Deck 13: The Public Sector in the Global Economy

Question 1

Moral hazard refers to the likelihood that firms selling particularly poor-quality products are the ones that have the greatest incentive to misrepresent their attributes in an effort to sell them.

Answer 1

False

Question 2

The Agreement on Trade-Related Aspects of Intellectual Property Rights establishes a minimum period of protection of:

A) 10 years for trademarks.
B) 20 years for patents.
C) 30 years for copyrights.
D) 40 years for public goods.

Answer 2

B

Question 3

Parallel imports are goods or services brought into a country:

A) by the domestic government alongside domestic private individuals and firms.
B) by a foreign government alongside domestic private individuals and firms.
C) by the owner of an existing copyright, trademark, or patent duplicating the intellectual property right in the importing nation.
D) without authorization of the owner of a copyright, trademark, or patent after initially being legitimately placed into circulation in some other locale.

Answer 3

D

Question 4

One way of addressing a situation of a negative international externality would be for a multinational authority to:

A) subsidize consumption of the item creating the externality.
B) tax producers of the item creating the externality.
C) implement policies aimed at boosting demand for the item creating the externality.
D) expand production of the item by having governments provide more units.

Question 5

Which of the following is not a characteristic of a public good?

A) It yields benefits to a number of people simultaneously.
B) Benefits from the item cannot be provided to one person without others deriving benefits at no additional cost.
C) It cannot be withheld from a person who has failed to contribute to its provision.
D) One person cannot consume an additional unit of the item without reducing by one unit the consumption of another person.

Question 6

An item that otherwise would function as a private good, yet society determines it wishes to promote consumption of the item through government intervention in the marketplace, is known as:

A) a merit good.
B) a positive externality.
C) a negative externality.
D) a global public good.

Question 7

A free-rider problem exists when:

A) individuals presume that others will pay for public goods so that, individually, they can escape from paying for their portion without reducing production of the public good.
B) individuals on one side of a market transaction possess information not available to people on the other side of the transaction.
C) a seller of an item may behave differently following agreement to undertake a transaction than they did prior to that agreement.
D) a seller of a low-quality item has the greatest incentive to try to sell that item to an uninformed buyer.

Question 8

The optimal degree of environmental improvement efforts:

A) typically yields a 100 percent pristine environment.
B) typically does not yield a 100 percent pristine environment.
C) is attained when the additional benefit of the efforts exceeds the additional cost.
D) is attained when the additional cost of the efforts exceeds the additional benefit.

Question 9

Which of the following is a reason that some nongovernment organizations offer for opposing international trade as a danger to the global environment?

A) Gains from trade help raise living standards in developing nations, and evidence indicates that environmental protection efforts increase with higher per capita incomes.
B) Growth-enhancing international trade speeds the pace at which the world's resources will be exhausted.
C) Increased international trade and investment will speed the pace of innovation, which will permit sustainable growth of the global economy.
D) Multilateral trade agreements and institutions provide forums for facilitating efforts to protect the environment.

Question 10

The idea that an increase in a tax rate generates a reduction in the tax base that makes the net effect of the tax rate increase potentially ambiguous is called the:

A) merit taxation perspective.
B) external taxation perspective.
C) dynamic view of taxation.
D) static view of taxation.

Question 11

International tax competition involves efforts by national governments:

A) to act together to jointly raise their tax rates and thereby remove incentives for people to shift taxable activities to other locales.
B) to reduce their tax rates below those prevailing in other countries in an effort to induce individuals and businesses to engage in taxable activities within their borders instead.
C) to act together to jointly establish identical tax bases to which they will apply identical tax rates.
D) to increase tax rates while expanding their tax bases in an effort to generated coordinated increases in tax revenues.

Question 12

Words or symbols that companies use to identify their goods or services and distinguish them from the goods or services produced by other firms are known as:

A) patents.
B) copyrights.
C) trademarks.
D) public goods.

Question 13

Legal documents granting an inventor the exclusive right to make, use, and sell an invention for a specified number of years are known as:

A) patents.
B) copyrights.
C) trademarks.
D) public goods.

Question 14

The potential for a seller to alter behavior in an undesirable way following an economic transaction is called:

A) a positive externality.
B) a negative externality.
C) adverse selection.
D) moral hazard.

Question 15

Intellectual property rights are laws granting ownership of creative ideas, typically in the form of a copyright, trademark, or patent.

Question 16

Under the TRIPS agreement, copyrights have a minimum duration of 50 years.

Question 17

Economic inefficiency results when individuals know the true opportunity costs of their decisions.

Question 18

An international externality occurs when spillover effects from market activities within one country affect third parties located in other nations.

Question 19

A free-rider problem arises when individuals presume that others will pay for public goods so that, individually, they can escape from paying for their portion without reducing production of the public good.

Question 20

Common property is a resource subdivided into shares exclusively owned by each individual in society.

Question 21

Nongovernmental organizations (NGOs) are not uniform in their position on international trade.

Question 22

The additional cost of efforts to improve the environment typically decreases as more resources are devoted to improvement efforts.

Question 23

A tax base is an economic quantity subject to taxation.

Question 24

The static view on taxation predicts a generally ambiguous net relationship between the tax rate and the tax base.

Question 25

The potential for an individual to try to avoid contributing to pay for a public good because he or she believes others will pay for it is referred to as:

A) a moral hazard.
B) a free-rider problem.
C) asymmetric information.
D) an adverse selection problem.