Question 1

Which of the following is an example of a public good?

Accepted Answer

A)  Amtrak rail transport services 
B)  Services of the U.S. Post Office 
C)  The provision of medical care 
D)  The provision of national defense 
A)  Amtrak rail transport services 
B)  Services of the U.S. Post Office 
C)  The provision of medical care 
D)  The provision of national defense

Question 2

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 3

The U.S. antitrust laws

Accepted Answer

A)  aid monopolies in their quest to dominate the market for a good or service. 
B)  are outdated and rarely used anymore. 
C)  promote competition. 
D)  are administered by the Department of Commerce. 
A)  aid monopolies in their quest to dominate the market for a good or service. 
B)  are outdated and rarely used anymore. 
C)  promote competition. 
D)  are administered by the Department of Commerce.

Question 4

Graphically, the effects of an external cost can be shown as

Accepted Answer

A)  a leftward shift of the market demand curve. 
B)  a leftward shift of the market supply curve. 
C)  a downward movement along the market demand curve. 
D)  a rightward shift of the market supply curve. 
A)  a leftward shift of the market demand curve. 
B)  a leftward shift of the market supply curve. 
C)  a downward movement along the market demand curve. 
D)  a rightward shift of the market supply curve.

Question 5

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

Accepted Answer

A)  Promoting competition 
B)  Providing public goods 
C)  Promoting price stability 
D)  Encouraging production of government-inhibited goods 
A)  Promoting competition 
B)  Providing public goods 
C)  Promoting price stability 
D)  Encouraging production of government-inhibited goods

Question 6

Market failures take place when

Accepted Answer

A)  a market fails to have the goods that consumers want. 
B)  an underground market develops. 
C)  market transactions lead to underproduction or overproduction of a good. 
D)  producers stop production. 
A)  a market fails to have the goods that consumers want. 
B)  an underground market develops. 
C)  market transactions lead to underproduction or overproduction of a good. 
D)  producers stop production.

Question 7

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as

Accepted Answer

A)  transfer payments. 
B)  government-sponsored payments. 
C)  government-inhibited payments. 
D)  black market payments. 
A)  transfer payments. 
B)  government-sponsored payments. 
C)  government-inhibited payments. 
D)  black market payments.

Question 8

Which of the following is the best example of a public good?

Accepted Answer

A)  inoculation against a contagious disease 
B)  a streetlight 
C)  garbage collection 
D)  Internet access 
A)  inoculation against a contagious disease 
B)  a streetlight 
C)  garbage collection 
D)  Internet access

Question 9

In the United States, which of the following is an example of a government-inhibited good?

Accepted Answer

A)  Museums 
B)  Concerts 
C)  Cigarettes 
D)  Sports stadiums 
A)  Museums 
B)  Concerts 
C)  Cigarettes 
D)  Sports stadiums

Question 10

The theory of public choice

Accepted Answer

A)  is the theory of how government decides on what military hardware to purchase. 
B)  considers government decision-making efficient. 
C)  is the study of collective decision making. 
D)  is the study of how negative externalities can be reduced. 
A)  is the theory of how government decides on what military hardware to purchase. 
B)  considers government decision-making efficient. 
C)  is the study of collective decision making. 
D)  is the study of how negative externalities can be reduced.

Question 11

A lighthouse that serves a dangerous coastal area is built. The lighthouse cost $500,000 to build and serves 500 ships a month. If the shipping in the area increases so that 750 ships pass by a month, the increase in additional costs of providing the light to these new ships is

Accepted Answer

A)  $500,000. 
B)  $250,000. 
C)  $250. 
D)  $0. 
A)  $500,000. 
B)  $250,000. 
C)  $250. 
D)  $0.

Question 12

An effluent fee is more effective when imposed on

Accepted Answer

A)  the firm or producer of the product which generates pollution. 
B)  the consumer of the product. 
C)  neither the producer nor the consumer of the product. 
D)  the supplier of the raw material used by the firm. 
A)  the firm or producer of the product which generates pollution. 
B)  the consumer of the product. 
C)  neither the producer nor the consumer of the product. 
D)  the supplier of the raw material used by the firm.

Question 13

A result of a positive externality in the production of a good is that

Accepted Answer

A)  the price system will over-allocate resources to the production of that good or service. 
B)  the price system will under-allocate resources to the production of that good or service. 
C)  the market supply will be too high. 
D)  the market demand will be too high. 
A)  the price system will over-allocate resources to the production of that good or service. 
B)  the price system will under-allocate resources to the production of that good or service. 
C)  the market supply will be too high. 
D)  the market demand will be too high.

Question 14

-Refer to the above figure. Medicare subsidies have increased the price of medical services to   . The quantity demanded of medical services is

Accepted Answer

A)    . 
B)    . 
C)    . 
D)  undetermined without more information. 
A)    . 
B)    . 
C)    . 
D)  undetermined without more information.

Question 15

A negative externality is a situation in which

Accepted Answer

A)  there is a spillover of benefits. 
B)  a cost associated with an economic activity is borne by a third party. 
C)  a firm is paying in excess of the total costs of producing a good. 
D)  none of the above. 
A)  there is a spillover of benefits. 
B)  a cost associated with an economic activity is borne by a third party. 
C)  a firm is paying in excess of the total costs of producing a good. 
D)  none of the above.

Question 16

Which of the following would be best classified as a private good?

Accepted Answer

A)  A missile defense system 
B)  Police force 
C)  Radio frequency 
D)  Clothing 
A)  A missile defense system 
B)  Police force 
C)  Radio frequency 
D)  Clothing

Question 17

The purpose of antitrust legislation is

Accepted Answer

A)  to reduce unemployment. 
B)  to reduce the power of monopoly. 
C)  to increase the power of monopoly. 
D)  to maximize employment for a given price level. 
A)  to reduce unemployment. 
B)  to reduce the power of monopoly. 
C)  to increase the power of monopoly. 
D)  to maximize employment for a given price level.

Question 18

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

Accepted Answer

A)  the market supply curve to shift upward. 
B)  the market demand curve to shift downward. 
C)  a reduction in the price that providers of medical care receive for each unit of care provided. 
D)  an increase in the quantity of medical care demanded above the quantity demanded in the absence of the subsidy. 
A)  the market supply curve to shift upward. 
B)  the market demand curve to shift downward. 
C)  a reduction in the price that providers of medical care receive for each unit of care provided. 
D)  an increase in the quantity of medical care demanded above the quantity demanded in the absence of the subsidy.

Question 19

An externality is

Accepted Answer

A)  a third-party benefit or cost that is associated with the production of a good. 
B)  when external forces such as war or flood affect the market. 
C)  government intervention in the markets. 
D)  transaction costs. 
A)  a third-party benefit or cost that is associated with the production of a good. 
B)  when external forces such as war or flood affect the market. 
C)  government intervention in the markets. 
D)  transaction costs.

Question 20

U.S. antitrust laws view monopolies as undesirable because

Accepted Answer

A)  monopolies restrain trade and promote inefficiencies. 
B)  monopolies create inferior products. 
C)  monopolies produce only capital goods. 
D)  monopolies produce only cheap, low quality goods. 
A)  monopolies restrain trade and promote inefficiencies. 
B)  monopolies create inferior products. 
C)  monopolies produce only capital goods. 
D)  monopolies produce only cheap, low quality goods.

Exam 5: Public Spending and Public Choice

Which of the following is an example of a public good?

Federal antitrust laws in the United States are intended to

The U.S. antitrust laws

Graphically, the effects of an external cost can be shown as

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

Market failures take place when

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as

Which of the following is the best example of a public good?

In the United States, which of the following is an example of a government-inhibited good?

The theory of public choice

A lighthouse that serves a dangerous coastal area is built. The lighthouse cost $500,000 to build and serves 500 ships a month. If the shipping in the area increases so that 750 ships pass by a month, the increase in additional costs of providing the light to these new ships is

An effluent fee is more effective when imposed on

A result of a positive externality in the production of a good is that

-Refer to the above figure. Medicare subsidies have increased the price of medical services to . The quantity demanded of medical services is

A negative externality is a situation in which

Which of the following would be best classified as a private good?

The purpose of antitrust legislation is

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

An externality is

U.S. antitrust laws view monopolies as undesirable because

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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