Question 1

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

Accepted Answer

A)  higher than optimal. 
B)  lower than optimal. 
C)  efficient. 
D)  at a optimal level. 
A)  higher than optimal. 
B)  lower than optimal. 
C)  efficient. 
D)  at a optimal level.

Question 2

The free-rider problem is

Accepted Answer

A)  the use of private goods in one state by residents of another state. 
B)  the incentive that people have to avoid paying for a public good. 
C)  the incentive that people have once they are receiving welfare to keep getting welfare. 
D)  that people cannot be forced to accept public goods. 
A)  the use of private goods in one state by residents of another state. 
B)  the incentive that people have to avoid paying for a public good. 
C)  the incentive that people have once they are receiving welfare to keep getting welfare. 
D)  that people cannot be forced to accept public goods.

Question 3

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 4

What are the voting rules followed by the political system as opposed to the market system?

Accepted Answer

In the political system, one person gets

Question 5

To protect the competitive economic system by restricting the formation of monopolies, the government has passed and enforced

Accepted Answer

A)  regulatory laws. 
B)  antitrust laws. 
C)  tort laws. 
D)  zoning laws. 
A)  regulatory laws. 
B)  antitrust laws. 
C)  tort laws. 
D)  zoning laws.

Question 6

When there is an external benefit, the unregulated market

Accepted Answer

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

Question 7

A free rider is someone who

Accepted Answer

A)  hops on the bus for free. 
B)  enjoys the flowers I have planted and does not compensate me for them. 
C)  creates a negative externality. 
D)  buys a ticket for a movie. 
A)  hops on the bus for free. 
B)  enjoys the flowers I have planted and does not compensate me for them. 
C)  creates a negative externality. 
D)  buys a ticket for a movie.

Question 8

Under present U.S. law, which one of the following is a government-inhibited good?

Accepted Answer

A)  Housing 
B)  Medical care 
C)  Heroin 
D)  Education 
A)  Housing 
B)  Medical care 
C)  Heroin 
D)  Education

Question 9

Public goods are characterized by the free-rider problem because

Accepted Answer

A)  no one can be excluded from the benefits of public goods once they are produced. 
B)  public goods are usually things that people really do not want to consume. 
C)  public goods are characterized by the principle of rival consumption. 
D)  public goods can easily be subdivided into small units. 
A)  no one can be excluded from the benefits of public goods once they are produced. 
B)  public goods are usually things that people really do not want to consume. 
C)  public goods are characterized by the principle of rival consumption. 
D)  public goods can easily be subdivided into small units.

Question 10

A government-sponsored good is often

Accepted Answer

A)  produced by the government. 
B)  subsidized. 
C)  taxed. 
D)  advertised. 
A)  produced by the government. 
B)  subsidized. 
C)  taxed. 
D)  advertised.

Question 11

Government goods are provided to the consumer at a zero price. This means that

Accepted Answer

A)  the cost to society is zero. 
B)  the political system is run by proportional rule. 
C)  people are getting something for nothing. 
D)  the cost of the goods is the value of the resources used to produce the good. 
A)  the cost to society is zero. 
B)  the political system is run by proportional rule. 
C)  people are getting something for nothing. 
D)  the cost of the goods is the value of the resources used to produce the good.

Question 12

When a business produces a product that creates external costs,

Accepted Answer

A)  the company produces a level of output larger than would be produced without the external cost. 
B)  the company produces a level of output smaller than would be produced without the external cost. 
C)  the company produces a level of output which would be the same as it would produce without the external cost. 
D)  the market provides the efficient level of output even with the existence of the external cost. 
A)  the company produces a level of output larger than would be produced without the external cost. 
B)  the company produces a level of output smaller than would be produced without the external cost. 
C)  the company produces a level of output which would be the same as it would produce without the external cost. 
D)  the market provides the efficient level of output even with the existence of the external cost.

Question 13

All of the following are economic functions of the government EXCEPT

Accepted Answer

A)  providing a legal system. 
B)  determining the wage rate for most jobs. 
C)  promoting competition in the market. 
D)  providing public goods. 
A)  providing a legal system. 
B)  determining the wage rate for most jobs. 
C)  promoting competition in the market. 
D)  providing public goods.

Question 14

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 15

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. A negative externality existed but has been corrected. Price and quantity will be

Accepted Answer

A)    and   . 
B)    and   . 
C)    and   . 
D)    and   . 
A)    and   . 
B)    and   . 
C)    and   . 
D)    and   .

Question 16

In public education, the value of the services provided is

Accepted Answer

A)  greater than the value that parents and students place on the services. 
B)  equal to the value that parents and students place on the services. 
C)  less than the value that parents and students place on the services. 
D)  zero since they are a public good. 
A)  greater than the value that parents and students place on the services. 
B)  equal to the value that parents and students place on the services. 
C)  less than the value that parents and students place on the services. 
D)  zero since they are a public good.

Question 17

What is the free-rider problem, and how is it related to public goods?

Accepted Answer

The free-rider problem arises from the e

Question 18

When the price system fails to generate an efficient allocation of resources,

Accepted Answer

A)  the market will always correct it. 
B)  consumers will spend less. 
C)  business will produce more. 
D)  too few or too many goods will be produced. 
A)  the market will always correct it. 
B)  consumers will spend less. 
C)  business will produce more. 
D)  too few or too many goods will be produced.

Question 19

-Refer to above figure in which negative externality existed. The government imposes a $1.00 pollution tax on the producer. Supply shifts leftward.

Accepted Answer

A)  This tax will be shifted entirely to the consumer. 
B)  This tax will be borne entirely by the producer. 
C)  The amount of the tax shifted to the consumer depends on the consumer's reaction. 
D)  The tax will be divided into equal amounts between consumer and producer. 
A)  This tax will be shifted entirely to the consumer. 
B)  This tax will be borne entirely by the producer. 
C)  The amount of the tax shifted to the consumer depends on the consumer's reaction. 
D)  The tax will be divided into equal amounts between consumer and producer.

Question 20

When an Australian citizen enjoys military protection in Australia without contributing to the cost of Australia's defense budget, then

Accepted Answer

A)  this citizen is a free rider. 
B)  Australia is a free rider. 
C)  this citizen receives no benefits if Australia is attacked. 
D)  Australia's defense budget will run out of funds. 
A)  this citizen is a free rider. 
B)  Australia is a free rider. 
C)  this citizen receives no benefits if Australia is attacked. 
D)  Australia's defense budget will run out of funds.

Exam 5: Public Spending and Public Choice

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

The free-rider problem is

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

What are the voting rules followed by the political system as opposed to the market system?

To protect the competitive economic system by restricting the formation of monopolies, the government has passed and enforced

When there is an external benefit, the unregulated market

A free rider is someone who

Under present U.S. law, which one of the following is a government-inhibited good?

Public goods are characterized by the free-rider problem because

A government-sponsored good is often

Government goods are provided to the consumer at a zero price. This means that

When a business produces a product that creates external costs,

All of the following are economic functions of the government EXCEPT

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.

In public education, the value of the services provided is

What is the free-rider problem, and how is it related to public goods?

When the price system fails to generate an efficient allocation of resources,

-Refer to above figure in which negative externality existed. The government imposes a $1.00 pollution tax on the producer. Supply shifts leftward.

When an Australian citizen enjoys military protection in Australia without contributing to the cost of Australia's defense budget, then

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