Question 1

An example of a good with a positive externality is

Accepted Answer

A) acid rain. 
B) an oil spill. 
C) air pollution. 
D) a contagious disease. 
E) research. 
A) acid rain. 
B) an oil spill. 
C) air pollution. 
D) a contagious disease. 
E) research.

Question 2

In a democratic system, the idea that there is a tendency for policies to reflect the middle view of the political spectrum is called the

Accepted Answer

A) convergence of positions theorem. 
B) median voter theorem. 
C) Arrow impossibility theorem. 
D) voting paradox. 
E) public choice theorem. 
A) convergence of positions theorem. 
B) median voter theorem. 
C) Arrow impossibility theorem. 
D) voting paradox. 
E) public choice theorem.

Question 3

A fee charged for the use of a good normally provided by the government is called a

Accepted Answer

A) private remedy. 
B) user fee. 
C) tax. 
D) sales tax. 
E) revenue enhancer. 
A) private remedy. 
B) user fee. 
C) tax. 
D) sales tax. 
E) revenue enhancer.

Question 4

Marginal social cost minus marginal external cost equals

Accepted Answer

A) average cost. 
B) marginal profit. 
C) marginal private cost. 
D) marginal private benefit. 
E) marginal internal cost. 
A) average cost. 
B) marginal profit. 
C) marginal private cost. 
D) marginal private benefit. 
E) marginal internal cost.

Question 5

A procedure that eliminates or internalizes externalities without government action other than defining property rights is called

Accepted Answer

A) a private remedy. 
B) a public remedy. 
C) privatization. 
D) contingent valuation. 
E) a user fee. 
A) a private remedy. 
B) a public remedy. 
C) privatization. 
D) contingent valuation. 
E) a user fee.

Question 6

Goods that have negative externalities are subsidized.

Accepted Answer

A) True 
 B)False

Question 7

An example of a public good is

Accepted Answer

A) education. 
B) cable TV. 
C) milk. 
D) national defense. 
E) bottled water. 
A) education. 
B) cable TV. 
C) milk. 
D) national defense. 
E) bottled water.

Question 8

Consider two children, Janet and Joey, sharing the same room. Janet loves to play loud music while Joey does not like loud music. Suppose Janet is willing to pay Joey $2 to be allowed to play loud music, and Joey is willing to pay Janet $3 to keep the room quiet.

Accepted Answer

The answer of Consider two children, Janet and Joey, sharing...

Question 9

The Coase theorem works provided

Accepted Answer

A) the transactions costs of an agreement are above a high level. 
B) the transactions costs associated with an agreement are low when compared with the costs of the externality itself. 
C) the costs of an externality are low when compared with the transactions costs of an agreement. 
D) both parties are willing to negotiate. 
E) transactions costs of an agreement are high when compared with the costs of the externality. 
A) the transactions costs of an agreement are above a high level. 
B) the transactions costs associated with an agreement are low when compared with the costs of the externality itself. 
C) the costs of an externality are low when compared with the transactions costs of an agreement. 
D) both parties are willing to negotiate. 
E) transactions costs of an agreement are high when compared with the costs of the externality.

Question 10

The tendency of politicians and/or political parties to gravitate toward the center of "citizens" views on issues is called

Accepted Answer

A) convergence of positions. 
B) pragmatism. 
C) the voting paradox. 
D) the Arrow impossibility theorem. 
E) the median voter theorem. 
A) convergence of positions. 
B) pragmatism. 
C) the voting paradox. 
D) the Arrow impossibility theorem. 
E) the median voter theorem.

Question 11

The Arrow impossibility theorem states that voting paradoxes are inevitable when there is democratic voting on packages of issues.

Accepted Answer

A) True 
 B)False

Question 12

In the United States, the corporate average fleet efficiency standards require the fleet of

Accepted Answer

A) trucks produced by auto manufacturers each year to achieve lower rates of pollution. 
B) planes produced by aircraft manufacturers each year to achieve lower rates of pollution. 
C) buses produced by bus manufacturers each year to achieve a stated number of miles per gallon on average. 
D) cars produced by auto manufacturers each year to achieve a stated number of miles per gallon on average. 
E) trains produced by train manufacturers each year to achieve a stated number of miles per gallon on average. 
A) trucks produced by auto manufacturers each year to achieve lower rates of pollution. 
B) planes produced by aircraft manufacturers each year to achieve lower rates of pollution. 
C) buses produced by bus manufacturers each year to achieve a stated number of miles per gallon on average. 
D) cars produced by auto manufacturers each year to achieve a stated number of miles per gallon on average. 
E) trains produced by train manufacturers each year to achieve a stated number of miles per gallon on average.

Question 13

Who actually pays for an adjustment that remedies an externality will be determined by

Accepted Answer

A) who is the weakest bargainer. 
B) a commercial adjudicator. 
C) the city mayor. 
D) a private judge. 
E) who has the property rights. 
A) who is the weakest bargainer. 
B) a commercial adjudicator. 
C) the city mayor. 
D) a private judge. 
E) who has the property rights.

Question 14

Exhibit 15-3  
-In any democratic voting scheme, inefficiencies resulting from the constant changes in voters' priorities are unavoidable. This principle is called the

Accepted Answer

A) median voter theorem. 
B) vote cycling theorem. 
C) convergence of positions hypothesis. 
D) Arrow impossibility theorem. 
E) voting paradox phenomenon. 
A) median voter theorem. 
B) vote cycling theorem. 
C) convergence of positions hypothesis. 
D) Arrow impossibility theorem. 
E) voting paradox phenomenon.

Question 15

On which of the following goods or services would the imposition of a government tax most likely result in more efficient allocation of our nation's resources?

Accepted Answer

A) Chemicals that produce toxic material 
B) Textbooks 
C) Beef liver 
D) Seat belts 
E) Cars 
A) Chemicals that produce toxic material 
B) Textbooks 
C) Beef liver 
D) Seat belts 
E) Cars

Question 16

A lighthouse

Accepted Answer

A) can project a light that simultaneously benefits many ships that pass. 
B) is a service that is always provided by the government. 
C) provides the feature of rivalry in the consumption of light. 
D) can easily exclude ships from using its light if the ship owners do not pay. 
E) can easily charge its users for the services provided. 
A) can project a light that simultaneously benefits many ships that pass. 
B) is a service that is always provided by the government. 
C) provides the feature of rivalry in the consumption of light. 
D) can easily exclude ships from using its light if the ship owners do not pay. 
E) can easily charge its users for the services provided.

Question 17

Consumption of a public good has the characteristics of rivalry and excludability.

Accepted Answer

A) True 
 B)False

Question 18

The cost of buying or selling in a market, including search, bargaining, and writing contracts, is called the

Accepted Answer

A) public cost. 
B) transactions cost. 
C) private cost. 
D) remedy cost. 
E) user cost. 
A) public cost. 
B) transactions cost. 
C) private cost. 
D) remedy cost. 
E) user cost.

Question 19

Suppose that 35 percent of the people want nothing spent on welfare, 20 percent of the people want 50 percent of the GDP spent on welfare, 25 percent of the people want 25 percent of the GDP spent on welfare, 10 percent of the people want 5 percent of the GDP spent on welfare, and 10 percent of the people want 10 percent of the GDP spent on welfare. According to the median voter theorem, what percentage of the GDP will be spent on welfare?

Accepted Answer

A) 5 percent 
B) 10 percent 
C) 25 percent 
D) 50 percent 
E) There is not enough information provided to answer the question. 
A) 5 percent 
B) 10 percent 
C) 25 percent 
D) 50 percent 
E) There is not enough information provided to answer the question.

Question 20

The process of providing incentives so that externalities are taken into account internally by firms or by consumers is called

Accepted Answer

A) socializing the externalities. 
B) contingent-valuing the externalities. 
C) privatizing the externalities. 
D) internalizing the externalities. 
E) externalizing the externalities. 
A) socializing the externalities. 
B) contingent-valuing the externalities. 
C) privatizing the externalities. 
D) internalizing the externalities. 
E) externalizing the externalities.

Exam 15: Public Goods, Externalities, and Government Behavior

An example of a good with a positive externality is

In a democratic system, the idea that there is a tendency for policies to reflect the middle view of the political spectrum is called the

A fee charged for the use of a good normally provided by the government is called a

Marginal social cost minus marginal external cost equals

A procedure that eliminates or internalizes externalities without government action other than defining property rights is called

Goods that have negative externalities are subsidized.

An example of a public good is

Consider two children, Janet and Joey, sharing the same room. Janet loves to play loud music while Joey does not like loud music. Suppose Janet is willing to pay Joey $2 to be allowed to play loud music, and Joey is willing to pay Janet $3 to keep the room quiet.

The Coase theorem works provided

The tendency of politicians and/or political parties to gravitate toward the center of "citizens" views on issues is called

The Arrow impossibility theorem states that voting paradoxes are inevitable when there is democratic voting on packages of issues.

In the United States, the corporate average fleet efficiency standards require the fleet of

Who actually pays for an adjustment that remedies an externality will be determined by

Exhibit 15-3 -In any democratic voting scheme, inefficiencies resulting from the constant changes in voters' priorities are unavoidable. This principle is called the

On which of the following goods or services would the imposition of a government tax most likely result in more efficient allocation of our nation's resources?

A lighthouse

Consumption of a public good has the characteristics of rivalry and excludability.

The cost of buying or selling in a market, including search, bargaining, and writing contracts, is called the

The process of providing incentives so that externalities are taken into account internally by firms or by consumers is called

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters