Question 1

Which is not a barrier to solving the free rider problem in the provision of public goods?

Accepted Answer

A)  Individuals may not know their valuation of a good. 
B)  Individuals may not reveal their valuation of a good to government. 
C)  The government may not be able to put together preferences of many citizens. 
D)  Some individuals may voluntarily choose to pay for a public good. 
A)  Individuals may not know their valuation of a good. 
B)  Individuals may not reveal their valuation of a good to government. 
C)  The government may not be able to put together preferences of many citizens. 
D)  Some individuals may voluntarily choose to pay for a public good.

Question 2

If individuals care about the outcomes for other people as well as for themselves,economists refer to them as:

Accepted Answer

A)  free riders. 
B)  irrational. 
C)  actuarially adjusted. 
D)  altruistic. 
A)  free riders. 
B)  irrational. 
C)  actuarially adjusted. 
D)  altruistic.

Question 3

In 1996,legal changes reduced the ability of noncitizens to benefit from cash welfare programs.Evidence on the resulting changes in charitable support by churches suggests that:

Accepted Answer

A)  crowd-out is insignificant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas. 
B)  crowd-out is significant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas. 
C)  crowd-out is insignificant since there was no difference in the charitable spending of churches in high-immigrant areas and those in low-immigrant areas. 
D)  crowd-out is significant since there was no difference in the charitable spending of churches in high-immigrant areas and those in low-immigrant areas. 
A)  crowd-out is insignificant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas. 
B)  crowd-out is significant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas. 
C)  crowd-out is insignificant since there was no difference in the charitable spending of churches in high-immigrant areas and those in low-immigrant areas. 
D)  crowd-out is significant since there was no difference in the charitable spending of churches in high-immigrant areas and those in low-immigrant areas.

Question 4

If one person consumes a good,so that no other person can consume it at all,then that good is:

Accepted Answer

A)  excludable. 
B)  nonexcludable. 
C)  purely rival. 
D)  partially rival. 
A)  excludable. 
B)  nonexcludable. 
C)  purely rival. 
D)  partially rival.

Question 5

The underprovision of public goods by a private market is characterized by the:

Accepted Answer

A)  holdout problem. 
B)  assignment problem. 
C)  free rider problem. 
D)  irrationality problem. 
A)  holdout problem. 
B)  assignment problem. 
C)  free rider problem. 
D)  irrationality problem.

Question 6

Suppose the local public radio station,which is supported partly by voluntary contributions,reaches eight towns.Suppose also that the radio station vowed not to report on the local news events of any town unless it received a certain level of contributions from the residents of that town.This could be best characterized as a:

Accepted Answer

A)  private provider method of providing a public good. 
B)  private provider method of providing a private good. 
C)  government solution to the free rider problem. 
D)  public sector provider method of providing a public good. 
A)  private provider method of providing a public good. 
B)  private provider method of providing a private good. 
C)  government solution to the free rider problem. 
D)  public sector provider method of providing a public good.

Question 7

Which of the following is excludable,but nonrival in consumption?

Accepted Answer

A)  a road 
B)  cable television 
C)  a lighthouse 
D)  health insurance 
A)  a road 
B)  cable television 
C)  a lighthouse 
D)  health insurance

Question 8

Suppose many potential donors reduce their annual gift in response to government grants to local medical research projects.This is an example of the problem associated with:

Accepted Answer

A)  measuring preferences for the public good. 
B)  crowding-out of private provision. 
C)  measuring the costs and benefits of public goods. 
D)  crowding-in of public provision. 
A)  measuring preferences for the public good. 
B)  crowding-out of private provision. 
C)  measuring the costs and benefits of public goods. 
D)  crowding-in of public provision.

Question 9

Local phone service is:

Accepted Answer

A)  excludable but not rival. 
B)  rival but not excludable. 
C)  both rival and excludable. 
D)  neither rival nor excludable. 
A)  excludable but not rival. 
B)  rival but not excludable. 
C)  both rival and excludable. 
D)  neither rival nor excludable.

Question 10

Which is a property of a private good,like a sandwich?

Accepted Answer

A)  non-rival in consumption 
B)  rival in consumption 
C)  non-excludable 
D)  subject to the free rider problem 
A)  non-rival in consumption 
B)  rival in consumption 
C)  non-excludable 
D)  subject to the free rider problem

Question 11

Which factor is likely to enable private market forces to provide more of a public good than it might otherwise provide?

Accepted Answer

A)  large differences among individuals in their demand for the public good 
B)  little to no difference among individuals in their demand for the public good 
C)  the existence of free riders who enjoy benefits but refuse to pay. 
D)  the fact that the benefits of the public good are available to everyone. 
A)  large differences among individuals in their demand for the public good 
B)  little to no difference among individuals in their demand for the public good 
C)  the existence of free riders who enjoy benefits but refuse to pay. 
D)  the fact that the benefits of the public good are available to everyone.

Question 12

Suppose a downtown business owner wants to convince the owners of nearby businesses to renovate their buildings to make the downtown area more attractive to shoppers.The problem that is likely to prevent this plan from going into action is called the:

Accepted Answer

A)  free rider problem 
B)  assignment problem 
C)  crowding out problem 
D)  irrationality problem 
A)  free rider problem 
B)  assignment problem 
C)  crowding out problem 
D)  irrationality problem

Question 13

Suppose someone observes that people in areas where residents have more education tend to donate more money for local parks than do people in areas where residents are less well educated,and the observer concludes that education increases altruism.Use what you have learned in this course to evaluate the validity of this conclusion.

Accepted Answer

It may be that becoming educated causes

Question 14

Which is generally TRUE of the empirical evidence on the crowding-out of individual contributions by government spending?

Accepted Answer

A)  The crowd-out effect is close to zero in both empirical and experimental studies. 
B)  The crowd-out effect is approximately 50% in both empirical and experimental studies. 
C)  The crowd-out effect is substantially larger in empirical studies than in experimental studies. 
D)  The crowd-out effect is substantially smaller in empirical studies than in experimental studies. 
A)  The crowd-out effect is close to zero in both empirical and experimental studies. 
B)  The crowd-out effect is approximately 50% in both empirical and experimental studies. 
C)  The crowd-out effect is substantially larger in empirical studies than in experimental studies. 
D)  The crowd-out effect is substantially smaller in empirical studies than in experimental studies.

Question 15

Suppose a city manager finds that residents lied about the value to them of a proposed city project.This illustrates the problem of:

Accepted Answer

A)  preference revelation. 
B)  altruism. 
C)  preference knowledge. 
D)  warm-glow effect. 
A)  preference revelation. 
B)  altruism. 
C)  preference knowledge. 
D)  warm-glow effect.

Question 16

Which activity is considered altruistic?

Accepted Answer

A)  planting flowers in your yard 
B)  donating money to the Red Cross 
C)  going to college 
D)  saving for retirement 
A)  planting flowers in your yard 
B)  donating money to the Red Cross 
C)  going to college 
D)  saving for retirement

Question 17

What property must a good satisfy to be a pure public good?

Accepted Answer

A)  It must be nonrival in consumption. 
B)  It must be rival in consumption. 
C)  It must be nonrival in production. 
D)  It must be rival in production. 
A)  It must be nonrival in consumption. 
B)  It must be rival in consumption. 
C)  It must be nonrival in production. 
D)  It must be rival in production.

Question 18

Which statement is generally TRUE?

Accepted Answer

A)  Private markets overprovide public goods. 
B)  Private markets underprovide public goods. 
C)  Private markets provide the socially optimal amount of public good. 
D)  Public goods must be priced at more than twice their price in the private market in order to provide the socially optimal amount. 
A)  Private markets overprovide public goods. 
B)  Private markets underprovide public goods. 
C)  Private markets provide the socially optimal amount of public good. 
D)  Public goods must be priced at more than twice their price in the private market in order to provide the socially optimal amount.

Question 19

If it is not possible to prevent potential users from consuming or having access to the benefits of a good,that good is:

Accepted Answer

A)  excludable. 
B)  non-excludable. 
C)  purely rival. 
D)  partially rival. 
A)  excludable. 
B)  non-excludable. 
C)  purely rival. 
D)  partially rival.

Question 20

A good for which the price is set at $1 to model choice between goods is:

Accepted Answer

A)  a pure public good. 
B)  a numeraire good. 
C)  an impure public good. 
D)  a pure private good. 
A)  a pure public good. 
B)  a numeraire good. 
C)  an impure public good. 
D)  a pure private good.

Exam 7: Public Goods

Which is not a barrier to solving the free rider problem in the provision of public goods?

If individuals care about the outcomes for other people as well as for themselves,economists refer to them as:

In 1996,legal changes reduced the ability of noncitizens to benefit from cash welfare programs.Evidence on the resulting changes in charitable support by churches suggests that:

If one person consumes a good,so that no other person can consume it at all,then that good is:

The underprovision of public goods by a private market is characterized by the:

Which of the following is excludable,but nonrival in consumption?

Suppose many potential donors reduce their annual gift in response to government grants to local medical research projects.This is an example of the problem associated with:

Local phone service is:

Which is a property of a private good,like a sandwich?

Which factor is likely to enable private market forces to provide more of a public good than it might otherwise provide?

Suppose a downtown business owner wants to convince the owners of nearby businesses to renovate their buildings to make the downtown area more attractive to shoppers.The problem that is likely to prevent this plan from going into action is called the:

Which is generally TRUE of the empirical evidence on the crowding-out of individual contributions by government spending?

Suppose a city manager finds that residents lied about the value to them of a proposed city project.This illustrates the problem of:

Which activity is considered altruistic?

What property must a good satisfy to be a pure public good?

Which statement is generally TRUE?

If it is not possible to prevent potential users from consuming or having access to the benefits of a good,that good is:

A good for which the price is set at $1 to model choice between goods is:

Why Study Public Finance

Theoretical Tools of Public Finance

Empirical Tools of Public Finance

Budget Analysis and Deficit Financing

Externalities- Problems and Solutions

Externalities in Action- Environmental and Health Externalities

Cost-Benefit Analysis

Political Economy

State and Local Government Expenditures

Education

Social Insurance- the New Function of Government

Social Security

Unemployment Insurance, disability Insurance, and Workers Compensation

Health Insurance I- Health Economics and Private Health Insurance

Health Insurance Ii- Medicare, medicaid, and Health Care Reform

Income Distribution and Welfare Programs

Taxation- How It Works and What It Means

The Equity Implications of Taxation- Tax Incidence

Taxes on Labor Supply

Taxes on Savings

Taxes on Risk Taking and Wealth

Taxation of Business Income

Fundamental Tax Reform and Consumption Tax

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