Question 1

Which of the following statements is true?

Accepted Answer

A) Special interest groups are more likely to push for policies that increase the size of the economic pie than to increase their slice of the pie. 
B) Special interest groups are likely to push for policies that increase the size of their slice of the economic pie even if it means that the overall size of the economic pie will shrink. 
C) Special interest groups are more likely to favor policies that increase the size of their slice of the economic pie than policies that favor economic growth. 
D) a and c 
E) b and c 
A) Special interest groups are more likely to push for policies that increase the size of the economic pie than to increase their slice of the pie. 
B) Special interest groups are likely to push for policies that increase the size of their slice of the economic pie even if it means that the overall size of the economic pie will shrink. 
C) Special interest groups are more likely to favor policies that increase the size of their slice of the economic pie than policies that favor economic growth. 
D) a and c 
E) b and c E

Question 2

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 B

Question 3

Consider a setting in which there is a negative externality,but no positive externality.It follows that

Accepted Answer

A) the market outcome is inefficient. 
B) the market outcome is efficient. 
C) MSC > MPC 
D) MPC > MSC 
E) a and c 
A) the market outcome is inefficient. 
B) the market outcome is efficient. 
C) MSC > MPC 
D) MPC > MSC 
E) a and c E

Question 4

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 5

One of the objectives of the health-care reform bills passed in March 2010 was to bring _____________ people into the pool of insured persons so that insurance policies would become ________________.However,provisions in the bill are likely to make the average cost of an insurance policy _____________ than it would have been without reform.

Accepted Answer

A) fewer;cheaper;lower 
B) fewer;more expensive;lower 
C) more;cheaper;lower 
D) more;cheaper;higher 
E) none of the above 
A) fewer;cheaper;lower 
B) fewer;more expensive;lower 
C) more;cheaper;lower 
D) more;cheaper;higher 
E) none of the above

Question 6

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 7

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 8

The strongest case for government with respect to a negative externality is that government needs to set the

Accepted Answer

A) subsidy equal to the marginal private benefits. 
B) tax equal to the marginal external costs plus $1. 
C) tax slightly below the marginal external costs. 
D) tax equal to the marginal external costs. 
E) subsidy equal to the marginal social benefits. 
A) subsidy equal to the marginal private benefits. 
B) tax equal to the marginal external costs plus $1. 
C) tax slightly below the marginal external costs. 
D) tax equal to the marginal external costs. 
E) subsidy equal to the marginal social benefits.

Question 9

A tax credit given to first-time home buyers would result in a _____________ shift in the ______________ curve for housing,which would lead to the unintended result of a(n)_____________ in the price of housing.

Accepted Answer

A) leftward;supply;increase 
B) leftward;demand;decrease 
C) rightward;supply;decrease 
D) rightward;demand;increase 
E) none of the above 
A) leftward;supply;increase 
B) leftward;demand;decrease 
C) rightward;supply;decrease 
D) rightward;demand;increase 
E) none of the above

Question 10

The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.

Accepted Answer

A) in almost all situations 
B) possibly 
C) not 
D) in all situations 
E) a or d 
A) in almost all situations 
B) possibly 
C) not 
D) in all situations 
E) a or d

Question 11

In the case of a nonexcludable public good,the market will fail to produce the good because of the free rider problem.

Accepted Answer

A) True 
 B)False

Question 12

The federal government and many state governments gave tax credits to first-time home buyers in 2009 and 2010.An effect of these tax credits was to

Accepted Answer

A) make the price of houses higher than they would have been without the tax credit. 
B) lower house prices. 
C) shift the demand curve for houses leftward. 
D) b and c 
E) none of the above 
A) make the price of houses higher than they would have been without the tax credit. 
B) lower house prices. 
C) shift the demand curve for houses leftward. 
D) b and c 
E) none of the above

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 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

It is possible for the government to remove individuals from a prisoner's dilemma setting and make them better off.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

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

Exam 24: Globalization and International Impacts on the Economy

Which of the following statements is true?

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

Consider a setting in which there is a negative externality,but no positive externality.It follows that

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

The strongest case for government with respect to a negative externality is that government needs to set the

A tax credit given to first-time home buyers would result in a _____________ shift in the ______________ curve for housing,which would lead to the unintended result of a(n)_____________ in the price of housing.

The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.

In the case of a nonexcludable public good,the market will fail to produce the good because of the free rider problem.

The federal government and many state governments gave tax credits to first-time home buyers in 2009 and 2010.An effect of these tax credits was to

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

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

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.

Which of the following statements is false?

It is possible for the government to remove individuals from a prisoner's dilemma setting and make them better off.

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?

Which of the following statements is false?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

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

A tax credit given to first-time home buyers would result in a _ shift in the curve for housing,which would lead to the unintended result of a(n)___ in the price of housing.

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

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.