Question 1

Which of the following is not an income transfer?

Accepted Answer

A)  Unemployment benefits 
B)  Social Security payments 
C)  Food stamps 
D)  Welfare 
A)  Unemployment benefits 
B)  Social Security payments 
C)  Food stamps 
D)  Welfare

Question 2

When firms have the ability to change the market price of a good or service,the market failure involved is:

Accepted Answer

A)  Market power. 
B)  Public goods. 
C)  Externalities. 
D)  Inequities. 
A)  Market power. 
B)  Public goods. 
C)  Externalities. 
D)  Inequities.

Question 3

Which of the following is not considered to be a source of market power for a firm?

Accepted Answer

A)  Externalities. 
B)  Patents. 
C)  Restrictive production agreements. 
D)  Economies of scale. 
A)  Externalities. 
B)  Patents. 
C)  Restrictive production agreements. 
D)  Economies of scale.

Question 4

Explain the impact of external costs and external benefits on the production of public verses private goods.

Accepted Answer

Whenever external costs are present then

Question 5

The market mechanism always leads the economy to the optimal mix of output.

Accepted Answer

A) True 
 B)False

Question 6

The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

Accepted Answer

A)  Inequity. 
B)  Externalities. 
C)  Market power. 
D)  Macro failure. 
A)  Inequity. 
B)  Externalities. 
C)  Market power. 
D)  Macro failure.

Question 7

The market will:

Accepted Answer

A)  Always provide the optimal mix of output. 
B)  Overproduce goods that yield external benefits. 
C)  Produce an optimal amount of goods that generate external costs. 
D)  Under produce goods that generate external benefits. 
A)  Always provide the optimal mix of output. 
B)  Overproduce goods that yield external benefits. 
C)  Produce an optimal amount of goods that generate external costs. 
D)  Under produce goods that generate external benefits.

Question 8

Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

Accepted Answer

A) True 
 B)False

Question 9

A public good is a good that:

Accepted Answer

A)  Can be jointly consumed. 
B)  Can be consumed by just one person. 
C)  Is financed by the public sector,not the private sector. 
D)  affects a third party. 
A)  Can be jointly consumed. 
B)  Can be consumed by just one person. 
C)  Is financed by the public sector,not the private sector. 
D)  affects a third party.

Question 10

The market produces too few public goods because:

Accepted Answer

A)  The link between payment and consumption is broken. 
B)  They must be paid for by wealthy individuals. 
C)  Only the government can produce public goods. 
D)  The market distributes goods to those with the most money. 
A)  The link between payment and consumption is broken. 
B)  They must be paid for by wealthy individuals. 
C)  Only the government can produce public goods. 
D)  The market distributes goods to those with the most money.

Question 11

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s)below.
Table 9.1-Costs of reducing water pollution  
-According to the schedule presented in Table 9.1,which rate of pollution is optimal?

Accepted Answer

A)  50 PPM 
B)  35 PPM 
C)  25 PPM 
D)  10 PPM 
A)  50 PPM 
B)  35 PPM 
C)  25 PPM 
D)  10 PPM

Question 12

One News Wire article in the text links secondhand smoke to cancer,heart attacks and strokes.This implies that:

Accepted Answer

A)  The social demand and market demand for smoking are equal. 
B)  Cigarette smoking produces inequities. 
C)  Cigarette producers have market power. 
D)  There are external costs associated with smoking. 
A)  The social demand and market demand for smoking are equal. 
B)  Cigarette smoking produces inequities. 
C)  Cigarette producers have market power. 
D)  There are external costs associated with smoking.

Question 13

By breaking up AT&T the Justice Department expected that the telecommunications market would change from:

Accepted Answer

A)  An oligopoly to a perfectly competitive market. 
B)  A competitive market toward a monopoly. 
C)  A monopoly toward a competitive market. 
D)  A contestable market to a monopoly. 
A)  An oligopoly to a perfectly competitive market. 
B)  A competitive market toward a monopoly. 
C)  A monopoly toward a competitive market. 
D)  A contestable market to a monopoly.

Question 14

When the economy experiences high unemployment,there is:

Accepted Answer

A)  Government failure. 
B)  Microeconomic failure. 
C)  Macroeconomic failure. 
D)  Government waste. 
A)  Government failure. 
B)  Microeconomic failure. 
C)  Macroeconomic failure. 
D)  Government waste.

Question 15

The free-rider problem arises because those who:

Accepted Answer

A)  Do not pay cannot be excluded. 
B)  Pay are not willing to share. 
C)  Demand the goods are excluded. 
D)  Supply the goods are greedy. 
A)  Do not pay cannot be excluded. 
B)  Pay are not willing to share. 
C)  Demand the goods are excluded. 
D)  Supply the goods are greedy.

Question 16

Patents and copyrights contribute to market power for a firm.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following created an agency to identify anticompetitive practices?

Accepted Answer

A)  The Sherman Act 
B)  The Clayton Act 
C)  The Federal Trade Commission Act 
D)  The Federal Reserve Act 
A)  The Sherman Act 
B)  The Clayton Act 
C)  The Federal Trade Commission Act 
D)  The Federal Reserve Act

Question 18

Market failure implies that a policy of laissez-faire:

Accepted Answer

A)  Leads the economy to a point beyond the production possibilities curve. 
B)  Leads the economy to an undesirable point on the production possibilities curve. 
C)  Is superior to government intervention. 
D)  Causes government failure. 
A)  Leads the economy to a point beyond the production possibilities curve. 
B)  Leads the economy to an undesirable point on the production possibilities curve. 
C)  Is superior to government intervention. 
D)  Causes government failure.

Question 19

One News Wire article in the text links secondhand smoke to cancer and other health issues.Which type of market failure does the article illustrate?

Accepted Answer

A)  Negative externality. 
B)  A failure to produce public goods. 
C)  Market power by the cigarette producers. 
D)  External benefits. 
A)  Negative externality. 
B)  A failure to produce public goods. 
C)  Market power by the cigarette producers. 
D)  External benefits.

Question 20

Market failure occurs when:

Accepted Answer

A)  Market prices signal producers to produce the optimal mix of output. 
B)  The economy produces at a point on the production possibilities curve. 
C)  Producers supply the goods that earn the greatest profit. 
D)  An imperfection in the market mechanism prevents an optimal outcome. 
A)  Market prices signal producers to produce the optimal mix of output. 
B)  The economy produces at a point on the production possibilities curve. 
C)  Producers supply the goods that earn the greatest profit. 
D)  An imperfection in the market mechanism prevents an optimal outcome.

Which of the following is not an income transfer?

When firms have the ability to change the market price of a good or service,the market failure involved is:

Which of the following is not considered to be a source of market power for a firm?

Explain the impact of external costs and external benefits on the production of public verses private goods.

The market mechanism always leads the economy to the optimal mix of output.

The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

The market will:

Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

A public good is a good that:

The market produces too few public goods because:

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s)below. Table 9.1-Costs of reducing water pollution -According to the schedule presented in Table 9.1,which rate of pollution is optimal?

One News Wire article in the text links secondhand smoke to cancer,heart attacks and strokes.This implies that:

By breaking up AT&T the Justice Department expected that the telecommunications market would change from:

When the economy experiences high unemployment,there is:

The free-rider problem arises because those who:

Patents and copyrights contribute to market power for a firm.

Which of the following created an agency to identify anticompetitive practices?

Market failure implies that a policy of laissez-faire:

One News Wire article in the text links secondhand smoke to cancer and other health issues.Which type of market failure does the article illustrate?

Market failure occurs when:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 9: Government Intervention

Which of the following is not an income transfer?

When firms have the ability to change the market price of a good or service,the market failure involved is:

Which of the following is not considered to be a source of market power for a firm?

Explain the impact of external costs and external benefits on the production of public verses private goods.

The market mechanism always leads the economy to the optimal mix of output.

The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

The market will:

Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

A public good is a good that:

The market produces too few public goods because:

This table contains data on the social costs and benefits incurred in improving water quality in a lake.Complete the table and answer the question(s)below. Table 9.1-Costs of reducing water pollution -According to the schedule presented in Table 9.1,which rate of pollution is optimal?

One News Wire article in the text links secondhand smoke to cancer,heart attacks and strokes.This implies that:

By breaking up AT&T the Justice Department expected that the telecommunications market would change from:

When the economy experiences high unemployment,there is:

The free-rider problem arises because those who:

Patents and copyrights contribute to market power for a firm.

Which of the following created an agency to identify anticompetitive practices?

Market failure implies that a policy of laissez-faire:

One News Wire article in the text links secondhand smoke to cancer and other health issues.Which type of market failure does the article illustrate?

Market failure occurs when:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters