Question 1

The market

Accepted Answer

A) On its own may not always provide the optimal mix of goods and services. 
B) Always provides the optimal mix of goods and services. 
C) Always provides a better mix of goods and services without government intervention than it does with government intervention. 
D) May not produce the optimal mix of output,which is known as government failure. 
A) On its own may not always provide the optimal mix of goods and services. 
B) Always provides the optimal mix of goods and services. 
C) Always provides a better mix of goods and services without government intervention than it does with government intervention. 
D) May not produce the optimal mix of output,which is known as government failure.

Question 2

Which of the following is most likely a private good?

Accepted Answer

A) Bicycles. 
B) National defense. 
C) Sidewalks. 
D) The administration of justice. 
A) Bicycles. 
B) National defense. 
C) Sidewalks. 
D) The administration of justice.

Question 3

A "free rider" is an individual who reaps

Accepted Answer

A) Indirect benefits from someone else's purchase of a public good. 
B) Indirect benefits from someone else's purchase of a private good. 
C) Direct benefits from someone else's purchase of a public good. 
D) Direct benefits from someone else's purchase of a private good. 
A) Indirect benefits from someone else's purchase of a public good. 
B) Indirect benefits from someone else's purchase of a private good. 
C) Direct benefits from someone else's purchase of a public good. 
D) Direct benefits from someone else's purchase of a private good.

Question 4

Which of the following scenarios would support the theory of public choice?

Accepted Answer

A) The governor of the state vetoes a highway bill even though the highway would enhance the value of property he or she owns. 
B) The local police chief fails to give the mayor a speeding ticket because the mayor might fire him. 
C) The president of Colombia goes after drug traffickers despite death threats and the offer of bribes that could make him a rich man. 
D) A college president eliminates wasteful departments and programs even though this will shorten her tenure and her political future. 
A) The governor of the state vetoes a highway bill even though the highway would enhance the value of property he or she owns. 
B) The local police chief fails to give the mayor a speeding ticket because the mayor might fire him. 
C) The president of Colombia goes after drug traffickers despite death threats and the offer of bribes that could make him a rich man. 
D) A college president eliminates wasteful departments and programs even though this will shorten her tenure and her political future.

Question 5

A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" implies the harm caused to nonsmokers is

Accepted Answer

A) An example of a public good. 
B) Included in the market price of cigarettes. 
C) An example of externality costs. 
D) An example of government failure. 
A) An example of a public good. 
B) Included in the market price of cigarettes. 
C) An example of externality costs. 
D) An example of government failure.

Question 6

The optimal mix of output may not be produced by an economy because of the existence of

Accepted Answer

A) Inequity. 
B) Internalities. 
C) Underproduction of public goods. 
D) Production possibilities. 
A) Inequity. 
B) Internalities. 
C) Underproduction of public goods. 
D) Production possibilities.

Question 7

Which of the following properly ranks the size of tax revenues received by the federal government from highest to lowest?

Accepted Answer

A) Excise taxes,Social Security payroll taxes,income taxes,and corporate taxes. 
B) Corporate taxes,Social Security payroll taxes,income taxes,and excise taxes. 
C) Income taxes,Social Security payroll taxes,corporate taxes,and excise taxes. 
D) Social Security payroll taxes,excise taxes,corporate taxes,and income taxes. 
A) Excise taxes,Social Security payroll taxes,income taxes,and corporate taxes. 
B) Corporate taxes,Social Security payroll taxes,income taxes,and excise taxes. 
C) Income taxes,Social Security payroll taxes,corporate taxes,and excise taxes. 
D) Social Security payroll taxes,excise taxes,corporate taxes,and income taxes.

Question 8

A private good

Accepted Answer

A) Is consumed by one person and excludes consumption by others. 
B) Experiences free riders. 
C) Results in market failure when provided in markets characterized by laissez faire. 
D) Is provided most efficiently by the government. 
A) Is consumed by one person and excludes consumption by others. 
B) Experiences free riders. 
C) Results in market failure when provided in markets characterized by laissez faire. 
D) Is provided most efficiently by the government.

Question 9

What is government failure,and how would it be demonstrated on a production possibilities curve?

Accepted Answer

Government failure occurs when governmen

Question 10

Local governments provide law enforcement,which benefits society,but if the costs of law enforcement exceed the benefits,the result is a situation of

Accepted Answer

A) Market failure. 
B) Efficiency as long as there is some benefit. 
C) Government failure. 
D) Public choice theory. 
A) Market failure. 
B) Efficiency as long as there is some benefit. 
C) Government failure. 
D) Public choice theory.

Question 11

Which of the following is possible when the market fails?

Accepted Answer

A) The mix of goods and services is on the production possibilities curve. 
B) It is impossible for government intervention to improve the mix of goods and services. 
C) The mix of goods and services is at the correct point on the production possibilities curve. 
D) The mix of goods and services is the optimal mix. 
A) The mix of goods and services is on the production possibilities curve. 
B) It is impossible for government intervention to improve the mix of goods and services. 
C) The mix of goods and services is at the correct point on the production possibilities curve. 
D) The mix of goods and services is the optimal mix.

Question 12

Approximately what percentage of state and local expenditures do bond referenda account for?

Accepted Answer

A) Less than 1 percent. 
B) 10 percent. 
C) 25 percent. 
D) 50 percent. 
A) Less than 1 percent. 
B) 10 percent. 
C) 25 percent. 
D) 50 percent.

Question 13

Which of the following statements is inaccurate?

Accepted Answer

A) There is substantial agreement about how and when markets fail. 
B) There is substantial agreement about whether government improves market outcomes. 
C) Voters are quick to blame government meddling for many economic woes. 
D) Ideally,the market mechanism will lead an economy to the optimal mix of output. 
A) There is substantial agreement about how and when markets fail. 
B) There is substantial agreement about whether government improves market outcomes. 
C) Voters are quick to blame government meddling for many economic woes. 
D) Ideally,the market mechanism will lead an economy to the optimal mix of output.

Question 14

Generally speaking,monopolies

Accepted Answer

A) Have great productive efficiency and are always beneficial to society. 
B) May be beneficial to society if they are allowed to act like monopolies without government interference. 
C) May be beneficial to society if they are natural monopolies and are regulated. 
D) Are never beneficial to society. 
A) Have great productive efficiency and are always beneficial to society. 
B) May be beneficial to society if they are allowed to act like monopolies without government interference. 
C) May be beneficial to society if they are natural monopolies and are regulated. 
D) Are never beneficial to society.

Question 15

According to cost-benefit analysis,a government project should be undertaken as long as the

Accepted Answer

A) Opportunity costs exceed the welfare benefits. 
B) Benefits exceed the opportunity costs. 
C) Benefits equal the costs. 
D) Voters approve the project. 
A) Opportunity costs exceed the welfare benefits. 
B) Benefits exceed the opportunity costs. 
C) Benefits equal the costs. 
D) Voters approve the project.

Question 16

The government's role in limiting smoking in many buildings is justified by considerations of

Accepted Answer

A) Inequity. 
B) Externalities. 
C) Market power. 
D) Government failure. 
A) Inequity. 
B) Externalities. 
C) Market power. 
D) Government failure.

Question 17

Social demand equals market demand plus externalities when there are positive external benefits.

Accepted Answer

A) True 
 B)False

Question 18

One In the News article titled "Perceptions of Government Failure" indicates that people think that the government is not very trustworthy when it comes to solving domestic issues.If this is true,this is an example of

Accepted Answer

A) The free-rider dilemma. 
B) Market failure. 
C) The problem of externalities. 
D) Government failure. 
A) The free-rider dilemma. 
B) Market failure. 
C) The problem of externalities. 
D) Government failure.

Question 19

Government intervention that fails to improve economic outcomes is known as market failure.

Accepted Answer

A) True 
 B)False

Question 20

As long as a public sector activity will generate benefits regardless of the costs,the activity should definitely be undertaken.

Accepted Answer

A) True 
 B)False

Exam 4: The Role of Government

The market

Which of the following is most likely a private good?

A "free rider" is an individual who reaps

Which of the following scenarios would support the theory of public choice?

A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" implies the harm caused to nonsmokers is

The optimal mix of output may not be produced by an economy because of the existence of

Which of the following properly ranks the size of tax revenues received by the federal government from highest to lowest?

A private good

What is government failure,and how would it be demonstrated on a production possibilities curve?

Local governments provide law enforcement,which benefits society,but if the costs of law enforcement exceed the benefits,the result is a situation of

Which of the following is possible when the market fails?

Approximately what percentage of state and local expenditures do bond referenda account for?

Which of the following statements is inaccurate?

Generally speaking,monopolies

According to cost-benefit analysis,a government project should be undertaken as long as the

The government's role in limiting smoking in many buildings is justified by considerations of

Social demand equals market demand plus externalities when there are positive external benefits.

One In the News article titled "Perceptions of Government Failure" indicates that people think that the government is not very trustworthy when it comes to solving domestic issues.If this is true,this is an example of

Government intervention that fails to improve economic outcomes is known as market failure.

As long as a public sector activity will generate benefits regardless of the costs,the activity should definitely be undertaken.

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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