Chapter 5 Quiz
Which of the following is an example of a transfer payment?
social security
The goal of antitrust legislation is to reduce the power of firms that can determine the market price of the goods they sell.
true
The provision of public education is at least in part an attempt to redistribute income by making sure that the poor have access to education.
true
Which of the following is an example of a transfer in kind?
Food stamps
Which of the following is not a difference between market and collective decision making?
Government goods are costless to produce, while private goods have production costs.
Sports stadiums, museums, ballets, plays, and concerts are examples of
government-sponsored goods.
Many economists suggest that our nation's legal system is an example of a public good. Which of the key properties of a public good does the legal system satisfy?
Both (a) and (b).
Suppose Canada spends less per capita on national defense than many other countries of similar size and income. A reasonable economic explanation would be that
Canada is able to free-ride on the defense spending of the United States.
Which of the following is not an economic function of government?
Income redistribution
The most important categories in the federal budget are
Medicare and other health-related spending, Social Security and other income-security programs, and national defense.
An online video game has the technical capability for a large number of players to participate, as long as a game administrator works to assure constant functionality of the game. Adding any additional players deprives no other participants of the entertainment services provided by the online game. It has been easy, however, to set up a system for excluding participation by anyone who fails to contribute $5 per month to a fund that assures covering extra expenses generated by that player's participation. Is this game a public good?
No, this game is not a public good because the exclusion of nonpaying consumers is not too costly to be feasible.
Which one of the following is a primary difference between a public good and a private good?
Private goods are subject to the principle of rival consumption while public goods are not.
The two primary money transfer payments in our system are
Social Security old-age and disability benefits and unemployment insurance benefits.
All of the following are goals established by the Full-Employment Act of 1946 except
a balanced budget.
Each of the following factors has played a significant role in the rapid expansion of Medicare spending by the U.S. government except
consumers of Medicare tend to only consume the high valued medical services.
The economic functions of government include
ensuring economy- wide stability
A cost or benefit of an economic activity that has an impact on an individual's well-being, even though the individual was not directly involved in the activity, is known as a(n)
externality.
An effluent fee refers to a government regulation which specifies a maximum allowable rate of pollution.
false
Transfer payments are money payments made by governments in exchange for goods or services.
false
One reason that collective and private decision making differ is
individuals working in the government sector face a different incentive structure than those in the private sector.
The economic functions of government include
promoting competition
The study of collective decision making, or the process through which voters, politicians and other interested parties influence nonmarket choices is known as
public choice theory
Correcting positive externalities will result in a new, corrected, market demand curve that is to the
right of the initial curve. This will increase the output level.
According to the theory of public choice, the employees of Microsoft and employees of the State of Washington should act differently because
the incentives facing them are different.
Market failure occurs because
the market system does not make individuals responsible for the social costs/benefits of their actions.
The theory of public choice is the study of
the process through which voters, politicians, and other interested parties interact to influence nonmarket choices.
After a government implements a voucher program, granting funds that families can spend at schools of their choice, numerous students in public schools switch to private schools. Parents' and students' valuations of the services provided at both private and public schools adjust to equality with the true market price of educational services. As a result of this voucher program,
the public schools will lose.
Which of the following is a dissimilarity between the market sector and the public sector decision making?
the type of voting system
Market failure occurs when
the unrestrained market economy leads to too few or too many resources going to a specific economic activity.
Which of the following is a similarity between the market sector and the public sector decision making?
there is an opportunity cost associated with every action
Heroin, cigarettes, gambling, and cocaine are examples of
government-inhibited goods.
