Question 1

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.

Question 2

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

Question 3

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

Accepted Answer

A) True 
 B)False

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

Question 5

Special interest group A receives a 1/10,000?? slice of the economic pie (Real GDP). It is seeking a transfer of $1,000. For group A to be indifferent between a transfer policy and an economic growth policy,economic growth must be ________________ times larger than the _________________.

Accepted Answer

A)  1,000; transfer 
B)  10,000; transfer 
C)  100; transfer 
D)  10,000; transfer minus $1,000 
E)  1,000; transfer; minus $10,000

Question 6

Government always makes individuals better off when it removes them from a prisoner's dilemma setting.

Accepted Answer

A) True 
 B)False

Question 7

An unintended effect of a new tax placed on the producers of good A may include

Accepted Answer

A)  a higher price paid by the consumers of good A. 
B)  less consumers' surplus for the buyers of good A. 
C)  fewer workers employed in the production of good A. 
D)  an increase in the supply of good A. 
E)  a, b, and c

Question 8

Which of the following 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.

Question 9

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

Question 10

The answer is,"Because of the free rider problem." The question is:

Accepted Answer

A)  Why can't the government produce nonexcludable public goods? 
B)  Why can't the market produce nonexcludable public goods? 
C)  Why do negative externalities exist? 
D)  Why do positive externalities exist? 
E)  b and d

Question 11

Which of the following 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.

Question 12

Special interest groups are very unlikely to push for policies that increase the size of their slice of the economic pie if it means that the overall size of the economic pie will shrink.

Accepted Answer

A) True 
 B)False

Question 13

A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome.To accomplish its objective,government must set the subsidy equal to marginal

Accepted Answer

A)  private cost. 
B)  social benefit. 
C)  external cost. 
D)  social cost. 
E)  external benefit.

Question 14

In the case of a positive 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)  subsidy; private costs

Question 15

In the case of nonexcludable goods,economists contend that the market ___________ produce these goods because of the ________________________.

Accepted Answer

A)  will; free rider problem 
B)  will not; law of diminishing marginal utility 
C)  will not; law of diminishing marginal returns 
D)  will not; free rider problem.

Question 16

In the case of externalities,government can use taxes and subsidies to turn an inefficient outcome into an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

A special interest group has a good chance of redistributing (transferring)income from others to itself if the

Accepted Answer

A)  costs of the transfer are spread over a very large number of people. 
B)  costs of the transfer are spread over a very small number of people. 
C)  costs of the transfer are spread over the same number of people that comprise the special interest group. 
D)  the number of members in the special interest group is greater than 100. 
E)  none of the above

Question 19

List and describe the three different types of transfers discussed in this chapter. Give a hypothetical example of each to help support your answer.

Accepted Answer

The answer of List and describe the three different types...

Question 20

Given that the demand for unskilled labor curve is downward-sloping,an unintended effect of raising the minimum wage is that some people who worked at the lower wage will lose their jobs at the higher wage.

Accepted Answer

A) True 
 B)False

Exam 37: The Economic Case For and Against Government: Five Topics Considered

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.

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

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

Special interest group A receives a 1/10,000?? slice of the economic pie (Real GDP) . It is seeking a transfer of $1,000. For group A to be indifferent between a transfer policy and an economic growth policy,economic growth must be times larger than the _.

Government always makes individuals better off when it removes them from a prisoner's dilemma setting.

An unintended effect of a new tax placed on the producers of good A may include

Which of the following is false?

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.

The answer is,"Because of the free rider problem." The question is:

Which of the following is false?

Special interest groups are very unlikely to push for policies that increase the size of their slice of the economic pie if it means that the overall size of the economic pie will shrink.

A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome.To accomplish its objective,government must set the subsidy equal to marginal

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

In the case of nonexcludable goods,economists contend that the market _ produce these goods because of the ______________.

In the case of externalities,government can use taxes and subsidies to turn an inefficient outcome into an efficient outcome.

A special interest group has a good chance of redistributing (transferring) income from others to itself if the

List and describe the three different types of transfers discussed in this chapter. Give a hypothetical example of each to help support your answer.

Given that the demand for unskilled labor curve is downward-sloping,an unintended effect of raising the minimum wage is that some people who worked at the lower wage will lose their jobs at the higher wage.

Exam 37: The Economic Case For and Against Government: Five Topics Considered

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.

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

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

Special interest group A receives a 1/10,000?? slice of the economic pie (Real GDP) . It is seeking a transfer of $1,000. For group A to be indifferent between a transfer policy and an economic growth policy,economic growth must be ________________ times larger than the _________________.

Government always makes individuals better off when it removes them from a prisoner's dilemma setting.

An unintended effect of a new tax placed on the producers of good A may include

Which of the following is false?

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.

The answer is,"Because of the free rider problem." The question is:

Which of the following is false?

Special interest groups are very unlikely to push for policies that increase the size of their slice of the economic pie if it means that the overall size of the economic pie will shrink.

A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome.To accomplish its objective,government must set the subsidy equal to marginal

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

In the case of nonexcludable goods,economists contend that the market ___________ produce these goods because of the ________________________.

In the case of externalities,government can use taxes and subsidies to turn an inefficient outcome into an efficient outcome.

A special interest group has a good chance of redistributing (transferring) income from others to itself if the

List and describe the three different types of transfers discussed in this chapter. Give a hypothetical example of each to help support your answer.

Given that the demand for unskilled labor curve is downward-sloping,an unintended effect of raising the minimum wage is that some people who worked at the lower wage will lose their jobs at the higher wage.

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.

Special interest group A receives a 1/10,000?? slice of the economic pie (Real GDP) . It is seeking a transfer of $1,000. For group A to be indifferent between a transfer policy and an economic growth policy,economic growth must be times larger than the _.

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

In the case of nonexcludable goods,economists contend that the market _ produce these goods because of the ______________.