Question 1

Which of the following taxes can be related to the benefit principle?

Accepted Answer

A)  personal income tax 
B)  estate tax 
C)  gasoline tax 
D)  corporate income tax 
E)  inheritance tax 
A)  personal income tax 
B)  estate tax 
C)  gasoline tax 
D)  corporate income tax 
E)  inheritance tax

Question 2

-If D₁ is the demand curve reflecting externalities in this industry

Accepted Answer

A)  external diseconomies are present. 
B)  taxing producers is warranted to reduce output. 
C)  the optimal output from society's standpoint is 0Q₀. 
D)  the social benefits from production are greater than those measured by the industry's demand curve. 
E)  subsidies to producers are too high and should be reduced or eliminated altogether. 
A)  external diseconomies are present. 
B)  taxing producers is warranted to reduce output. 
C)  the optimal output from society's standpoint is 0Q₀. 
D)  the social benefits from production are greater than those measured by the industry's demand curve. 
E)  subsidies to producers are too high and should be reduced or eliminated altogether.

Question 3

Which of the following is an accurate statement about tax incidence?

Accepted Answer

A)  Questions about tax incidence are purely problems of normative economics, that is, questions involving, "Who should pay the tax?" 
B)  The incidence of the personal income tax is not generally agreed on. 
C)  The property tax is borne entirely by the landlord. 
D)  The incidence of the sales tax depends on the price sensitivity of the supply and demand curves for the taxed commodity. 
E)  Economists agree that most, if not all, corporate income taxes are incidental. 
A)  Questions about tax incidence are purely problems of normative economics, that is, questions involving, "Who should pay the tax?" 
B)  The incidence of the personal income tax is not generally agreed on. 
C)  The property tax is borne entirely by the landlord. 
D)  The incidence of the sales tax depends on the price sensitivity of the supply and demand curves for the taxed commodity. 
E)  Economists agree that most, if not all, corporate income taxes are incidental.

Question 4

If the socially optimal level of output for an industry is greater than the equilibrium output for that industry,there are

Accepted Answer

A)  external diseconomies. 
B)  external economies. 
C)  both external economies and diseconomies simultaneously. 
D)  external internalities of substance. 
E)  both external internalities and internal externalities. 
A)  external diseconomies. 
B)  external economies. 
C)  both external economies and diseconomies simultaneously. 
D)  external internalities of substance. 
E)  both external internalities and internal externalities.

Question 5

A sales or excise tax

Accepted Answer

A)  shifts the supply curve upward by the amount of the tax. 
B)  is rarely paid by the consumer if demand is insensitive to price. 
C)  is another name for a supply-side tax. 
D)  increases the quantity sold in the market. 
E)  has a very high collection cost relative to its yield. 
A)  shifts the supply curve upward by the amount of the tax. 
B)  is rarely paid by the consumer if demand is insensitive to price. 
C)  is another name for a supply-side tax. 
D)  increases the quantity sold in the market. 
E)  has a very high collection cost relative to its yield.

Question 6

The concept that those people who receive more from a certain government service should pay more in taxes to support it is known as the ________ principle.

Accepted Answer

A)  benefit 
B)  ethical 
C)  ability-to-pay 
D)  confiscatory tax 
E)  tax reform 
A)  benefit 
B)  ethical 
C)  ability-to-pay 
D)  confiscatory tax 
E)  tax reform

Question 7

Liberals

Accepted Answer

A)  argue that the role of the government should be minimized and carefully circumscribed. 
B)  feel that economic and political freedom is undermined by reliance on the government. 
C)  are skeptical about the government's ability to solve economic and social problems. 
D)  assert that the government can and should overcome the limitations of the price system by regulating private activity. 
E)  view the price system as an efficient noncoercive method of allocation. 
A)  argue that the role of the government should be minimized and carefully circumscribed. 
B)  feel that economic and political freedom is undermined by reliance on the government. 
C)  are skeptical about the government's ability to solve economic and social problems. 
D)  assert that the government can and should overcome the limitations of the price system by regulating private activity. 
E)  view the price system as an efficient noncoercive method of allocation.

Question 8

The following question are based on the following diagram:
  
-The amount of tax shifted onto the seller is best illustrated by

Accepted Answer

A)  AB. 
B)  DE. 
C)  CE. 
D)  DC. 
E)  CF. 
A)  AB. 
B)  DE. 
C)  CE. 
D)  DC. 
E)  CF.

Question 9

The major source of revenue for state governments is ________ taxes.

Accepted Answer

A)  personal income 
B)  sales 
C)  property 
D)  inheritance 
E)  import 
A)  personal income 
B)  sales 
C)  property 
D)  inheritance 
E)  import

Question 10

If the demand curve is vertical and the supply curve slopes upward,the imposition of a sales tax will

Accepted Answer

A)  shift entirely to the buyer. 
B)  fall more heavily on the buyer. 
C)  be equally shared by the buyer and seller. 
D)  fall more heavily on the seller. 
E)  shift entirely to the seller. 
A)  shift entirely to the buyer. 
B)  fall more heavily on the buyer. 
C)  be equally shared by the buyer and seller. 
D)  fall more heavily on the seller. 
E)  shift entirely to the seller.

Question 11

Government health care programs such as Medicare and Medicaid are justified on the basis of the notion that the government has a responsibility to ensure

Accepted Answer

A)  that markets remain competitive. 
B)  a fairer or more desirable distribution of income. 
C)  full employment with stable prices. 
D)  that fraud is prevented. 
E)  the elimination of external economies. 
A)  that markets remain competitive. 
B)  a fairer or more desirable distribution of income. 
C)  full employment with stable prices. 
D)  that fraud is prevented. 
E)  the elimination of external economies.

Question 12

According to conservatives,large elaborate government bureaucracies

Accepted Answer

A)  constitute an appropriate alternative to an outmoded market system. 
B)  are efficient and effective promoters of the general welfare. 
C)  are slow to respond to changes in economic conditions and difficult to control because of political considerations. 
D)  quickly assimilate the information necessary to provide appropriate remedies to most social problems. 
E)  rarely interfere or limit the economic freedom of individuals and businesses. 
A)  constitute an appropriate alternative to an outmoded market system. 
B)  are efficient and effective promoters of the general welfare. 
C)  are slow to respond to changes in economic conditions and difficult to control because of political considerations. 
D)  quickly assimilate the information necessary to provide appropriate remedies to most social problems. 
E)  rarely interfere or limit the economic freedom of individuals and businesses.

Question 13

When companies and newscasters say that any additional excise tax will just be "passed on to the consumer," they are correct only if

Accepted Answer

A)  the quantity demanded is completely insensitive to the price. 
B)  the amount of the tax is relatively small. 
C)  producers do not want to absorb any of the tax themselves. 
D)  the government allows firms to do that. 
E)  the tax reduces the equilibrium quantity of the good. 
A)  the quantity demanded is completely insensitive to the price. 
B)  the amount of the tax is relatively small. 
C)  producers do not want to absorb any of the tax themselves. 
D)  the government allows firms to do that. 
E)  the tax reduces the equilibrium quantity of the good.

Question 14

A common argument against prices determined in noncompetitive markets is that such prices

Accepted Answer

A)  do not reflect consumer desires properly. 
B)  tend to be below competitive market prices, creating surpluses. 
C)  always work to the advantage of the buyer. 
D)  eliminate the need for regulation. 
E)  primarily promote the interest of those lacking market power. 
A)  do not reflect consumer desires properly. 
B)  tend to be below competitive market prices, creating surpluses. 
C)  always work to the advantage of the buyer. 
D)  eliminate the need for regulation. 
E)  primarily promote the interest of those lacking market power.

Question 15

The following question are based on the following diagram:
  
-The amount of tax per unit is

Accepted Answer

A)  $1.40. 
B)  $1. 
C)  $0.60. 
D)  $0.50. 
E)  $0.40. 
A)  $1.40. 
B)  $1. 
C)  $0.60. 
D)  $0.50. 
E)  $0.40.

Question 16

Establishing the "rules of the game" means that the government

Accepted Answer

A)  uses its authority to redistribute income from the rich to the poor. 
B)  becomes the owner of all of the nonhuman resources in the economy. 
C)  should be the primary sponsor of athletic contests in the country. 
D)  establishes market prices by law. 
E)  provides an appropriate institutional framework to enable the price system to function properly. 
A)  uses its authority to redistribute income from the rich to the poor. 
B)  becomes the owner of all of the nonhuman resources in the economy. 
C)  should be the primary sponsor of athletic contests in the country. 
D)  establishes market prices by law. 
E)  provides an appropriate institutional framework to enable the price system to function properly.

Question 17

With which of the following would Milton Friedman probably agree?

Accepted Answer

A)  All people should have equal incomes. 
B)  Economic and political freedoms are likely to be lost if we rely too heavily on government to solve economic problems. 
C)  The nation suffers because too little is spent on governmental services such as transportation, education, and urban renewal. 
D)  The price system involves substantial coercion and must be supervised carefully. 
E)  Government tends to be more efficient and to respond more quickly than the market. 
A)  All people should have equal incomes. 
B)  Economic and political freedoms are likely to be lost if we rely too heavily on government to solve economic problems. 
C)  The nation suffers because too little is spent on governmental services such as transportation, education, and urban renewal. 
D)  The price system involves substantial coercion and must be supervised carefully. 
E)  Government tends to be more efficient and to respond more quickly than the market.

Question 18

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

Accepted Answer

A)  a hamburger 
B)  an automobile 
C)  a parade 
D)  an upholstered chair 
E)  a model airplane kit 
A)  a hamburger 
B)  an automobile 
C)  a parade 
D)  an upholstered chair 
E)  a model airplane kit

Question 19

An external economy occurs when

Accepted Answer

A)  library facilities of a university are open to the general public without charge. 
B)  wealthy individuals are taxed more heavily to support programs to help poor people. 
C)  a consumer buys a hamburger and a milkshake. 
D)  someone attends a regular Academy of Music performance of the Philadelphia Orchestra. 
E)  people smoke in public facilities. 
A)  library facilities of a university are open to the general public without charge. 
B)  wealthy individuals are taxed more heavily to support programs to help poor people. 
C)  a consumer buys a hamburger and a milkshake. 
D)  someone attends a regular Academy of Music performance of the Philadelphia Orchestra. 
E)  people smoke in public facilities.

Question 20

If external economies exist in the production of a good,the government could intervene to

Accepted Answer

A)  shift the industry supply curve to the left. 
B)  tax the industry to reduce production. 
C) shift the industry demand curve to the right. 
D)  tax the user of the industry's product. 
E)  prohibit production until the external economies are eliminated. 
A)  shift the industry supply curve to the left. 
B)  tax the industry to reduce production. 
C) shift the industry demand curve to the right. 
D)  tax the user of the industry's product. 
E)  prohibit production until the external economies are eliminated.

Exam 14: Public Goods and the Role of the Government

Which of the following taxes can be related to the benefit principle?

-If D₁ is the demand curve reflecting externalities in this industry

Which of the following is an accurate statement about tax incidence?

If the socially optimal level of output for an industry is greater than the equilibrium output for that industry,there are

A sales or excise tax

The concept that those people who receive more from a certain government service should pay more in taxes to support it is known as the ________ principle.

Liberals

The following question are based on the following diagram: -The amount of tax shifted onto the seller is best illustrated by

The major source of revenue for state governments is ________ taxes.

If the demand curve is vertical and the supply curve slopes upward,the imposition of a sales tax will

Government health care programs such as Medicare and Medicaid are justified on the basis of the notion that the government has a responsibility to ensure

According to conservatives,large elaborate government bureaucracies

When companies and newscasters say that any additional excise tax will just be "passed on to the consumer," they are correct only if

A common argument against prices determined in noncompetitive markets is that such prices

The following question are based on the following diagram: -The amount of tax per unit is

Establishing the "rules of the game" means that the government

With which of the following would Milton Friedman probably agree?

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

An external economy occurs when

If external economies exist in the production of a good,the government could intervene to

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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