Question 1

The theory of public choice

Accepted Answer

A)   Examines why the public rejects so many bond referendums.
B)   Emphasizes the self-interest of decision makers and voters.
C)   Examines how a policy of laissez faire works to allocate resources.
D)   Explains the selfless pursuit of public goals by public servants.E) A) and D)
F) All of the above

Question 2

A public good

Accepted Answer

A)   Is any good produced by the government.
B)   Is overproduced by the market.
C)   Causes government failure.
D)   Experiences the free-rider dilemma.E) All of the above
F) B) and C)

Question 3

If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to

Accepted Answer

A)   Overproduce goods that yield external benefits and overproduce those that generate external costs.
B)   Overproduce goods that yield external benefits and underproduce those that generate external costs.
C)   Underproduce goods that yield external benefits and overproduce those that generate external costs.
D)   Underproduce goods that yield external benefits and underproduce those that generate external costs.E) A) and B)
F) None of the above

Question 4

Cities and other local governments receive most of their tax revenues from

Accepted Answer

A)   Local income taxes.
B)   Sales tax.
C)   Property taxes.
D)   Excise taxes.E) A) and B)
F) B) and C) C

Question 5

Social demand equals market demand plus externalities when there are positive external benefits.

Accepted Answer

A) True 
 B)False

Question 6

One In the News article titled "Persistent Doubts about Government Waste" indicates that people think "the government wastes a lot of tax money." If this is true, this is an example of

Accepted Answer

A)   The free-rider dilemma.
B)   Market failure.
C)   The problem of externalities.
D)   Government failure.E) A) and B)
F) A) and C)

Question 7

In a market economy, producers will produce the goods and services that

Accepted Answer

A)   Producers want to purchase.
B)   Consumers demand.
C)   Consumers need the most.
D)   Optimize producer utility.E) B) and C)
F) A) and B) B

Question 8

Which of the following properly ranks the size of tax revenues received by the federal government from highest to lowest?

Accepted Answer

A)   Excise taxes, Social Security payroll taxes, income taxes, and corporate taxes.
B)   Corporate taxes, Social Security payroll taxes, income taxes, and excise taxes.
C)   Income taxes, Social Security payroll taxes, corporate taxes, and excise taxes.
D)   Social Security payroll taxes, excise taxes, corporate taxes, and income taxes.E) None of the above
F) B) and C)

Question 9

Which of the following is the best example of a government effort to address market failure in relation to the FOR WHOM to produce question?

Accepted Answer

A)   Antitrust policy.
B)   Regulations reducing pollution.
C)   Transfer payments.
D)   The production of goods that allow free riders.E) All of the above
F) C) and D)

Question 10

Market failure leads to

Accepted Answer

A)   An equitable distribution of goods and services.
B)   Public goods being underproduced.
C)   The absence of externalities.
D)   Production possibilities.E) C) and D)
F) A) and B)

Question 11

A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" claims what percentage of all deaths worldwide are caused by secondhand smoke?

Accepted Answer

A)   1 percent.
B)   2 percent.
C)   5 percent.
D)   None of the choices are correct.E) A) and B)
F) All of the above

Question 12

Local governments provide law enforcement, which benefits society, but if the costs of law enforcement exceed the benefits, the result is a situation of

Accepted Answer

A)   Market failure.
B)   Efficiency as long as there is some benefit.
C)   Government failure.
D)   Public choice theory.E) A) and D)
F) A) and C)

Question 13

In the cost-benefit analysis of public goods, the benefits

Accepted Answer

A)   Can be accurately measured using the market price of the public good.
B)   Can be accurately measured by ballot box economics.
C)   Are more easily estimated than the costs.
D)   Can be only roughly estimated using highly subjective techniques.E) None of the above
F) A) and B)

Question 14

Government failure means that government intervention fails to move us closer to our economic goals.

Accepted Answer

A) True 
 B)False

Question 15

From the In the News article titled, "Firefighters Watch as Home Burns to the Ground," Which of the following is true?

Accepted Answer

A)   Fire protection paid for like fire insurance is a public good.
B)   Fire protection paid for like fire insurance is a private good.
C)   Fire protection is always a public good.
D)   None of the choices are correct.E) A) and D)
F) A) and B)

Question 16

Which of the following is most likely a private good?

Accepted Answer

A)   Cars.
B)   National defense.
C)   Sidewalks.
D)   The administration of justice.E) None of the above
F) All of the above

Question 17

Government intervention can serve to stabilize the macro economy by

Accepted Answer

A)   Reducing inflation and encouraging the equitable distribution of income.
B)   Reducing employment and encouraging economic growth.
C)   Regulating monopolies and encouraging the equitable distribution of output.
D)   Reducing inflation and encouraging economic growth.E) A) and B)
F) None of the above

Question 18

The optimal mix of output may not be produced by an economy because of the existence of

Accepted Answer

A)   Inequity.
B)   Internalities.
C)   Public goods.
D)   Production possibilities.E) A) and B)
F) All of the above

Question 19

Transfer payments are payments to individuals for which nothing is currently rendered in return.

Accepted Answer

A) True 
 B)False

Question 20

The term transfer payments refers to

Accepted Answer

A)   Federal income taxes.
B)   Money that is transferred between savings and checking accounts.
C)   Payments to individuals that are not in exchange for current goods and services being produced.
D)   Additional profits transferred to monopolies as a result of their market power.E) B) and D)
F) B) and C) C

Exam 4: The Role of Government

The theory of public choice

Correct AnswerverifiedShow Answer

A public good

Correct AnswerverifiedShow Answer

If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to

Correct AnswerverifiedShow Answer

Cities and other local governments receive most of their tax revenues from

Correct AnswerverifiedC

Social demand equals market demand plus externalities when there are positive external benefits.

Correct AnswerverifiedShow Answer

One In the News article titled "Persistent Doubts about Government Waste" indicates that people think "the government wastes a lot of tax money." If this is true, this is an example of

Correct AnswerverifiedShow Answer

In a market economy, producers will produce the goods and services that

Correct AnswerverifiedB

Which of the following properly ranks the size of tax revenues received by the federal government from highest to lowest?

Correct AnswerverifiedShow Answer

Which of the following is the best example of a government effort to address market failure in relation to the FOR WHOM to produce question?

Correct AnswerverifiedShow Answer

Market failure leads to

Correct AnswerverifiedShow Answer

A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" claims what percentage of all deaths worldwide are caused by secondhand smoke?

Correct AnswerverifiedShow Answer

Local governments provide law enforcement, which benefits society, but if the costs of law enforcement exceed the benefits, the result is a situation of

Correct AnswerverifiedShow Answer

In the cost-benefit analysis of public goods, the benefits

Correct AnswerverifiedShow Answer

Government failure means that government intervention fails to move us closer to our economic goals.

Correct AnswerverifiedShow Answer

From the In the News article titled, "Firefighters Watch as Home Burns to the Ground," Which of the following is true?

Correct AnswerverifiedShow Answer

Which of the following is most likely a private good?

Correct AnswerverifiedShow Answer

Government intervention can serve to stabilize the macro economy by

Correct AnswerverifiedShow Answer

The optimal mix of output may not be produced by an economy because of the existence of

Correct AnswerverifiedShow Answer

Transfer payments are payments to individuals for which nothing is currently rendered in return.

Correct AnswerverifiedShow Answer

The term transfer payments refers to

Correct AnswerverifiedC

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C

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B

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C