Question 1

From the In the News article titled,"Firefighters Watch as Home Burns to the Ground," Which of the following is true?

Accepted Answer

A) Fire protection paid for like fire insurance is a public good. 
B) Fire protection paid for like fire insurance is a private good. 
C) Fire protection is always a public good. 
D) None of the choices are correct. 
A) Fire protection paid for like fire insurance is a public good. 
B) Fire protection paid for like fire insurance is a private good. 
C) Fire protection is always a public good. 
D) None of the choices are correct. B

Question 2

Why is it safe to assume that national defense will always be provided by the government instead of the market?

Accepted Answer

National defense is a public good,which means that consumption by one person does not exclude consumption by other people.This joint consumption creates a dilemma referred to as the free-rider problem.Once national defense is purchased,even those who do not pay for the defense will benefit from it,so no one person is willing to pay for the defense.The government must get involved and provide national defense and other public goods.

Question 3

Which of the following explains why flood control is a public good?

Accepted Answer

A) There are external benefits associated with its consumption. 
B) The private sector usually produces flood control projects. 
C) It is not divisible and therefore cannot be kept from people who do not pay. 
D) Flood control is paid for by taxpayers. 
A) There are external benefits associated with its consumption. 
B) The private sector usually produces flood control projects. 
C) It is not divisible and therefore cannot be kept from people who do not pay. 
D) Flood control is paid for by taxpayers. C

Question 4

Which of the following occurs when the economy experiences inflation?

Accepted Answer

A) Government failure. 
B) Micro instability. 
C) Macro instability. 
D) The free-rider problem. 
A) Government failure. 
B) Micro instability. 
C) Macro instability. 
D) The free-rider problem.

Question 5

A tax is regressive if it takes a

Accepted Answer

A) Larger number of dollars as income falls. 
B) Smaller fraction of dollars as income falls. 
C) Larger number of dollars as income rises. 
D) Smaller fraction of dollars as income rises. 
A) Larger number of dollars as income falls. 
B) Smaller fraction of dollars as income falls. 
C) Larger number of dollars as income rises. 
D) Smaller fraction of dollars as income rises.

Question 6

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

Accepted Answer

A) Carpooling with your friends. 
B) Flood control. 
C) Social Security payments. 
D) None of the choices are correct. 
A) Carpooling with your friends. 
B) Flood control. 
C) Social Security payments. 
D) None of the choices are correct.

Question 7

When market failure occurs,the role of government is to

Accepted Answer

A) Eliminate markets. 
B) Push market outcomes closer to the ideal. 
C) Create an alternative to markets. 
D) Do nothing. 
A) Eliminate markets. 
B) Push market outcomes closer to the ideal. 
C) Create an alternative to markets. 
D) Do nothing.

Question 8

Air pollution best illustrates

Accepted Answer

A) Market power. 
B) An external cost. 
C) An inequity. 
D) Government failure. 
A) Market power. 
B) An external cost. 
C) An inequity. 
D) Government failure.

Question 9

In a market economy,producers will produce the goods and services that

Accepted Answer

A) Producers want to purchase. 
B) Consumers demand. 
C) Consumers need the most. 
D) Optimize producer utility. 
A) Producers want to purchase. 
B) Consumers demand. 
C) Consumers need the most. 
D) Optimize producer utility.

Question 10

The term transfer payments refers to

Accepted Answer

A) Federal income taxes. 
B) Money that is transferred between savings and checking accounts. 
C) Payments to individuals that are not in exchange for current goods and services being produced. 
D) Additional profits transferred to monopolies as a result of their market power. 
A) Federal income taxes. 
B) Money that is transferred between savings and checking accounts. 
C) Payments to individuals that are not in exchange for current goods and services being produced. 
D) Additional profits transferred to monopolies as a result of their market power.

Question 11

Does a state sales tax function as a progressive,regressive,or proportional source of revenue,and why?

Accepted Answer

A regressive tax system is one in which

Question 12

The market tends to underproduce public goods.

Accepted Answer

A) True 
 B)False

Question 13

A monopoly occurs when

Accepted Answer

A) A firm gains some level of market power. 
B) A firm charges a price greater than the equilibrium price. 
C) There is only one producer of a particular good or service. 
D) There is an underproduction of a good or service by a firm. 
A) A firm gains some level of market power. 
B) A firm charges a price greater than the equilibrium price. 
C) There is only one producer of a particular good or service. 
D) There is an underproduction of a good or service by a firm.

Question 14

Market failure can occur even when the price signals are accurate.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following produces external benefits?

Accepted Answer

A) Garbage dumped in the Atlantic Ocean. 
B) College students getting vaccinated against the flu. 
C) Passive smoke in a public building. 
D) All of the choices are correct. 
A) Garbage dumped in the Atlantic Ocean. 
B) College students getting vaccinated against the flu. 
C) Passive smoke in a public building. 
D) All of the choices are correct.

Question 16

The fastest-growing areas for state expenditures are

Accepted Answer

A) Education and welfare. 
B) Sewage and trash service. 
C) Prisons and welfare. 
D) Transportation and public safety. 
A) Education and welfare. 
B) Sewage and trash service. 
C) Prisons and welfare. 
D) Transportation and public safety.

Question 17

In the United States,direct expenditures for governments between 1933 and 1943

Accepted Answer

A) Trended up for state and local governments and down for the federal government. 
B) Trended down for state and local governments and up for the federal government. 
C) Trended down for all governments. 
D) Trended up for all governments. 
A) Trended up for state and local governments and down for the federal government. 
B) Trended down for state and local governments and up for the federal government. 
C) Trended down for all governments. 
D) Trended up for all governments.

Question 18

The largest source of federal revenue is the corporate income tax.

Accepted Answer

A) True 
 B)False

Question 19

Government intervention may be appropriate to correct market outcomes because of

Accepted Answer

A) Externalities. 
B) Private goods. 
C) Production possibilities. 
D) None of the choices are correct. 
A) Externalities. 
B) Private goods. 
C) Production possibilities. 
D) None of the choices are correct.

Question 20

State income tax revenues are much less than sales tax revenues.

Accepted Answer

A) True 
 B)False

Exam 4: The Role of Government

From the In the News article titled,"Firefighters Watch as Home Burns to the Ground," Which of the following is true?

Why is it safe to assume that national defense will always be provided by the government instead of the market?

Which of the following explains why flood control is a public good?

Which of the following occurs when the economy experiences inflation?

A tax is regressive if it takes a

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

When market failure occurs,the role of government is to

Air pollution best illustrates

In a market economy,producers will produce the goods and services that

The term transfer payments refers to

Does a state sales tax function as a progressive,regressive,or proportional source of revenue,and why?

The market tends to underproduce public goods.

A monopoly occurs when

Market failure can occur even when the price signals are accurate.

Which of the following produces external benefits?

The fastest-growing areas for state expenditures are

In the United States,direct expenditures for governments between 1933 and 1943

The largest source of federal revenue is the corporate income tax.

Government intervention may be appropriate to correct market outcomes because of

State income tax revenues are much less than sales tax revenues.

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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