Question 1

Government intervention in the market

Accepted Answer

A) Always involves an opportunity cost. 
B) Never involves an opportunity cost because only market activities result in other goods and services being given up. 
C) Does not involve an opportunity cost if market outcomes are improved. 
D) Results in the free-rider dilemma. 
A) Always involves an opportunity cost. 
B) Never involves an opportunity cost because only market activities result in other goods and services being given up. 
C) Does not involve an opportunity cost if market outcomes are improved. 
D) Results in the free-rider dilemma.

Question 2

In general,state and local taxes tend to be

Accepted Answer

A) Regressive. 
B) Progressive. 
C) Proportional. 
D) Flat. 
A) Regressive. 
B) Progressive. 
C) Proportional. 
D) Flat.

Question 3

Explain why government-funded college education can be considered a role of the government.

Accepted Answer

An externality is a cost or benefit of a

Question 4

If Good X has social demand that is less than market demand,then Good X must be a

Accepted Answer

A) Public good. 
B) Good with an external cost. 
C) Good with an external benefit. 
D) Good suffering from the free-rider problem. 
A) Public good. 
B) Good with an external cost. 
C) Good with an external benefit. 
D) Good suffering from the free-rider problem.

Question 5

If the consumption of a good yields external benefits,then

Accepted Answer

A) The social demand is greater than the market demand. 
B) The social demand is equal to the market demand. 
C) The social demand is less than the market demand. 
D) There is neither social demand nor market demand for the good. 
A) The social demand is greater than the market demand. 
B) The social demand is equal to the market demand. 
C) The social demand is less than the market demand. 
D) There is neither social demand nor market demand for the good.

Question 6

The market mechanism leads to underproduction of public goods because the supply of public goods is hidden.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a merit good?

Accepted Answer

A) Local telephone service. 
B) Electricity. 
C) Health care. 
D) Automobiles. 
A) Local telephone service. 
B) Electricity. 
C) Health care. 
D) Automobiles.

Question 8

The theory of public choice

Accepted Answer

A) Examines why the public rejects so many bond referendums. 
B) Emphasizes the self-interest of decision makers and voters. 
C) Examines how a policy of laissez faire works to allocate resources. 
D) Explains the selfless pursuit of public goals by public servants. 
A) Examines why the public rejects so many bond referendums. 
B) Emphasizes the self-interest of decision makers and voters. 
C) Examines how a policy of laissez faire works to allocate resources. 
D) Explains the selfless pursuit of public goals by public servants.

Question 9

Markets will underproduce goods that yield external benefits and overproduce those that generate external costs.

Accepted Answer

A) True 
 B)False

Question 10

The federal government's role in providing aid to the poor and the aged is justified because of concerns about

Accepted Answer

A) Market power. 
B) Inequity. 
C) Macro failure. 
D) Restricted supply. 
A) Market power. 
B) Inequity. 
C) Macro failure. 
D) Restricted supply.

Question 11

The Social Security tax is

Accepted Answer

A) A progressive tax. 
B) A regressive tax. 
C) A proportional tax. 
D) A proportional tax at low income levels and a progressive tax at higher income levels. 
A) A progressive tax. 
B) A regressive tax. 
C) A proportional tax. 
D) A proportional tax at low income levels and a progressive tax at higher income levels.

Question 12

Micro and macro failures of the marketplace never justify government intervention.

Accepted Answer

A) True 
 B)False

Question 13

A public good

Accepted Answer

A) Is any good produced by the government. 
B) Is overproduced by the market. 
C) Causes government failure. 
D) Is subject to the free-rider dilemma. 
A) Is any good produced by the government. 
B) Is overproduced by the market. 
C) Causes government failure. 
D) Is subject to the free-rider dilemma.

Question 14

An external cost on supply can be measured graphically as the

Accepted Answer

A) Horizontal distance between the market demand curve and the social demand curve. 
B) Vertical distance between the market demand curve and the social demand curve. 
C) Horizontal distance between the market supply curve and the social supply curve. 
D) Vertical distance between the market supply curve and the social supply curve. 
A) Horizontal distance between the market demand curve and the social demand curve. 
B) Vertical distance between the market demand curve and the social demand curve. 
C) Horizontal distance between the market supply curve and the social supply curve. 
D) Vertical distance between the market supply curve and the social supply curve.

Question 15

Which of the following is a merit good?

Accepted Answer

A) Cigarettes. 
B) Food. 
C) Local telephone service. 
D) A computer operating system. 
A) Cigarettes. 
B) Food. 
C) Local telephone service. 
D) A computer operating system.

Question 16

Which of the following is a source of market failure?

Accepted Answer

A) Private goods. 
B) Market power. 
C) Government intervention. 
D) None of the choices are correct. 
A) Private goods. 
B) Market power. 
C) Government intervention. 
D) None of the choices are correct.

Question 17

The optimal mix of output is always the same as the

Accepted Answer

A) Output that consumers demand. 
B) Most desired combination on a production possibilities curve. 
C) Output that the government provides. 
D) Output that producers produce. 
A) Output that consumers demand. 
B) Most desired combination on a production possibilities curve. 
C) Output that the government provides. 
D) Output that producers produce.

Question 18

Market failure may lead to

Accepted Answer

A) An equitable distribution of goods and services. 
B) Public goods being underproduced. 
C) The absence of externalities. 
D) Production possibilities. 
A) An equitable distribution of goods and services. 
B) Public goods being underproduced. 
C) The absence of externalities. 
D) Production possibilities.

Question 19

The most desirable combination of output attainable with existing resources,technology,and social values is known as the

Accepted Answer

A) Optimal mix of output. 
B) Efficient mix of output. 
C) Attainable mix of output. 
D) Efficient choice of production. 
A) Optimal mix of output. 
B) Efficient mix of output. 
C) Attainable mix of output. 
D) Efficient choice of production.

Question 20

A public good is a good or service for which consumption by one person makes consumption by others impossible.

Accepted Answer

A) True 
 B)False

Exam 4: The Role of Government

Government intervention in the market

In general,state and local taxes tend to be

Explain why government-funded college education can be considered a role of the government.

If Good X has social demand that is less than market demand,then Good X must be a

If the consumption of a good yields external benefits,then

The market mechanism leads to underproduction of public goods because the supply of public goods is hidden.

Which of the following is a merit good?

The theory of public choice

Markets will underproduce goods that yield external benefits and overproduce those that generate external costs.

The federal government's role in providing aid to the poor and the aged is justified because of concerns about

The Social Security tax is

Micro and macro failures of the marketplace never justify government intervention.

A public good

An external cost on supply can be measured graphically as the

Which of the following is a merit good?

Which of the following is a source of market failure?

The optimal mix of output is always the same as the

Market failure may lead to

The most desirable combination of output attainable with existing resources,technology,and social values is known as the

A public good is a good or service for which consumption by one person makes consumption by others impossible.

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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