Question 1

Which of the following is a property of a public good?

Accepted Answer

A)  A public good is free from externalities. 
B)  Many individuals benefit simultaneously. 
C)  A public good is not subject to free riders. 
D)  A public good is established by law. 
A)  A public good is free from externalities. 
B)  Many individuals benefit simultaneously. 
C)  A public good is not subject to free riders. 
D)  A public good is established by law.

Question 2

The government would use production taxes to remedy the problem of substantial:

Accepted Answer

A)  internal benefits of production. 
B)  external benefits of production. 
C)  external costs of production. 
D)  external benefits of consumption 
E)  external costs of consumption. 
A)  internal benefits of production. 
B)  external benefits of production. 
C)  external costs of production. 
D)  external benefits of consumption 
E)  external costs of consumption.

Question 3

When there is a positive externality associated with the watering of one's lawn,the free market results in:

Accepted Answer

A)  not enough lawn watering. 
B)  too much lawn watering. 
C)  the socially optimal level of lawn watering. 
D)  people watering each other's lawns. 
E)  government subsidies for lawn watering. 
A)  not enough lawn watering. 
B)  too much lawn watering. 
C)  the socially optimal level of lawn watering. 
D)  people watering each other's lawns. 
E)  government subsidies for lawn watering.

Question 4

Assume a price floor is set above the equilibrium price.The result is a surplus.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 4-3 Supply and demand curves
  
-Beginning from an equilibrium at point E₂ in Exhibit 4-3,an increase in demand for good X,other things being equal,would move the equilibrium point to:

Accepted Answer

A)  E₁. 
B)  E₂. 
C)  E₃. 
D)  E₄. 
A)  E₁. 
B)  E₂. 
C)  E₃. 
D)  E₄.

Question 6

An increase in both supply and demand causes which of the following?

Accepted Answer

A)  Equilibrium price falls. 
B)  Equilibrium price rises. 
C)  Equilibrium price change is indeterminate. 
D)  Equilibrium quantity decreases. 
E)  Equilibrium quantity change is indeterminate. 
A)  Equilibrium price falls. 
B)  Equilibrium price rises. 
C)  Equilibrium price change is indeterminate. 
D)  Equilibrium quantity decreases. 
E)  Equilibrium quantity change is indeterminate.

Question 7

Exhibit 4-8 Demand and supply curves
  
-In Exhibit 4-8,a movement from A to B in which price has decreased and quantity has increased is best explained by a(n):

Accepted Answer

A)  increase in supply and demand. 
B)  decrease in supply and demand. 
C)  increase in supply that dominates a decrease in demand. 
D)  increase in demand that dominates a decrease supply. 
E)  decrease in demand that dominates an increase in supply. 
A)  increase in supply and demand. 
B)  decrease in supply and demand. 
C)  increase in supply that dominates a decrease in demand. 
D)  increase in demand that dominates a decrease supply. 
E)  decrease in demand that dominates an increase in supply.

Question 8

If it costs $2,000 to pick up the litter along a highway,then the cost of the externality is:

Accepted Answer

A)  $0. 
B)  more than $0, but less than $2,000. 
C)  $2,000. 
D)  more than $2,000, but finite. 
E)  infinite. 
A)  $0. 
B)  more than $0, but less than $2,000. 
C)  $2,000. 
D)  more than $2,000, but finite. 
E)  infinite.

Question 9

A public good may be defined as any good or service that:

Accepted Answer

A)  must be provided to citizens who are most able to benefit from it. 
B)  must be distributed to all citizens in equal shares. 
C)  excludes free riders. 
D)  none of the above. 
A)  must be provided to citizens who are most able to benefit from it. 
B)  must be distributed to all citizens in equal shares. 
C)  excludes free riders. 
D)  none of the above.

Question 10

People who enjoy the benefits of a public good without paying for them are called:

Accepted Answer

A)  spillover parties. 
B)  external consumers. 
C)  free riders. 
D)  antitrust violators. 
A)  spillover parties. 
B)  external consumers. 
C)  free riders. 
D)  antitrust violators.

Question 11

For a public good,only one user can consume the good.

Accepted Answer

A) True 
 B)False

Question 12

Assume that the production of a good imposes external costs upon third parties.If the price and quantity of this good is set by supply and demand the price will be too:

Accepted Answer

A)  high and quantity too low for efficient resource allocation. 
B)  low and quantity too low for efficient resource allocation. 
C)  low and quantity too high for efficient resource allocation. 
D)  high and quantity too high for efficient resource allocation. 
A)  high and quantity too low for efficient resource allocation. 
B)  low and quantity too low for efficient resource allocation. 
C)  low and quantity too high for efficient resource allocation. 
D)  high and quantity too high for efficient resource allocation.

Question 13

A side effect of a price floor set above the equilibrium price is:

Accepted Answer

A)  the new price is below equilibrium price. 
B)  an excess supply of the good is created. 
C)  an excess demand for the good is created. 
D)  the supply of the good decreases. 
E)  the demand for the good increases. 
A)  the new price is below equilibrium price. 
B)  an excess supply of the good is created. 
C)  an excess demand for the good is created. 
D)  the supply of the good decreases. 
E)  the demand for the good increases.

Question 14

Suppose a wallet firm has been dumping its wastes into the local river.The government finds out and insists that the firm pay for the cost of the river cleanup.As a result,we can expect

Accepted Answer

A)  more wallets to be produced at a lower price. 
B)  more wallets to be produced at a higher price. 
C)  fewer wallets to be produced at a lower price. 
D)  fewer wallets to be produced at a higher price. 
E)  the same number of wallets to be produced at a higher price. 
A)  more wallets to be produced at a lower price. 
B)  more wallets to be produced at a higher price. 
C)  fewer wallets to be produced at a lower price. 
D)  fewer wallets to be produced at a higher price. 
E)  the same number of wallets to be produced at a higher price.

Question 15

Which of the following is a free rider?

Accepted Answer

A)  Butch breeds the feared pit bulls, and his neighbors now erect fences around their property. 
B)  Fred watches many public television programs, but he has never sent in a contribution. 
C)  Barry steals candy from the store where he works. 
D)  Betty regularly uses the local public library. 
E)  Joe drives 20,000 miles a year on public streets, but he pays no more in taxes than Sam, who only drives 1,000 miles. 
A)  Butch breeds the feared pit bulls, and his neighbors now erect fences around their property. 
B)  Fred watches many public television programs, but he has never sent in a contribution. 
C)  Barry steals candy from the store where he works. 
D)  Betty regularly uses the local public library. 
E)  Joe drives 20,000 miles a year on public streets, but he pays no more in taxes than Sam, who only drives 1,000 miles.

Question 16

If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread,then:

Accepted Answer

A)  more bread will be produced. 
B)  there will be a shortage of bread. 
C)  the demand for bread will decrease. 
D)  producers will charge $0.50 for bread. 
E)  $0.50 in tax revenue will be paid for each unit of bread. 
A)  more bread will be produced. 
B)  there will be a shortage of bread. 
C)  the demand for bread will decrease. 
D)  producers will charge $0.50 for bread. 
E)  $0.50 in tax revenue will be paid for each unit of bread.

Question 17

Price floors are instituted because the government wants to:

Accepted Answer

A)  help consumers. 
B)  help producers. 
C)  raise tax revenue. 
D)  prevent imports. 
E)  increase demand. 
A)  help consumers. 
B)  help producers. 
C)  raise tax revenue. 
D)  prevent imports. 
E)  increase demand.

Question 18

Which of the following would raise both the equilibrium price and the equilibrium quantity of strawberries?

Accepted Answer

A)  A decrease in the demand for strawberries. 
B)  An increase in the demand for strawberries. 
C)  A decrease in the supply of strawberries. 
D)  An increase in the supply of strawberries. 
A)  A decrease in the demand for strawberries. 
B)  An increase in the demand for strawberries. 
C)  A decrease in the supply of strawberries. 
D)  An increase in the supply of strawberries.

Question 19

Assume no price ceiling exists and a market is in equilibrium.Then a price ceiling is established which is below the market equilibrium.What would result?

Accepted Answer

A)  Shortage. 
B)  Equilibrium. 
C)  Surplus. 
D)  Equity. 
A)  Shortage. 
B)  Equilibrium. 
C)  Surplus. 
D)  Equity.

Question 20

If the government imposes a price floor above the market equilibrium price,then:

Accepted Answer

A) b and e. 
B) there will be excess supply. 
C) there will be excess demand. 
D) consumers will benefit. 
E) producers will benefit. 
A) b and e. 
B) there will be excess supply. 
C) there will be excess demand. 
D) consumers will benefit. 
E) producers will benefit.

Exam 4: Markets in Action

Which of the following is a property of a public good?

The government would use production taxes to remedy the problem of substantial:

When there is a positive externality associated with the watering of one's lawn,the free market results in:

Assume a price floor is set above the equilibrium price.The result is a surplus.

Exhibit 4-3 Supply and demand curves -Beginning from an equilibrium at point E₂ in Exhibit 4-3,an increase in demand for good X,other things being equal,would move the equilibrium point to:

An increase in both supply and demand causes which of the following?

Exhibit 4-8 Demand and supply curves -In Exhibit 4-8,a movement from A to B in which price has decreased and quantity has increased is best explained by a(n):

If it costs $2,000 to pick up the litter along a highway,then the cost of the externality is:

A public good may be defined as any good or service that:

People who enjoy the benefits of a public good without paying for them are called:

For a public good,only one user can consume the good.

Assume that the production of a good imposes external costs upon third parties.If the price and quantity of this good is set by supply and demand the price will be too:

A side effect of a price floor set above the equilibrium price is:

Suppose a wallet firm has been dumping its wastes into the local river.The government finds out and insists that the firm pay for the cost of the river cleanup.As a result,we can expect

Which of the following is a free rider?

If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread,then:

Price floors are instituted because the government wants to:

Which of the following would raise both the equilibrium price and the equilibrium quantity of strawberries?

Assume no price ceiling exists and a market is in equilibrium.Then a price ceiling is established which is below the market equilibrium.What would result?

If the government imposes a price floor above the market equilibrium price,then:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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