Question 1

Federal antitrust laws in the United States are enforced

Accepted Answer

A)  solely by the Federal Trade Commission. 
B)  solely by the Department of Justice. 
C)  by the Department of Justice and by the Federal Trade Commission. 
D)  by the Department of Commerce. 
A)  solely by the Federal Trade Commission. 
B)  solely by the Department of Justice. 
C)  by the Department of Justice and by the Federal Trade Commission. 
D)  by the Department of Commerce.

Question 2

A shift from SS1U1B11S1U1B0 to SS1U1B12S1U1B0 reflects the change that happens when a negative externality is taken into account. A shift from DS1U1B11S1U1B0 to DS1U1B12S1U1B0 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 benefits exist?

Accepted Answer

A)  Panel 1 
B)  Panel 2 
C)  Panels 1 and 2 
D)  Neither panels 
A)  Panel 1 
B)  Panel 2 
C)  Panels 1 and 2 
D)  Neither panels

Question 3

Which of the following does NOT involve transfers in kind?

Accepted Answer

A)  Public housing 
B)  Food stamps 
C)  Medicare 
D)  Salaries of government employees 
A)  Public housing 
B)  Food stamps 
C)  Medicare 
D)  Salaries of government employees

Question 4

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

Accepted Answer

A)  there is a need for more funds to be spent. 
B)  we have declining enrollment in public schools. 
C)  parents and children value the last unit of educational services received more than the cost. 
D)  parents and children value the last unit of educational services received less than the cost. 
A)  there is a need for more funds to be spent. 
B)  we have declining enrollment in public schools. 
C)  parents and children value the last unit of educational services received more than the cost. 
D)  parents and children value the last unit of educational services received less than the cost.

Question 5

One characteristic of a public good is that it

Accepted Answer

A)  is available for consumption by only a few individuals at any particular time. 
B)  always eliminates the free-rider problem. 
C)  can be consumed simultaneously by many individuals. 
D)  can be easily subdivided into small units. 
A)  is available for consumption by only a few individuals at any particular time. 
B)  always eliminates the free-rider problem. 
C)  can be consumed simultaneously by many individuals. 
D)  can be easily subdivided into small units.

Question 6

Medicare subsidies will cause people to

Accepted Answer

A)  perceive the price they pay per unit of medical services to be lower than the price received by the provider. 
B)  perceive the price they pay per unit of medical services to be higher than the price received by the provider. 
C)  perceive the price they pay per unit of medical services to be exactly equal to the price received by the provider. 
D)  demand fewer services. 
A)  perceive the price they pay per unit of medical services to be lower than the price received by the provider. 
B)  perceive the price they pay per unit of medical services to be higher than the price received by the provider. 
C)  perceive the price they pay per unit of medical services to be exactly equal to the price received by the provider. 
D)  demand fewer services.

Question 7

Graphically, the effect of a government subsidy on a good is shown as

Accepted Answer

A)  a leftward shift of the market demand curve. 
B)  a rightward shift of the market demand curve. 
C)  a downward movement along the market demand curve. 
D)  no change to the market demand curve. 
A)  a leftward shift of the market demand curve. 
B)  a rightward shift of the market demand curve. 
C)  a downward movement along the market demand curve. 
D)  no change to the market demand curve.

Question 8

A government-inhibited good is one that

Accepted Answer

A)  cannot be individually consumed. 
B)  would be underproduced by the private market. 
C)  should be subsidized to correct the market failure and productive inefficiency. 
D)  has been deemed socially undesirable via the political process. 
A)  cannot be individually consumed. 
B)  would be underproduced by the private market. 
C)  should be subsidized to correct the market failure and productive inefficiency. 
D)  has been deemed socially undesirable via the political process.

Question 9

The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account,

Accepted Answer

A)  the demand curve will be too far to the left. 
B)  the supply curve will be too far to the left. 
C)  the demand curve will be too far to the right. 
D)  the supply curve will be too far to the right. 
A)  the demand curve will be too far to the left. 
B)  the supply curve will be too far to the left. 
C)  the demand curve will be too far to the right. 
D)  the supply curve will be too far to the right.

Question 10

Which of the following is NOT an example of a transfer payment?

Accepted Answer

A)  Social Security 
B)  Unemployment benefits 
C)  Welfare 
D)  Interest payments on government bonds 
A)  Social Security 
B)  Unemployment benefits 
C)  Welfare 
D)  Interest payments on government bonds

Question 11

When government intervenes in the production process because external benefits exist, it typically attempts

Accepted Answer

A)  to impose a tax on each unit produced. 
B)  to shift the industry's demand curve to the left. 
C)  to shift the industry's demand curve to the right. 
D)  to shift the industry's supply curve to the left. 
A)  to impose a tax on each unit produced. 
B)  to shift the industry's demand curve to the left. 
C)  to shift the industry's demand curve to the right. 
D)  to shift the industry's supply curve to the left.

Question 12

Which of the following statements is NOT true about the price system?

Accepted Answer

A)  The price system allows resources to flow from low-valued uses to high-valued uses. 
B)  The price system encourages the production of public goods. 
C)  Individuals have freedom to purchase what they want. 
D)  The price system allows for economic efficiency. 
A)  The price system allows resources to flow from low-valued uses to high-valued uses. 
B)  The price system encourages the production of public goods. 
C)  Individuals have freedom to purchase what they want. 
D)  The price system allows for economic efficiency.

Question 13

Positive externalities arise when

Accepted Answer

A)  an unprofitable firm is shut down. 
B)  a profitable firm is regulated. 
C)  tax rates are reduced. 
D)  production of a good generates benefits that spill over to third parties. 
A)  an unprofitable firm is shut down. 
B)  a profitable firm is regulated. 
C)  tax rates are reduced. 
D)  production of a good generates benefits that spill over to third parties.

Question 14

If the production of a product results in significant external costs, an appropriate government policy might be to

Accepted Answer

A)  subsidize the production of the good. 
B)  tax producers and thus shift the supply curve to the left. 
C)  tax consumers' incomes and thus shift the demand curve to the left. 
D)  subsidize consumers since the good is being under-consumed. 
A)  subsidize the production of the good. 
B)  tax producers and thus shift the supply curve to the left. 
C)  tax consumers' incomes and thus shift the demand curve to the left. 
D)  subsidize consumers since the good is being under-consumed.

Question 15

An externality can best be defined as

Accepted Answer

A)  a party not directly involved in a transaction. 
B)  a consequence of a transaction that spills over to affect third parties. 
C)  a right of an owner to use and exchange property. 
D)  a cost associated with the production of one more unit of output. 
A)  a party not directly involved in a transaction. 
B)  a consequence of a transaction that spills over to affect third parties. 
C)  a right of an owner to use and exchange property. 
D)  a cost associated with the production of one more unit of output.

Question 16

-According to the above figure, if steel mills ignore the cost of pollution, the equilibrium quantity of steel will most likely be

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q2 - Q1. 
D)  none of the above. 
A)  Q1. 
B)  Q2. 
C)  Q2 - Q1. 
D)  none of the above.

Question 17

-According to the above figure, , then the supply curve will

Accepted Answer

A)  shift from S1 to S2. 
B)  shift from S2 to S1. 
C)  remain at S1. 
D)  shift either to the left or the right, but it is impossible to say without more information. 
A)  shift from S1 to S2. 
B)  shift from S2 to S1. 
C)  remain at S1. 
D)  shift either to the left or the right, but it is impossible to say without more information.

Question 18

Examples of transfer payments are

Accepted Answer

A)  wages, profits, and rents. 
B)  Social Security checks and unemployment insurance payments. 
C)  salaries of educators, police, and firefighters. 
D)  federal government spending for national defense. 
A)  wages, profits, and rents. 
B)  Social Security checks and unemployment insurance payments. 
C)  salaries of educators, police, and firefighters. 
D)  federal government spending for national defense.

Question 19

One way that the government encourages the production of a good with positive externalities is to offer

Accepted Answer

A)  an effluent fee. 
B)  a market to pollute. 
C)  a subsidy. 
D)  a pollution tax. 
A)  an effluent fee. 
B)  a market to pollute. 
C)  a subsidy. 
D)  a pollution tax.

Question 20

In which of the following ways is the private market sector similar to the public sector in terms of decision making?

Accepted Answer

A)  Prices determine the demand for goods and services in each sector. 
B)  There is competition for scarce resource in both sectors. 
C)  Both sectors may use a type of "force" if necessary. 
D)  Votes by individual voters are basically equal in importance with dollars spent by individuals on goods. 
A)  Prices determine the demand for goods and services in each sector. 
B)  There is competition for scarce resource in both sectors. 
C)  Both sectors may use a type of "force" if necessary. 
D)  Votes by individual voters are basically equal in importance with dollars spent by individuals on goods.

Exam 5: Public Spending and Public Choice

Federal antitrust laws in the United States are enforced

Which of the following does NOT involve transfers in kind?

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

One characteristic of a public good is that it

Medicare subsidies will cause people to

Graphically, the effect of a government subsidy on a good is shown as

A government-inhibited good is one that

The Do-Good Company produces goods that provide benefits to society-at-large. If consumers of Do-Good's products fail to take external benefits into account,

Which of the following is NOT an example of a transfer payment?

When government intervenes in the production process because external benefits exist, it typically attempts

Which of the following statements is NOT true about the price system?

Positive externalities arise when

If the production of a product results in significant external costs, an appropriate government policy might be to

An externality can best be defined as

-According to the above figure, if steel mills ignore the cost of pollution, the equilibrium quantity of steel will most likely be

-According to the above figure, , then the supply curve will

Examples of transfer payments are

One way that the government encourages the production of a good with positive externalities is to offer

In which of the following ways is the private market sector similar to the public sector in terms of decision making?

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

Filters