Question 1

Government-sponsored goods are those goods

Accepted Answer

A)  that society views desirable through the political process. 
B)  that companies give away as promotional prizes. 
C)  that have lower than average negative externality. 
D)  that only low-income individuals consume. 
A)  that society views desirable through the political process. 
B)  that companies give away as promotional prizes. 
C)  that have lower than average negative externality. 
D)  that only low-income individuals consume. A

Question 2

The economic functions of government differ from the political functions of government in that

Accepted Answer

A)  the economic functions are carried out by the federal government, while the political functions are carried out by state and local governments. 
B)  the economic functions include policies that affect income redistribution, while the political functions involve things that affect the way exchange is carried out. 
C)  the economic functions involve things that affect the way exchange is carried out while the political functions include policies that affect income redistribution. 
D)  the economic functions are carried out by state and local governments, while the political functions are carried out by the federal government. 
A)  the economic functions are carried out by the federal government, while the political functions are carried out by state and local governments. 
B)  the economic functions include policies that affect income redistribution, while the political functions involve things that affect the way exchange is carried out. 
C)  the economic functions involve things that affect the way exchange is carried out while the political functions include policies that affect income redistribution. 
D)  the economic functions are carried out by state and local governments, while the political functions are carried out by the federal government. C

Question 3

The distinguishing characteristic of private goods is that

Accepted Answer

A)  the principle of rival consumption does not apply to them. 
B)  their use is exclusive to the people who purchase them. 
C)  they can be sold but not rented. 
D)  they can be sold or rented, but not borrowed. 
A)  the principle of rival consumption does not apply to them. 
B)  their use is exclusive to the people who purchase them. 
C)  they can be sold but not rented. 
D)  they can be sold or rented, but not borrowed. B

Question 4

Which of the following statements is NOT true of external benefits?

Accepted Answer

A)  External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B)  External benefits lead to a price in the market that is too high. 
C)  External benefits lead to too few of the goods that have the external benefit being produced. 
D)  External benefits are a good thing for the allocation of resources because people are getting something at no cost. 
A)  External benefits lead to an underallocation of resources to the production of the good that has the external benefit. 
B)  External benefits lead to a price in the market that is too high. 
C)  External benefits lead to too few of the goods that have the external benefit being produced. 
D)  External benefits are a good thing for the allocation of resources because people are getting something at no cost.

Question 5

The "principle of rival consumption" applies to which of the following?

Accepted Answer

A)  national defense 
B)  the free-rider problem 
C)  the exclusion principle 
D)  a private good 
A)  national defense 
B)  the free-rider problem 
C)  the exclusion principle 
D)  a private good

Question 6

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

Accepted Answer

A)  an technologically inefficient market 
B)  a market failure 
C)  a laissez-faire market 
D)  an external market 
A)  an technologically inefficient market 
B)  a market failure 
C)  a laissez-faire market 
D)  an external market

Question 7

By subsidizing the provision of public education, the government

Accepted Answer

A)  generates an increase in the quantity of educational services demanded. 
B)  pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C)  pushes the per-unit price that producers of educational services receive above the market clearing price. 
D)  All of the above 
A)  generates an increase in the quantity of educational services demanded. 
B)  pushes the per-unit price that consumers pay for educational services below the market clearing price. 
C)  pushes the per-unit price that producers of educational services receive above the market clearing price. 
D)  All of the above

Question 8

Market failures include all of the following EXCEPT

Accepted Answer

A)  equalization of quantity supplied and quantity demanded 
B)  public goods 
C)  positive externalities 
D)  negative externalities 
A)  equalization of quantity supplied and quantity demanded 
B)  public goods 
C)  positive externalities 
D)  negative externalities

Question 9

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 10

An example of third parties in the market of automobiles is

Accepted Answer

A)  a pedestrian that is affected by the polluted air from automobiles. 
B)  a producer of automobiles. 
C)  a consumer of automobiles. 
D)  None of the above belongs to third parties. 
A)  a pedestrian that is affected by the polluted air from automobiles. 
B)  a producer of automobiles. 
C)  a consumer of automobiles. 
D)  None of the above belongs to third parties.

Question 11

Public goods are

Accepted Answer

A)  any goods or services produced by the government. 
B)  provided to additional users at no additional cost. 
C)  provided only by the capitalistic system. 
D)  provided only by the communist system. 
A)  any goods or services produced by the government. 
B)  provided to additional users at no additional cost. 
C)  provided only by the capitalistic system. 
D)  provided only by the communist system.

Question 12

An effluent fee is an example of

Accepted Answer

A)  a government policy to correct for an external benefit. 
B)  a government policy to promote the production of a product with an external cost. 
C)  a government policy to promote the production of a product with an external benefit. 
D)  a government policy to correct for an external cost. 
A)  a government policy to correct for an external benefit. 
B)  a government policy to promote the production of a product with an external cost. 
C)  a government policy to promote the production of a product with an external benefit. 
D)  a government policy to correct for an external cost.

Question 13

Which one of the following is NOT a characteristic of public goods?

Accepted Answer

A)  They are indivisible. 
B)  It is difficult to charge people on the basis of how much they use. 
C)  Public goods can be used by increasing numbers of people at no additional cost. 
D)  Public goods are subject to the principle of rival consumption. 
A)  They are indivisible. 
B)  It is difficult to charge people on the basis of how much they use. 
C)  Public goods can be used by increasing numbers of people at no additional cost. 
D)  Public goods are subject to the principle of rival consumption.

Question 14

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 15

Which of the following is NOT related to the government's political function of income redistribution?

Accepted Answer

A)  Providing money transfer payments 
B)  Excise tax on gasoline 
C)  Social Security 
D)  In-kind transfers 
A)  Providing money transfer payments 
B)  Excise tax on gasoline 
C)  Social Security 
D)  In-kind transfers

Question 16

Public goods are

Accepted Answer

A)  rival and exclusive. 
B)  rival, but not exclusive. 
C)  exclusive, but not rival. 
D)  neither exclusive nor rival. 
A)  rival and exclusive. 
B)  rival, but not exclusive. 
C)  exclusive, but not rival. 
D)  neither exclusive nor rival.

Question 17

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 18

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

Accepted Answer

A)  A bread company emits a wonderful aroma in the air that makes people smile. 
B)  The neighbor's wind chimes interfere with your sleep. 
C)  A firm fires 500 people. 
D)  Cancer-causing chemicals are dumped into the drinking water supply of a city. 
A)  A bread company emits a wonderful aroma in the air that makes people smile. 
B)  The neighbor's wind chimes interfere with your sleep. 
C)  A firm fires 500 people. 
D)  Cancer-causing chemicals are dumped into the drinking water supply of a city.

Question 19

-According to the above figure, if steel mills are charged an effluent fee in order to bear the cost of pollution, what happens to the equilibrium price and equilibrium quantity?

Accepted Answer

A)  They are unchanged. 
B)  They change from P1 and Q1 to P2 and Q2. 
C)  They change from P2 and Q2 to P1 and Q1. 
D)  The equilibrium price increases from P1 and P2, but the equilibrium quantity is unchanged. 
A)  They are unchanged. 
B)  They change from P1 and Q1 to P2 and Q2. 
C)  They change from P2 and Q2 to P1 and Q1. 
D)  The equilibrium price increases from P1 and P2, but the equilibrium quantity is unchanged.

Question 20

Ms. Smith is given a voucher for an apartment in a public housing project. The apartment

Accepted Answer

A)  is not subject to the principle of rival consumption. 
B)  is not a public good. 
C)  has widespread benefits and concentrated costs. 
D)  is subject to the exclusion principle. 
A)  is not subject to the principle of rival consumption. 
B)  is not a public good. 
C)  has widespread benefits and concentrated costs. 
D)  is subject to the exclusion principle.

Exam 5: Public Spending and Public Choice

Government-sponsored goods are those goods

The economic functions of government differ from the political functions of government in that

The distinguishing characteristic of private goods is that

Which of the following statements is NOT true of external benefits?

The "principle of rival consumption" applies to which of the following?

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?

By subsidizing the provision of public education, the government

Market failures include all of the following EXCEPT

The current Medicare system is designed so that it actually encourages

An example of third parties in the market of automobiles is

Public goods are

An effluent fee is an example of

Which one of the following is NOT a characteristic of public goods?

Why does our government enforce antitrust legislation?

Which of the following is NOT related to the government's political function of income redistribution?

Public goods are

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

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

-According to the above figure, if steel mills are charged an effluent fee in order to bear the cost of pollution, what happens to the equilibrium price and equilibrium quantity?

Ms. Smith is given a voucher for an apartment in a public housing project. The apartment

The Nature of Economics

Scarcity and the World of Trade-Offs

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Extensions of Demand and Supply Analysis

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

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Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

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Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

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Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

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Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

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Unions and Labor Market Monopoly Power

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Environmental Economics

Comparative Advantage and the Open Economy

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