Question 1

In the case of a negative externality,

Accepted Answer

A)  marginal external costs are greater than marginal private costs. 
B)  marginal external costs are less than marginal private costs. 
C)  marginal external benefits are greater than marginal private benefits. 
D)  marginal external benefits are equal to marginal private costs. 
E)  none of the above 
A)  marginal external costs are greater than marginal private costs. 
B)  marginal external costs are less than marginal private costs. 
C)  marginal external benefits are greater than marginal private benefits. 
D)  marginal external benefits are equal to marginal private costs. 
E)  none of the above

Question 2

Person A argues that government is unnecessary and often does more harm than good.Economist A disagrees.What does economist A --- who believes that there is a legitimate case that can be made for government --- most likely say to support his position?

Accepted Answer

A)  Government almost always does more good than harm. 
B)  Without government,life would be anarchy. 
C)  There are some things that individuals want done that can't get done without government. 
D)  There are better people going into government work than are going into the private sector. 
E)  none of the above 
A)  Government almost always does more good than harm. 
B)  Without government,life would be anarchy. 
C)  There are some things that individuals want done that can't get done without government. 
D)  There are better people going into government work than are going into the private sector. 
E)  none of the above

Question 3

Dan and Ann live in the same community and both can participate in two activities,producing and stealing.
-Refer to Situation 37-2.Ann spends 8 hours of each day producing and 1 hour of each day stealing.It is probably the case for her that

Accepted Answer

A)  at some point the MB/MC ratio for producing fell below the MB/MC ratio for stealing. 
B)  her MB/MC ratio for producing was always greater than her MB/MC ratio for stealing. 
C)  her MB/MC ratio for producing never changed,no matter how much or how little she produced. 
D)  her MB/MC ratio for stealing never changed,no matter how much or how little she stole. 
E)  There is not enough information to answer the question. 
A)  at some point the MB/MC ratio for producing fell below the MB/MC ratio for stealing. 
B)  her MB/MC ratio for producing was always greater than her MB/MC ratio for stealing. 
C)  her MB/MC ratio for producing never changed,no matter how much or how little she produced. 
D)  her MB/MC ratio for stealing never changed,no matter how much or how little she stole. 
E)  There is not enough information to answer the question.

Question 4

If the government grants tax credits to first-time homebuyers,the supply of houses would increase and the price of housing would fall.

Accepted Answer

A) True 
 B)False

Question 5

In making the case against government,discuss the two main points about special interest groups.

Accepted Answer

Legislation that on the surface looks li

Question 6

Individuals want nonexcludable public good X,but the market does not provide it because of the free rider problem.Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

Accepted Answer

A)  forcing individuals to work longer hours 
B)  taxing 
C)  surveying 
D)  subsidizing 
E)  none of the above 
A)  forcing individuals to work longer hours 
B)  taxing 
C)  surveying 
D)  subsidizing 
E)  none of the above

Question 7

Special interest group Z receives a 1/200th slice of the economic pie.Its net benefit from both an economic growth policy and a transfer policy is $30,000.How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

Accepted Answer

A)  $150 
B)  $600,000 
C)  $600,000,000 
D)  $6,000,000 
E)  none of the above 
A)  $150 
B)  $600,000 
C)  $600,000,000 
D)  $6,000,000 
E)  none of the above

Question 8

"I'm not going to pay for the good if,once produced,the good cannot be denied to anyone." This statement is most relevant to

Accepted Answer

A)  negative externalities. 
B)  positive externalities 
C)  private goods. 
D)  nonexcludable public goods. 
E)  the issue of rivalry versus nonrivalry in consumption. 
A)  negative externalities. 
B)  positive externalities 
C)  private goods. 
D)  nonexcludable public goods. 
E)  the issue of rivalry versus nonrivalry in consumption.

Question 9

A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome.To accomplish its objective,government must set the subsidy equal to marginal

Accepted Answer

A)  private cost. 
B)  social benefit. 
C)  external cost. 
D)  social cost. 
E)  external benefit. 
A)  private cost. 
B)  social benefit. 
C)  external cost. 
D)  social cost. 
E)  external benefit.

Question 10

Involuntary transfers are the type of transfers used in the case against government.

Accepted Answer

A) True 
 B)False

Question 11

When a negative externality exists,_______________________ and thus _______________ intervention may be needed to achieve efficiency.

Accepted Answer

A)  external costs are necessarily greater than private costs; government 
B)  social costs equal private costs; no government 
C)  social costs are less than private costs; government 
D)  social costs are greater than private costs; government 
E)  none of the above 
A)  external costs are necessarily greater than private costs; government 
B)  social costs equal private costs; no government 
C)  social costs are less than private costs; government 
D)  social costs are greater than private costs; government 
E)  none of the above

Question 12

To say that government sometimes functions as a "transfer mechanism," means that government sometimes

Accepted Answer

A)  ends up transferring goods to individuals in return for taxes paid. 
B)  ends up transferring negative externalities into positive externalities. 
C)  ends up taking from group X to give to group Y. 
D)  transfers taxes into subsidies. 
E)  none of the above 
A)  ends up transferring goods to individuals in return for taxes paid. 
B)  ends up transferring negative externalities into positive externalities. 
C)  ends up taking from group X to give to group Y. 
D)  transfers taxes into subsidies. 
E)  none of the above

Question 13

Special interest group Q receives a 1/10,000th slice of the economic pie.Its net benefit from either an economic growth policy or a transfer policy is $50,000.In order for group Q to be indifferent between the two policies,the economic growth policy would have to make the size of the economic pie (Real GDP)grow by _________________.This type of analysis is used to show that special interest groups tend press government for ______________ instead of ________________.

Accepted Answer

A)  $50,000,000; economic growth; transfers 
B)  $500,000; transfers; economic growth 
C)  $500,000,000; transfers; economic growth 
D)  $5,000,000; transfers; economic growth 
E)  none of the above 
A)  $50,000,000; economic growth; transfers 
B)  $500,000; transfers; economic growth 
C)  $500,000,000; transfers; economic growth 
D)  $5,000,000; transfers; economic growth 
E)  none of the above

Question 14

Government always makes individuals better off when it removes them from a prisoner's dilemma setting.

Accepted Answer

A) True 
 B)False

Question 15

In the case of a negative externality,in order to achieve efficiency the government must set the _________________ equal to the marginal ____________________.

Accepted Answer

A)  tax; external costs 
B)  tax; external benefits 
C)  subsidy; external costs 
D)  subsidy; external benefits 
E)  tax; private costs 
A)  tax; external costs 
B)  tax; external benefits 
C)  subsidy; external costs 
D)  subsidy; external benefits 
E)  tax; private costs

Question 16

Which of the following statements is false?

Accepted Answer

A)  A government with the power to tax can solve the free rider problem. 
B)  A government with the power to tax can set a tax greater than the MEC when trying to change the market outcome into the efficient outcome. 
C)  A government with the power to subsidize can set a subsidy greater than the MEB when trying to change the market outcome into the efficient outcome. 
D)  Government can remove individuals from a prisoner's dilemma setting by changing the payoffs in the payoff matrix. 
E)  none of the above 
A)  A government with the power to tax can solve the free rider problem. 
B)  A government with the power to tax can set a tax greater than the MEC when trying to change the market outcome into the efficient outcome. 
C)  A government with the power to subsidize can set a subsidy greater than the MEB when trying to change the market outcome into the efficient outcome. 
D)  Government can remove individuals from a prisoner's dilemma setting by changing the payoffs in the payoff matrix. 
E)  none of the above

Question 17

Suppose health-care reform X makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease.One unintended effect of this reform is that some people

Accepted Answer

A)  will buy more health insurance than they would have without reform X. 
B)  may wait until they have a particular disease before they buy health insurance. 
C)  will try to work longer hours,to earn more income,to pay for increasing health insurance premiums. 
D)  a and c 
E)  none of the above 
A)  will buy more health insurance than they would have without reform X. 
B)  may wait until they have a particular disease before they buy health insurance. 
C)  will try to work longer hours,to earn more income,to pay for increasing health insurance premiums. 
D)  a and c 
E)  none of the above

Question 18

Which of the following is usually discussed in the case against government?

Accepted Answer

A)  special interest groups and transfers 
B)  the unintended effects of governments actions 
C)  removal from the prisoner's dilemma 
D)  a and b 
E)  none of the above 
A)  special interest groups and transfers 
B)  the unintended effects of governments actions 
C)  removal from the prisoner's dilemma 
D)  a and b 
E)  none of the above

Question 19

Government provides a nonexcludable public good that no one wants.This situation is most closely related with:

Accepted Answer

A)  government solving a market failure. 
B)  government failure. 
C)  market failure. 
D)  the market solving a government failure. 
A)  government solving a market failure. 
B)  government failure. 
C)  market failure. 
D)  the market solving a government failure.

Question 20

A consequence of a negative externality is that social costs __________ private costs,and the efficient level of output __________.

Accepted Answer

A)  equal; does not require any type of government intervention 
B)  are less than; requires the government to create a subsidy 
C)  are greater than; requires the government to impose a tax 
D)  are greater than; requires the government to create a subsidy 
E)  are less than; requires the government to impose a tax 
A)  equal; does not require any type of government intervention 
B)  are less than; requires the government to create a subsidy 
C)  are greater than; requires the government to impose a tax 
D)  are greater than; requires the government to create a subsidy 
E)  are less than; requires the government to impose a tax

Exam 23: Stocks,bonds,futures,and Options

In the case of a negative externality,

Person A argues that government is unnecessary and often does more harm than good.Economist A disagrees.What does economist A --- who believes that there is a legitimate case that can be made for government --- most likely say to support his position?

Dan and Ann live in the same community and both can participate in two activities,producing and stealing. -Refer to Situation 37-2.Ann spends 8 hours of each day producing and 1 hour of each day stealing.It is probably the case for her that

If the government grants tax credits to first-time homebuyers,the supply of houses would increase and the price of housing would fall.

In making the case against government,discuss the two main points about special interest groups.

Individuals want nonexcludable public good X,but the market does not provide it because of the free rider problem.Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

Special interest group Z receives a 1/200th slice of the economic pie.Its net benefit from both an economic growth policy and a transfer policy is $30,000.How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

"I'm not going to pay for the good if,once produced,the good cannot be denied to anyone." This statement is most relevant to

A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome.To accomplish its objective,government must set the subsidy equal to marginal

Involuntary transfers are the type of transfers used in the case against government.

When a negative externality exists,_______________________ and thus _______________ intervention may be needed to achieve efficiency.

To say that government sometimes functions as a "transfer mechanism," means that government sometimes

Government always makes individuals better off when it removes them from a prisoner's dilemma setting.

In the case of a negative externality,in order to achieve efficiency the government must set the _________________ equal to the marginal ____________________.

Which of the following statements is false?

Suppose health-care reform X makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease.One unintended effect of this reform is that some people

Which of the following is usually discussed in the case against government?

Government provides a nonexcludable public good that no one wants.This situation is most closely related with:

A consequence of a negative externality is that social costs __________ private costs,and the efficient level of output __________.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Filters

Special interest group Z receives a 1/200^th slice of the economic pie.Its net benefit from both an economic growth policy and a transfer policy is $30,000.How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

When a negative externality exists,_________ and thus _ intervention may be needed to achieve efficiency.

In the case of a negative externality,in order to achieve efficiency the government must set the _ equal to the marginal ____.

A consequence of a negative externality is that social costs private costs,and the efficient level of output .