Question 1

Which of the following is a merit good?

Accepted Answer

A)  Local telephone service.
B)  Electricity.
C)  Health care.
D)  Automobiles.E) A) and D)
F) All of the above

Question 2

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 B)
F) B) and D)

Question 3

Which of the following is a merit good?

Accepted Answer

A)  Cigarettes.
B)  Food.
C)  Local telephone service.
D)  A computer operating system.E) C) and D)
F) B) and C)

Question 4

The market mechanism leads to underproduction of public goods because the supply of public goods is hidden.

Accepted Answer

A) True 
 B)False

Question 5

The optimal mix of output is always the same as the

Accepted Answer

A)  Output that consumers demand.
B)  Most desired combination on a production possibilities curve.
C)  Output that the government provides.
D)  Output that producers produce.E) None of the above
F) B) and C)

Question 6

The federal government's role in providing aid to the poor and the aged is justified because of concerns about

Accepted Answer

A)  Market power.
B)  Inequity.
C)  Macro failure.
D)  Restricted supply.E) None of the above
F) B) and D)

Question 7

Markets will underproduce goods that yield external benefits and overproduce those that generate external costs.

Accepted Answer

A) True 
 B)False

Question 8

Explain why government-funded college education can be considered a role of the government.

Accepted Answer

An externality is a cost or benefit of a...

Question 9

Government intervention in the market

Accepted Answer

A)  Always involves an opportunity cost.
B)  Never involves an opportunity cost because only market activities result in other goods and services being given up.
C)  Does not involve an opportunity cost if market outcomes are improved.
D)  Results in the free-rider dilemma.E) A) and D)
F) C) and D)

Question 10

A public good is a good or service for which consumption by one person makes consumption by others impossible.

Accepted Answer

A) True 
 B)False

Question 11

An external cost on supply can be measured graphically as the

Accepted Answer

A)  Horizontal distance between the market demand curve and the social demand curve.
B)  Vertical distance between the market demand curve and the social demand curve.
C)  Horizontal distance between the market supply curve and the social supply curve.
D)  Vertical distance between the market supply curve and the social supply curve.E) All of the above
F) A) and C)

Question 12

In general,state and local taxes tend to be

Accepted Answer

A)  Regressive.
B)  Progressive.
C)  Proportional.
D)  Flat.E) B) and C)
F) A) and B)

Question 13

Which of the following is a source of market failure?

Accepted Answer

A)  Private goods.
B)  Market power.
C)  Government intervention.
D)  None of the choices are correct.E) C) and D)
F) B) and C)

Question 14

Market failure may lead 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) All of the above
F) B) and C)

Question 15

If the consumption of a good yields external benefits,then

Accepted Answer

A)  The social demand is greater than the market demand.
B)  The social demand is equal to the market demand.
C)  The social demand is less than the market demand.
D)  There is neither social demand nor market demand for the good.E) All of the above
F) A) and B)

Question 16

The Social Security tax is

Accepted Answer

A)  A progressive tax.
B)  A regressive tax.
C)  A proportional tax.
D)  A proportional tax at low income levels and a progressive tax at higher income levels.E) B) and C)
F) All of the above

Question 17

If Good X has social demand that is less than market demand,then Good X must be a

Accepted Answer

A)  Public good.
B)  Good with an external cost.
C)  Good with an external benefit.
D)  Good suffering from the free-rider problem.E) A) and D)
F) B) and C)

Question 18

Micro and macro failures of the marketplace never justify government intervention.

Accepted Answer

A) True 
 B)False

Question 19

The most desirable combination of output attainable with existing resources,technology,and social values is known as the

Accepted Answer

A)  Optimal mix of output.
B)  Efficient mix of output.
C)  Attainable mix of output.
D)  Efficient choice of production.E) B) and C)
F) A) and C)

Question 20

A public good

Accepted Answer

A)  Is any good produced by the government.
B)  Is overproduced by the market.
C)  Causes government failure.
D)  Is subject to the free-rider dilemma.E) None of the above
F) All of the above

Exam 4: The Role of Government

If the consumption of a good yields external benefits,then

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Which of the following is a merit good?

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Markets will underproduce goods that yield external benefits and overproduce those that generate external costs.

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A public good is a good or service for which consumption by one person makes consumption by others impossible.

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The theory of public choice

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If Good X has social demand that is less than market demand,then Good X must be a

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Market failure may lead to

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Government intervention in the market

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Explain why government-funded college education can be considered a role of the government.

Correct AnswerverifiedAn externality is a cost or benefit of a...View AnswerShow Answer

In general,state and local taxes tend to be

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The market mechanism leads to underproduction of public goods because the supply of public goods is hidden.

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The Social Security tax is

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An external cost on supply can be measured graphically as the

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The federal government's role in providing aid to the poor and the aged is justified because of concerns about

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Micro and macro failures of the marketplace never justify government intervention.

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The most desirable combination of output attainable with existing resources,technology,and social values is known as the

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A public good

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Which of the following is a source of market failure?

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The optimal mix of output is always the same as the

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Which of the following is a merit good?

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An externality is a cost or benefit of a...
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