Question 1

Which of the following statements is false?

Accepted Answer

A)  Government can remove individuals from a prisoner's dilemma setting and make both participants better off. 
B)  Government can define and enforce the property rights that individuals actually want defined and enforced. 
C)  Individuals in a prisoner's dilemma setting may want to get out of the prisoner's dilemma setting. 
D)  none of the above 
A)  Government can remove individuals from a prisoner's dilemma setting and make both participants better off. 
B)  Government can define and enforce the property rights that individuals actually want defined and enforced. 
C)  Individuals in a prisoner's dilemma setting may want to get out of the prisoner's dilemma setting. 
D)  none of the above

Question 2

Suppose that for Alicia the marginal benefit (MB)of producing is $75 and that the marginal cost (MC)of producing is $5.Suppose also that her marginal benefit of stealing is $85 and the marginal cost of stealing is $5.Is Alicia currently maximizing utility in terms of producing and stealing? If not,should she produce more and steal less,or produce less and steal more to move toward utility maximization?

Accepted Answer

A)  Yes,Alicia is maximizing utility. 
B)  No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing,Alicia should produce more and steal less. 
C)  No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing,Alicia should produce more and steal less. 
D)  No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing,Alicia should steal more and produce less. 
A)  Yes,Alicia is maximizing utility. 
B)  No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing,Alicia should produce more and steal less. 
C)  No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing,Alicia should produce more and steal less. 
D)  No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing,Alicia should steal more and produce less.

Question 3

Government provides a nonexcludable public good that the public demands and can't seem to acquire through the market.This is government

Accepted Answer

A)  acting as a transfer mechanism. 
B)  being non-productive. 
C)  engaging in rent-seeking activities. 
D)  being productive. 
E)  a and c 
A)  acting as a transfer mechanism. 
B)  being non-productive. 
C)  engaging in rent-seeking activities. 
D)  being productive. 
E)  a and c

Question 4

When the government imposes a tariff on imported goods,it _____________ prices for domestic consumers,________________ consumers' surplus and _________________ the producers' surplus for domestic producers.

Accepted Answer

A)  raises; lowers; raises 
B)  lowers; raises; raises 
C)  lowers; raises; lowers 
D)  raises; lowers; lowers 
E)  none of the above 
A)  raises; lowers; raises 
B)  lowers; raises; raises 
C)  lowers; raises; lowers 
D)  raises; lowers; lowers 
E)  none of the above

Question 5

Economist A believes that the case for government is a strong one,but she doesn't always say,when it comes to negative externalities,that government can turn an inefficient market outcome into an efficient outcome.Which statement is economist A most likely to make?

Accepted Answer

A)  If the tax placed on the activity that generates the negative externality is too large,we are not likely too move from inefficiency to efficiency. 
B)  If the subsidy placed on the activity that generates the negative externality is too small,we are not likely to move from inefficiency to efficiency. 
C)  If there is a free rider problem,then government cannot solve the problem of negative externalities. 
D)  a and b 
E)  none of the above 
A)  If the tax placed on the activity that generates the negative externality is too large,we are not likely too move from inefficiency to efficiency. 
B)  If the subsidy placed on the activity that generates the negative externality is too small,we are not likely to move from inefficiency to efficiency. 
C)  If there is a free rider problem,then government cannot solve the problem of negative externalities. 
D)  a and b 
E)  none of the above

Question 6

Some people see the government as being more heavily involved in taking sides than in serving the common interest.

Accepted Answer

A) True 
 B)False

Question 7

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much __________________ percentage _______________ in growth to equal what they can get from the transfer.

Accepted Answer

A)  smaller; decrease 
B)  larger; increase 
C)  larger; decrease 
D)  smaller; increase 
E)  none of the above 
A)  smaller; decrease 
B)  larger; increase 
C)  larger; decrease 
D)  smaller; increase 
E)  none of the above

Question 8

In the prisoner's dilemma setting for stealing and producing,both participants end up __________,which turns out to be ________________________ stolen.The government _________ make both participants better off by changing the payoff matrix.

Accepted Answer

A)  stealing; better for them than if they had both not; can 
B)  stealing; worse for them than if they had both not; can 
C)  not stealing; better for them than if they had both; cannot 
D)  not stealing; worse for them than if they had both; cannot 
A)  stealing; better for them than if they had both not; can 
B)  stealing; worse for them than if they had both not; can 
C)  not stealing; better for them than if they had both; cannot 
D)  not stealing; worse for them than if they had both; cannot

Question 9

Which of the following statements is false?

Accepted Answer

A)  Government can remove individuals from a prisoner's dilemma setting and make them better off. 
B)  In a prisoner's dilemma setting,it is impossible for the government to define and enforce property rights that the individuals involved in the setting want to have defined and enforced. 
C)  As long as government charges each individual in a prisoner's dilemma setting a tax that is less than the gain received by being removed from the setting,then government has made the individuals better off. 
D)  Depending upon the amount of the tax charged to each individual in a prisoner's dilemma setting,the government can make both persons better off,both persons worse off,or one person better off and the other person worse off. 
A)  Government can remove individuals from a prisoner's dilemma setting and make them better off. 
B)  In a prisoner's dilemma setting,it is impossible for the government to define and enforce property rights that the individuals involved in the setting want to have defined and enforced. 
C)  As long as government charges each individual in a prisoner's dilemma setting a tax that is less than the gain received by being removed from the setting,then government has made the individuals better off. 
D)  Depending upon the amount of the tax charged to each individual in a prisoner's dilemma setting,the government can make both persons better off,both persons worse off,or one person better off and the other person worse off.

Question 10

Suppose health-care reform Y makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease and sets a fine for those people who do not buy insurance.It follows that if the fine is

Accepted Answer

A)  larger than the benefits derived from not buying insurance right away,then people will not buy the insurance and pay the fine. 
B)  smaller than the benefits derived from not buying the insurance right away,then people will not buy the insurance and pay the fine. 
C)  larger than the benefits derived from not buying insurance right away,then people will buy the insurance right away and not pay the fine. 
D)  b and c 
E)  none of the above 
A)  larger than the benefits derived from not buying insurance right away,then people will not buy the insurance and pay the fine. 
B)  smaller than the benefits derived from not buying the insurance right away,then people will not buy the insurance and pay the fine. 
C)  larger than the benefits derived from not buying insurance right away,then people will buy the insurance right away and not pay the fine. 
D)  b and c 
E)  none of the above

Question 11

In a divisive society the members of groups within the society see themselves as

Accepted Answer

A)  working in harmony with other groups in the society. 
B)  equal to other groups within the society. 
C)  pitted against other groups in the society. 
D)  a and b 
A)  working in harmony with other groups in the society. 
B)  equal to other groups within the society. 
C)  pitted against other groups in the society. 
D)  a and b

Question 12

Which economist said,"This focus on distribution makes the significance of distributional issues (transfer issues)in political life relatively greater and the significance of widespread common interest in political life relatively smaller."?

Accepted Answer

A)  John Maynard Keynes 
B)  Milton Friedman 
C)  David Friedman 
D)  Mancur Olson 
E)  David Ricardo 
A)  John Maynard Keynes 
B)  Milton Friedman 
C)  David Friedman 
D)  Mancur Olson 
E)  David Ricardo

Question 13

Consider a setting in which there is a negative externality,but no positive externality.The market outcome is __________________; government can bring about the ___________________ outcome if it sets a tax equal to the __________________.

Accepted Answer

A)  efficient; inefficient; MSC 
B)  efficient; inefficient; MEC 
C)  inefficient; efficient; MEC 
D)  inefficient; efficient; MPC 
E)  inefficient; efficient; MSB 
A)  efficient; inefficient; MSC 
B)  efficient; inefficient; MEC 
C)  inefficient; efficient; MEC 
D)  inefficient; efficient; MPC 
E)  inefficient; efficient; MSB

Question 14

-Refer to Exhibit 37-1,where the higher the number,the better the position for the person to whom the number is connected.Jaden and Karen are currently in box 4,each receiving 10.they would like to move to box 1,where each receives 12.Without someone to ________________ their agreement,moving from box 4 is ______________________.

Accepted Answer

A)  enforce; likely 
B)  enforce; unlikely 
C)  break; unlikely 
D)  break; likely 
E)  There is not enough information to answer the question. 
A)  enforce; likely 
B)  enforce; unlikely 
C)  break; unlikely 
D)  break; likely 
E)  There is not enough information to answer the question.

Question 15

Tiffany gives $50 to Jeremy for his birthday.This is an example of a(n)

Accepted Answer

A)  involuntary transfer. 
B)  involuntary-voluntary transfer. 
C)  voluntary transfer. 
D)  gift. 
E)  c and d 
A)  involuntary transfer. 
B)  involuntary-voluntary transfer. 
C)  voluntary transfer. 
D)  gift. 
E)  c and d

Question 16

Which of the following statements is false?

Accepted Answer

A)  In the case of a negative externality,the market equilibrium is inefficient. 
B)  In the case of a negative externality,when a tax is set equal to the marginal external costs (ME
C) efficiency can be achieved. 
C)  In the case of a negative externality,when a tax is set that is greater than the marginal external costs (ME
C) inefficiency will result. 
D)  In the case of a positive externality,when a tax is set equal to the marginal external benefits (ME
B) efficiency can be achieved. 
A)  In the case of a negative externality,the market equilibrium is inefficient. 
B)  In the case of a negative externality,when a tax is set equal to the marginal external costs (ME
C) efficiency can be achieved. 
C)  In the case of a negative externality,when a tax is set that is greater than the marginal external costs (ME
C) inefficiency will result. 
D)  In the case of a positive externality,when a tax is set equal to the marginal external benefits (ME
B) efficiency can be achieved.

Question 17

Which of the following statements is false?

Accepted Answer

A)  One of the intended effects of the health-care reform bills passed in March 2010 was for some people who had health insurance before the reform to choose to become uninsured after health-care reform. 
B)  One of the provisions of the health-care reform bills passed in March 2010 is that individuals will be fined for not buying insurance. 
C)  Among the provisions in the health-care reform bills passed in March 2010 is that insurance companies are prohibited from turning down a person with a preexisting disease. 
D)  One of the objectives of the health-care reform bills passed in March 2010 was to bring more people into the pool of insured persons so that insurance policies would become cheaper. 
A)  One of the intended effects of the health-care reform bills passed in March 2010 was for some people who had health insurance before the reform to choose to become uninsured after health-care reform. 
B)  One of the provisions of the health-care reform bills passed in March 2010 is that individuals will be fined for not buying insurance. 
C)  Among the provisions in the health-care reform bills passed in March 2010 is that insurance companies are prohibited from turning down a person with a preexisting disease. 
D)  One of the objectives of the health-care reform bills passed in March 2010 was to bring more people into the pool of insured persons so that insurance policies would become cheaper.

Question 18

A nonexcludable public good is

Accepted Answer

A)  rivalrous in consumption and nonexcludable 
B)  nonrivalrous in consumption and excludable 
C)  nonrivalrous in consumption and nonexcludable 
D)  rivalrous in consumption and excludable 
E)  none of the above 
A)  rivalrous in consumption and nonexcludable 
B)  nonrivalrous in consumption and excludable 
C)  nonrivalrous in consumption and nonexcludable 
D)  rivalrous in consumption and excludable 
E)  none of the above

Question 19

Economist B thinks that it is important to identify the condition(s)under which the case for government is strongest.With respect to the provision of nonexcludable public goods,she says

Accepted Answer

A)  people must pay taxes to pay for the nonexcludable public good. 
B)  firms must pay taxes to pay for the nonexcludable public good. 
C)  people must actually want the nonexcludable public good that the government provides. 
D)  people must express their desire for the nonexcludable public good by voting for it. 
E)  none of the above 
A)  people must pay taxes to pay for the nonexcludable public good. 
B)  firms must pay taxes to pay for the nonexcludable public good. 
C)  people must actually want the nonexcludable public good that the government provides. 
D)  people must express their desire for the nonexcludable public good by voting for it. 
E)  none of the above

Question 20

When a positive 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

Exam 23: Stocks,bonds,futures,and Options

Which of the following statements is false?

Government provides a nonexcludable public good that the public demands and can't seem to acquire through the market.This is government

When the government imposes a tariff on imported goods,it _____________ prices for domestic consumers,________________ consumers' surplus and _________________ the producers' surplus for domestic producers.

Economist A believes that the case for government is a strong one,but she doesn't always say,when it comes to negative externalities,that government can turn an inefficient market outcome into an efficient outcome.Which statement is economist A most likely to make?

Some people see the government as being more heavily involved in taking sides than in serving the common interest.

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much __________________ percentage _______________ in growth to equal what they can get from the transfer.

In the prisoner's dilemma setting for stealing and producing,both participants end up __________,which turns out to be ________________________ stolen.The government _________ make both participants better off by changing the payoff matrix.

Which of the following statements is false?

Suppose health-care reform Y makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease and sets a fine for those people who do not buy insurance.It follows that if the fine is

In a divisive society the members of groups within the society see themselves as

Which economist said,"This focus on distribution makes the significance of distributional issues (transfer issues)in political life relatively greater and the significance of widespread common interest in political life relatively smaller."?

Consider a setting in which there is a negative externality,but no positive externality.The market outcome is __________________; government can bring about the ___________________ outcome if it sets a tax equal to the __________________.

Tiffany gives $50 to Jeremy for his birthday.This is an example of a(n)

Which of the following statements is false?

Which of the following statements is false?

A nonexcludable public good is

Economist B thinks that it is important to identify the condition(s)under which the case for government is strongest.With respect to the provision of nonexcludable public goods,she says

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

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

When the government imposes a tariff on imported goods,it _ prices for domestic consumers, consumers' surplus and _____ the producers' surplus for domestic producers.

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much ____ percentage _ in growth to equal what they can get from the transfer.

In the prisoner's dilemma setting for stealing and producing,both participants end up ,which turns out to be ______ stolen.The government _ make both participants better off by changing the payoff matrix.

Consider a setting in which there is a negative externality,but no positive externality.The market outcome is ________; government can bring about the _ outcome if it sets a tax equal to the __________.

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