Deck 14: Public Goods and Taxation

Question 1

A collective good is one that is

A) nonrival but excludable.
B) rival but nonexcludable.
C) consumed by more than one person.
D) both nonrival and nonexcludable.
E) designed to benefit society collectively.

Answer 1

nonrival but excludable.

Question 2

If it is impossible,or highly costly,to prevent consumers from consuming a good when they have not paid for it,the good is called

A) nonexcludable.
B) public.
C) private.
D) nonrival.
E) common.

Answer 2

nonexcludable.

Question 3

When dealing with pure public goods,

A) government must always provide them.
B) private firms will always provide them.
C) government frequently provides them,although private firms provide some.
D) government must legally compel private firms to provide them.
E) private firms provide nearly all of them and government provides the few remaining ones.

Answer 3

government frequently provides them,although private firms provide some.

Question 4

Which of the following items is an example of a nonrival but excludable good?

A) Pay-per-view movies.
B) Corn.
C) National defence.
D) Broadcast TV.
E) Access to the Internet.

Question 5

To say that a particular good is nonrival means that

A) it has no substitutes.
B) consumers can enjoy it without paying for it.
C) consumption of the good by one person does not diminish the availability of the good to others.
D) it is the best good,i.e. ,it has no rivals.
E) consumption of the good by one person reduces the availability of the good to others.

Question 6

If government needs to raise revenue to pay for a public good,the ideal tax structure would be to tax

A) all citizens by the same amount.
B) all citizens in proportion to their willingness to pay for the public good.
C) all citizens by the same proportion of their income.
D) only the citizens that use the public good.
E) only the citizens that are willing to pay for the public good.

Question 7

Which of the following is NOT a proper justification for making government responsible for collecting revenues to finance a public good?

A) No single individual may have a reservation price high enough to pay for the public good.
B) Negotiation between private citizens about each person's contribution is costly.
C) Individuals may attempt to free ride on the contributions of others.
D) The cost of the public good exceeds the benefit.
E) The number of citizens affected may be so large as to render private negotiation impossible.

Question 8

If government chooses to use a head tax to finance a particular public good,then the

A) proportion of income paid in taxes is constant.
B) amount of tax paid by each taxpayer declines as income rises.
C) proportion of income paid in taxes declines as income rises.
D) proportion of income paid in taxes increases as income rises.
E) taxpayers who use the public good pay a greater amount than those who do not use it.

Question 9

In general,

A) government must always provide public goods.
B) government is best able to provide all public goods.
C) government should only provide public goods when private solutions fail and the benefits of the goods exceed the costs.
D) the benefits of public goods will necessarily be less than the costs,so government must be relied upon to provide them.
E) the lack of a profit motive means government-provided public goods will be wasteful.

Question 10

A nonexcludable good is one

A) for which the availability of the good does not depend on the number of consumers.
B) that consumers can consume without paying for it.
C) that consumers cannot remove from their budget.
D) that consumers must pay for before they can consume it.
E) of which consumption continues despite serious health risks,e.g. ,cigarettes.

Question 11

A head tax means the amount of tax paid is

A) the same for all taxpayers.
B) the same for all families.
C) an increasing function of the taxpayer's income.
D) a decreasing function of the taxpayer's income.
E) the same for all taxpayers who use the public good.

Question 12

A private good possesses the characteristics of being

A) rival but nonexcludable.
B) rival and excludable.
C) nonrival but excludable.
D) nonrival and nonexcludable.
E) rival or excludable,but not both.

Question 13

A public good is one that

A) has some degree of being either nonrival or nonexcludable.
B) is nonrival but may or may not be nonexcludable.
C) has some degree of being both nonrival and nonexcludable.
D) is nonexcludable but may or may not be nonrival.
E) must be highly nonrival and highly nonexcludable.

Question 14

Collective goods tend to be

A) provided only by government.
B) over-consumed.
C) provided only by private firms.
D) provided by government in some cases,by private firms in other cases.
E) provided by government if the costs exceed the benefits.

Question 15

A copy of the movie Pulp Fiction at the video store is a __________ good;when it is shown on a cable TV station,it is a __________ good;and when it is shown on broadcast TV,it is a __________ good.

A) private;public;pure public
B) collective;private;public
C) private;private;collective
D) private;collective;public
E) private;private;public

Question 16

The best example of a public good is

A) cable TV.
B) a national park.
C) national defence.
D) social security.
E) education.

Question 17

A public good is one that is

A) nonrival only.
B) nonexcludable only.
C) highly rival and highly excludable.
D) highly nonrival highly excludable.
E) highly nonrival and highly nonexcludable.

Question 18

Radio programs broadcast over airwaves are an example of a good that is

A) only nonrival.
B) only nonexcludable.
C) neither nonrival nor nonexcludable.
D) both nonrival and nonexcludable.
E) private.

Question 19

If the percentage of income paid in taxes falls as income rises,the tax is called

A) progressive.
B) proportional.
C) liberal.
D) conservative.
E) regressive.

Question 20

Radio and broadcast television are examples of

A) collective goods.
B) private goods.
C) public goods provided by government.
D) rival yet nonexcludable goods.
E) public goods provided by private firms.

Question 21

In Canada,public sector services such as national defence are

A) exclusively produced by public servants and by public firms.
B) exclusively produced by private firms.
C) exclusively contracted out to other public departments.
D) provided by government,but some other public sector services may be sub-contracted to private firms for production.
E) provided by the private sector,but are sub-contracted to the public sector for production.

Question 22

Relying on a regressive tax structure to fund public goods would

A) result in overprovision of public goods.
B) be favoured by the wealthy.
C) come closest to the ideal tax structure.
D) result in large amounts of tax revenue.
E) result in a gross underprovision of public goods.

Question 23

Banff National Park is a jointly consumed good in the sense that

A) the size and beauty of the park is the same for all visitors.
B) typically only families visit the park.
C) while the government owns the park,private firms provide the lodgings.
D) all taxpayers pay for its upkeep even if they do not visit the park.
E) it is a national resource.

Question 24

A tax that results in a larger fraction of income being paid in taxes as income rises is a ________ tax.

A) regressive
B) head
C) progressive
D) proportional
E) flat

Question 25

A sales tax applied to all consumer purchases would be considered a __________ tax because __________.

A) proportional;the percentage of income spend on consumption is constant as income rises
B) regressive;the percentage of income spent on consumption declines as income rises
C) regressive;the sales tax percentage is the same for all consumers
D) progressive;the percentage of income spent on consumption rises as income rises
E) progressive;the amount paid in sales tax rises with income

Question 26

Karl earns $25,000 while Angela earns $40,000.If they are subject to a regressive tax structure,

A) Karl and Angela will pay the same amount in taxes.
B) Karl will pay a larger amount in taxes.
C) Angela will pay a larger amount in taxes.
D) Karl will pay a larger percentage of his income in taxes.
E) Karl and Angela will pay the same percentage of income in taxes.

Question 27

Based on the information provided above,which ONE of the following statements would economists tend to agree describes an efficient use of resources?

A) Government should both provide and produce public goods.
B) Government should provide public goods.
C) The private sector should provide public goods.
D) Government should produce public goods.
E) Government should ban the production of public goods.

Question 28

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.The net social benefit of providing the public good is

A) $100.
B) $700.
C) $900.
D) $1,000.
E) unknown.

Question 29

The public restrooms along the Trans-Canada Highway are

A) nonrival.
B) a collective good.
C) both nonrival and nonexcludable.
D) a pure public good.
E) nonexcludable.

Question 30

Joe earns $10,000 in income and pays $1,000 in taxes,while Jack earns $30,000 and pays $4,000 in taxes.The structure of this tax is

A) progressive.
B) proportional.
C) regressive.
D) a constant percentage of income.
E) a constant amount of income.

Question 31

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.Under an 8% proportional income tax,the relationship between the percentage of income paid in tax and the voters' reservation prices is

A) constant.
B) positive.
C) negative.
D) progressive.
E) regressive.

Question 32

Aaron's neighbour Cliff keeps his front yard well manicured and plants beautiful flowers,which Aaron finds pleasing.The attractiveness of Cliff's front yard is

A) nonrival.
B) a private good.
C) nonexcludable.
D) both nonrival and nonexcludable.
E) a commons good.

Question 33

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.Suppose that the government proposes a proportional income tax of 8%.The result of the referendum will be that

A) all three voters will vote for the tax.
B) Max and Tammy will vote against the tax but Karen will vote for it.
C) Karen and Max will vote for the tax,but Tammy will vote against it.
D) all three voters will vote against the tax.
E) the public good will not be provided.

Question 34

Empirical studies have found that the demand for public goods

A) is quite price inelastic.
B) has a small,positive income elasticity.
C) is price elastic.
D) has an income elasticity in excess of one.
E) is perfectly elastic.

Question 35

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.As individuals,

A) Karen and Tammy will never agree to pay for the public good.
B) Max will purchase the public good.
C) none of the three will find it worthwhile to purchase the public good.
D) all three are better off without the public good.
E) Max's value of the public good is too high.

Question 36

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.Since the government does not know,and cannot discover,the voters' reservation prices,it proposes a head tax of $300 per voter.The result of the referendum is that

A) the tax is accepted and the public good is provided.
B) Max votes for the tax but Karen and Tammy vote against it and the tax is not accepted.
C) Max votes for the tax,Karen votes against it but Tammy's vote is uncertain.
D) all three voters vote against the tax.
E) only Max casts a vote and the tax is accepted.

Question 37

A proportional tax results in

A) a larger percentage of income going to taxes as income rises.
B) a smaller percentage of income going to taxes as income rises.
C) the same amount of income going to taxes as income rises.
D) the same percentage of income going to taxes as income rises.
E) a smaller amount of income going to taxes as income rises.

Question 38

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.Suppose that the government accurately knows the three reservation prices and the cost of the public good.To achieve the ideal tax structure and collect no more in tax revenue than $900,each voter should be charged __________ of their __________.

A) 100%;reservation price
B) 70%;reservation price
C) 20%;income
D) 90%;reservation price
E) 10%;income

Question 39

A public good that would benefit Karen,Tammy,and Max has a one-time installation cost of $900.These three voters must approve any tax plan by a simple majority and all three will cast a vote.
Refer to the information above.If the government proposes a head tax of $300,the relationship between the percentage of income paid in taxes and the voters' reservation prices is

A) positive.
B) linear.
C) increasing.
D) progressive.
E) negative.

Question 40

A public good is a good

A) that is produced by government.
B) that is free to the public.
C) with zero marginal cost.
D) that is nonrival and nonexcludable.
E) that is rival and excludable.

Question 41

Allowing the government to assess and collect tax revenue to fund a voter-approved public good is

A) likely to be the least expensive method of raising the necessary revenue.
B) a further abdication of power by voters.
C) never the optimal way of raising revenue.
D) relatively uncommon in Canada.
E) fair only if all voters pay the same amount of tax.

Question 42

Regressive tax rates mean that the ratio of tax collected to income

A) falls as income rises.
B) rises as income rises.
C) falls as income falls.
D) remains the same as income falls.
E) remains the same as income rises.

Question 43

If taxpayers pay a larger fraction of income in taxes as their incomes rise,the tax is known as a

A) proportional tax.
B) progressive tax.
C) head tax.
D) flat tax.
E) regressive tax.

Question 44

Which of the following taxes is most likely to be regressive?

A) Personal income taxes.
B) Corporate income taxes.
C) Estate taxes.
D) Sales taxes.
E) A flat-rate income tax.

Question 45

If all taxpayers pay the same percentage of their income in taxes,the tax is termed a

A) proportional tax.
B) progressive tax.
C) head tax.
D) flat tax.
E) regressive tax.

Question 46

Which of the following taxes would most likely be regressive?

A) A 6% sales tax.
B) A 15% flat-rate income tax.
C) A progressive income tax.
D) A corporate income tax.
E) A 5% flat-rate income tax.

Question 47

A good or service that is both highly nonrival and highly nonexcludable is called a

A) public nuisance.
B) public good.
C) collective good.
D) commons good.
E) private good.

Question 48

The primary factor that limits the ability of private firms to supply public goods is

A) the nonrival characteristic of public goods.
B) the lack of well-defined demand.
C) custom and tradition.
D) the nonexcludable characteristic of public goods.
E) diseconomies of scale.

Question 49

One source of friction in the governmental provision of a pure public good is that voters have access to __________ of the public good and have __________ for the public good.

A) different amounts;different reservation prices
B) different amounts;the same reservation price
C) the same amount;different reservation prices
D) the same amount;the same reservation price
E) different amounts;the same desire

Question 50

If all taxpayers pay the same dollar amount of tax,the tax is termed a

A) proportional tax.
B) progressive tax.
C) head tax.
D) flat tax.
E) per-unit tax.

Question 51

A good or service that is nonrival but excludable is referred to as a

A) public nuisance.
B) public good.
C) collective good.
D) commons good.
E) private good.

Question 52

A good or service that is both rival and excludable is a

A) public nuisance.
B) public good.
C) collective good.
D) commons good.
E) private good.

Question 53

If taxpayers pay a smaller fraction of income in taxes as their incomes rise,the tax is known as a

A) proportional tax.
B) progressive tax.
C) head tax.
D) flat tax.
E) regressive tax.

Question 54

To properly justify the governmental provision of a public good,it must be the case that the __________ and that __________.

A) good is indeed a public good;is the only necessary requirement
B) benefit exceeds the cost;no private provider exists
C) voters desire the good;no new taxes will be needed
D) benefit exceeds the cost;is the only necessary requirement
E) benefit exceeds the cost;all voters value the good equally

Question 55

If all voters in a particular political district have individual reservation prices less than the total cost of a public good (a park),then

A) the government should build the park.
B) some sort of collective action by voters will be necessary to fund the park.
C) a private firm will appear with the proposal to build the park.
D) the park will never be built.
E) by definition,the benefit of the park is less than the cost and thus the park should not be built.

Question 56

A public good

A) generally results in substantial spillover costs.
B) can never be provided by a non-governmental organization.
C) cannot be provided to one person without making it available to other people as well.
D) costs essentially nothing to produce and thus is provided by government at a price of zero.
E) generally results in substantial informational failures.

Question 57

Juan pays $14,000 in taxes while earning $100,000.Hector earns $120,000.If the tax system is progressive,Hector will pay taxes of

A) more than $14,000.
B) more than $16,800.
C) more than $14,000 but less than $16,800.
D) $16,800.
E) less than $16,800.

Question 58

If the marginal tax rate is 20% on an income of $15,000 and 15% on an income of $20,000,then the tax structure is

A) progressive.
B) regressive.
C) proportional.
D) unfair.
E) flat-rate.

Question 59

A good or service that is rival but nonexcludable is called a

A) public nuisance.
B) public good.
C) collective good.
D) commons good.
E) private good.

Question 60

Mandy pays $12,000 in taxes and earns $150,000.Moe pays $7,000 in taxes.If the tax system is proportional,then Moe's income is

A) less than $87,500.
B) more than $30,000.
C) $87,500.
D) more than $87,500.
E) impossible to calculate.

Question 61

The problems of externalities and poorly-formed property rights are

A) minor in modern economies.
B) additional rationales for the existence of government.
C) better solved by private,rather than government,action.
D) never a reason for creating government.
E) easily solved by individuals.

Question 62

To derive the market demand curve for a private good,one sums the __________.For a public good,one sums the __________.

A) individual quantities at various prices;individual quantities at various prices
B) individual prices at various quantities;individual quantities at various prices
C) individual quantities at various prices;individual prices at various quantities
D) individual prices at various quantities;individual prices at various quantities
E) demand vertically;demand horizontally

Question 63

The demand curve for public goods is

A) found by horizontally summing each voter's desired quantity of the public good at various reservation prices.
B) found by surveying voters on how much of a particular public good they want at various reservation prices.
C) found by vertically summing each voter's reservation price for a given level of public good.
D) unknown,because of the nonrival and nonexcludable nature of the good.
E) found by withdrawing the public good and measuring the public outcry.

Question 64

Suppose that Scott's demand for a public good is P = 7 - 0.3Q and that Mike's demand is P = 10 - 1.5Q.If marginal cost is $14,then the optimal quantity of the public good provided is

A) 1.67 units.
B) 2.67 units.
C) 23.33 units.
D) 25.93 units.
E) an infinite amount.

Question 65

Suppose that Scott's demand for a public good is P = 7 - 0.3Q and that Mike's demand is P = 10 - 1.5Q.The marginal cost is $14.At the optimal quantity of provision,the marginal benefit of the public good to Mike is about

A) 1.67 units.
B) 7.49 units.
C) $1.67.
D) $7.50.
E) $14.

Question 66

The judicial system is an example of government

A) providing a public good.
B) encouraging a positive externality.
C) defining and enforcing property rights.
D) discouraging a negative externality.
E) claiming more power at the expense of the individual.

Question 67

The reason the demand curve for a public good is constructed differently from that for a private good is that

A) all consumers will have the same amount of the public good.
B) all consumers have the same reservation price for the public good.
C) different consumers can consume different amounts of the public good.
D) government is going to provide the good.
E) tax revenues will be used to pay for the public good.

Question 68

Assume that there is no way to prevent someone from using the Trans-Canada Highway,regardless of whether or not he or she helps pay for it.This characteristic is associated with

A) rival goods.
B) complementary goods.
C) public goods.
D) capital goods.
E) physical goods.

Question 69

Suppose that Scott's demand for a public good is P = 7 - 0.3Q and that Mike's demand is P = 10 - 1.5Q.The marginal cost is $14.At the optimal quantity of provision,the marginal benefit of the public good to Scott is about

A) 0.5 units.
B) 1.67 units.
C) $0.50.
D) $2.
E) $6.50.

Question 70

The socially optimal level of provision of a public good is where the

A) marginal cost of the output is equal to the vertical sum of the individual demand curves.
B) marginal cost of the output is equal to the horizontal sum of the individual demand curves.
C) marginal cost of the output is equal to the sum of the market's marginal benefit.
D) market price of the output is equal to the vertical sum of the individual demand curves.
E) market price of the output is equal to the vertical sum of all the market demand curves.

Question 71

If market demand for a public good is given by P = 10 - 3Q,then the elasticity of demand when Q = 2 is

A) 0.67.
B) 6.
C) 1.
D) 0.06.
E) 3.

Question 72

When a negative externality is present in a market,government

A) must regulate it.
B) should regulate it if the public supports regulation.
C) should never regulate it.
D) needs only regulate it if loss of life is involved.
E) should regulate it if the benefit of regulation exceeds the cost.

Question 73

Government subsidizes education because

A) it is a public good.
B) private firms will not provide education.
C) of custom and tradition.
D) education is thought to have positive externalities.
E) it wants to advance its agenda.

Question 74

In Canada,support for public schooling was partly driven by the economic principles of

A) diminishing marginal returns.
B) external economies.
C) absolute advantage.
D) positive externalities.
E) negative externalities.

Question 75

If voters A,B,and C have the following demand curves for a public library P_a = 5 - 2Q,P_b = 7 - 0.5Q,and P_c = 2 - 4Q,then market demand for a public library is

A) Q = 14 - 6.5P.
B) P = 15 - 6Q.
C) P = 21 - 1.5Q.
D) P = 14 - 6.5Q.
E) P = 6 - 12Q.

Question 76

When we sum individual benefits vertically for a public good,we calculate the sum of the society's marginal benefit from a given

A) quantity of the good.
B) price.
C) market.
D) marginal cost.
E) marginal revenue.

Question 77

Most legislation is

A) the by-product of a corrupt political process.
B) unnecessary.
C) an attempt to either define property rights or control externalities.
D) an excuse to spend money.
E) an attempt to increase governmental power at the expense of the individual.

Question 78

Suppose that Scott's demand for a public good is P = 7 - 0.3Q and that Mike's demand is P = 10 - 1.5Q.The marginal cost is $14.At the optimal quantity of provision,the marginal benefit of the public good is about

A) 1.67 units.
B) 3 units.
C) $1.67.
D) $3.00.
E) $14.

Question 79

Suppose that Scott's demand for a public good is P = 7 - 0.3Q and that Mike's demand is P = 10 - 1.5Q.The equation for total demand for the public good is

A) Q = 17 - 1.8P.
B) P = 17 - 1.8Q.
C) P = 3 - 1.2Q.
D) P = 14 - 0.6Q.
E) P = 20 - 3.0Q.

Question 80

Refer to the information above.In order to receive 20 units of the public good,the total willingness to pay is __________ with __________ three individuals willing to pay.

A) $5;two of the
B) $3;one of the
C) $7;one of the
D) $10;two of the
E) $10;all