benefit would not have to pay for it 
C) because no one really benefits from public goods 
D) because private sector firms do not have the foresight to plan for public goods 
A) because they are large-scale projects that require the kind of financing only governments can generate through the issuance of bonds 
B) because it would be difficult for a private sector firm to make a profit providing a public good,since consumers who benefit would not have to pay for it 
C) because no one really benefits from public goods 
D) because private sector firms do not have the foresight to plan for public goods

Question 16

Market failure means that

Accepted Answer

A) the strike organized by unionized employees fails to achieve its goal. 
B) too many outdated products are offered for sale in the local supermarket. 
C) there is overallocation or underallocation of resources to certain economic activity. 
D) an unexpectedly harsh winter shuts down a factory. 
A) the strike organized by unionized employees fails to achieve its goal. 
B) too many outdated products are offered for sale in the local supermarket. 
C) there is overallocation or underallocation of resources to certain economic activity. 
D) an unexpectedly harsh winter shuts down a factory.

Question 17

The free-rider problem is encountered when

Accepted Answer

A) someone benefits from the consumption of a public good without paying his or her full share. 
B) all individuals who consume a public good pay for it. 
C) all goods consumed and produced are private goods. 
D) all individuals are willing to pay for what they consume. 
A) someone benefits from the consumption of a public good without paying his or her full share. 
B) all individuals who consume a public good pay for it. 
C) all goods consumed and produced are private goods. 
D) all individuals are willing to pay for what they consume.

Question 18

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

Accepted Answer

A) negative externalities. 
B) positive externalities. 
C) internal benefits. 
D) external benefits. 
A) negative externalities. 
B) positive externalities. 
C) internal benefits. 
D) external benefits.

Question 19

What is the purpose of antitrust legislation?

Accepted Answer

Antitrust legislation makes illegal cert

Question 20

The free-rider problem is

Accepted Answer

A) the use of private goods in one state by residents of another state. 
B) the incentive that people have to avoid paying for a public good. 
C) the incentive that people have once they are receiving welfare to keep getting welfare. 
D) that people cannot be forced to accept public goods. 
A) the use of private goods in one state by residents of another state. 
B) the incentive that people have to avoid paying for a public good. 
C) the incentive that people have once they are receiving welfare to keep getting welfare. 
D) that people cannot be forced to accept public goods.

"Second-hand" smoke,an often cited disadvantage of allowing smoking in restaurants,is referred to in economics as a(n)

What is market failure? How can the government correct market failure?

Which of the following functions of government gives property owners the incentive to use their property efficiently?

Explain why ensuring economic stability is an economics function of government?

Assume the production of a good gives rise to external benefits.The government may increase efficiency by

Which of the following statements is true about the difference between a public and private good?

The largest spending category for state governments is

Which of the following statements is true of external costs?

In the United States,the idea that the federal government should undertake actions to stabilize business activity

A friend of yours receives a government voucher for an apartment in a public housing project.This apartment represents

A situation in which a benefit or a cost associated with an economic activity spills over to third parties is called

Public education is priced below market price largely as a result of

Federal antitrust laws in the United States are intended to

The government tries to protect the competitive economic system by passing and enforcing

Why are public goods provided by the government,rather than by the private sector?

Market failure means that

The free-rider problem is encountered when

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

What is the purpose of antitrust legislation?

The free-rider problem is

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

"Second-hand" smoke,an often cited disadvantage of allowing smoking in restaurants,is referred to in economics as a(n)

What is market failure? How can the government correct market failure?

Which of the following functions of government gives property owners the incentive to use their property efficiently?

Explain why ensuring economic stability is an economics function of government?

Assume the production of a good gives rise to external benefits.The government may increase efficiency by

Which of the following statements is true about the difference between a public and private good?

The largest spending category for state governments is

Which of the following statements is true of external costs?

In the United States,the idea that the federal government should undertake actions to stabilize business activity

A friend of yours receives a government voucher for an apartment in a public housing project.This apartment represents

A situation in which a benefit or a cost associated with an economic activity spills over to third parties is called

Public education is priced below market price largely as a result of

Federal antitrust laws in the United States are intended to

The government tries to protect the competitive economic system by passing and enforcing

Why are public goods provided by the government,rather than by the private sector?

Market failure means that

The free-rider problem is encountered when

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

What is the purpose of antitrust legislation?

The free-rider problem is

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