Question 1

The theory of public choice suggests that

Accepted Answer

A) government agencies tend to be inefficient because the people running them do not understand the concept of opportunity cost. 
B) government agencies tend to be inefficient because they are subject to institutional arrangements in which managers do not have an incentive to be efficient. 
C) the goods provided by government, whether public or private goods, are not scarce. 
D) you can lower your tax bill if you are careful not to consume too many government resources, regardless of what your neighbors do. 
A) government agencies tend to be inefficient because the people running them do not understand the concept of opportunity cost. 
B) government agencies tend to be inefficient because they are subject to institutional arrangements in which managers do not have an incentive to be efficient. 
C) the goods provided by government, whether public or private goods, are not scarce. 
D) you can lower your tax bill if you are careful not to consume too many government resources, regardless of what your neighbors do.

Question 2

Receiving a voucher for an apartment in a public housing project would be an example of a good that satisfies

Accepted Answer

A) the principle of rival consumption. 
B) the definition of a public good. 
C) the definition of a good with a positive externality. 
D) the nonexclusion principle. 
A) the principle of rival consumption. 
B) the definition of a public good. 
C) the definition of a good with a positive externality. 
D) the nonexclusion principle.

Question 3

Social Security and Medicare are clear examples of

Accepted Answer

A) capitalism. 
B) market-determined services. 
C) market failures and externalities. 
D) governmental intervention in the market. 
A) capitalism. 
B) market-determined services. 
C) market failures and externalities. 
D) governmental intervention in the market.

Question 4

What is the assumption underlying public-choice theory?

Accepted Answer

A) Elected officials believe in cooperating with one another and they seek to avoid competition among themselves. 
B) The costs and benefits of being efficient are the same whether one is in the private sector or in the public sector. 
C) Individuals act within the political process to improve their own individual well-being. 
D) Resources in the public sector are not scarce. 
A) Elected officials believe in cooperating with one another and they seek to avoid competition among themselves. 
B) The costs and benefits of being efficient are the same whether one is in the private sector or in the public sector. 
C) Individuals act within the political process to improve their own individual well-being. 
D) Resources in the public sector are not scarce.

Question 5

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

Accepted Answer

A) higher than optimal. 
B) lower than optimal. 
C) efficient. 
D) at a optimal level. 
A) higher than optimal. 
B) lower than optimal. 
C) efficient. 
D) at a optimal level.

Question 6

To correct for negative externalities, the government

Accepted Answer

A) should allow the price system do the correction. 
B) can impose a tax. 
C) can provide a subsidy to consumers. 
D) should create a public good. 
A) should allow the price system do the correction. 
B) can impose a tax. 
C) can provide a subsidy to consumers. 
D) should create a public good.

Question 7

A government-inhibited good is a good which

Accepted Answer

A) is not subject to the principle of mutual exclusivity. 
B) the political process has deemed socially undesirable. 
C) can be consumed by one individual without affecting the consumption of another individual. 
D) the political process has deemed socially desirable. 
A) is not subject to the principle of mutual exclusivity. 
B) the political process has deemed socially undesirable. 
C) can be consumed by one individual without affecting the consumption of another individual. 
D) the political process has deemed socially desirable.

Question 8

Which of the following is a political function of government but is not a central economic function?

Accepted Answer

A) determining who has a right to vote 
B) determining government-sponsored and government-inhibited goods 
C) providing a legal system to adjudicate property rights 
D) redistributing income from some individuals to others 
A) determining who has a right to vote 
B) determining government-sponsored and government-inhibited goods 
C) providing a legal system to adjudicate property rights 
D) redistributing income from some individuals to others

Question 9

Which of the following is NOT an example of an externality?

Accepted Answer

A) A bread company emits a wonderful aroma in the air that makes people smile. 
B) The neighbor's wind chimes interfere with your sleep. 
C) A firm fires 500 people. 
D) Cancer-causing chemicals are dumped into the drinking water supply of a city. 
A) A bread company emits a wonderful aroma in the air that makes people smile. 
B) The neighbor's wind chimes interfere with your sleep. 
C) A firm fires 500 people. 
D) Cancer-causing chemicals are dumped into the drinking water supply of a city.

Question 10

If the production of a product results in significant external costs, an appropriate government policy might be to

Accepted Answer

A) subsidize the production of the good. 
B) tax producers and thus shift the supply curve to the left. 
C) tax consumers' incomes and thus shift the demand curve to the left. 
D) subsidize consumers since the good is being under-consumed. 
A) subsidize the production of the good. 
B) tax producers and thus shift the supply curve to the left. 
C) tax consumers' incomes and thus shift the demand curve to the left. 
D) subsidize consumers since the good is being under-consumed.

Question 11

Many nations are consistently accused of enjoying the benefits of membership in the United Nations, yet they provide few or no funds to support the organization. This is an example of

Accepted Answer

A) the principle of rival consumption. 
B) the free-rider problem. 
C) the negative externality problem. 
D) the property rights problem. 
A) the principle of rival consumption. 
B) the free-rider problem. 
C) the negative externality problem. 
D) the property rights problem.

Question 12

A shift from S₁ to S₂ reflects the change that happens when a negative externality is taken into account. A shift from D₁ to D₂ reflects the change that happens when a positive externality is taken into account.
-Refer to the above figures. An external cost exists. This will lead to a(n)

Accepted Answer

A) underproduction equal to Q₁ minus Q₂. 
B) overproduction equal to Q₄ minus Q₃. 
C) underproduction equal to Q₄ minus Q₃. 
D) overproduction equal to Q₁ minus Q₂. 
A) underproduction equal to Q₁ minus Q₂. 
B) overproduction equal to Q₄ minus Q₃. 
C) underproduction equal to Q₄ minus Q₃. 
D) overproduction equal to Q₁ minus Q₂.

Question 13

-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. The perceived price on the part of consumers is

Accepted Answer

A) Ps. 
B) P₀. 
C) Pd. 
D) undetermined without more information. 
A) Ps. 
B) P₀. 
C) Pd. 
D) undetermined without more information.

Question 14

Which of the following is the largest component of federal spending today?

Accepted Answer

A) income security 
B) Social Security 
C) Medicare 
D) national defense 
A) income security 
B) Social Security 
C) Medicare 
D) national defense

Question 15

External costs can be defined as

Accepted Answer

A) the cost associated with private production, but partially borne by society. 
B) the sum of all private production costs. 
C) the cost of running the federal government. 
D) the cost of providing all public goods and services. 
A) the cost associated with private production, but partially borne by society. 
B) the sum of all private production costs. 
C) the cost of running the federal government. 
D) the cost of providing all public goods and services.

Question 16

Which of the following is NOT related to the government's political function of income redistribution?

Accepted Answer

A) providing money transfer payments 
B) excise tax on gasoline 
C) Social Security 
D) in-kind transfers 
A) providing money transfer payments 
B) excise tax on gasoline 
C) Social Security 
D) in-kind transfers

Question 17

To protect the competitive economic system by restricting the formation of monopolies, the government has passed and enforced

Accepted Answer

A) regulatory laws. 
B) antitrust laws. 
C) tort laws. 
D) zoning laws. 
A) regulatory laws. 
B) antitrust laws. 
C) tort laws. 
D) zoning laws.

Question 18

Private goods are those goods

Accepted Answer

A) that violate the principle of rival consumption. 
B) for which no public market exists. 
C) that can only be consumed by one individual at a time. 
D) to which the non-exclusion principle applies. 
A) that violate the principle of rival consumption. 
B) for which no public market exists. 
C) that can only be consumed by one individual at a time. 
D) to which the non-exclusion principle applies.

Question 19

By subsidizing the provision of public education, the government

Accepted Answer

A) generates an increase in the quantity of educational services demanded. 
B) pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C) pushes the per-unit price that producers of educational services receive above the market clearing price. 
D) All of the above 
A) generates an increase in the quantity of educational services demanded. 
B) pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C) pushes the per-unit price that producers of educational services receive above the market clearing price. 
D) All of the above

Question 20

The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account

Accepted Answer

A) the demand curve will be too far to the left. 
B) the supply curve will be too far to the left. 
C) the demand curve will be too far to the right. 
D) the supply curve will be too far to the right. 
A) the demand curve will be too far to the left. 
B) the supply curve will be too far to the left. 
C) the demand curve will be too far to the right. 
D) the supply curve will be too far to the right.

The theory of public choice suggests that

Receiving a voucher for an apartment in a public housing project would be an example of a good that satisfies

Social Security and Medicare are clear examples of

What is the assumption underlying public-choice theory?

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

To correct for negative externalities, the government

A government-inhibited good is a good which

Which of the following is a political function of government but is not a central economic function?

Which of the following is NOT an example of an externality?

If the production of a product results in significant external costs, an appropriate government policy might be to

Many nations are consistently accused of enjoying the benefits of membership in the United Nations, yet they provide few or no funds to support the organization. This is an example of

A shift from S₁ to S₂ reflects the change that happens when a negative externality is taken into account. A shift from D₁ to D₂ reflects the change that happens when a positive externality is taken into account. -Refer to the above figures. An external cost exists. This will lead to a(n)

-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. The perceived price on the part of consumers is

Which of the following is the largest component of federal spending today?

External costs can be defined as

Which of the following is NOT related to the government's political function of income redistribution?

To protect the competitive economic system by restricting the formation of monopolies, the government has passed and enforced

Private goods are those goods

By subsidizing the provision of public education, the government

The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account

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

The theory of public choice suggests that

Receiving a voucher for an apartment in a public housing project would be an example of a good that satisfies

Social Security and Medicare are clear examples of

What is the assumption underlying public-choice theory?

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

To correct for negative externalities, the government

A government-inhibited good is a good which

Which of the following is a political function of government but is not a central economic function?

Which of the following is NOT an example of an externality?

If the production of a product results in significant external costs, an appropriate government policy might be to

Many nations are consistently accused of enjoying the benefits of membership in the United Nations, yet they provide few or no funds to support the organization. This is an example of

A shift from S₁ to S₂ reflects the change that happens when a negative externality is taken into account. A shift from D₁ to D₂ reflects the change that happens when a positive externality is taken into account. -Refer to the above figures. An external cost exists. This will lead to a(n)

-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. The perceived price on the part of consumers is

Which of the following is the largest component of federal spending today?

External costs can be defined as

Which of the following is NOT related to the government's political function of income redistribution?

To protect the competitive economic system by restricting the formation of monopolies, the government has passed and enforced

Private goods are those goods

By subsidizing the provision of public education, the government

The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account

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