Exam 5: Public Spending and Public Choice

If external benefits are taken into account in the market

The Employment Act of 1946 reflects which one of the following functions of government?

Public elementary and high school education in the United States is provided

When costs spill over to third parties, there is a(n)

A lighthouse that serves a dangerous coastal area is built. The lighthouse cost $2 million to build and serves 200 ships a month. If the shipping in the area increases so that 400 ships pass by a month, the increase in additional costs of providing the light to these new ships is

Markets tend to overallocate resources to the production of a good when

Suppose a valley periodically floods. A dam can be built in the river that would prevent the flooding. Explain how flood control provided by building the dam arguably fits the characteristics of a public good.

Establishing rules for voter registration is an example of a(n)

"Second-hand" smoke, an often cited disadvantage of allowing smoking in restaurants, is referred to in economics as a(n)

The purpose of an effluent fee is to

When market failures occur

List and explain the four key assumptions in the theory of public choice.

Positive externalities arise when

A difference between the market and the public sector is that

-In the above figure, market equilibrium at point E yields the quantity X. The quantity is the socially optimal quantity. Point E indicates that currently there is

To correct for the underproduction of products with positive externalities, the government must

An example of a transfer payment is

What is market failure? How can the government correct market failure?

Which of the following is NOT an economic function of the U.S. government?

One way that the government encourages the production of a good with positive externalities is to offer