Question 1

Whether an externality is positive or negative, it is always

Accepted Answer

A) evaluated by the Supreme Court of the United States. 
B) evaluated by the government. 
C) evaluated by the impact on the third party. 
D) judged by the profitability of the firm producing the product. 
A) evaluated by the Supreme Court of the United States. 
B) evaluated by the government. 
C) evaluated by the impact on the third party. 
D) judged by the profitability of the firm producing the product.

Question 2

A result of a positive externality in the production of a good is that

Accepted Answer

A) the price system will over-allocate resources to the production of that good or service. 
B) the price system will under-allocate resources to the production of that good or service. 
C) the market supply will be too high. 
D) the market demand will be too high. 
A) the price system will over-allocate resources to the production of that good or service. 
B) the price system will under-allocate resources to the production of that good or service. 
C) the market supply will be too high. 
D) the market demand will be too high.

Question 3

Over the past 40 years, there has been an increase in spending on public education without a significant increase in student performance. One explanation given by economists on why student performance has not improved is that

Accepted Answer

A) not enough funds have been spent on public education. 
B) schools are providing high-priced services that are not valued by parents. 
C) the quantity of educational services has not increased beyond the pre-subsidy equilibrium. 
D) too much competition for educational services. 
A) not enough funds have been spent on public education. 
B) schools are providing high-priced services that are not valued by parents. 
C) the quantity of educational services has not increased beyond the pre-subsidy equilibrium. 
D) too much competition for educational services.

Question 4

Which of the following statements is NOT true about the price system?

Accepted Answer

A) The price system allows resources to flow from low-valued uses to high-valued uses. 
B) Firms have total control over what consumers can buy. 
C) Individuals have freedom to purchase what they want. 
D) The price system allows for economic efficiency. 
A) The price system allows resources to flow from low-valued uses to high-valued uses. 
B) Firms have total control over what consumers can buy. 
C) Individuals have freedom to purchase what they want. 
D) The price system allows for economic efficiency.

Question 5

Which of the following leads to an underallocation of resources to a specific economic activity?

Accepted Answer

A) external costs 
B) external benefits 
C) marginal costs 
D) effluent benefits 
A) external costs 
B) external benefits 
C) marginal costs 
D) effluent benefits

Question 6

When a paper producer pollutes the air, economists argue that there is

Accepted Answer

A) efficiency, if production is at its maximum level. 
B) a positive externality. 
C) an external cost. 
D) a cost paid solely by the firm. 
A) efficiency, if production is at its maximum level. 
B) a positive externality. 
C) an external cost. 
D) a cost paid solely by the firm.

Question 7

In the U.S. economy, which of the following is NOT a generally accepted economic function of government?

Accepted Answer

A) providing public goods 
B) distributing consumer goods 
C) ensuring economy-wide stability 
D) promoting competition in the marketplace 
A) providing public goods 
B) distributing consumer goods 
C) ensuring economy-wide stability 
D) promoting competition in the marketplace

Question 8

Which of the following is an example of a negative externality?

Accepted Answer

A) A person buys a car that is a lemon. 
B) A worker is injured on the job. 
C) A new restaurant's success causes another to go out of business. 
D) A new hotel ruins the view of the ocean for a few homeowners. 
A) A person buys a car that is a lemon. 
B) A worker is injured on the job. 
C) A new restaurant's success causes another to go out of business. 
D) A new hotel ruins the view of the ocean for a few homeowners.

Question 9

In graphical form,the effect of imposing a tax on a good is shown as

Accepted Answer

A) a leftward shift of the market supply curve. 
B) a rightward shift of the market supply curve. 
C) a downward movement along the market supply curve. 
D) no change to the market supply curve. 
A) a leftward shift of the market supply curve. 
B) a rightward shift of the market supply curve. 
C) a downward movement along the market supply curve. 
D) no change to the market supply curve.

Question 10

Which of the following statements is NOT true of external benefits?

Accepted Answer

A) External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B) External benefits lead to a price in the market that is too high. 
C) External benefits lead to too few of the goods that have the external benefit being produced. 
D) External benefits are a good thing for the allocation of resources because people are getting something at no cost. 
A) External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B) External benefits lead to a price in the market that is too high. 
C) External benefits lead to too few of the goods that have the external benefit being produced. 
D) External benefits are a good thing for the allocation of resources because people are getting something at no cost.

Question 11

Under present U.S. federal law, which one of the following is a government-inhibited good?

Accepted Answer

A) housing 
B) medical care 
C) marijuana 
D) education 
A) housing 
B) medical care 
C) marijuana 
D) education

Question 12

Which of the following legal subjects is most concerned with the economic function of the legal system?

Accepted Answer

A) criminal law 
B) public goods 
C) antitrust legislation 
D) civil rights 
A) criminal law 
B) public goods 
C) antitrust legislation 
D) civil rights

Question 13

If production of an item results in negative external costs, then

Accepted Answer

A) the market price is below the socially preferred price that reflects the external costs. 
B) the market price is above the socially preferred price that reflects the external costs. 
C) market forces will always correct the problem. 
D) the market quantity is too low from society's point of view. 
A) the market price is below the socially preferred price that reflects the external costs. 
B) the market price is above the socially preferred price that reflects the external costs. 
C) market forces will always correct the problem. 
D) the market quantity is too low from society's point of view.

Question 14

The purpose of an effluent fee imposed on a firm is

Accepted Answer

A) to increase output of its product by increasing the resources allocated to production. 
B) to increase output of its product by reducing the resources allocated to production. 
C) to reduce output by increasing production costs thereby reducing resources used. 
D) none of the above 
A) to increase output of its product by increasing the resources allocated to production. 
B) to increase output of its product by reducing the resources allocated to production. 
C) to reduce output by increasing production costs thereby reducing resources used. 
D) none of the above

Question 15

If a government determines that the provision of services by museums should be encouraged, then this means that the government has judged museum displays to be a(n)

Accepted Answer

A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good. 
A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good.

Question 16

If a nation's government determines that consumption of cigarettes should be discouraged, then this means that the government has judged cigarettes to be a(n)

Accepted Answer

A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good. 
A) government-sponsored good. 
B) exclusive good. 
C) government-inhibited good. 
D) public good.

Question 17

Which of the following checks issued by the government represents a transfer payment?

Accepted Answer

A) The federal government pays a defense contractor for development of a missile system. 
B) The federal government pays a retiree her Social Security benefits. 
C) The state of Oregon pays a construction firm for its work in repairing a state highway. 
D) The state of Illinois pays groundskeepers at the state capitol building their weekly wages. 
A) The federal government pays a defense contractor for development of a missile system. 
B) The federal government pays a retiree her Social Security benefits. 
C) The state of Oregon pays a construction firm for its work in repairing a state highway. 
D) The state of Illinois pays groundskeepers at the state capitol building their weekly wages.

Question 18

The "principle of rival consumption" applies to which of the following?

Accepted Answer

A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good 
A) national defense 
B) the free-rider problem 
C) the exclusion principle 
D) a private good

Question 19

When there are too few or too many resources going to an economic activity

Accepted Answer

A) a public good exists. 
B) a market failure exists. 
C) consumer sovereignty exists. 
D) a free-rider problem exists. 
A) a public good exists. 
B) a market failure exists. 
C) consumer sovereignty exists. 
D) a free-rider problem exists.

Question 20

Suppose that a per-unit subsidy is granted to each individual who consumes a product providing external benefits to society at large. Each individuals demand curve will shift ________, and the market demand curve for the product will shift ________.

Accepted Answer

A) to the right; to the right 
B) to the right; to the left 
C) to the left; to the left 
D) to the left; to the right 
A) to the right; to the right 
B) to the right; to the left 
C) to the left; to the left 
D) to the left; to the right

Whether an externality is positive or negative, it is always

A result of a positive externality in the production of a good is that

Over the past 40 years, there has been an increase in spending on public education without a significant increase in student performance. One explanation given by economists on why student performance has not improved is that

Which of the following statements is NOT true about the price system?

Which of the following leads to an underallocation of resources to a specific economic activity?

When a paper producer pollutes the air, economists argue that there is

In the U.S. economy, which of the following is NOT a generally accepted economic function of government?

Which of the following is an example of a negative externality?

In graphical form,the effect of imposing a tax on a good is shown as

Which of the following statements is NOT true of external benefits?

Under present U.S. federal law, which one of the following is a government-inhibited good?

Which of the following legal subjects is most concerned with the economic function of the legal system?

If production of an item results in negative external costs, then

The purpose of an effluent fee imposed on a firm is

If a government determines that the provision of services by museums should be encouraged, then this means that the government has judged museum displays to be a(n)

If a nation's government determines that consumption of cigarettes should be discouraged, then this means that the government has judged cigarettes to be a(n)

Which of the following checks issued by the government represents a transfer payment?

The "principle of rival consumption" applies to which of the following?

When there are too few or too many resources going to an economic activity

Suppose that a per-unit subsidy is granted to each individual who consumes a product providing external benefits to society at large. Each individuals demand curve will shift , and the market demand curve for the product will shift .

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 5: Public Spending and Public Choice

Whether an externality is positive or negative, it is always

A result of a positive externality in the production of a good is that

Over the past 40 years, there has been an increase in spending on public education without a significant increase in student performance. One explanation given by economists on why student performance has not improved is that

Which of the following statements is NOT true about the price system?

Which of the following leads to an underallocation of resources to a specific economic activity?

When a paper producer pollutes the air, economists argue that there is

In the U.S. economy, which of the following is NOT a generally accepted economic function of government?

Which of the following is an example of a negative externality?

In graphical form,the effect of imposing a tax on a good is shown as

Which of the following statements is NOT true of external benefits?

Under present U.S. federal law, which one of the following is a government-inhibited good?

Which of the following legal subjects is most concerned with the economic function of the legal system?

If production of an item results in negative external costs, then

The purpose of an effluent fee imposed on a firm is

If a government determines that the provision of services by museums should be encouraged, then this means that the government has judged museum displays to be a(n)

If a nation's government determines that consumption of cigarettes should be discouraged, then this means that the government has judged cigarettes to be a(n)

Which of the following checks issued by the government represents a transfer payment?

The "principle of rival consumption" applies to which of the following?

When there are too few or too many resources going to an economic activity

Suppose that a per-unit subsidy is granted to each individual who consumes a product providing external benefits to society at large. Each individuals demand curve will shift ________, and the market demand curve for the product will shift ________.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Suppose that a per-unit subsidy is granted to each individual who consumes a product providing external benefits to society at large. Each individuals demand curve will shift , and the market demand curve for the product will shift .