Question 1

Most economists believe that the market __________ produce nonexcludable public goods because of the __________.

Accepted Answer

A)  will; monetary incentive they have to produce them 
B)  will not; externality problem 
C)  will not; free rider problem 
D)  will; market shortage that often accompanies the production of public goods. 
E)  none of the above 
A)  will; monetary incentive they have to produce them 
B)  will not; externality problem 
C)  will not; free rider problem 
D)  will; market shortage that often accompanies the production of public goods. 
E)  none of the above

Question 2

"I'm not going to pay for the good if,once produced,the good cannot be denied to anyone." This statement is most relevant to

Accepted Answer

A)  negative externalities. 
B)  positive externalities 
C)  private goods. 
D)  nonexcludable public goods. 
E)  the issue of rivalry versus nonrivalry in consumption. 
A)  negative externalities. 
B)  positive externalities 
C)  private goods. 
D)  nonexcludable public goods. 
E)  the issue of rivalry versus nonrivalry in consumption.

Question 3

A divisive society is one in which members of society work together for the common good.

Accepted Answer

A) True 
 B)False

Question 4

To say that government sometimes functions as a "transfer mechanism," means that government sometimes

Accepted Answer

A)  ends up transferring goods to individuals in return for taxes paid. 
B)  ends up transferring negative externalities into positive externalities. 
C)  ends up taking from group X to give to group Y. 
D)  transfers taxes into subsidies. 
E)  none of the above 
A)  ends up transferring goods to individuals in return for taxes paid. 
B)  ends up transferring negative externalities into positive externalities. 
C)  ends up taking from group X to give to group Y. 
D)  transfers taxes into subsidies. 
E)  none of the above

Question 5

Consider a setting in which there is a negative externality,but no positive externality. The market outcome is __________________; government can bring about the ___________________ outcome if it sets a tax equal to the __________________.

Accepted Answer

A) 	efficient; inefficient; MSC 
B) 	efficient; inefficient; MEC 
C) 	inefficient; efficient; MEC 
D) 	inefficient; efficient; MPC 
E) 	inefficient; efficient; MSB 
A) 	efficient; inefficient; MSC 
B) 	efficient; inefficient; MEC 
C) 	inefficient; efficient; MEC 
D) 	inefficient; efficient; MPC 
E) 	inefficient; efficient; MSB

Question 6

Special interest group Q receives a 1/10,000?? slice of the economic pie. Its net benefit from either an economic growth policy or a transfer policy is $50,000. In order for group Q to be indifferent between the two policies,the economic growth policy would have to make the size of the economic pie (Real GDP)grow by _________________. This type of analysis is used to show that special interest groups tend press government for ______________ instead of ________________.

Accepted Answer

A)  $50,000,000; economic growth; transfers 
B)  $500,000; transfers; economic growth 
C)  $500,000,000; transfers; economic growth 
D)  $5,000,000; transfers; economic growth 
E)  none of the above 
A)  $50,000,000; economic growth; transfers 
B)  $500,000; transfers; economic growth 
C)  $500,000,000; transfers; economic growth 
D)  $5,000,000; transfers; economic growth 
E)  none of the above

Question 7

Consider a setting in which there is a positive externality,but no negative externality. The market outcome is __________________; government can bring about the ___________________ outcome if it sets a subsidy equal to the __________________.

Accepted Answer

A)  inefficient; efficient; MEB 
B)  inefficient; efficient; MEC 
C)  efficient; inefficient; MPC 
D)  inefficient; efficient; MPB 
E)  inefficient; efficient; MSB 
A)  inefficient; efficient; MEB 
B)  inefficient; efficient; MEC 
C)  efficient; inefficient; MPC 
D)  inefficient; efficient; MPB 
E)  inefficient; efficient; MSB

Question 8

When a good is nonexcludable,then individuals

Accepted Answer

A)  will purchase the good for more than what it cost to produce the good. 
B)  can obtain the benefits of the good without paying for it. 
C)  have an incentive to become free riders. 
D)  will purchase more than the optimum amount. 
E)  b and c 
A)  will purchase the good for more than what it cost to produce the good. 
B)  can obtain the benefits of the good without paying for it. 
C)  have an incentive to become free riders. 
D)  will purchase more than the optimum amount. 
E)  b and c

Question 9

A consequence of a negative externality is that social costs __________ private costs,and the efficient level of output __________.

Accepted Answer

A)  equal; does not require any type of government intervention 
B)  are less than; requires the government to create a subsidy 
C)  are greater than; requires the government to impose a tax 
D)  are greater than; requires the government to create a subsidy 
E)  are less than; requires the government to impose a tax 
A)  equal; does not require any type of government intervention 
B)  are less than; requires the government to create a subsidy 
C)  are greater than; requires the government to impose a tax 
D)  are greater than; requires the government to create a subsidy 
E)  are less than; requires the government to impose a tax

Question 10

Which of the following is true?

Accepted Answer

A)  Government cannot remove individuals from a prisoner's dilemma setting and make them better off. 
B)  As long as government charges each individual a tax that is more than the gain received by being removed from a prisoner's dilemma setting, then government makes that individual better off. 
C)  Government can remove individuals from a prisoner's dilemma setting by changing the payoff matrix. 
D)  a and c 
E)  all of the above 
A)  Government cannot remove individuals from a prisoner's dilemma setting and make them better off. 
B)  As long as government charges each individual a tax that is more than the gain received by being removed from a prisoner's dilemma setting, then government makes that individual better off. 
C)  Government can remove individuals from a prisoner's dilemma setting by changing the payoff matrix. 
D)  a and c 
E)  all of the above

Question 11

Special interest group Z receives a 1/200th slice of the economic pie. Its net benefit from both an economic growth policy and a transfer policy is $30,000. How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

Accepted Answer

A)  $150 
B)  $600,000 
C)  $600,000,000 
D)  $6,000,000 
E)  none of the above 
A)  $150 
B)  $600,000 
C)  $600,000,000 
D)  $6,000,000 
E)  none of the above

Question 12

Economist B thinks that it is important to identify the condition(s)under which the case for government is strongest. With respect to the provision of nonexcludable public goods,she says

Accepted Answer

A)  people must pay taxes to pay for the nonexcludable public good. 
B)  firms must pay taxes to pay for the nonexcludable public good. 
C)  people must actually want the nonexcludable public good that the government provides. 
D)  people must express their desire for the nonexcludable public good by voting for it. 
E)  none of the above 
A)  people must pay taxes to pay for the nonexcludable public good. 
B)  firms must pay taxes to pay for the nonexcludable public good. 
C)  people must actually want the nonexcludable public good that the government provides. 
D)  people must express their desire for the nonexcludable public good by voting for it. 
E)  none of the above

Question 13

Suppose that for Jim the marginal benefit (MB)of producing is $60 and that the marginal cost (MC)of producing is $10. Suppose also that his marginal benefit of stealing is $50 and the marginal cost of stealing is $10. Is Jim currently maximizing utility in terms of producing and stealing? If not,should he produce more and steal less,or produce less and steal more to move toward utility maximization?

Accepted Answer

A)  Yes, Jim is maximizing utility. 
B)  No, Jim is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Jim should produce more and steal less. 
C)  No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should produce more and steal less. 
D)  No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should steal more and produce less. 
A)  Yes, Jim is maximizing utility. 
B)  No, Jim is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Jim should produce more and steal less. 
C)  No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should produce more and steal less. 
D)  No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should steal more and produce less.

Question 14

Individuals want nonexcludable public good X,but the market does not provide it because of the free rider problem. Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

Accepted Answer

A)  forcing individuals to work longer hours 
B)  taxing 
C)  surveying 
D)  subsidizing 
E)  none of the above 
A)  forcing individuals to work longer hours 
B)  taxing 
C)  surveying 
D)  subsidizing 
E)  none of the above

Question 15

Exhibit 37-1
  
-Refer to Exhibit 37-1,where the higher the number,the better the position for the person to whom the number is connected. Jaden and Karen are currently in box 4,each receiving 10. they would like to move to box 1,where each receives 12. Without someone to ________________ their agreement,moving from box 4 is ______________________.

Accepted Answer

A)  enforce; likely 
B)  enforce; unlikely 
C)  break; unlikely 
D)  break; likely 
E)  There is not enough information to answer the question. 
A)  enforce; likely 
B)  enforce; unlikely 
C)  break; unlikely 
D)  break; likely 
E)  There is not enough information to answer the question.

Question 16

The strongest case for government with respect to a negative externality is that government needs to set the

Accepted Answer

A)  subsidy equal to the marginal private benefits. 
B)  tax equal to the marginal external costs plus $1. 
C)  tax slightly below the marginal external costs. 
D)  tax equal to the marginal external costs. 
E)  subsidy equal to the marginal social benefits. 
A)  subsidy equal to the marginal private benefits. 
B)  tax equal to the marginal external costs plus $1. 
C)  tax slightly below the marginal external costs. 
D)  tax equal to the marginal external costs. 
E)  subsidy equal to the marginal social benefits.

Question 17

The essence of a prisoner's dilemma setting is that if both person A and person B do what is best for each of them,

Accepted Answer

A)  they end up in a position that is "the best" for each of them. 
B)  they end up in a position that is "the worst" for each of them. 
C)  one ends up in a position that is "the best" for him and the other ends in a position that is "the worst" for him. 
D)  they end up in a position from which each would prefer to move away. 
E)  none of the above 
A)  they end up in a position that is "the best" for each of them. 
B)  they end up in a position that is "the worst" for each of them. 
C)  one ends up in a position that is "the best" for him and the other ends in a position that is "the worst" for him. 
D)  they end up in a position from which each would prefer to move away. 
E)  none of the above

Question 18

In the case of a negative externality,in order to achieve efficiency the government must set the _________________ equal to the marginal ____________________.

Accepted Answer

A)  tax; external costs 
B)  tax; external benefits 
C)  subsidy; external costs 
D)  subsidy; external benefits 
E)  tax; private costs 
A)  tax; external costs 
B)  tax; external benefits 
C)  subsidy; external costs 
D)  subsidy; external benefits 
E)  tax; private costs

Question 19

In the prisoner's dilemma setting for producing and stealing,a tax imposed on participants could end up changing the payoff matrix so that

Accepted Answer

A)  one participant is better off, and one participant is worse off. 
B)  both participants are worse off. 
C)  both participants are better off. 
D)  all of the above are possible 
A)  one participant is better off, and one participant is worse off. 
B)  both participants are worse off. 
C)  both participants are better off. 
D)  all of the above are possible

Question 20

In the case of a nonexcludable public good,the market will fail to produce the good because of the free rider problem.

Accepted Answer

A) True 
 B)False

Exam 37: The Economic Case For and Against Government: Five Topics Considered

Most economists believe that the market __________ produce nonexcludable public goods because of the __________.

"I'm not going to pay for the good if,once produced,the good cannot be denied to anyone." This statement is most relevant to

A divisive society is one in which members of society work together for the common good.

To say that government sometimes functions as a "transfer mechanism," means that government sometimes

Consider a setting in which there is a negative externality,but no positive externality. The market outcome is __________________; government can bring about the ___________________ outcome if it sets a tax equal to the __________________.

Consider a setting in which there is a positive externality,but no negative externality. The market outcome is __________________; government can bring about the ___________________ outcome if it sets a subsidy equal to the __________________.

When a good is nonexcludable,then individuals

A consequence of a negative externality is that social costs __________ private costs,and the efficient level of output __________.

Which of the following is true?

Special interest group Z receives a 1/200th slice of the economic pie. Its net benefit from both an economic growth policy and a transfer policy is $30,000. How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

Economist B thinks that it is important to identify the condition(s)under which the case for government is strongest. With respect to the provision of nonexcludable public goods,she says

Individuals want nonexcludable public good X,but the market does not provide it because of the free rider problem. Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

The strongest case for government with respect to a negative externality is that government needs to set the

The essence of a prisoner's dilemma setting is that if both person A and person B do what is best for each of them,

In the case of a negative externality,in order to achieve efficiency the government must set the _________________ equal to the marginal ____________________.

In the prisoner's dilemma setting for producing and stealing,a tax imposed on participants could end up changing the payoff matrix so that

In the case of a nonexcludable public good,the market will fail to produce the good because of the free rider problem.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Most economists believe that the market produce nonexcludable public goods because of the .

Consider a setting in which there is a negative externality,but no positive externality. The market outcome is ________; government can bring about the _ outcome if it sets a tax equal to the __________.

Consider a setting in which there is a positive externality,but no negative externality. The market outcome is ________; government can bring about the _ outcome if it sets a subsidy equal to the __________.

A consequence of a negative externality is that social costs private costs,and the efficient level of output .

Special interest group Z receives a 1/200^th slice of the economic pie. Its net benefit from both an economic growth policy and a transfer policy is $30,000. How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

In the case of a negative externality,in order to achieve efficiency the government must set the _ equal to the marginal ____.