Exam 5: Public Spending and Public Choice

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. A positive externality exists that has not been corrected. Price and quantity will be

The economic functions of the government deal with

The U.S. legal system mainly engages in activities that

Which of the following will LEAST likely generate positive external effects to society?

Which of the following is a major reason why the Medicare program is in such financial trouble?

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. Which of the panels would be consistent with the situation in which external costs exist?

A negative externality such as pollution can be corrected by

What is an effluent fee? Graphically, show how an effluent fee can correct an externality.

-Refer to the above figure. An external benefit exists. The amount of that benefit is represented by

Government payment of a per-unit subsidy for medical care causes

An example of a negative externality created in the market system would be

What happens in public schools when government funds subsidize education?

Public schools

Market failures occur when

A possible solution to the problems of external benefits is

Suppose that one firm produces a product that results in negative external costs to society. This information suggests that

One major characteristic of the price system is that

Measures of student performance have not increased even though per-pupil government subsidies have increased because

A government-inhibited good is one that

The purpose of antitrust legislation is