Question 1

When a good causes positive external benefits to accrue to third parties, an unfettered market will

Accepted Answer

A) under-allocate resources to the good causing the benefit. 
B) over-allocate resources to the good causing the benefit. 
C) cause the equilibrium quantity, established before the benefit is taken into account, to be produced more efficiently. 
D) eliminate such goods. 
A) under-allocate resources to the good causing the benefit. 
B) over-allocate resources to the good causing the benefit. 
C) cause the equilibrium quantity, established before the benefit is taken into account, to be produced more efficiently. 
D) eliminate such goods.

Question 2

Which of the following types of goods would most likely be classified as a government-inhibited good?

Accepted Answer

A) heroin 
B) marijuana 
C) tobacco 
D) All of the above are correct. 
A) heroin 
B) marijuana 
C) tobacco 
D) All of the above are correct.

Question 3

Which of the following types of goods is subject to the free-rider problem?

Accepted Answer

A) a private good 
B) a public good 
C) a product that creates a positive externality 
D) a product that creates a negative externality 
A) a private good 
B) a public good 
C) a product that creates a positive externality 
D) a product that creates a negative externality

Question 4

Medicare is an example of a third-party payment for medical services that

Accepted Answer

A) causes providers to supply less of medical services than they would without the payment. 
B) causes buyers to consume more of medical services than they would without the payment. 
C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. 
D) causes the price of medical services to rise for the consumer once the payment is provided. 
A) causes providers to supply less of medical services than they would without the payment. 
B) causes buyers to consume more of medical services than they would without the payment. 
C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. 
D) causes the price of medical services to rise for the consumer once the payment is provided.

Question 5

Public goods face the

Accepted Answer

A) principle of rival consumption. 
B) free-rider problem. 
C) law of overproduction. 
D) exclusion principle. 
A) principle of rival consumption. 
B) free-rider problem. 
C) law of overproduction. 
D) exclusion principle.

Question 6

What is an externality?
 How do positive and negative externalities differ in their effects?
 How can government action correct positive and negative externalities?

Accepted Answer

An externality is a cost or benefit of a

Question 7

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

Accepted Answer

A) something obtainable at a zero price 
B) a lower crime rate for a community in which residents receive more education 
C) increased purchases of landscaping services by a homeowner that boost a neighbor's property value 
D) a discount for consumers buying in large quantity 
A) something obtainable at a zero price 
B) a lower crime rate for a community in which residents receive more education 
C) increased purchases of landscaping services by a homeowner that boost a neighbor's property value 
D) a discount for consumers buying in large quantity

Question 8

Which of the following would be considered an economic function of government?

Accepted Answer

A) providing a legal system 
B) promoting competition 
C) providing public goods 
D) All of the above are correct. 
A) providing a legal system 
B) promoting competition 
C) providing public goods 
D) All of the above are correct.

Question 9

Why does our government enforce antitrust legislation?

Accepted Answer

A) because monopolies are known to be unfair to their stockholders 
B) because monopolies are known to be unfair to their employees 
C) because the government wants to create competition in markets in the interests of promoting efficiency 
D) because the government wants to create competition in markets in the interests of promoting an equal distribution of income 
A) because monopolies are known to be unfair to their stockholders 
B) because monopolies are known to be unfair to their employees 
C) because the government wants to create competition in markets in the interests of promoting efficiency 
D) because the government wants to create competition in markets in the interests of promoting an equal distribution of income

Question 10

In the absence of government

Accepted Answer

A) public goods are likely to be overprovided. 
B) market failure is less likely to occur. 
C) public goods are likely to be underprovided. 
D) the free-rider problem is more likely to occur. 
A) public goods are likely to be overprovided. 
B) market failure is less likely to occur. 
C) public goods are likely to be underprovided. 
D) the free-rider problem is more likely to occur.

Question 11

The legal system in the United States tends

Accepted Answer

A) to support monopolies. 
B) to actively discourage unionization. 
C) to discourage the entry of new firms into industries. 
D) to promote competition. 
A) to support monopolies. 
B) to actively discourage unionization. 
C) to discourage the entry of new firms into industries. 
D) to promote competition.

Question 12

Orchards provide services to beekeepers because the bees use the pollen to make honey. This is an example of

Accepted Answer

A) a positive externality, and too many orchards exist in society. 
B) a positive externality, and too few orchards exist in society. 
C) a negative externality, and too many orchards exist in society. 
D) a negative externality, and too few orchards exist in society. 
A) a positive externality, and too many orchards exist in society. 
B) a positive externality, and too few orchards exist in society. 
C) a negative externality, and too many orchards exist in society. 
D) a negative externality, and too few orchards exist in society.

Question 13

What is the free-rider problem, and how is it related to public goods?

Accepted Answer

The free-rider problem arises from the e

Question 14

Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?

Accepted Answer

A) The incentive system for individuals to perform efficiently are vastly different. 
B) The workers themselves are really quite different types of people. 
C) In both sectors individuals will try to maximize their own individual gains over the gains of others. 
D) Costs and resources are vastly different in each sector. 
A) The incentive system for individuals to perform efficiently are vastly different. 
B) The workers themselves are really quite different types of people. 
C) In both sectors individuals will try to maximize their own individual gains over the gains of others. 
D) Costs and resources are vastly different in each sector.

Question 15

An economic activity in which benefits or costs affect third parties is called

Accepted Answer

A) a public good. 
B) a third-party good. 
C) the exclusion principle. 
D) an externality. 
A) a public good. 
B) a third-party good. 
C) the exclusion principle. 
D) an externality.

Question 16

-In the above figure, if a Medicare subsidy that had previously been paid by the government has now been eliminated, the result will be

Accepted Answer

A) an increase in the price received by producers, from P₀ to Ps. 
B) a decrease in the price received by producers, from Ps to P₀. 
C) an increase in the price paid by consumers, from P₀ to Ps. 
D) a decrease in the price paid by consumers, from Ps to P₀. 
A) an increase in the price received by producers, from P₀ to Ps. 
B) a decrease in the price received by producers, from Ps to P₀. 
C) an increase in the price paid by consumers, from P₀ to Ps. 
D) a decrease in the price paid by consumers, from Ps to P₀.

Question 17

Public goods are desired because

Accepted Answer

A) people want and value them but the private sector will not make them available. 
B) we want the government to spend our tax dollars. 
C) they came in small units. 
D) they make supply equal to demand for private goods. 
A) people want and value them but the private sector will not make them available. 
B) we want the government to spend our tax dollars. 
C) they came in small units. 
D) they make supply equal to demand for private goods.

Question 18

All of the following are economic functions of the government EXCEPT

Accepted Answer

A) providing a legal system. 
B) determining the wage rate for most jobs. 
C) promoting competition in the market. 
D) providing public goods. 
A) providing a legal system. 
B) determining the wage rate for most jobs. 
C) promoting competition in the market. 
D) providing public goods.

Question 19

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

Accepted Answer

A) inoculation against disease 
B) pollution 
C) playing a boom box loudly in a crowded park 
D) rush hour traffic 
A) inoculation against disease 
B) pollution 
C) playing a boom box loudly in a crowded park 
D) rush hour traffic

Question 20

When government intervenes in the production process because external costs exist, it typically attempts to shift the industry's

Accepted Answer

A) demand curve to the right. 
B) demand curve to the left. 
C) supply curve to the right. 
D) supply curve to the left. 
A) demand curve to the right. 
B) demand curve to the left. 
C) supply curve to the right. 
D) supply curve to the left.

When a good causes positive external benefits to accrue to third parties, an unfettered market will

Which of the following types of goods would most likely be classified as a government-inhibited good?

Which of the following types of goods is subject to the free-rider problem?

Medicare is an example of a third-party payment for medical services that

Public goods face the

What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?

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

Which of the following would be considered an economic function of government?

Why does our government enforce antitrust legislation?

In the absence of government

The legal system in the United States tends

Orchards provide services to beekeepers because the bees use the pollen to make honey. This is an example of

What is the free-rider problem, and how is it related to public goods?

Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?

An economic activity in which benefits or costs affect third parties is called

-In the above figure, if a Medicare subsidy that had previously been paid by the government has now been eliminated, the result will be

Public goods are desired because

All of the following are economic functions of the government EXCEPT

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

When government intervenes in the production process because external costs exist, it typically attempts to shift the industry's

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

When a good causes positive external benefits to accrue to third parties, an unfettered market will

Which of the following types of goods would most likely be classified as a government-inhibited good?

Which of the following types of goods is subject to the free-rider problem?

Medicare is an example of a third-party payment for medical services that

Public goods face the

What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?

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

Which of the following would be considered an economic function of government?

Why does our government enforce antitrust legislation?

In the absence of government

The legal system in the United States tends

Orchards provide services to beekeepers because the bees use the pollen to make honey. This is an example of

What is the free-rider problem, and how is it related to public goods?

Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?

An economic activity in which benefits or costs affect third parties is called

-In the above figure, if a Medicare subsidy that had previously been paid by the government has now been eliminated, the result will be

Public goods are desired because

All of the following are economic functions of the government EXCEPT

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

When government intervenes in the production process because external costs exist, it typically attempts to shift the industry's

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