macroeconomics chapter 5 quiz questions

A true public good must be provided by the government. Which of the following goods provided by the government is a true public​ good? A. Flood control. B. Postal service. C. Tax collection. D. Highways where tolls are collected.

A

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: A. Canada is able to​ free-ride on the defense spending of the United States. Your answer is correct. B. national defense is not a public good in Canada. C. Canadians perceive national defense as generating external costs rather than as a public good. D. ​Canada's tax system is less efficient than other industrial nations.

A

Which one of the following is a primary difference between a public good and a private​ good? A. Private goods are subject to the principle of rival consumption while public goods are not. B. A private good is subject to the​ free-rider problem while a public good is not. C. Private goods are manufactured because of the workings of the price system while public goods come about through antitrust legislation. D. Private goods are purchased by money transfers while public goods are purchased by​ in-kind transfers.

A

Market failure occurs because A. the market system forces individuals to consider the social consequences of their actions. B. the market system does not make individuals responsible for the social​ costs/benefits of their actions. C. the market system forces individuals to consider the social and private consequences of their actions. D. the market system does not make individuals responsible for the private​ costs/benefits of their actions.

B

Each of the following factors has played a significant role in the rapid expansion of Medicare spending by the U.S. government except A. the profit motive of physicians and hospitals. B. total medical spending​ (number of consumers times the price of medical​ services) has risen rapidly in the U.S. C. consumers of Medicare tend to only consume the high valued medical services. D. government planners failed to correctly estimate the increase in consumption of medical services.

C

A good that has been deemed socially desirable through the political process is known as A. a demerit good. B. a​ free-rider. C. a positive externality. D. a merit good.

D

In the decision making process for markets and the public sector A. the market system is run by proportional voting rules and the public sector is run by majority rule. B. the spending of dollars can indicate intensity of​ want, but political voting does not. C. dollars spent count as votes in the market​ system, but in the public sector one person gets one vote. D. All of the above.

D

Subsidizing medical services through Medicare: A. makes medical services available to a large percentage of the​ population, who otherwise could not afford them. B. drives a wedge between the price received by providers and the price perceived by consumers. C. is a relatively low percentage of U.S. GDP compared to other nations. D. All of the above are true. E. Only A and B are true.

E

Market failure occurs when A. the market system fails to allocate resources to each individual according to their needs. B. the market system fails to allocate an equal share of resources to all individuals. C. the unrestrained market economy leads to too few or too many resources going to a specific economic activity. D. the market system fails to allocate resources to each individual according to their abilities.

c

Which of the following is not a political function of the government that leads to involvement in the​ economy? A. Merit and demerit goods. B. Income redistribution. C. Public goods. D. ​In-kind transfers.

c

Which of the following is not an economic function of​ government? A. Ensuring​ economy-wide stability. B. Promoting competition. C. Income redistribution. D. Providing a legal system.

c