Question 1

A natural monopoly is

Accepted Answer

A) An industry that is dominated by a single firm. 
B) An industry in which one firm can achieve economies of scale over the entire range of market supply. 
C) An unregulated monopoly. 
D) A monopoly that always benefits society even when it is unregulated. 
A) An industry that is dominated by a single firm. 
B) An industry in which one firm can achieve economies of scale over the entire range of market supply. 
C) An unregulated monopoly. 
D) A monopoly that always benefits society even when it is unregulated.

Question 2

Which of the following is consumed jointly?

Accepted Answer

A) A can of Coke. 
B) A doughnut. 
C) A seat on an airplane. 
D) A missile shield. 
A) A can of Coke. 
B) A doughnut. 
C) A seat on an airplane. 
D) A missile shield.

Question 3

The federal income tax system is regressive.

Accepted Answer

A) True 
 B)False

Question 4

A merit good is

Accepted Answer

A) Income payments for which no goods or services are exchanged. 
B) A good society holds to a higher standard in tax regulations. 
C) A good or service that society believes everyone is entitled to a minimal quantity of. 
D) A product that serves as an incentive to produce more output. 
A) Income payments for which no goods or services are exchanged. 
B) A good society holds to a higher standard in tax regulations. 
C) A good or service that society believes everyone is entitled to a minimal quantity of. 
D) A product that serves as an incentive to produce more output.

Question 5

Externalities

Accepted Answer

A) Occur because of government failure. 
B) Are the costs or benefits of market activities that "spill over" onto third parties. 
C) Occur because of selfish consumers. 
D) Occur because demand is hidden. 
A) Occur because of government failure. 
B) Are the costs or benefits of market activities that "spill over" onto third parties. 
C) Occur because of selfish consumers. 
D) Occur because demand is hidden.

Question 6

Transfer payments are payments to individuals for which nothing is currently rendered in return.

Accepted Answer

A) True 
 B)False

Question 7

A proportional tax is one that

Accepted Answer

A) Rises as income rises. 
B) Falls as income rises. 
C) Is collected voluntarily for specific expenditure purposes. 
D) Collects the same rate on every dollar of income. 
A) Rises as income rises. 
B) Falls as income rises. 
C) Is collected voluntarily for specific expenditure purposes. 
D) Collects the same rate on every dollar of income.

Question 8

Social demand equals market demand minus externalities when there are external benefits.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that if your income is $100,000,your tax is $20,000,but if your income is $200,000,your tax is $45,000.Such a tax is

Accepted Answer

A) Regressive. 
B) Progressive. 
C) Proportional. 
D) A flat tax. 
A) Regressive. 
B) Progressive. 
C) Proportional. 
D) A flat tax.

Question 10

The federal government's role as the provider of national defense is justified by considerations of

Accepted Answer

A) Inequity. 
B) Public goods. 
C) Private goods. 
D) None of the choices are correct. 
A) Inequity. 
B) Public goods. 
C) Private goods. 
D) None of the choices are correct.

Question 11

A progressive tax system is one in which tax rates rise as incomes rise.

Accepted Answer

A) True 
 B)False

Question 12

Government failure may result from

Accepted Answer

A) Operational inefficiency by the public sector only. 
B) Misallocation of resources only. 
C) Accurate valuations of benefits but inaccurate valuations of costs. 
D) Outright waste of resources by the public sector or misallocation of resources. 
A) Operational inefficiency by the public sector only. 
B) Misallocation of resources only. 
C) Accurate valuations of benefits but inaccurate valuations of costs. 
D) Outright waste of resources by the public sector or misallocation of resources.

Question 13

Using Figure 4.2,suppose point C represents the optimal mix of public and private goods for a society.The market mechanism is likely to result in a mix of output represented by point

Accepted Answer

A) F because the market mechanism is inefficient. 
B) B because the market mechanism tends to overproduce public goods. 
C) C because the market mechanism is efficient. 
D) D because the market mechanism tends to underproduce public goods. 
A) F because the market mechanism is inefficient. 
B) B because the market mechanism tends to overproduce public goods. 
C) C because the market mechanism is efficient. 
D) D because the market mechanism tends to underproduce public goods.

Question 14

The four specific sources of market failure are

Accepted Answer

A) Public goods,market power,externalities,and inequity. 
B) Private goods,market power,externalities,and inequity. 
C) Public goods,market goods,externalities,and inequity. 
D) Private goods,market goods,externalities,and inequity. 
A) Public goods,market power,externalities,and inequity. 
B) Private goods,market power,externalities,and inequity. 
C) Public goods,market goods,externalities,and inequity. 
D) Private goods,market goods,externalities,and inequity.

Question 15

Income transfers directly alter the mix of output and answer the question of WHAT is produced question.

Accepted Answer

A) True 
 B)False

Question 16

Using Figure 4.1,assume that point C represents the best possible mix or optimal level of output for this society.If the market fails and produces a suboptimal mix of output,then it could produce at

Accepted Answer

A) Point A,B,D,or E. 
B) Point D or F. 
C) Point A,B,D,or F. 
D) Point E or F. 
A) Point A,B,D,or E. 
B) Point D or F. 
C) Point A,B,D,or F. 
D) Point E or F.

Question 17

Market power may result from all of the following except

Accepted Answer

A) Patents and copyrights. 
B) Control of resources. 
C) Efficiencies of large-scale production. 
D) Low barriers to entry. 
A) Patents and copyrights. 
B) Control of resources. 
C) Efficiencies of large-scale production. 
D) Low barriers to entry.

Question 18

Government failure will likely arise if

Accepted Answer

A) There are no valuation problems. 
B) Public services have reliable market prices. 
C) Government officials attempt to maximize their own utility. 
D) The free-rider problem occurs. 
A) There are no valuation problems. 
B) Public services have reliable market prices. 
C) Government officials attempt to maximize their own utility. 
D) The free-rider problem occurs.

Question 19

The principal mechanism for redistributing incomes is

Accepted Answer

A) The tax-and-transfer system. 
B) Antitrust policy. 
C) Market power. 
D) The production of public goods. 
A) The tax-and-transfer system. 
B) Antitrust policy. 
C) Market power. 
D) The production of public goods.

Question 20

Which of the following explains what would likely happen if public goods were marketed like private goods?

Accepted Answer

A) Public goods would be underproduced. 
B) Many consumers would want to buy the goods. 
C) Public goods would be overproduced. 
D) Government failure would result. 
A) Public goods would be underproduced. 
B) Many consumers would want to buy the goods. 
C) Public goods would be overproduced. 
D) Government failure would result.

Exam 4: The Role of Government

A natural monopoly is

Which of the following is consumed jointly?

The federal income tax system is regressive.

A merit good is

Externalities

Transfer payments are payments to individuals for which nothing is currently rendered in return.

A proportional tax is one that

Social demand equals market demand minus externalities when there are external benefits.

Suppose that if your income is $100,000,your tax is $20,000,but if your income is $200,000,your tax is $45,000.Such a tax is

The federal government's role as the provider of national defense is justified by considerations of

A progressive tax system is one in which tax rates rise as incomes rise.

Government failure may result from

Using Figure 4.2,suppose point C represents the optimal mix of public and private goods for a society.The market mechanism is likely to result in a mix of output represented by point

The four specific sources of market failure are

Income transfers directly alter the mix of output and answer the question of WHAT is produced question.

Using Figure 4.1,assume that point C represents the best possible mix or optimal level of output for this society.If the market fails and produces a suboptimal mix of output,then it could produce at

Market power may result from all of the following except

Government failure will likely arise if

The principal mechanism for redistributing incomes is

Which of the following explains what would likely happen if public goods were marketed like private goods?

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

Filters