Question 1

How does a government-sponsored good differ from a public good?

Accepted Answer

A public good is characterized by the fa

Question 2

Which law specifically mandated the federal government's responsibility for economy-wide stability?

Accepted Answer

A) the Employment Act of 1946 
B) the Sherman Act of 1890 
C) the Great Depression Act of 1930 
D) the Miller Act of 1960 
A) the Employment Act of 1946 
B) the Sherman Act of 1890 
C) the Great Depression Act of 1930 
D) the Miller Act of 1960

Question 3

A fundamental reason that governments provide public goods is that

Accepted Answer

A) those goods are subject to the free-rider problem. 
B) negative externalities are part of the production process of those goods. 
C) public goods are merit goods. 
D) those goods are perfectly divisible. 
A) those goods are subject to the free-rider problem. 
B) negative externalities are part of the production process of those goods. 
C) public goods are merit goods. 
D) those goods are perfectly divisible.

Question 4

One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be

Accepted Answer

A) left alone. 
B) taxed. 
C) subsidized. 
D) banned. 
A) left alone. 
B) taxed. 
C) subsidized. 
D) banned.

Question 5

The current Medicare system is designed so that it actually encourages

Accepted Answer

A) cost reductions. 
B) higher costs of medical services. 
C) higher costs only for surgeries. 
D) lower drug costs for recipients. 
A) cost reductions. 
B) higher costs of medical services. 
C) higher costs only for surgeries. 
D) lower drug costs for recipients.

Question 6

Government payment of a per-unit subsidy for medical care causes the out-of-pocket price that consumers pay for care to be

Accepted Answer

A) less than the price that producers receive for providing care. 
B) greater than the price that producers receive for providing care. 
C) greater than the market clearing price without the subsidy. 
D) equal to zero. 
A) less than the price that producers receive for providing care. 
B) greater than the price that producers receive for providing care. 
C) greater than the market clearing price without the subsidy. 
D) equal to zero.

Question 7

A situation in which the market system allocates too many resources to the production of a given activity is known as

Accepted Answer

A) market allocation. 
B) market failure. 
C) market efficiency. 
D) market breakdown. 
A) market allocation. 
B) market failure. 
C) market efficiency. 
D) market breakdown.

Question 8

If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded.
II. decrease in the out-of-pocket price paid by consumers.
III. increase in the quantity supplied by producers.

Accepted Answer

A) I only 
B) both I and II only 
C) both II and III only 
D) I, II, and III 
A) I only 
B) both I and II only 
C) both II and III only 
D) I, II, and III

Question 9

Which of the following is FALSE about public-sector decision making?

Accepted Answer

A) Decisions are based on majority rule. 
B) The price charged to consumers is often less than its full opportunity cost. 
C) Decisions involve no opportunity cost. 
D) Incentives play a role in decision making. 
A) Decisions are based on majority rule. 
B) The price charged to consumers is often less than its full opportunity cost. 
C) Decisions involve no opportunity cost. 
D) Incentives play a role in decision making.

Question 10

The economic functions of government include

Accepted Answer

A) determining prices. 
B) setting wages in the public sector. 
C) protecting property rights. 
D) welfare. 
A) determining prices. 
B) setting wages in the public sector. 
C) protecting property rights. 
D) welfare.

Question 11

The difference between the economic and political functions of government is that

Accepted Answer

A) the economic function is concerned with the Federal Taxation system while the political function is not. 
B) the economic function is concerned with correcting for market failures while the political function is not. 
C) the economic function is concerned with the reallocation of income while the political function is not. 
D) the economic function encourages merit goods while the political function discourages demerit goods. 
A) the economic function is concerned with the Federal Taxation system while the political function is not. 
B) the economic function is concerned with correcting for market failures while the political function is not. 
C) the economic function is concerned with the reallocation of income while the political function is not. 
D) the economic function encourages merit goods while the political function discourages demerit goods.

Question 12

Examples of transfers-in-kind include

Accepted Answer

A) tax rebates on both the federal and state levels. 
B) taxes on alcohol and tobacco. 
C) food stamps and public housing. 
D) political advertising. 
A) tax rebates on both the federal and state levels. 
B) taxes on alcohol and tobacco. 
C) food stamps and public housing. 
D) political advertising.

Question 13

The free-rider problem plagues public goods because

Accepted Answer

A) public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society. 
B) once public goods are produced it is not possible to exclude anyone from consuming these goods. 
C) the government can refuse to serve a citizen. 
D) the public doesn't care about public goods. 
A) public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society. 
B) once public goods are produced it is not possible to exclude anyone from consuming these goods. 
C) the government can refuse to serve a citizen. 
D) the public doesn't care about public goods.

Question 14

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

Accepted Answer

An external benefit is the benefit assoc

Question 15

The goal of Medicare is to

Accepted Answer

A) help the poor and indigent pay their hospital bills. 
B) prevent poverty in urban cities. 
C) subsidize medical expenses for the elderly. 
D) subsidize costs incurred by doctors. 
A) help the poor and indigent pay their hospital bills. 
B) prevent poverty in urban cities. 
C) subsidize medical expenses for the elderly. 
D) subsidize costs incurred by doctors.

Question 16

Federal antitrust laws in the United States are intended to

Accepted Answer

A) promote competition by prohibiting monopolies. 
B) increase corporate earnings. 
C) create new monopolies. 
D) create only government-owned monopolies. 
A) promote competition by prohibiting monopolies. 
B) increase corporate earnings. 
C) create new monopolies. 
D) create only government-owned monopolies.

Question 17

When there is an external cost, the unregulated market

Accepted Answer

A) overproduces the good or service. 
B) underproduces the good or service. 
C) reaches the most efficient solution. 
D) minimizes public welfare. 
A) overproduces the good or service. 
B) underproduces the good or service. 
C) reaches the most efficient solution. 
D) minimizes public welfare.

Question 18

Medicare subsides will cause people to

Accepted Answer

A) consume less medical services than in the absence of the subsidies. 
B) consume more medical services than in the absence of the subsidies. 
C) consume the same amount medical services as they would if there were no subsidies. 
D) be sicker because of inferior care. 
A) consume less medical services than in the absence of the subsidies. 
B) consume more medical services than in the absence of the subsidies. 
C) consume the same amount medical services as they would if there were no subsidies. 
D) be sicker because of inferior care.

Question 19

Which of the following might be a method that the government could use to correct a negative externality?

Accepted Answer

A) an effluent fee on waste from the production of goods that create negative externalities 
B) government subsidies to producers of goods that create negative externalities 
C) financing additional production of goods that create negative externalities 
D) encouraging overallocation of resources of production of goods that create negative externalities 
A) an effluent fee on waste from the production of goods that create negative externalities 
B) government subsidies to producers of goods that create negative externalities 
C) financing additional production of goods that create negative externalities 
D) encouraging overallocation of resources of production of goods that create negative externalities

Question 20

Scarcity

Accepted Answer

A) affects both market and public sector decision making. 
B) affects market, but not public sector decision making. 
C) affects public sector, but not market decision making. 
D) is really not an issue in such a wealthy nation as the United States. 
A) affects both market and public sector decision making. 
B) affects market, but not public sector decision making. 
C) affects public sector, but not market decision making. 
D) is really not an issue in such a wealthy nation as the United States.

How does a government-sponsored good differ from a public good?

Which law specifically mandated the federal government's responsibility for economy-wide stability?

A fundamental reason that governments provide public goods is that

One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be

The current Medicare system is designed so that it actually encourages

Government payment of a per-unit subsidy for medical care causes the out-of-pocket price that consumers pay for care to be

A situation in which the market system allocates too many resources to the production of a given activity is known as

If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded. II. decrease in the out-of-pocket price paid by consumers. III. increase in the quantity supplied by producers.

Which of the following is FALSE about public-sector decision making?

The economic functions of government include

The difference between the economic and political functions of government is that

Examples of transfers-in-kind include

The free-rider problem plagues public goods because

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

The goal of Medicare is to

Federal antitrust laws in the United States are intended to

When there is an external cost, the unregulated market

Medicare subsides will cause people to

Which of the following might be a method that the government could use to correct a negative externality?

Scarcity

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

How does a government-sponsored good differ from a public good?

Which law specifically mandated the federal government's responsibility for economy-wide stability?

A fundamental reason that governments provide public goods is that

One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be

The current Medicare system is designed so that it actually encourages

Government payment of a per-unit subsidy for medical care causes the out-of-pocket price that consumers pay for care to be

A situation in which the market system allocates too many resources to the production of a given activity is known as

If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded. II. decrease in the out-of-pocket price paid by consumers. III. increase in the quantity supplied by producers.

Which of the following is FALSE about public-sector decision making?

The economic functions of government include

The difference between the economic and political functions of government is that

Examples of transfers-in-kind include

The free-rider problem plagues public goods because

Explain why an external benefit leads to an under-allocation of resources to the production of a good.

The goal of Medicare is to

Federal antitrust laws in the United States are intended to

When there is an external cost, the unregulated market

Medicare subsides will cause people to

Which of the following might be a method that the government could use to correct a negative externality?

Scarcity

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