Question 1

What is the purpose of antitrust legislation?

Accepted Answer

Antitrust legislation makes illegal cert

Question 2

-Refer to the above figure. An external benefit exists. The amount of that benefit is represented by

Accepted Answer

A)  P4. 
B)  the vertical distance between D1 and D2. 
C)  the distance between G and F. 
D)  P3. 
A)  P4. 
B)  the vertical distance between D1 and D2. 
C)  the distance between G and F. 
D)  P3.

Question 3

The total amount that the U.S. government spends to support a covered type of health care service under the Medicare system equals

Accepted Answer

A)  the per-unit subsidy provided to producers of that service times the quantity of the service demanded by consumers at a below-equilibrium out-of-pocket price of the service. 
B)  the per-unit subsidy provided to producers of that service times the equilibrium quantity of the service demanded at the market clearing price that would arise in the absence of Medicare. 
C)  the below-equilibrium, out-of-pocket price that consumers pay for the service times the quantity of the service provided by producers at that out-of-pocket price. 
D)  the below-equilibrium, out-of-pocket price that consumers pay for the service times the quantity of the service demanded by consumers at that out-of-pocket price. 
A)  the per-unit subsidy provided to producers of that service times the quantity of the service demanded by consumers at a below-equilibrium out-of-pocket price of the service. 
B)  the per-unit subsidy provided to producers of that service times the equilibrium quantity of the service demanded at the market clearing price that would arise in the absence of Medicare. 
C)  the below-equilibrium, out-of-pocket price that consumers pay for the service times the quantity of the service provided by producers at that out-of-pocket price. 
D)  the below-equilibrium, out-of-pocket price that consumers pay for the service times the quantity of the service demanded by consumers at that out-of-pocket price.

Question 4

When the production of one good spills benefits over to third parties, the government should consider all of the following EXCEPT

Accepted Answer

A)  subsidizing the consumption of the good. 
B)  subsidizing the production of the good. 
C)  creating tax incentives to encourage more consumption. 
D)  taxing the production or consumption of the good. 
A)  subsidizing the consumption of the good. 
B)  subsidizing the production of the good. 
C)  creating tax incentives to encourage more consumption. 
D)  taxing the production or consumption of the good.

Question 5

A free rider is someone who

Accepted Answer

A)  hops on the bus without paying the correct bus fare. 
B)  enjoys the trees I have planted and does not compensate me for them. 
C)  creates a negative externality. 
D)  buys a ticket for a movie. 
A)  hops on the bus without paying the correct bus fare. 
B)  enjoys the trees I have planted and does not compensate me for them. 
C)  creates a negative externality. 
D)  buys a ticket for a movie.

Question 6

When government intervenes in the production process because external benefits exist, it typically attempts

Accepted Answer

A)  to impose a tax on each unit produced. 
B)  to shift the market's demand curve to the left. 
C)  to shift the market's demand curve to the right. 
D)  to shift the market's supply curve to the left. 
A)  to impose a tax on each unit produced. 
B)  to shift the market's demand curve to the left. 
C)  to shift the market's demand curve to the right. 
D)  to shift the market's supply curve to the left.

Question 7

-Costs that spill over to third parties are called

Accepted Answer

A)  opportunity costs. 
B)  external costs. 
C)  variable costs. 
D)  public costs. 
A)  opportunity costs. 
B)  external costs. 
C)  variable costs. 
D)  public costs.

Question 8

Public goods are

Accepted Answer

A)  any goods or services produced by the government. 
B)  provided to additional users at no additional cost. 
C)  provided only by the capitalistic system. 
D)  provided only by the communist system. 
A)  any goods or services produced by the government. 
B)  provided to additional users at no additional cost. 
C)  provided only by the capitalistic system. 
D)  provided only by the communist system.

Question 9

A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account.
-Refer to above figures. Prior to the shift of the curves, which panel and which curve involve the existence of negative externality?

Accepted Answer

A)  Panel 1 and S1 
B)  Panel 1 and S2 
C)  Panel 2 and D1 
D)  Panel 2 and D2 
A)  Panel 1 and S1 
B)  Panel 1 and S2 
C)  Panel 2 and D1 
D)  Panel 2 and D2

Question 10

-In the above figure, market equilibrium at point E yields the quantity X. The quantity X* is the socially optimal quantity. Point E indicates that currently there is

Accepted Answer

A)  a negative externality. 
B)  a positive externality. 
C)  a public good. 
D)  a positive externality with subsidy. 
A)  a negative externality. 
B)  a positive externality. 
C)  a public good. 
D)  a positive externality with subsidy.

Question 11

External costs can be defined as

Accepted Answer

A)  the cost associated with private production, but partially borne by society. 
B)  the sum of all private production costs. 
C)  the cost of running the federal government. 
D)  the cost of providing all public goods and services. 
A)  the cost associated with private production, but partially borne by society. 
B)  the sum of all private production costs. 
C)  the cost of running the federal government. 
D)  the cost of providing all public goods and services.

Question 12

When a person throws a cigarette out of a car window and starts a brush fire, this is

Accepted Answer

A)  an example of an external benefit. 
B)  an example of an external cost. 
C)  an example of a public good. 
D)  an example of market power. 
A)  an example of an external benefit. 
B)  an example of an external cost. 
C)  an example of a public good. 
D)  an example of market power.

Question 13

The theory of public choice

Accepted Answer

A)  is the theory of how government decides on what military hardware to purchase. 
B)  considers government decision-making efficient. 
C)  is the study of collective decision making. 
D)  is the study of how negative externalities can be reduced. 
A)  is the theory of how government decides on what military hardware to purchase. 
B)  considers government decision-making efficient. 
C)  is the study of collective decision making. 
D)  is the study of how negative externalities can be reduced.

Question 14

Market failures occur when

Accepted Answer

A)  externalities exist. 
B)  economic efficiency increases. 
C)  there is an increase in demand. 
D)  there is a change in quantity demanded. 
A)  externalities exist. 
B)  economic efficiency increases. 
C)  there is an increase in demand. 
D)  there is a change in quantity demanded.

Question 15

Which of the following checks issued by the government represents a transfer payment?

Accepted Answer

A)  The federal government pays a defense contractor for development of a missile system. 
B)  The federal government pays a retiree her Social Security benefits. 
C)  The state of Oregon pays a construction firm for its work in repairing a state highway. 
D)  The state of Illinois pays groundskeepers at the state capitol building their weekly wages. 
A)  The federal government pays a defense contractor for development of a missile system. 
B)  The federal government pays a retiree her Social Security benefits. 
C)  The state of Oregon pays a construction firm for its work in repairing a state highway. 
D)  The state of Illinois pays groundskeepers at the state capitol building their weekly wages.

Question 16

An example of an in-kind transfer is

Accepted Answer

A)  income tax. 
B)  Social Security. 
C)  low-cost public housing. 
D)  unemployment benefits. 
A)  income tax. 
B)  Social Security. 
C)  low-cost public housing. 
D)  unemployment benefits.

Question 17

One way that the government encourages the production of a good with positive externalities is to offer

Accepted Answer

A)  an effluent fee. 
B)  a market to pollute. 
C)  a subsidy. 
D)  a pollution tax. 
A)  an effluent fee. 
B)  a market to pollute. 
C)  a subsidy. 
D)  a pollution tax.

Question 18

To correct for positive externalities the government

Accepted Answer

A)  should allow the price system to do the correction. 
B)  can impose a tax. 
C)  can give a subsidy. 
D)  should create a public good. 
A)  should allow the price system to do the correction. 
B)  can impose a tax. 
C)  can give a subsidy. 
D)  should create a public good.

Question 19

Markets tend to overallocate resources to the production of a good when

Accepted Answer

A)  there are negative externalities. 
B)  there are positive externalities. 
C)  there are public goods produced. 
D)  equilibrium occurs. 
A)  there are negative externalities. 
B)  there are positive externalities. 
C)  there are public goods produced. 
D)  equilibrium occurs.

Question 20

As a share of total national income, government spending generally has

Accepted Answer

A)  been constant over the last 50 years. 
B)  increased over the last 50 years. 
C)  decreased over the last 50 years. 
D)  increased until 20 years ago, and then decreased steadily. 
A)  been constant over the last 50 years. 
B)  increased over the last 50 years. 
C)  decreased over the last 50 years. 
D)  increased until 20 years ago, and then decreased steadily.

Exam 5: Public Spending and Public Choice

What is the purpose of antitrust legislation?

-Refer to the above figure. An external benefit exists. The amount of that benefit is represented by

The total amount that the U.S. government spends to support a covered type of health care service under the Medicare system equals

When the production of one good spills benefits over to third parties, the government should consider all of the following EXCEPT

A free rider is someone who

When government intervenes in the production process because external benefits exist, it typically attempts

-Costs that spill over to third parties are called

Public goods are

-In the above figure, market equilibrium at point E yields the quantity X. The quantity X* is the socially optimal quantity. Point E indicates that currently there is

External costs can be defined as

When a person throws a cigarette out of a car window and starts a brush fire, this is

The theory of public choice

Market failures occur when

Which of the following checks issued by the government represents a transfer payment?

An example of an in-kind transfer is

One way that the government encourages the production of a good with positive externalities is to offer

To correct for positive externalities the government

Markets tend to overallocate resources to the production of a good when

As a share of total national income, government spending generally has

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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